Just because you’re running a small business, doesn’t mean you don’t have to do market research. Whether it’s big or small, market research is an important process that every business owner should implement. It’ll help you understand your customers, their needs and what they want.
What is a market analysis?
A market analysis is the process of gathering information about a market within an industry. Your analysis studies the dynamics of a market and what makes potential customers tick.
A market analysis may seem complex, but it’s necessary if you want to lead your business in the direction of success.
When you conduct a market analysis, you learn the following:
- Who are my potential customers?
- What are my customers’ shopping and buying habits?
- How large is my target market?
- How much are potential customers willing to pay?
- Who is my competition?
- What are my competitors’ strengths and weaknesses?
Your market analysis can make or break your startup. Analyzing markets helps you reduce risks because you can better understand your customers and market conditions.
Your analysis also helps you clarify what makes you different from the competition. That way, you know what makes you stand out. Or, you know what you need to do to set yourself apart.
How can market research benefit a small business owner?
Right now you’re probably wondering: why do you need market research?
Small businesses already have a lot of day-to-day operations to deal with.
It’s hard to make time to do market research for small business—especially if you also need to learn how to do market research in the first place.
But if you don’t periodically check in with your audience, you could be leaving business and revenue on the table without ever knowing.
There are many benefits of market research for small business, but the top ones include:
- Helping you create more compelling marketing materials
- Identifying more targeted niches interested in your company
- Suggesting ideas for new products or services based on pain points
- Minimizing the risk of bad positioning that costs you leads without you knowing
- Giving you early updates on industry trends before they become widespread
Simply put, effective market research helps you get inside your customers’ heads. How cool is that?
When you need to conduct market research on a tight budget, it can be tricky to find the techniques and market research tools that give the best value for the time and cost investment.
Common market research mistakes
Here are three common missteps that we see:
1. Relying on free data from the Internet
The web is a great starting point, but often this information may be incomplete, outdated or too superficial to be relevant to your business decisions.
2. Surveying your personal network
Again, it can be a great starting point to talk to friends and colleagues. But for truly meaningful insights, you need to hear from sales prospects, customers, suppliers and other stakeholders in your business.
3. Relying only on anecdotal feedback
Businesses often receive feedback from customers and other stakeholders. But a few data points are not enough. Business insights need to be collected in a systematic way.
So how can small businesses conduct market research in a timely, cost‑effective manner?
How to gather insights about your business
Small businesses can use the following framework and resources to gather insights in a systematic, rigorous way.
1. Mine your internal information sources
Within your organization, there may be several untapped resources that can provide valuable information. Sales, customer service and other frontline employees, for example, can provide insights into the competition, customer reaction to products, new product ideas and potential new markets. Although this information will be anecdotal and subjective, employee feedback gathered in a regular, systematic manner can provide valuable information that you can then use as a basis for further investigation.
It’s also important to analyze your sales data. For instance, a review of your customer records may highlight that you’re doing more business in certain geographic regions or during certain seasons.
2. Look at the big picture with secondary market research
Although it may seem counter‑intuitive, your market research plan should start with a scan of published information. Data from secondary research will give you a high‑level overview of market opportunities. It typically consists of previously collected information on consumer demographics, industry trends, market share, etc.
This type of information provides the context you need to develop a profile of your market and industry. For instance, if you wanted to launch a locally produced wine to the Ontario and Quebec markets, you would need to gather information on the number of wine drinkers in these provinces, broken down by gender, age, geography, household income and level of education. You would also need to gather broad industry data on the wine market, such as size, forecasted growth, profitability, key players, market share and market trends.
Statistics Canada and Industry Canada are reliable sources of economic, industry, social and census data. Other sources of information include articles from business magazines and periodicals, trade associations and their publications, and analyst reports or company annual reports. As well, there are several companies that offer industry research and analysis for a fee.
3. Dive deeper with primary research
Primary research (or field research) refers to the gathering of original information, through interviews and other first‑hand methods, specifically about your product or business. Primary research gives you control over the type of questions you ask and information you gather. While the results can be extremely valuable, the research can be time‑consuming and costly. As well, conducting primary research is a highly-specialized skill. Given the investment and technical requirements for designing and conducting primary research, we recommend you employ a market research professional or company if you decide to undertake primary research.
Before you begin your primary research, be sure to map out exactly what you want to learn. Ask yourself the following questions: What business decisions do I want to make from this research? Who should we talk to? If I could get an answer to only one question, what would it be?
Here are the main types of primary research that may be useful for your business:
Online surveys
These surveys are increasingly popular and relatively inexpensive. Online surveys can generate thousands of responses to a broad range of questions. The main benefit of online surveys is quick results, usually within days. A drawback is that they can be prone to superficial or incomplete answers. We recommend using online surveys where you need to get market feedback from a wide range of respondents.
Telephone surveys
These are used to conduct more indepth interviews that can last from 10 to 30 minutes. However, potential customers are often wary of callers and may be reluctant to participate or give anything other than short answers. In a B2B environment, telephone interviews can be an efficient method to get feedback from prospective or current customers.
Direct mail surveys
This is a relatively cheap method to cover a wide geographical area and avoids the potential for interviewer bias. However, response rates (the proportion of people sending back a completed survey) are often very low and it can take a long time before enough surveys are returned to get a useful sample.
Focus groups
This methodology brings potential or current customers together to discuss their feelings about a product or market. Focus groups are a good way of getting detailed information about customer tastes and preferences.
Observation
Observing customers or prospective customers allows you to see how they behave in a store or with a product. Observation works well in retail markets. However, without direct feedback from the consumer being observed, you may not get the “whys” behind their actions.
Conclusion
Researching your target market is an important step in creating a new marketing plan for any small business. Whether you’re marketing your own company or promoting the services of an outside provider, knowing just who you’re marketing to can be the difference between success and failure.