When you are starting your business — and when your business is growing and expanding into new markets, products, or services — understanding the basics of market research is key to success.
Market research helps you understand three things: your industry, your competition, and your target market.
There are two kinds of market research:
Primary research is research in which you go directly to the source to gather data or ask questions. Primary research methods can include:
- Holding in-person focus groups with members of your target market
- Interviewing members of your target market in person or by phone
- Visiting your competitors’ stores or locations
- Conducting surveys of your target market either online, in writing, or through social media tools such as Facebook or Twitter
- Observing your target market (such as at a mall or community event) and noting how they behave
Secondary research is data that’s been gathered and published by other researchers or sources. You can get secondary research by:
- Reading articles in trade journals, industry publications, or websites
- Doing Internet searches
- Visiting a reference library
- Contacting industry associations or trade organizations
- Visiting public agency or government websites, or reading their reports
Whether you are doing primary or secondary research, here are some of the key questions to ask:
- What stage is this industry in (inception, mature, or declining)?
- Is the industry outlook favorable, or is it shrinking?
- What challenges is this industry facing?
- What trends are creating opportunity for this industry?
- What is the average profit margin in this industry?
- Who are your key competitors?
- How big are they? Are they small businesses or global corporations?
- Where are they located?
- What is their business model? How do they make their money, and what sales channels do they use?
- How much do they charge, and how profitable are they?
- What are their demographics (age, sex, race, marital status)?
- What is their income?
- How much do they spend on products or services like yours?
- What purchasing channels do they use (retail stores, online, consultative sales)?
The answers to these questions will help you determine the feasibility of your business model, plan your marketing strategy, and pinpoint your target customers.