So you have a brilliant idea for a new startup. Before you file for your LLC and put down cash on a retail space rental, you should conduct market research. Market research is an essential step for any nascent small business because it gives you a sense of your competition, market saturation, and what you need to do to make your business stand out.
How Can a Small Business Conduct Market Research?
While major corporations may enlist the help of fancy consultants, you can perform market research on your own. To perform market research for your new small business, you’ll need time, effort, and an understanding of what you want to achieve.
The Goals of Market Research
The goal of market research is to help you identify new business opportunities, avoid failure, secure funding (due to a more robust business plan), make informed business decisions, and ultimately deliver a more satisfying customer experience. These goals are true for all industries—whether your business is in construction, retail, healthcare, restaurants, or another industry.
The 4 Types of Primary Market Research
Primary market research, wherein information is obtained directly from the source, falls into 4 main categories: interviews, surveys, focus groups, and customer observation.
Market research interviews involve going directly to your potential customers and asking relevant questions about their needs, concerns, and opinions. You may want to ask questions regarding your interview subjects’ demographic—age and gender, for example—to help you better understand your target customer.
To achieve the best results, plan your questions ahead of time. Take care with each question to ensure each is working toward your market research goals. That care will give you the best results, and your interview subjects will be grateful for the respect you’ve shown for their time.
Like an interview, but not in-person. Surveys allow you to gain pertinent information from larger groups of people. A number of survey tools make this process accessible for small business entrepreneurs. SurveyMonkey, for example, offers free market research survey templates to help guide your questions for the most actionable results.
3. Focus Groups
Usually organized by market research companies, focus groups can be one of the pricier forms of primary market research. Focus groups generally consist of bringing together 6–8 people to share their opinions on a company’s product. If an official focus group isn’t in your budget, you can also host an informal focus group yourself. The feedback you get may not be as impartial—and you need to be sure you’re equipped to receive negative feedback well—but it’s still worth hearing the different answers you receive in a group vs. individual setting.
4. Customer Observation
Get ready to embrace your inner spy because it’s time for a stakeout. Customer observation is the form of primary research that requires that you observe potential customers without interacting with them. You want to watch how they behave with products and services similar to yours. How do they purchase? What do they say? What do they buy? How much do they pay? How do they pay?
The 4 Types of Secondary Market Research
Secondary market research relies on information that was previously collected by another person or entity, otherwise known as secondary sources. The 4 key types of secondary market research include libraries, government data, colleges and universities, and trade publications.
A library should be your first stop in secondary research because they possess a single invaluable resource: librarians. While we’re here to outline general resources for all small businesses, no one will be better equipped to guide your specific search than a librarian. Your local library (if you’re near a research library, all the better) can help you launch your research with books on the topic, journal articles, and other secondary market research sources like government data and trade publications.
When you’re starting a business, you can’t pass up free help from an expert, so be sure to utilize the expertise of your local librarian.
2. Government Data
Government data is massive in scope and can provide compelling insights. Government data is free to access, but the sheer quantity can be overwhelming for some entrepreneurs. Here are some places worth starting:
- Census Bureau: Provides all kinds of fascinating and informative demographic data
- Bureau of Economic Analysis: Provides statistical data on economic trends, including GDP
- National Center for Health Statistics: Provides pertinent healthcare information for those starting a healthcare-related business.
- Bureau of Transportation Statistics: Provides data on transportation safety, freight industry trends, airline safety, and so much more., especially if you plan to start a trucking business
- Energy Information Administration: Provides information for energy-related businesses
3. Colleges and Universities
Similar to libraries, colleges and universities can provide research expertise. Find out who is researching your specific field and if they are associated with a specific college or university. They may be able to provide invaluable data to inform your business decisions.
4. Trade Publications
While your specific product or niche does not yet exist, your small business will be joining a well-established industry. Trade publications will inform you about the issues the industry is tackling and how they’re approaching those challenges, along with emerging trends and industry innovation.
Other Times to Perform Market Research
The beginning of a small business isn’t the only time to do market research. You should consider market research at these other critical junctures.
To Gauge How Your Customers Feel About You
You should never have a “set it and forget it” approach to customer satisfaction. Surveying your customer base once you’re established can help you determine how your customers feel about your brand, how they experience your product (what they like, don’t like, or struggle with), and how they feel about your competition. This information is essential in growing your business and gaining traction.
If you can’t manage an official survey, incorporate market research into your daily business practices. Ask your customers what they like about your business and what you can do better. Listen, take the feedback happily, even (and especially) if it’s negative. If you get the same feedback from several people, it can indicate what you need to adjust.
Before Launching a New Product or Venture
When it’s time to expand your business, you may look at launching a new product, a second location, or a novel venture. Apply these practices for market research to ensure this new launch for your business is just as successful as the first.