When starting a small business – whether you’re investing in a franchise or looking into an independent start-up – it’s important to know who your customers will be, how you’re going to get the word out to them, and who you’ll have to go up against in order to get their business.
So how do you find out all that information? Market research.
Entrepreneur Magazine’s Small Business Encyclopedia defines market research as, “the process of gathering, analyzing, and interpreting information about a market, about a product or service to be offered for sale in that market, and about the past, present, and potential customers for the product or service; research into the characteristics, spending habits, location, and needs of your business’ target market, the industry as a whole, and the particular competitors you face.”
Simply put, market research gives you the data you need to develop a marketing strategy.
The importance of market research cannot be overstated. Its purpose is to understand why customers buy what they buy, and more to the point, to understand why a customer would want to buy or use your product/service.
To conduct market research, you’ll want to gather primary data and secondary data. Primary data comes directly from potential customers whereas secondary data comes from outside statistics, reports, blogs, etc. You are looking for information on:
- Who will your customers be? Who’s going to be interested in buying your product/service? Look at age, income, education, occupation, lifestyle, gender, etc.
- What are these customers buying now? Who are they buying from? Are they brand loyalists or on the lookout for a good deal? How much are they buying? How much are they spending?
- Why are these customers buying? Are they buying for functionality or for aesthetics? What about value? For instance, the customer buying bath towels – is he/she buying the softest, plushest towels; the towels that come in the biggest bundle for the best price; or the towels that come in the widest assortment of colors?
- What will make these customers buy from you? Are you offering something new that no one has ever seen before? Are you saturating the market but offering the lowest price or customer service? What is going to make someone want to buy a product/service from you versus a longer-established business?