Learn How To Do Market Research Before Starting A Business
Updated: Apr 21
Starting a new business is an exciting time but stressful as there is a whole array of things to think about such as finance, the actual product or service, distribution and advertising. However, during this busy time one important aspect that will help your venture become a success often gets overlooked is market research. Otherwise, this may have not been neglected but if you don’t know how to do market research before starting a business then you have come to the right place to help you get started and guide you through the research process.
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4 steps in conducting market research when starting out
In getting the most out of your market research budget when starting a business, you will need to follow the 4 steps below to ensure the money is spent wisely:
Step 1: Establish what you must know about the market
If the approach to the research is more focused through setting objectives then you will get more value out of it.
Step 2: Give precedence to the findings from step 1
By focusing on the information that will benefit you the most rather than trying to research everything.
Step 3: Examine the cheaper research options
This could be through secondary research (information already published by an independent party) such as trade associations or business libraries. You can develop and run your own surveys with the assistance from bodies that represent small businesses. Alternatively, you can use a freelance researcher or a research agency agency if your budget allows for it.
Step 4: Evaluate the cost of doing the research yourself
With the internet you are able to do research without breaking the bank. It comes down to the what you need, the level of expertise required to get it and the budget available before deciding whether to use a researcher or not.
Two types of market research to use
There are quite a few market research methods available from using census data to doing an online survey. This could be telephone interviews, face to face interviews or self-completion (online or paper) and information found in internal or external sources like Google. Whilst in other cases a mix of methodologies can be applied. All this comes down to is basically two types of market research: primary and secondary research.
1. Secondary market research methods
Secondary market research also known as desk research, are sources of information that have been previously completed separately by other parties for another purpose and is made available through paid or free sources. This could be reports carried out by a researcher or financial data made available by companies. Examples of this are through online search (Google trends), government databases (census data), paid research reports, corporate databases (www.sec.gov and Hoovers), trade and business press.
Another example is using social listening tools like Awario, you can identify topics of interest and analyse the related posts such as examining the number of brand mentions and what people are saying about the product online. Social media analytics can also track the number of likes, shares, impressions and link clicks.
2. Primary market research methods
As secondary research is likely to cover only part of the information you want, primary research will be required. Primary research focuses on key objectives that you have set for your business.
This could be through development of research material such as questionnaires, interviewing or observations of your target audience, data analysis and interpretation of results for conclusions and recommendations to be made.
Although, you can use bought or old market research through secondary research, this won’t entirely be relevant to the issue at hand and most likely be out of date. Whereas, primary research will have a key set focus on the objectives for those moments in time. Primary research is split into two forms of research - quantitative and qualitative research.
Quantitative research is where results can be measured by numbers, which is straight forward to understand and pick up in making decisions. These quantified results are collected by interviewing a large group of people (from 50 running into the 1000s) that is a reflection of the whole population. Therefore, with a larger sample size, statistical analysis can be applied to provide better insights such as key drivers of buyers’ decisions, predicted behaviour and optimal price levels.
These surveys can be flexible because of the wide range of question formats and can be a mix of mainly closed questions with a couple of open-ended questions (in their own words reasons why). Closed ended questions can be multiple choice, yes or no answers, checkbox, rating scales and a matrix of options. Some demographic questions will also be included in these surveys. Online surveys are the fastest and least expensive method to use especially if doing the research yourself rather paying a research agency.
Check out this post if doing DIY research : 5 Best Survey Maker Platforms To Consider Using
Qualitative research is exploring the in-depth behaviour, attitudes and opinions of a small group of individuals in a more open manner instead of strictly following a set of questions. These tend to be face to face in-depth interviews or focus groups, where people can discuss the subject at hand openly with guidance from the interviewer. Also, observational techniques like mystery shopping can be used as well.
Qualitative research is normally applied at the initial stage for exploratory purposes and build understanding of the subject from the key target audience that tends to lead to further research, where the insights gained from the initial phase can feed into.
For more in-depth information of the research methods available then read this great post :
All the best methods of market research
So what should I research before starting a business?
There are a number of questions that you will need answers to, in order for your new business to be successful and sustainable like:
What is my target audience?
Who are my competitors both locally and further afield?
What are the strengths and weaknesses of my competitors?
What price are customers willing to pay?
What is the likely frequency of purchase of the product or service?
Whether or not you will be able to make money from this business enterprise?
It’s best to make time to gather all the relevant information you need before starting your business, otherwise money and time may get wasted on marketing without doing so.
There will be things where you need to make realistic assumptions from the information you have such as gross profit margins and projected sales figures, else your business and marketing plan will just be numbers on a page.
Two key areas that your questions will primarily focus on is the audience you are targeting and the competition.
1. Target audience
Determine who your customers are with a description of their age, income, job, lifestyle, level of education and so on. Find out what they are currently buying with an explanation of their buying habits of relevant services or products. This can include popular features, the quantity of purchase, their preferred suppliers and the main price points.
Look for reasons behind the purchase of these products or services, which require more in-depth investigation into the minds of consumers and see what the triggers are. This could be a price promotion, the colours available, quality, better fit for purpose and many other things.
Also understand, what would drive your target audience to buy from you.
The information you are likely to want to know about your competition, could be:
Competitors of a similar size.
Companies that may be serving the same locations or regions. So, if you’re a web-based business, this is likely to be worldwide.
Businesses with a similar structure of ownership, that could be a partnership or a limited company then it’s best to research those companies with the same composition.
Look for competitors who are relatively new as much older competitors maybe successful due to their long-term history and reputation.
Utilise the information you collect not only for how much business you could make but also find out how your business could fit and adjust to the marketplace.
After you have gathered all the answers to these questions, you will be able to do SWOT analysis of your competition by establishing what their strengths and weaknesses are. You can also check out the customer experience of your competitors by visiting their shop or website. By analysing the results, you may be able to establish an opportunity that you can exploit to meet the needs of customers or there is a niche that needs to be filled. Plus see any possible barriers to entry to the market.
3 common market research mistakes to avoid
The following are 3 common mistakes to avoid making, when carrying out market research:
1. Only interviewing family and friends
By relying on friends and family you are not getting the full picture of your potential customers, needs, wants, attitudes and buying behaviour as well as the competition. Those close to you are more likely to bias the information and data as they want to support you on your new venture. You need an independent view from customers or potential customers and peers from your sector.
2. Relying on one source of data
Using only one set of data like secondary research that maybe out of date and not specific to your business goals. In order to do market research well, you need both primary and secondary research through different resources to get a true unbiased opinion.
3. Understanding your own bias
Each person has their own views and opinions that could influence the way they interpret the results. Obviously, you want your business to work but you don’t want it to bias your opinion of the results. So be wary of this and make that extra step in finding another way to make sense of it.
All the methods explained above are valid and valuable in getting you the information, you need but as your starting out there maybe budget constraints on what you can do. However, there are many free secondary sources of information that you can start off with along with trying your own DIY online survey through survey platforms such as JotForm who provide you with easy to use tools for a range of different purposes and will help you along the way. Plus, they also have a wide range of online forms and templates for apps, PDFs, approvals, tables, online stores and more.
Once your business is more established and profitable, you can use more traditional and in-depth methods of research such as ethnography to further increase your business chances of sustainable success.
By getting in the mind of customers will help give you an edge as a small business because market research tends to be further down the list of things to do for many of your competitors.
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