Market Research

Market research is a necessary tool that all business owners should implement at some point. It is commonly used during the start-up phase of an operation, but marketing research is also done by established business owners who are planning to introduce a new product or service.

Today’s business owners, start-ups and established, are acknowledging the advantages of market research, and are more then willing to invest the time and money that it takes to do it right. The future of their business, and the impact it can have on them financially has created an entire industry to service this need. Finally, there are many companies and individuals who offer consulting and marketing research assistance to businesses.

Market research is a way for business owners to learn about their customers, and by doing so, they are better able to understand what it takes to make them buy. So for a business to boost their profit making potential, it only makes sense to do the research that will, literally, tell them how!

Marketing research is part of a sound business plan. If you want to get future loans for your business, you are going to have to know where your business stands and where it will be in the future. Determining your business’s market is all part and parcel of the business loan process. If you want to be approved, you will need a firm handle on your market research.

Market research may seem like an insignificant business task, but in reality market research is essential to business success. What is so important about market research? Isn’t market research just a waste of precious work time? No; market research is the perfect way to figure out who will buy what you’re selling. For example: Starting up a cake decorating business only because everyone thinks your cakes are great doesn’t mean it will be successful. Market research is needed to help you determine if there is a need for cake decorating, who your competition is, what people are willing to pay, and if you are in an appropriate location.

If a business takes the time to do the foot work before launching a new product or service, they can easily avoid a lot of unnecessary expenses and hassles, not to mention failure. According to statistics, 80% of new businesses go under in the first 5 years, why is this? Perhaps there wasn’t enough market research being done to ensure start-ups of their product, or service’s potential for success. For all intents and purposes, a business owner puts everything they have into a business, so it only makes sense to take precautions by doing the market research that will ensure financial stability, a secure future, and an unwavering reputation.

Is market research expensive? Will you have to cough out a significant investment to get quality market research? Will investing in a marketing research professional be worth your investment? In reality, market research can be as inexpensive or as costly as you want it to be, and depends entirely on your needs.

For example: A woman in a small town wants to open a daycare facility, but she’s not sure if she will be able to get enough children to turn a profit. She needs to find out if there is a need for childcare, who, if any, her competition is, and how much people are willing to pay for her services.

Market research will help her answer these questions, and before she invests her time and money in starting this business. To find out if there is a need for childcare in her town, she may want to write a survey with appropriate questions, such as:

Are you or someone you know, looking for quality childcare? If yes, for how many children?

Do you need part-time or full-time care? What hours?

How much are you willing to pay for professional childcare and why?

If you currently use professional childcare, would you consider moving your children to a new daycare facility if:

It costs less money?

Has a better educational program?

Includes extra things that your current program doesn’t offer, like meals or certain activities?

This survey is an inexpensive way for her to get her questions answered. The survey can be mailed, or she can talk to the local schools about sending one home with each child, or she could even create the survey on a door hanger and hang them on the doors of resident’s homes around her town. Then depending on her method of getting the surveys to her potential clients, she can include pre-paid postage and have them mail the surveys back, arrange to pick them up, or even set out boxes so people can simply drop them in.

Once the results are in, she will know better the need for childcare. If it turns out that there is too much competition, either from another facility or many home daycare operations, or that there simply isn’t the need for a professional daycare facility, she will be saving herself a lot of money and trouble. Instead, she may consider doing her business on a smaller scale, such as a nursery school or home daycare.

Because her business is in the planning stage, there is no risk involved and doing minimal, inexpensive market research is all that is needed.

There are however, other situations that may require more costly marketing research.

For example: A family owned bookstore is considering an expansion to add on a coffee shop and deli with an eating area, as well as a sitting area complete with a fireplace for customers to relax after browsing for books. But because the expansion will cost a lot of money, and possible downtime, they want to know if their customers will purchase items from the coffee shop/deli, and stay around long enough to make use of the sitting area.

This could mean hiring a marketing consultant to find out how popular other coffee shops, restaurants, and cafes are in the area, what kinds of people frequent them, how long they stay, and what sort of items they purchase. They may make phone calls to all the store’s customers to ask them directly how they feel the changes. In store observations can determine the actions of the customers, such as finding out how much time they usually spend in the store.

Learning the potential for a successful expansion can be both time consuming, and costly, due to the amount of market research that must be done to find the answers, and hiring outside help. But because they will be investing a lot of money into growing their business, it is certainly worth the expense of finding out whether it’s a viable idea.

Your market research costs will depend entirely on your individual needs and business situation.

How important is a market research plan? Do you really need a market research plan? What can a market research plan do for you, if anything? A market research plan will help determine what kind of market research needs to be conducted to answer the questions you have. With a plan in place, it will be easier to implement the actual research phase.

Describe each of the products or services you will be selling, and their prices. Explain how you decided what to charge for your products or services, any credit terms, discounts, etc. that you will be offering to your customers. This list will help you ask the right questions, and explain your business to your customers.

Create a marketing research budget plan, and work with in that, or find someone who will.

What type of market researching is conducted by market research professionals? Are there any kinds of market research that you can conduct on your own? What are the simplest methods of market research? Surveys: These can be conducted on paper, or over the phone. Keep the questions simple. Do not list more then ten because you don’t want to overwhelm or impose on customers.

Interviews: Talking with people in person to ask questions can wield great results. The answers are immediate, and the interviewer will have the opportunity to delve further into the responses.

Experiments: Test new products by giving out free samples, offering taste testing, demonstrations, new packaging, and even moving displays around, can help understand customers.

Observing: Watching how customers shop can help a business learn what attracts their customers, like displays, what the popular items are, how much time they spend shopping, who they shop for, etc.

Tracking: This is most commonly used for online stores, and is a form of internet research. There are all kinds of software programs that will tell businesses where customers are going on their website, what they are buying, how long they shop online, and counters determine the number of daily, monthly, and yearly visitors the site gets. The results can be used to determine future internet marketing plans.

A business owner may or may not have control over their business’s location, but here are some things to be considered for start-ups and established business who want to offer a new product or service.

Demographics: The age of the people who will be using the products or services, are there many? An increase in two income families can mean more money to spend, more women going to work can mean a higher need for childcare, population of the area, is it increasing or decreasing? The demographics of a business location can have a large impact on business success.

Economy: What is the average income level of the local population? Employment, are people working or is the amount of unemployed people rising? If a business is started up in an area that is low income, then obviously it would have to be something that would be affordable to the people who live there. So the economy of the area or country must be considered.

Social: Are people in the area more conscious of the environment, or do they have certain religious values? For example: Starting up an adult video store in a heavily religious area could be a big mistake.

Technological: What is the technology like in the area, are there positive or negative things in this area that could have an impact on your business. Such as, there is no high speed internet service, or unlimited long distance calling packages available. These could have an affect on the way you operate your business.

Political: Are there any recent or pending government policies that you need to be aware of, or any that could affect the way you do business now or in the future. These could be pending zoning laws, or tax laws that could mean reconsidering your business plan.

What exactly is a target market and how is a target market important to your business research? One of the most important things a business owner needs to do, is figure out who their target market is, otherwise they might as well put on a blindfold and fumble around, it will have the same effect as a business without a target market.

It would be almost impossible to sell children’s clothing to people who don’t have kids; instead a business selling children’s clothing would have to target parents because they are the ones who will buy the clothing.

Ways to determine the target market: Who will buy the product/service? Why will they buy the product/service? How many people are in the target market?

Defining a target market will make marketing plans easier because you know exactly who you have to market to, whether it’s other businesses or customers.

How important is it to know your competition? Scope out other businesses in your area who sell similar products or services, and find out how many are the same or different then what you have.

Is your competition increasing? If so, then your business could be a tough sell in an area where there are so many others trying to sell the same thing, unless of course there is a big enough market for it.

Find out how well other businesses of your type are doing, are they profitable? How long have they been in business?

There are many market research companies and freelancers that can help businesses create a plan and put it into action. Hiring outside help can be more costly, but it can get the job done efficiently, and save time and future expenses.

The business plan is a huge part of your business success. You should never attempt to create a business plan alone if you have no idea what a good business plan requires. If you do plan to create your own business plan, take the time to research what goes into a business plan.

Your business plan should be on quality paper and the pages should be neatly typed. For specific formats you can easily look up business plan samples in a preferred search engine. Don’t get overly fancy with the paper, lenders are not impressed by pretty stationary: what lenders really want to see are the clear cut facts and research you provide. Make sure you take the time to proofread carefully.

Typical business plan format includes, but is in no way limited to a professional looking cover, seven to twelve pages discussing the market you are working with, a three to four page executive summary, four to six pages revealing the structure of your intended organization, documentation citing risks and your time line for business success, five to seven pages about the enterprise and its operation, and at least three pages that cite your business’s future financial prospects. Last but not least, all of your market research will need to be included and easy to understand.

Professionals can handle all of the rough work for you: all you will need to do is supply professional business plan creators with the appropriate information and documentation. You can sit down with a professional and discuss what it is your business is about and where you see your business in the future. The professional business plan writer can than establish a business plan that is structured, soundly, around the critical information that you provide.

A business plan must be typo free, clear, concise and completely comprehensive. It also must be utterly realistic: an over emphasized business plan that is focused on hopeful ideas instead of realistic goals will fail to serve its purpose. Considering the significance that a business plan plays in one’s success, it is far better to hire a professional to create the business plan for you. For all intents and purposes, your market research should be able to stand on its own and to speak about your business for you: quality research will reveal that your business is well organized, well structured and successful, precisely what lenders want to see in a business.