Ideas for Conducting Market Research
Building a business plan typically requires thinking into four distinct areas:
- What am I selling, and why do people want to pay for it? (Value Proposition)
- Who are my target customers, and how many potential customers can I reach? (Market Research)?
- How do I provide my goods or services to my customers? (Operating Model)
- Looking at the startup costs, potential revenue, and variable/fixed costs – can this business generate a profit? (Financial Model)
A common challenge many entrepreneurs face after developing their value proposition relates to conducting market research to understand better their target customers, the size of their potential market, and their strengths/weaknesses relative to their competition. Market research done well provides data and insights helpful in making stronger strategic decisions, spotting emerging trends, projecting revenue, securing funding from investors/lenders, and determining new business opportunities. That all sounds great, but how do you conduct market research if you’ve never done it before and don’t have the cash to hire a marketing firm to do it for you?
Here are a few ideas or approaches to consider – Primary or Direct Research:
Interviews allow you to talk face-to-face with potential customers about your product and allow for a flowing conversation in which you can see what it is about your product that resonates with customers and, conversely, what isn’t as valuable. Interviews are also an excellent way to refine your sales or elevator pitch. Don’t limit your interviewees to just potential customers. If you’re a brick-and-mortar business addressing a local market, consider researching similar businesses operating in a similarly sized market. As long as you’re not in direct competition, business owners are often willing to share their stories and lessons learned. They might even want to pick your brain a bit too.
Focus Groups are typically more structured than interviews and require you to gather a group of carefully selected people to test your product or watch a demo and provide feedback.
Competitive Analysis provides insights into the competition in your market and industry. The goal is to learn what is working in your industry and how the competition is differentiating so that you can be strategic in filling a market gap and separating yourself from the competition.
Pricing Research involves seeking out similar products or services already in the market and identifying how much they sell for. This should give you an idea of what customers are willing to pay and inform your pricing strategy.
Secondary or Indirect research – Several powerful data tools are available through the United States Census Bureau and the Small Business Administration. Use these tools to estimate the size of your potential market, whether that’s defined by geography, socio-demographic parameters, or other. You can find the United States Census Bureau’s library of data tools. There are also several free data tools sourced and linked by the Small Business Administration at:
Market research, when done well, is a powerful process that results in a stronger understanding of your target customer and market, your competition, and where to position your business to provide a strategic advantage. We hope some of the ideas raised here give you direction in conducting market research for your concept.