Researching your business idea
If you're serious about starting a business, using market research as part of your business plan will help you determine how viable your business idea is, as well as helping to convince potential investors. Market research shouldn't just be used when you're planning your business, though: conduct regular research to gain a deeper understanding of how your market and customers are changing.
Using market data
- A simple way to conduct market research is to look at pre-published reports and statistics. These will provide data on how your market is performing, market trends, and may give you statistics on the average customer in your sector and his or her habits. These may be available for free from the government, or for a fee from commercial data companies.
- Always ensure the information is up-to-date. Statistics for the property market from a year ago will show a market which was dramatically different to the current climate.
- There's a wealth of information out there, but it will take a bit of research to find the right information for your business. Try searching:
- Trade associations or bodies: Your trade association will either have publications of its own or be able to point you in the direction of information.
- The web: It's an obvious one, but it's surprising how much information you can glean just from getting the right phrase when you're on search. For the best results, put speech marks around specific phrases.
- The Office for National Statistics: The government statistics website has stats on everything, from UK tourism to tomato growers in the South-East. A word of warning, though: the website is almost impenetrable, so be prepared to spend time sifting through data sets to find the right figures.
- Commercial publishers: Companies such as Mintel, Datamonitor, Euromonitor, Visiongain and The Economist Intelligence Unit (EIU) publish extensive, detailed reports - but be prepared to pay for the information. If you don't have a spare £3,000, though, try the British Library Business & IP Centre, which gives you access to thousands of publications and statistics.
- Trade publications: Some trade publications also conduct market research. Look at titles from publishers such as William Reed, United Business Media, or B2B International.
- Although it's never a pleasant process to go through, cold calling is faster than direct interviews and useful if you want to get hold of a large amount of data in a short space of time.
- Cold calling is more suited to quantitative statistics regarding customers' ages, occupations and habits than for lengthy discussions of your product or service idea and where it might fit into their lives.
- Make it clear at the beginning of the call that you're not trying to sell anything to the person on the other end of the line, and ask politely whether they would like to answer a few questions.
- Keep your calls as short as possible - people don't like being bothered. Simple yes/no questions or multiple choice questions, as long as they are specific enough to provide detailed information, will keep things brief.
- You can buy direct marketing lists which include telephone numbers, email addresses and other contact details from companies such as TLS Data or Selectabase. Search the web if you're looking for a specific group.
- Cold calling has a relatively low success rate, so you'll need to develop a thick skin. If 5% of the people you call are prepared to answer your questions, you're doing very well. If you feel yourself lagging or beginning to get frustrated, take a break and try again later on.
- For customer research, nothing beats going out with a clipboard and a survey, standing on a street corner, looking your customers in the eye and asking questions.
- Choose a time and place you know lots of your target customers will be around. For example, if you're launching a cleaning service, busy commuters may be your best market, so try standing near bus stops in the morning, or if you're launching a new variety of baby food, mums will be your best customers - so try to speak to parents returning from the school run.
- It may be worth offering an incentive to complete your survey. If you can buy them a coffee while you talk to them or offer money off your product or service, they will be more likely to stop and chat.
- Don't be disheartened if people turn you down, and persevere. Eventually, people will stop and talk.
- To increase the number of results you get, employ people to help you out - but make it clear they need to be courteous.
Running focus groups
- Focus groups allow you to glean information from customers' responses to your product or questionnaire, creating a dialogue which will allow them to build on each others' opinions.
- Focus groups are good for getting reactions from children or other groups whose level of literacy or attention span may not be robust enough to handle innumerable survey questions.
- A focus group should be made up for six to eight participants, all of whom have been pre-invited. Incentivise people to attend the focus group by offering a financial reward or gift.
- The session should last no more than an hour or people will start to lose interest. Explain to the attendees exactly how long the session will last and how it will be run so they aren't left anticipating an endless stream of boring questions.
- Ensure all the questions you ask are open to prevent people from giving yes/no answers. Instead, bring up topics and encourage people to speak to each other about it. If the participants aren't being particularly forthcoming with their opinions, invite each person to speak in turn.
- To encourage them to really think about their responses, ask participants to consider a particular issue or topic for a few minutes before they write down how they feel about it. Then, ask each participant to read their response aloud to the group. This should help stimulate debate and will ensure well thought-out and structured arguments.
- Keep minutes for each focus group, as well as a brief profile of each attendee. This will ensure you have a lasting record of the focus groups and, in the longer term, will provide you with information on how your market is evolving.
- Use pre-published market data to get statistics on how your market is performing, market trends, and the average customer and his or her habits
- Cold calling allows you to gather last amounts of direct information, fast
- Direct surveys will allow you to speak to your potential customers
- Focus groups stimulate dialogue among potential customers
Quantitative research: Quantitative research looks at statistics: how many customers there are, what their age ranges are, what their average incomes are, and provides information you can then present as a graph or table.
Quantitative research: Quantitative research is more anecdotal: for example, you may want to ask customers why they use your product or what you can do to improve your service. This can't be presented in a table or graph format, but may be useful to help you better understand your customers.
Open/Closed questions: An open question forces the answerer to put detail in their question - for example, 'How do you think we can improve our product?'. A closed question generally has a yes or no answer - for example, 'Is our product useful to you?'
Some information you might want to find out:
From new customers:
- How many there are
- Their age
- Their occupation
- Their background
- Where they are based
- Whether they have a need for your product or service
- Whether they would use your product or service
- How they would use your product or service
- Whether they will have a need for your product or service in the future - if you are a baby brand and they don't have children, are they planning a family?
- How much they would be willing to pay for your product or service
- What they think of your branding
- What they think of your competitors
- How they would compare your product or service to your competitors'
- What sort of service they expect for the price they are paying - if you are a plumber, would they value a free call-out?
- Whether they would be tempted by an introductory offer or freebies
- If they are a business, whether they have any future plans which might mean they need your services
- If they are a business, what is the name of the person who you need to speak to?
From existing customers:
- What they think of your product or service
- Whether they have ever used a competitor. If so, why they chose the competitor and whether they would use them again
- How they feel about your prices
- Why they use your product or service over your competitors
- What they think of your customer service
- Whether they have any suggestions for your business
- Whether the reason they use your business is likely to change - are they likely to move from the area?
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