Understanding market research
Never underestimate the power of market research: if it's well
done, it can help you decide exactly where your business will sit
in the market, allowing you to work out what your customers'
expectations of your service will be and determining how you should
approach your branding.
What is market research?
- Market research is a method of looking at the market you
plan to enter in an objective, systematic way, allowing you
to analyse exactly how you will position your business and predict
how and where to place yourself in the market. Business owners then
include the data in their business plans to help potential
stakeholders gain a better insight into how the business will
- Market research comes from a number of sources, which can
loosely be divided into:
- Secondary research - research commissioned by
others which is relevant to your business. This generally takes the
form of reports and statistics put together by government agencies,
chambers of commerce, trade association or statistics groups such
as Mori or Nielsen. Most people start with secondary research to
give them a good idea of the state of the market as a whole.
- Primary research - research the business has done
itself, often by putting together focus groups, drawing up surveys
or simply interviewing potential customers and competitors. This
allows you to get immediate feedback about your product or
- When you're conducting market research, it's likely you'll want
to look at the following categories:
- The environment surrounding your business - the
political, social and economic factors around the business. If you
are starting up during a recession, are you sure people will be
able to afford bespoke bathrooms? Likewise, is Kensington the right
place for a pound shop?
- Your potential customers and who they are. Finding
out about your customer will help you to decide how to brand the
business, how much to charge and where to place it in the
- Who your competitors are and why they are
successful. Use competitors as case studies, looking at what has
worked and what hasn't, and even niches they've overlooked which
you can target.
Why market research is important
- The main reason market research is essential for any new
business is to find out if there will be a demand for your
product or service. Not only will this help you decide
whether to go ahead with the business in the first place, but it
will allow you to work out what volume you will need to produce and
how many people you will be able to afford to employ.
- Having all the figures and statistics at your fingertips when
you are pitching for finance will help to convince investors
and bank managers, demonstrating your business acumen and
showing savvy enough to entrust with their cash.
- Good market research will help you work out who your
customers are, determining their average age, gender,
income, occupation and habits. If your customers are other
businesses, it will help you work out how big they are, who their
customers are and who makes the procurement decisions. This will
allow you to target more specific markets and disregard unsuitable
- Because market research will help you understand your
customers' habits, it will also help you increase your
marketing returns by allowing you to target more specific
groups in more effective ways.
- Likewise, a good understanding of your customers, their income
levels and how much they are willing to pay, as well as an insight
into how your competitors approach pricing will enable you to
determine how much you will charge for your
- Market research looks at market data objectively
- Start with secondary research before you move on to primary
- Look at the environmental circumstances surrounding your
- Look into your customers and their habits
- Check out your competitors to see how they price their
How large should my survey be?
Your sample size should be as large as possible - if you are
targeting consumers, questions at least 100 people, but more if you
can. To be technically representative of the UK population, you
should survey at least 342 people.
How often do I need to do it?
Market research should be an ongoing thing so you can monitor how
your market is evolving. You don't necessarily need to conduct
large customer surveys on a regular basis - keeping up-to-date on
the latest activities in your market should be enough.
Should I use a market research agency?
It may be more cost-effective to outsource your market research to
an agency which already has the infrastructure in place to get fast
results. If you have a limited budget, though, it may not be a
viable option as market research agencies rarely take on projects
with a budget below £2,500. Make sure you check up on your agency
thoroughly before you agree to use them, though.
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
Qualitative research: Qualitative 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
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