To start a business, you need Market research
Market Research is key to a new business becoming a profitable entity. It anticipates and minimises risk, identifies potential customers and helps ensure success. Only about half of new small businesses will survive 5 years. To ensure yours is a survivor, learn how to research your market, identify potential clients and have a strategy for attracting them.
Market Research, or Business Intelligence as it is sometimes called, is a vital weapon in ensuring your new business survives to become a strong profitable entity.
It is about anticipating and minimising risk, understanding your potential customers and so helping to ensure success for your new venture. Don’t skip this important step in the rush to get your product to market.
Finding customers is the most difficult part of running a business. So it is vital to research your market, identify potential clients and have a strategy for attracting them before you invest your time and money in a new venture.
Only about half of new small businesses will survive 5 years. Here are some of the factors that often contribute to a new business’s failure;-
- Lack of capital, often due to poor planning or unexpected costs
- Poor cash flow management
- Unexpected market factors-growth or reduction in market size
- Underestimating the competition
- New entrants to the market
- Technological problems
- Not having a strong business plan in place
- Lack of understanding of the market
- Poor advertising or marketing
- Weak product
- lack of selling and marketing expertise
- over trading or over expansion
According to First Research, a Dun & Bradstreet firm, the global market research industry produces about $50 billion in annual revenue.
Quality, professional market research helps you to ask the right questions for your business. Good market research reports will use a mixture of primary and secondary research to provide accurate information and conclusions.
Primary research is information gathered through surveys, interviews and other direct contact with industry experts and participants. For example by contacting industry leaders and canvasing their opinions.
Secondary research is information gathered from company reports, trade association documents and industry journals, and published market research reports.
It is a good plan to carry out both Primary and Secondary research. Then you should check out competition and assess your potential consumer base. This should give you a fair idea of the viability of your business.
If you commission professional advice, you can expect a report that will cover the following points;-
- Context/Background: This is a review of the recent history of the market; how it has developed into its current size and shape. It will also consider the market in the context of factors such as the economy, social and cultural changes, globalization, and technology, and consider how these factors are affecting the market.
- Detailed Market Data: While context and analysis are critical, this section will look at hard numbers. It will use whatever data is available.
- Competitor Information: Players, products, profiles, competitive analysis and other information on the market.
- Trend Analysis: This will look at what the data indicates about the health of the market and opportunities for future growth. It should cover emerging markets, and new forms of competition.
An understanding of the market potential should be gained from the information above. The size of the market and its possible growth will determine the viability of opening up a business in the sector.
So from this report, or from your own research, you should be able to consider the following types of questions.
- Assume your intended business is selling potted plants:-
- How many people buy potted plants?
- What is the market value?
- What is your cost price?
- What is the likely gross profit you could make selling a potted plants?
- How many potted plants must you sell to run a successful business
- Is this a realistic number for your business model?
- Is the market already saturated or near saturation?
Can you enhance your business model-for example can you offer other products, services, sell online, open other outlets?
Market research should answer key questions, expose risks, and will probably throw up other questions. Professional analysts who study markets, products, industries, sectors, and consumer demographics are trained to provide unbiased factual information, clearly stating the risks associated with a market.
If you plan to conduct your own research rather than commissioning a professional Market Research project, be careful that you don’t seize on information and data to back up what you are hoping to find – that your business is a great idea!!
But take care to be open to market realities and factors that may even enhance your business plans. Keep a look out for niche markets that may present better opportunities than mainstream, where there is more competition.
Carefully assess market factors. There are many factors which can affect the size of a market and its pace and direction of growth. They include:
- Regional economics, politics, culture, geography and weather
- Seasonal and cyclical trends
- Fashionability and trends
- Customer wants and needs
- Competing markets
- Technological advances
- Educational opportunities
- Regulatory requirements
- Financial incentives, grants and programmes
- Company schemes and productivity.
Also look carefully at competition:
- Is there a lot of competition in your market?
- Who are the players?
- Is the market dominated by a few large companies or is it mostly small operators?
- What are the strengths and weaknesses of your competitors?
- What is the market scope of your competitors?
- How profitable are they?
- What types of problems do they face?
- What is your Unique Selling Point (USP)? What can you offer customers that your competitors do not?
Finding customers is the most difficult part of running a business. But without them you don’t have a business, so do some demographics research as well, to establish who your customer is.
Make sure you know as much as possible about who will be buying from you.
For example, if you’re marketing to consumers:
- What is their gender, age, marital status, religion, ethnicity
- Where do they live?
- What is their economic status?
- Do they already buy the product or service you’ll be offering?
- How are they purchasing these products or services?
- What issues do they have with your competition?
- What do they like about your competition?
- How much are they paying now, and will be willing to pay for your products or services?
- What do they do for a living?
- What are their lifestyles like?
- What do they think of your product or service?
- Why will they buy from you and no one else?
- How will you tell them about your business?
Knowing the answers to these questions will help you promote your business much more effectively.
Then you need to consider marketing and advertising .How will you attract consumer’s attention, get them to purchase your product, and come back to you for repeat purchases.
- What is your USP –how should you transmit that message?
- What can you do to assure customer retention?
- How can you exceed customers’ expectations?
- Can you offer some type of guarantee?
- What are the best advertising routes to reach customers?
Some of the more common advertising routes include Websites, Social networking sites (such as Facebook), Radio, Television, E-mail marketing, E-bay, You Tube, Internet, magazines, newspapers. Trade magazines, Forums and Billboards.
Social media advertising, blogging, and use of other online social forums, has rapidly become one of the biggest platforms on which to advertise your business.
What type of advertising will work best for your business depends on who you are trying to reach, your budget, and your product. You need to find the most cost effective method for you.
All of this information will be valuable in formulating your business plan, which we will discuss in another lesson. Having all this information at your fingertips will give you an edge over your competitors, an understanding of your client base and will improve your businesses chances of survival.