Are you starting a new business, expanding an existing business, introducing a new product line, or entering a new geographic market? In all of these situations, market research can help you make better decisions and improve your chances of success. There are two types of market research: secondary market research and primary market research. Here's a closer look at the difference between the two.
Secondary Market Research
Secondary research is based on information from studies previously performed by government agencies, chambers of commerce, trade associations, and other organizations. For example, U.S. Census Bureau information and Nielsen ratings are secondary market research.
Secondary market research is easy to find, and much of it is free or low-cost. For instance, you can find secondary market research online at government or industry websites, at your local library, on business websites, and in magazines and newspapers.
The downside of secondary market research is that it is not customized to your needs, so it may not be as useful as primary market research. For example, secondary research will tell you how much money U.S. teenagers spent last year on basketball shoes, but not how much they're willing to pay for the particular shoe design your company has in mind.
Primary Market Research
Primary market research is tailored to a company's particular needs and is conducted either by you or by a company that you pay to conduct the research for you. Focus groups, surveys, field tests, interviews, and observation are examples of primary market research.
Primary market research lets you investigate an issue of specific interest to your business, get feedback about your website, assess demand for a proposed service, gauge response to various packaging options, find out how much consumers will pay for a new product, and more.
Primary research delivers more specific results than secondary research, which is an especially important consideration when you're launching a new product or service. In addition, primary research is usually based on statistical methodologies that involve sampling as little as 1 percent of a target market. This tiny sample can give an accurate representation of a particular market.
The downside of professionally conducted primary market research is that it can be expensive -- several thousand dollars or more. Fortunately, a growing number of online tools allow you to conduct primary research such as surveys yourself at very little cost.
Use Both Kinds of Research for Your Business
Savvy entrepreneurs do secondary research first and then conduct primary research. For example, the owner of a cupcake shop would want to know all about a neighborhood before opening a new store there. Using information gleaned from secondary sources, the owner can uncover all kinds of demographic information, including detailed income data and spending patterns. The owner can then send out a questionnaire to a sampling of households to find out how often they're likely to buy cupcakes and how much they're willing to spend.
Secondary research lays the groundwork, while primary research fills in the gaps. By using both types of market research, small business owners get a well-rounded view of their markets.