Market Research Why Do Research? Research is essential to finding out if your business idea will work. It is always best to have information from unbiased sources (that is, not your friends) to base decisions on, and it is best you have this information well before you launch your business. Key Point Market research pays off. Although the only guaranteed way to find out how the market will respond is to start operating, that is a leap in the dark. Carrying out market research significantly lowers the risks associated with starting a business. Research Objectives Before conducting any market research, you need to have clear objectives for it. That is, you need to know exactly what information you are trying to find out and why you need it. Market research can be used for numerous reasons. For example, it can be used to find out: Whether people actually want the product. Which people are most likely to buy the product. Which group of customers is likely to be most profitable. What prices you could charge for your products and services. How often people will buy – is your product or service a ‘one-off’ purchase, or something that people will buy regularly? The benefits that people want to receive when they buy your type of product. What needs people have which are currently not being met by any other businesses. The best ways to market to potential customers. Where people currently buy from and why they choose to support those businesses. Much of this information can be used to work out whether there will be enough demand for your business’s products for your business idea to work. It can also be used to figure out how you could change your original idea so it will be viable, perhaps by identifying ‘gaps’ in the market. Factor to Consider Through the process of conducting market research, you may discover that only a specific subgroup of your expected target market is interested in your product. If so, you will need to do more secondary research to check whether it will be large enough to support your business. Research Methods There are a number of ways in which you can carry out market research. The main ways for new businesses include: Observation: This involves collecting data without interacting with the people from whom data is being collected. For example, if your idea involves selling products in a certain location, you could go to that location at various times of the day, on different days of the week, to count how many people are there or how many cars are driving past. Product testing: If you have created a new product, you can try testing it with members of the target market (or with different audiences to see who is most interested in it). Surveys: This involves collecting data by asking people questions. There are many methods for carrying out surveys including online, by email, and by interviewing people. Focus Groups: This is a type of survey. However, instead of surveying people individually, it is done in a group setting. This is a good way to generate discussion and get thoughtful responses to your questions. Product testing may also be done in a focus group. Surveys Surveys are the most popular method of market research. A survey questionnaire can reach many people and produce information that is easy to use. It is just a list of questions that can be done on paper or online, or even over the phone or on the street. Whilst it seems to be a simple research method, it is important to note that the quality of the results depends largely on the quality of your questions. You should always test your questions on several people before going ahead with your survey. Check for: Unclear questions: Do people understand what they are being asked? Ambiguous questions: Make sure questions cannot be interpreted in different ways. Logical response options: If you give people options for responding to a question, these options should make sense and should cover all possible responses. It is good to include ‘other’ as a response option. Leading questions: Avoid questions which are worded in a way that encourages a certain response over others. Make sure the questions you ask fully cover your research objectives. However, you also need to be careful about the length of your survey. If it is too long, some people may choose not to participate, may stop partway through, or may rush through it without giving decent thought to their responses. Therefore, base all questions around your research objectives and do not include extra ‘nice to know’ but non-essential questions. Also, be careful as to how you ask a question. It is easier to analyse ‘closed questions’, but sometimes ‘open questions’ are needed. Closed questions involve ‘yes’ and ‘no’ responses or require someone to choose an answer. You can then add up responses and easily calculate how many people gave a certain answer. In comparison, open questions ask people to explain what they think and feel, so it is harder to summarise responses. The questions you ask may affect the survey method. Some survey questions are best asked in an interview situation, although this is typically an expensive and time-consuming way of conducting research. Online surveys have the advantages of fast results, low cost, and long reach. They can be a good way for you to send out a short survey about the feasibility of your business idea. A useful online survey service is provided by SurveyMonkey. The free version of this service allows you to send out a 10-question survey to up to 100 respondents. Very importantly, be careful who you ask. Don’t survey only your friends and family – they might just tell you what you want to hear! In most cases, participants should be members of your target market. Furthermore, as a general guideline, you need to survey at least 30 people from each of your potential target markets. Making business decisions based on a small number of responses is extremely risky! Factor to Consider The Unsolicited Electronic Messages Act 2007 prohibits the sending of unsolicited commercial electronic messages. ‘Electronic messages’ include emails, online messaging, and SMSs (text messages). If you send out a survey through any electronic means, make sure you have consent first. Next: Will You Make a Profit?