Research is the cornerstone of any successful marketing and sales effort. Thorough market research provides a great deal of information about potential and existing customers, competition, and the industry in general. It allows you to determine the overall feasibility of a business before making a substantial investment in the venture. Failure to conduct market research is like driving a car with a dirty windshield. You may not see what’s ahead of you until it’s too late.
The purpose of market research is to provide relevant data that will help solve marketing problems your business might encounter. This is absolutely necessary in the start-up phase. Conducting thorough market surveys is the foundation of any successful business. In fact, strategies such as identifying specific segments within a market and creating an identity for your product or service that separates it from your competitors, would be impossible to develop without market research.
Market research allows you to:
- See if a market exists for your product or service.
- Define the size of the market you’ve identified.
- Identify typical customer characteristics.
- Analyse market trends.
- Keep tabs on your competition.
- Give your customer what they want, as opposed to what you want to give them.
- Realistically set your pricing structure.
The market research process can be broken down into specific stages:
- Determining the problems that must be solved.
- Determining which problems require research.
- Listing the goals and objectives that market research will help you to achieve.
- Identifying the type of data that you need to gather to meet those goals.
- Planning the method you will use to acquire the desired information.
- Defining the sample audience that will best provide you with the information required.
- Conducting your market research and gathering the information.
- Analysing the data.
Finally, you will need to develop conclusions based on the information gathered, and determine a course of action.
How to do a market survey
There are four primary research methods you can use for gathering information. They are:
The historical method – which relies on past data to define current conditions. This is particularly useful when seasonality (factors such as school holidays or religious holidays) affects your business.
The observational method – which uses current data to predict future conditions.
The experimental method – which tests the effectiveness of specific marketing activities.
The market survey – which is by far the most prevalent research method.
A thorough market survey will help determine a reasonable sales forecast for your business and help you determine the best area in which to locate.
Basic steps to assess market
Here are the basic steps you need to take to assess your market and make a forecast:
Determine the area(s) in which you would most like to locate your business.
Where are your customers coming from?
Study the population within this area to determine its social and demographic attributes.
Take into account the size, family structure, age of residents and projections of age and type of resident likely to be there in the next 5 to 10 years.
Determine the area’s socio-economic characteristics.
Look at things such as the buying power of residents, common occupations, lifestyle, marital status, education, religion, culture, preferences, etc.
Determine the present number of similar businesses in the area or surrounding areas and estimate sales volume and customers for the type of products or services you want to offer.
Estimate the proportion of the total sales volume and the total number of customers you could realistically obtain by locating your business in the area.
Step 5 is extremely important. Opening your business in a particular area does not guarantee additional business volume; it may simply redistribute what is already there.
