(Read article HERE on The Guardian Small Business Network or continue)
Market research will help you understand your customers, familiarise yourself with the competition and get to know what people are prepared to pay for your product or service
by Emily Wight, Guardian Professional, Friday 23 August 2013 05.21 EDT
Whatever sector you’re in, understanding the cultural, social and economic context in which you’re trading is crucial. You’ll need to know about the local area, what your competition is, and what people will be prepared to pay for your product or service.
Starting your market research as soon as possible will save you money in the long run, said Debbie Bray, a director of research and creative development at Morph Research, because you’ll be ensuring that you invest in the right sectors and the right products. She said: “If you’ve got the name wrong, or maybe the ingredients list wrong, that can have fundamental impacts later on.”
Jose Scheuer is a lecturer in business and marketing at the London School of Business and Finance. For her, market research is important because the competition is so much tougher these days. She revealed: “Whereas in the past a small business had competition from other, often local, small businesses and their customers were known, today a small business competes in a much larger field. Not only does it face competition from local as well as international companies, often these competitors are much larger and have greater negotiating power to source and sell at cheaper prices. In addition to this, small businesses face competition from the unstoppable growth from e-commerce.”
Paul Mooney is the director at Blue Orchid, a small business support service. Pointing to the support Blue Orchid offers for startups, Mooney says that a lot of the time they’ll ask people to go away and do a lot more market research before coming to them for help. “It’s a fundamental thing,” he explained. “You need to know if there’s a market for your product or service, how much demand is out there, who your potential customers are, what are they prepared to pay, how often are they prepared to pay it and are you going to be able to make money from what people are prepared to pay for your product or service?”
Mooney points to five key steps in the market research process: deciding the questions you need answers to, deciding what information you need to collect in order to answer those questions, deciding how you’re going to collect the information, how you’re going to analyse it, and what you’re going to do with the results. This, Mooney said, is critical: “If you ask the wrong questions you could end up getting misleading answers which will then lead to poor business decisions.”
But market research shouldn’t only be carried out at the beginning of a business venture. Mooney believes that there are all sorts of other points in the business process where a small business owner should be undertaking research, from developing a new product or service and bringing something new into their product portfolio to finding out how they can deal with legislative change and increasing the price of their product or service. “What you’re trying to do with market research is basically get some feedback about what the market thinks about you,” he said.
So what are the different market research methods out there? You can divide them into two: primary and secondary research. Primary research is going out and finding out for yourself about your potential market. This could be through focus groups, online or offline surveys or, if you’re researching for an already established business, speaking to existing clients about their expectations.
Bray said: “Online surveys can be quite cheap to do and you can put questionnaires up on Facebook and LinkedIn. Or you could go out and hand out questionnaires, people still do that. That happens in the food trade. If someone’s trying something new they’ll put up a form asking for feedback. Nowadays people are more confident with giving their opinions about things. People are used to telling people what they think, they don’t hold back and that’s a good thing for research.”
On the other hand, secondary research, or third-party research, is information already at your disposal. Mooney explained: “It’s not like the old days where you had to dig around for information about your competitors on the internet, it’s usually there within seconds. You can do a lot of very quick, effective research just by spending an hour on the internet, looking at who your potential competitors are.”
Where can small business owners go to get this information? The Office for National Statistics (ONS) has a wealth of information, added Mooney. “The census gives you fantastic information about the area, about age groups and occupations. The local authority websites are very good as well for getting information about the local population.”
And when researching competitors, there’s an annual business surveyrun by the ONS as well as information provided by organisations such as the Federation of Small Businesses and the British Chambers of Commerce.
With thorough research taking time, is it worth small businesses outsourcing to a market research agency? Mooney thinks so, but added there is a great deal you should do yourself first. “I wouldn’t commission anyone to do anything for me until I’d done the basic DIY research myself, because I’d want to be clear. At some point when you’ve got a bit of an idea about what you want to do it might be too big, too challenging and it might need a specialist type of analysis that you are unable to do. At that point you should think about taking on professional support.”