There comes a time in the life of every business when you need to engage in market research to ensure that you're heading in the right direction.
Going on a gut feeling will only get you so far in business.
There are plenty of consultants out there who will conduct market research on your behalf, but there's also a lot that small business owners can do themselves. Of course, any insight gained is only as good as the data it's drawn from, so it's important to take a systematic approach to your market research efforts.
Every time you talk with your customers and suppliers, or check out the competition, that's a type of market research.
But rather than simply ramp up these efforts, you’ll get better results if you break your market research campaign into stages and define your goals before you start.
DIY your market research in 3 steps
Market research sounds complex but it boils down to three steps.
- Make a market research plan.
- Go in search of data.
- Choose your approach.
Ready to learn how to do your own research? Let’s get to it.
1. Make a market research plan
The four key phases of a market research campaign are plan, collect, analyse and act. But it's all for nought if you get the first one wrong.
When planning, your approach will vary depending on whether you're:
- Starting a new business from scratch
- Turning an existing business in a new direction
- Simply expanding your existing products or services
A goal-orientated market research plan might include these steps:
- Assessing customer needs and level of satisfaction
- Evaluating your pricing model
- Learning how widely known your business is (or isn’t)
- Defining your target audience
- Identifying or validating new opportunities
- Establishing market expectations and honing your existing products or services
These goals obviously need to align with your business strategy and long-term goals. If you don't have these things in order, put your market research efforts on hold while you sort them out. You can't plan a journey when you're not sure where you want to end up.
Start with the right questions
You should be able to define your market research strategy with simple questions that align with your business strategy and goals. For example:
- How do we determine which products we should we focus on, in order to improve profitability?
- How can we attract new customers in order to increase our market share?
- How do we keep current customers from drifting away in order to maintain revenue?
If you can't easily explain your market research strategy in relation to your business strategy, then you need to keep thinking before you go any further. You don't want to waste time and effort asking the wrong people the wrong questions.
2. Go in search of data
With your market research goals in place, you’re ready to decide what research you need to answer these questions.
There are two main kinds of research:
- Primary research involves conducting your own study
- Secondary research looks at data that is already available
There are also two basic approaches to research: quantitative and qualitative. Quantitative research is based on measurable facts and figures. Qualitative research tends to be more "unstructured" data, where people answer questions in their own words.
Qualitative research is typically more about gathering opinions than facts, although both are important.
In order to see the big picture, your market research should incorporate customers, competitors and the business environment.
Quantitative vs. qualitative data
Applied in the real world, quantitative research for your cafe might including finding data for:
- How many takeaway coffee shops are in your area
- How much they each charge for a standard latte
- How many takeaway coffees people tend to buy each week
- How far they are prepared to travel to get their caffeine fix
Meanwhile, qualitative data might involve asking people what they look for in a great takeaway coffee, why they remain loyal to a particular cafe and what it would take to win them over.
How to get it
Quantitative data on a topic can come from a wide range of sources, such as:
- Sales figures
- Industry reports
- Newspaper articles
- Australian Bureau of Statistics data
- Economic reports
- Google search trends
The sample size tends to be large so quantitative data can be easily turned into graphs and charts, in search of trends and insights.
It's easy to gather a lot of this data yourself and you'll find a wealth of information online. You can also look to your own business data, such as sales reports, churn statistics and Google Analytics traffic reports for your website.
Meanwhile, qualitative data tends to come from:
- Focus groups
- Individual interviews
- Telephone surveys
- Observations of behaviour
The number of people involved is typically small, and respondents are selected to provide a relevant cross-section of the target group.
You might find some relevant qualitative data online, but it's more likely that you'll need to gather your own. Sources can include customer feedback, social media comments, customer surveys and focus groups.
Keep in mind that what people tell you they'll do and what they actually do can be two very different things.
So always look for ways to measure real behaviour and not just purported attitudes and intentions.
3. Choose your approach
There are different schools of thought as to which research you should conduct first — quantitative or qualitative.
Some would argue the best approach is to focus on quantitative research first, especially as this data tends to be easier to obtain and analyse. This might include your own primary quantitative research, such as doing a basic survey.
The insight gained from this research can then help you decide where to focus your qualitative research, which tends to be more time-consuming and expensive to carry out. You don't want to look at the quantitative data afterwards and realise you've wasted your quantitative research efforts digging in the wrong spot.
Be open to unexpected results
It's important to do market research with an open mind. If you assume you already know the answers, it can taint your results. This of course makes the whole project a waste of time and effort.
The concept of "confirmation bias" is a real thing. This is when people favour information that confirms their existing beliefs rather than looking at the results objectively. Even with the best intentions, we can accidentally pull the rug out from under our research by reading the results with blinders on.
Knowledge is power
Effective market research helps ensure that your business doesn't stumble when it's ready to take the next big step — whatever that is.
The key to a 'do it yourself' market research campaign is great planning. Your goals need to align with your business strategy, to make sure you're asking the right questions.
You also need to appreciate the benefits of both qualitative and quantitative data, taking advantage of the sources already at your disposal as well as looking further afield. This way you can confidently turn data into insight … and insight into effective action.