One of the most important resources to have for your business is one you can create yourself: market research.
Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs starting up a new biz, but it can also better inform existing businesses on activities like marketing, advertising, and releasing new products or services.
As a newbie to this kind of data, market research can feel overwhelming at first. But once you break it down into a focused plan with defined steps, the whole process will feel more manageable.
So, whether you’re planning to do market research to beef up your business plan or to inform your marketing strategy, keep reading for a crash course in the basics of conducting research.
What is market research?
When boiled down to its essence, market research helps you better understand who your customers are and why they might want to buy your product or service.
Let’s put it another way: If you’re a writer, one of the first things you should know it who you’re talking to. Who is your audience? And what are you trying to tell them? Well, the same concept applies to market research for businesses.
Using both primary (talking to customers) and secondary (info on your customers from other sources) research, businesses gather data to answer the following crucial questions:
- Who are your customers? Not only do you need to learn their basic demographics (age, gender, ethnicity, geographic location), but also other info like their average income, educational level, and lifestyle. Getting a peek at their lives (and inside their heads) can help businesses better communicate with and sell to customers.
- What problem do customers have? What is the need your product or service will meet for your customers? What problem are you trying to solve for them? Understanding your customers’ motivation here can help you clearly define your value proposition.
- What are customers currently buying to meet that need? When it comes to your specific industry or niche, take a look at what solutions are resonating with your customers right now. This can give you some in-depth info on potential competitors.
- How can you get customers to buy from you instead? How can you encourage your target customers to buy your product instead of your competitors’? What will motivate customers to switch? And how can you differentiate yourself and/or your product?
Market research can encompass everything from customer surveys to interviews to industry reports and even some agencies that will sell you credit reports on competing companies (no, we don’t recommend you buy those). Because of the depth and potential impact of all this data, solid market research is expensive—Fortune 500 companies happily spend many thousands of dollars on a robust market research report.
As a small business owner, that kind of cost can be prohibitive. But even if you don’t have wads of cash lying around, you can compile market research without busting your budget. And we’ll walk you through some ways to get started.
How to do your own market research
Putting together your plan
Before diving into doing your actual research, you’ll need to set aside some time to create a plan. One piece of market research can’t be everything to everyone in a company, especially when you have a limited budget. To help stretch your dollars further, spend some time honing your focus with these steps:
- Figure out what you need to know about your market. Define your market (your industry, niche, etc.) and specifics on what you want to find out. If you just want data on your ideal customer, great—hone in on collecting that information. But you can do an in-depth competitive analysis or analyze your industry as well (think trends, threats, revenue data, and potential growth). Prioritize the information that’s most valuable to your business, and focus your efforts on that.
- Gather resources for your research: Not every kind of primary or secondary research makes sense for every small business. If you’re a newbie business and have no customers yet, then it won’t do much good to try to do customer interviews. And don’t worry—we’ll share some low-cost resource options below.
- Set a budget: Once you know what resources you’ll use and have outlined the goal for your research, estimate how much it’ll cost. Be reasonable and realistic—you won’t be able to get through this process without spending a little something.
Now, let’s get to the meat of market research. As I mentioned earlier, there are two types of market research: primary and secondary.
Primary research is brand, spanking new information. It doesn’t currently exist anywhere else, and you get it straight from the source: your target customers. Primary research is meant to help business owners get direct answers to their burning questions, like defining customer product preferences, understanding their motivations, and getting a sense of their needs.
Some common types of primary research include:
- Online surveys: Using a tool like SurveyMonkey or Wufoo, create and distribute a survey to ideal customers in your target market. But before blasting out any emails, ensure that you’re compliant with anti-spam laws like CAN-SPAM (U.S.) and CASL (Canada).
- Customer interviews: Asking customers questions either in person or over the phone.
- Focus groups: Create a small sample of your ideal customers, gather them together, and have a mediator facilitate a discussion.
- Direct mail: Don’t discount the power of snail mail! Send a paper survey to a sampling of your ideal customers. While direct mail surveys can help curb researcher bias, the response rate is usually low and responses take a while to reach you. But direct mail is a great avenue if your customers belong to an older demographic or you’re worried about spam email standards. Also, direct mail works: 42% of recipients read or scan direct mail pieces.
Digging into primary research might take you outside your comfort zone. You might shy away from asking customers lengthy questions to avoid annoying them. Or maybe you’ll fret over taking too much of their time. But trust me: the long-term impact of a rigorous market research report is worth the discomfort.
When designing your survey questions, follow a few basic rules of thumb:
- Keep questions short and simple. The longer the question, the more likely it is to confuse your customers.
- Go from general questions to more specific ones.
- Make sure your survey is easy to read and has a clean design.
- Don’t use ambiguous words or leading questions.
- Offer different ways to respond based on the question. It could be true or false, multiple choice, a response scale (like stars or numbers 1 to 5), or comment boxes to elaborate.
- Send your survey to friends/colleagues first. Fresh eyes can spot potential problems and errors.
While primary research offers a more detailed view of customer needs and competitor profiles, secondary research offers a bigger-picture analysis.
As I mentioned before, secondary research uses resources that already exist. That could mean digging through government demographic data, industry reports, or pricing guides for data that can guide your research.
Some resources you can use for secondary research include:
- Demographic data: Look up specific demographic data from government entities like Census.gov or Statistics Canada for valuable insights to inform ideal customer profiles.
- Industry/sector data: Get a sense of how your specific industry is performing using data from the U.S. Bureau of Labor Statistics, the U.S. Census Bureau, Statistics Canada, or Industry Canada. Also check out information from your specific trade association and trade publications for specific industry info.
- Competitors: Don’t forget to check out competing companies! Look up other businesses that are relatively the same size, offering similar products/services, in your geographic area, and/or that are serving the same customers. What can you learn from them? Where do they succeed or fall short? Are there gaps in their offerings that you can fill with your products/services?
- Local library: It might sound old-fashioned, but your local library will likely have great reference materials on your market and industry.
- Sales data: If you’re an existing business, don’t neglect your own internal data. Examine invoices, sales receipts, revenue reports, and other relevant data to determine trends, popularity of certain goods/services, and the impact of specific advertising/marketing campaigns.
If you’re still digging for more information (or maybe just a helping hand), there are a variety of other resources to use to inform your research:
- PR Newswire: A repository of press releases for the general media. Search by industry to find current events, data, and research affecting your chosen market.
- U.S. Small Business Administration: Access resources to help you conduct your research, write a business plan, calculate your business costs, and more.
- Canada Business Network: Access free market research services, secondary research resources, sample business plans, a guide to designing your questionnaire, and more.
Moving forward with your own market research
No matter what kind of small business you’re running, it’s crucial to know everything you can about your customers. Knowing how your product or service meets a specific need—and then figuring out how to communicate that effectively—can make the difference between success and failure.
And now that you have a better grasp on the fundamentals of market research, you can start designing your own plan to better understand both your target customers and your competitors.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.