Market research - Why?No matter how good your product and your service, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is very dangerous to simply assume that you already know about your intended market. You need to do market research to make sure you are on track. Use the business planning process as your opportunity to uncover data and question your marketing efforts. Your time will be well spent.
Market research - How?
There are 2 kinds of market research: primary and secondary.
Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, vendors who sell to your industry, and government agencies.
Start with your local library. Most librarians are pleased to guide you through their business data collection. You will be amazed at what is there. There are more online sources than you could possibly use. Your Chamber of Commerce has good information on the local area. Trade associations and trade publications often have excellent industry specific data.
Primary market research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus group interviews to learn about consumer preferences. Professional market research can be very costly, but there are many books out that show small business owners how to do effective research by themselves.
In your marketing plan, be as specific as possible; give statistics & numbers and sources. The marketing plan will be the basis, later on, of the all-important sales projection.
Conditions (Facts about your industry and specifically your target market)
- What is the total size of your market?
- Current demand in the target market
- Trends in target market - growth trends, trends in consumer preferences, and trends in product development.
- What is the growth potential and opportunity for a business of your size?
- What barriers to entry do you face in entering this market with your new company? Some typical ones are: high capital costs, high production costs, high marketing costs, consumer acceptance/brand recognition, training/skills, unique technology/patents, unions, shipping costs, tariff barriers/quotas,
- And of course, how will you overcome the barriers?
How could the following affect your company?
- Change in technology
- Government regulations
- Changing economy
- Change in your industry
CustomersIdentify your targeted customers, their characteristics, and their geographic locations; i.e., demographics (age, income, gender, family life-cycle), type of business (if you are selling to business), lifestyles, behaviour, psycographics (personality)..
The description will be completely different depending on whether you plan to sell to other businesses or directly to consumers. If you sell a consumer product, but sell it through a channel of distributors, wholesalers and retailers, then you must carefully analyze both the end consumer and the middlemen businesses to which you sell.
You may well have more than one customer group. Identify the most important groups. Then, for each consumer group, construct what is called a demographic profile:
- Income level
- Social class/occupation
- Other (specific to your industry)
For business customers, the demographic factors might be:
- Industry (or portion of an industry)
- Size of firm
- Quality/technology/price preferences
- Other (specific to your industry)
For each group determine the following:
- What is the typical customer purchasing process? How do they go about making a decision that they need something and then actually purchasing it?
- What are their key buying criteria? What are the most important factors to the customer in deciding between competitive choices?
- How long is the typical sales cycle for your targeted customer segment/s?
CompetitionWhat products and companies will compete with you? List your major competitors with names & addresses. Will they compete with you across the board, or just for certain products, certain customers, or in certain locations? Will you have important indirect competitors? (For example, video rental stores compete with theatres, though they are different types of business.)
How will your products/services compare with the competition?
Use the table called Competitive Analysis, below to compare your company with your three most important competitors. In the first column are key competitive factors. Since these vary from one industry to another, you may want to customize the list of factors.
In the cell labelled "Me", state how you honestly think you will likely stack up in customers' minds. Then check whether you think this factor will be strength or a weakness for you. Sometimes it is hard to analyze our own weaknesses. Try to be very honest here. Better yet, get some disinterested strangers to assess you. This can be a real eye-opener. And remember that you cannot be all things to all people. In fact, trying to be causes many business failures because your efforts become scattered and diluted. You want an honest assessment of your firm's strong and weak points.
Now analyze each major competitor. In a few words, state how you think they compare. In the final column, estimate the importance of each competitive factor to the customer. 1 = critical; 5 = not very important.
Table 1 : Competitive Analysis
Having done the competitive matrix, write a short paragraph stating your competitive advantages and disadvantages.
NicheNow that you have systematically analyzed your industry, your product, your customers and the competition, you should have a clear picture of where your company fits into the world. In one short paragraph, define your niche, your unique corner of the market. What percent share of the market will you have?