How to Do Market Research For Your Small Business
Every business is dependent on its customers. No business plan is complete without considering who your customers will be and what need you will be addressing. That means researching and creating a marketing strategy for your small business. But how in depth do you have to be when it comes to researching your target market, and why does it matter?
Marketing research is a massive field of ever-changing knowledge. Since consumer needs are always changing, so will your marketing tactics. It’s hard to predict how your marketing strategy will change over the years, but doing research prior to opening and advertising can be the difference between a successful first year and going under.
Fiscal Tiger is here to help walk you through the important steps of defining your market, discovering your competitors, targeting customers, and strengthening your business plan with a solid marketing strategy. There’s lots of information out there, but we’ll get you on the right steps to succeed through your first — and toughest — year.
Start By Asking Questions
Market research is done so you can properly identify your target customer and can better meet their needs. Before you begin diving into your marketing plan and putting together your strategy, set up some expectations on what you hope to discover with this research. This will help you understand how you need to adjust your marketing plan, what you already know, what you expect to know, and where you need to improve. Here are four questions to get started:
- Who are your customers? (Define them in terms of age, occupation, income, lifestyle, education, etc. It’s common to have multiple customer profiles, not just a single customer.)
- What do they buy now? (Consider their buying habits in relation to the product you offer or the market you’re in. How much do they buy, who is their favorite supplier, and what is the most common price point?)
- Why do they buy? (The answer to this question will simply be your best guess. Since you can’t get directly into the head of your customer, try looking at reviews of competitor’s products, or simply make an educated assumption about their motivations.)
- What will make them buy from you? (Identify the pain-point of your customers and how your product or what you have to offer will help make their life easier.)
How to Conduct Market Research
Next, you’ll want to further explore these questions through primary or secondary research. Primary research consists of studies you have conducted yourself with potential or existing customers. Secondary research is done by looking at information that other people have collected about your audience. This can be through government entities or research groups, and some options can be utilized for free, while other organizations will charge your for the information.
Although secondary research might be convenient for some, you’ll also want to conduct some primary research for yourself. Secondary research can often be skewed or too broad, or just not paint the most helpful picture of who your customer base is. That is why primary research — although time consuming — should always be conducted when you’re compiling your marketing research.
There are a few options that you can try to help you better understand your customer’s need and expectations. Surveys, focus groups, and cold call interviews can be some of the most effective ways to get your customer’s perspectives.
However, The Small Business Association has a plethora of free tools and resources to help you either conduct surveys, or better understand your local community’s demographics.
Once you feel confident in your answers, you’ll need to do some more in-depth research on your competitors. This will help you better understand how you can gain the upper hand in the market, and will also help you better understand your customers. But first, who are your competitors?
Identify Your Competitors
Identifying your competitors will be key to understanding how your market fluctuates, and how you can be a better company for your customer base. Here are four thing to consider that will help you determine who is your competitor, and how they will impact your market research:
- Look at companies of similar size.
- Look at companies in the same geographic area (if you’re web-based, then that may be a global area).
- Look at companies with a similar ownership structure (if you’re run by two people, then it will be hard to compare yourself to a business that has a board of ten or more people — an apples to oranges comparison. Ditto for publicly traded companies, non-profits, etc).
- Look at companies that are relatively new (it’s also hard to compare yourself to a company that has half-century’s worth of history).
Once you’ve identified your competitors, utilize that information to help you understand how your product or service will be superior to theirs. What unique need will you be meeting that they haven’t been successful with in the past? Additionally, this information can help you determine if the market you’re in is already saturated with similar products or services. The more saturated the industry, the harder it will be to succeed and really stand out.
Focus on What Sets You Apart
Now that you’ve dived into researching your customers and your competitors, take a step back and re-answer those first four questions you asked. Have any of your answers changed? What surprised you in your research?
Through all this market research you will be able to better identify all the opportunities that exist among your customer base, and all the risks that exist in your market among your competitors. This isn’t just useful for your own knowledge, but it will bolster and strengthen your business plan.
Lenders and potential partners, especially, will be interested in this information. They will want to know how aware you are of the risks, and how likely it will be that your business succeeds or fails. If you can focus on the aspects that make your business unique, you will be more likely to stand out and excel in your industry, which means their investment into your business will be a smart move. Your dedication to investigating your market will be seen as a competitive advantage in itself, as well. If you continue to invest time in understanding your industry, you’ll be more prepared for future changes and evolutions.
Continue Researching and Refining Your Plan
As we mentioned in the beginning, every industry and customer base changes over time. This means your marketing plan — no matter how thorough it may be — will change over time, too. Although you will want to do intense marketing research before you open your doors, you will also need to do it continually to make sure you understand the fluctuations within your industry. As your business grows and changes, so will your marketing plan.
All the dedication you put into your plan will not only help inspire investors, but it will help customers feel a stronger connection with your business. When you take the opportunity to sit down with customers, listen to their concerns, and make their priorities a part of your business plan, customers will notice that. Your business will be building a relationship with them that could help carry you through your first year.
Marketing is all about connecting and creating relationships with the very people that keep your company running. Show your customers how you will listen to them, and how your business will meet their needs, and they will be there to support you through your toughest times.
For more tips and guides, check out our small business resource center.
Image Source: https://depositphotos.com/
Katie McBeth is a researcher and writer out of Boise, ID, with experience in marketing for small businesses and management. Her favorite subject of study is millennials, and she has been featured on Fortune Magazine and the Quiet Revolution. She researches SEO strategies during the day, and freelances at night. You can follow her writing adventures on Instagram or Twitter: @ktmcbeth
This post was updated December 7, 2017. It was originally published September 26, 2017.