You may have the best idea in the world – a fantastic new product, or a life-changing new service, but for your business to be a success, you need to be sure that there is a real market in place. Do consumers want to buy your product, or do they actually need your service?
As a prospective business owner, you will already be sold on your new idea. Unfortunately, you are probably the least objective judge of the viability of your idea. It’s perfectly natural to be sensitive to criticism, and unwilling to accept flaws in your business vision.
However, this is one of the first true tests of your strength as a business owner – to spend time to undertake some robust market research to help you establish whether a market exists for your business.
Market research basics
There are all sorts of ways to conduct market research. Much of it you can carry out yourself – especially if you are on a budget.
Regardless of the type of business you are launching, you should divide your market research work into several distinct parts, for example:
- Work out the right questions to ask.
- How are you going to source this information?
- How are you going to analyse the results and benefit from them?
What questions do you need to ask?
At the very highest level, you need the answers to two fundamental questions:
a) Firstly – is there a market for your goods or services?
b) If a market exists, how can your business enter the market and operate successfully?
Then, you need to work out the detailed questions you want to find answers to, and how best to conduct the market research.
The questions you are likely to ask vary hugely according to the type of business you are looking to launch, but may include:
- How much demand is there for the product?
- Who are your potential customers (demographic information)?
- What influences customer behavior (branding, price sensitivity, advertising, etc.)?
- Who are your competitors?
- What are your competitors doing well, and what are they doing badly?
- How much are potential customers willing to pay for your product?
- What external factors affect your potential market (seasonality, regulations, technology, etc.)
Market research methods / resources
Globalisation and the boom in internet technology has meant that small businesses face competition from all directions these days – not just from the locality or niche in which they operate. At the same time, it has never been easier to access market-based information thanks to the web, or for you to undertake primary research of your own, for a very low cost.
Here are some methods you can use to undertake your research:
- Create surveys on social media sites, such as Facebook and Twitter. Both platforms allow you to promote your survey – and you can apply filters to ensure they appear before your target audience.
- If you are launching a new product, give away samples and ask for feedback, ask for feedback in retail areas. You simply can’t beat face-to-face research. If you’re not a natural people’s person, consider involving friends, colleagues and family to help.
- Spend lots of time researching your competitors on Google. Find out what type of price points, promotions, deals, etc. they offer.
- Visit business group websites, such as the IoD, CBI, FSB, or IPSE. They often undertake surveys which may be relevant.
- Visit industry sites, which may publish sales data, trends, etc.
- Consider buying customer data, and undertake a cold-calling campaign to gauge response.
- Visit Government sites, such as GOV.UK, and the ONS which provides access to huge amounts of data.
- Run some focus groups to ask for opinions from real people – people who will be potential customers. Offer them a discount on your services, or provide free samples in return for their time.
- For a fixed fee, you can commission a professional survey, such as those offered by YouGov Omnibus. This provides a next-day survey of 2,000 people for £300 per question, plus a £200 entry fee.
- Hire a market research agency to undertake work on your behalf. Visit the Research Buyers Guide for some excellent resources.
- Download this excellent ISBA guide to market research.
The market research stage is an essential one. You would rather find out any flaws in your business plan prior to launch, rather than months down the line when you may already have spent time and money getting your business off the ground.
Market research is something you may call upon in the future, if you’re looking to diversity, or launch a new product or service. Markets change all the time, so consider carrying out ongoing research to keep up with your competitors, and to identify changes before they happen.