Market Research

Market Research: Key to a Successful Business

Some entrepreneurs go into the business arena without considering what their customers want. They have become certain that their customers will purchase the product or service. This is a common mistake that most entrepreneurs encounter when starting a business.

Before investing in a business, entrepreneurs must know their customers’ wants. They must also be aware of the competitor’s product or service for them to be able to know what features need to be added on their new product or service. All of this can be done through market research.

What is Market Research?

Market research is the process of gathering relevant information that helps an entrepreneur find out target market for his product or service. It is an essential component of business strategy.

Through market research, entrepreneurs will be able to identify, analyse, and interpret the market need, size, and competition of the product or service. Market research also gives insights on how customers act to the product.  Hence, it will help make wise decision on the business by understanding customers. Moreover, it provides significant data to help solve business challenges.

Two Types of Market Research

The two major types of market research are Primary Research and Secondary Research. It’s necessary to do them both in order to know the viability of the business idea.

• Primary Research – also known as Field Research, is the process of gathering first hand information through questionnaires, surveys, polls, phone and personal interviews, and direct mails.
• Secondary Research – or Desk Research, is a type of research that deals with gathering of readily available information. This information have been collected and published in reports, statistics, websites, government agencies, and trade associations.

Considerations when staring a business

Before starting a business, there are a few important things an entrepreneur must consider. These considerations fall under market research.

• Market information – Market information helps an entrepreneur determine the supply, demand, and prices of the product in the market. This will make him understand the social and technical aspects of his market.
• Market segmentation – This is a strategy of subdividing large market into identifiable segments by considering the following differences: geographic, personality, demographic, psychographic, and gender.
• Market trends – This is the general movement of a product or service prices over time. By understanding market trends, one can assist to forecast sales in the future and anticipate changes that may affect the business.
• SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis – The entrepreneur will be able to improve his business by comparing the strength and weakness of his product against the competitor’s product. He will be able to develop improvements on the product or service in order to make it more competitive in the market arena. And by becoming aware of the opportunities and threats, such as changes or innovation related to the product, he can achieve business stability and success. SWOT can also be done by measuring market effectiveness through methods such as Customer Analysis and Competitor Analysis. Other methods that measure SWOT are Marketing Mix Modeling (MMM) and Simulated Test Marketing (STM). Using them, one will be able to analyze sales statistics and optimize promotional strategy for the product or service.
• Competitor’s product and customers – An entrepreneur must not only know his product and customers. He also needs to have an extensive knowledge about the competitor’s product, on what’s in the product that makes customers buy it, and on what segment of market do its customers fall under. Market research will help do this.

The Steps of Market Research

Step 1: Designing the questionnaire

The questionnaire is the most effective and efficient tool in determining customers’ needs, wants, and likes, how they act to a specific product or service. It is also a good way to extensively know the competitor’s product. It is actually the most widely used method of primary market research.

By asking potential customers or competitors with the use of a questionnaire, one will gain valuable information to develop the proposed product with respect to the answers to the questions.

The advisable number of possible customers or competitors who will be surveyed is 40-50. The number of questions in the questionnaire is 10-12. Questions must be “Open-ended questions”. This type of question lets customers provide information about their wants, needs, and habits.

Step 2: Analyzing the results

When the questionnaires are all answered, the next step of market research is to analyse the answers. For instance, the question is “How likely would you recommend product A to your friends and family and why?” The choices are: Very likely, Likely, Neutral, Unlikely, Very unlikely. By putting the figures into a graph or chart, one can easily see the results as to how many from the 40-50 customers answered which choices.

Step 3: Application to the business

After analyzing the results, one must now apply them by making necessary changes on the business. For example, 35 customers answered the above question “Neutral”. Thirty from them reasoned out the costly price. With this finding, one may lower the price of the product to get more recommendations.

Step 4: Continuation of the research

Market research is an ongoing activity. Entrepreneurs must evaluate their customers to know if they are satisfied or if the product or service needs to be improved. They must serve the customers need in order for them to keep using the product. If customers want something new on the product, entrepreneurs must improve it to continually delight customers. This can only be achieved by carrying out a market research.

The Activities in Market Research

• Go over existing products or services. By looking at similar products or services in the market, one will be able to learn from them. He will be able to distinguish their strengths and weaknesses. This is relevant in making the proposed product better.
• Check the target audience. Identify the needs, wants, likes, and habits of the target customers through survey questionnaires.
• Perform demonstration of the product to prospects. Before selling the product, it’s also recommended to show it to some of the target customers. Their feedback will help decide whether or not it’s the time to start selling.
• Be aware of the market and its trends. Keeping an eye on the market and its trends will help an entrepreneur decide about his business. Do some aspects of the product or service need improvement before selling? Is it the right time to sell bulk or small? Is there market innovation that the product needs to adapt to? These questions can only be answered accurately through market research.
• Know the competitor’s product or services. Researching the competitor’s product or service will let one know its strengths and weaknesses. He will be able to identify the advantage of his product over the competitor’s and determine what needs to be improved.

Entrepreneurs must rely on market research before setting out business operation to avoid mistakes early on. Understanding customers is a key for a business to succeed. And one can only understand his customers by conducting market research.