You may have a great idea for a product or service, but before you go any further, first make sure there’s a market for it. So you have a great idea for a product. Or perhaps you have stumbled on a service that isn’t being offered by anyone else but one that you think is desperately needed. But before you shift into high gear, you must determine whether there really is a market for your product or service. Not only that, you need to ascertain if any fine-tuning is needed. Quite simply, you must conduct market research.
Marketing research is any set of techniques used to gather information and better understand a company’s target market. Marketing research helps reduce the uncertainty surrounding the decisions to be made. Many business owners neglect this crucial step in product/service development for the sole reason that they don’t want to hear any negative feedback. They are convinced their product or service is perfect just the way it is, and they don’t want to risk tampering with it. Other entrepreneurs bypass market research because they fear it will be too expensive. With all the other startup costs you’re facing, it’s not easy to justify spending money on research that will only prove what you knew all along: Your product is a winner.
Regardless of the reason, failing to do market research can amount to a death sentence for your product. A lot of companies skim over the important background information because they’re so interested in getting their product to market fearing someone else might beat them to the market. But the companies that do the best are the ones that do their homework.
Market Research Methods
In conducting market research, you need to gather two types of data: primary and secondary. Primary research is information that comes directly from the source — that is, potential customers. You can compile this information yourself or hire someone else to gather it for you via surveys, focus groups and other methods. Secondary research involves gathering statistics, reports, studies and other data from organizations such as government agencies, trade associations and your local chamber of commerce.
The vast majority of research you can find will be secondary research. While large companies spend huge amounts of money on market research, the good news is that plenty of information is available for free to entrepreneurs on a tight budget. The best places to start? Your local library and the internet. Reference librarians at public and university libraries will be happy to point you in the right direction. Become familiar with the business reference section–you’ll be spending a lot of time there. Two good sources to look for: ThomasNet, an online resource that connects industrial buyers and sellers, and the Harris InfoSource All-Industries and Manufacturing Directories. Both sources can be found at most libraries, as well as online, and can help you target businesses in a particular industry, read up on competitors or find manufacturers for your product. To get insights into consumer markets, check out the Census Data of the United States, which you can find at most libraries. It contains a wealth of social, political and economic data. Ask reference librarians for other resources targeted at your specific business.
Key Data Websites To Start Your Market Research
- NAICS: https://www.census.gov/eos/www/naics/
- United States Census: https://www.census.gov/topics/
- American Community Survey: www.census.gov/acs
- Small Business Administration: www.sba.gov
- Bureau of Economic Analysis: www.bea.gov
- Securities and Exchange Commission: www.sec.gov
- Bureau of Labor and Statistics: www.bls.gov
- Risk Management Association Annual Studies (RMA): www.rmahq.org
- Dun & Bradstreet: www.dandb.com
Key areas to think about when starting to assess a business concept include:
- Competition: How many competitors are there? How big are they? What product or service features and benefits do they offer?
- Suppliers: What kinds of suppliers will you need? Are sources of supply readily available? How reliable are they?
- Business Risk: Is the product or service you’re considering a short-lived fad or does it have long-term potential? Are there legal or environmental factors that could threaten your business, such as pending legislation that might restrict your operations?
SOURCES OF INDUSTRY DATA – Use these tools to start your industry research:
- The North American Industry Classification System (NAICS) is the standard system federal agencies use to classify businesses. Search it online or go to http://www.census.gov/eos/www/naics/ to find your industry description.
- Trade associations also have valuable industry information. Search for associations online or consult the National Trade and Professional Associations (NTPA) Directory, available at libraries or online at http://www.associationexecs.com.
- Risk Management Association (RMA) Annual Statement Studies, available at libraries or online at http://www.rmahq.org, provide benchmark financial ratios for businesses in over 370 industries.
SOURCES OF CUSTOMER DATA – Use these tools to start your customer research:
- Trade Associations: Trade groups typically maintain data about market trends. Search for trade associations online.
- Reference Librarians: A good business reference librarian can be immensely helpful in finding what you’re looking for.
- Government Websites: You’ll find a wealth of information at: http://www.sba.gov; http://www.bls.gov; http://www.nber.org; https://data.census.gov/cedsci/; http://www.fedstats.gov.
- Focus Groups: Get a group that represents your target market—whether that’s college students or moms—together for a short focus group.
- Surveys: Online tools like http://www.SurveyMonkey.com and http://www.SurveyGizmo.com offer free options for conducting surveys to ask potential customers questions; http://www.ConstantContact.com is a competitively priced fee-based option.
SOURCES OF COMPETITOR DATA – Follow these sources to start researching your competition:
- Trade associations
- Reference USA (available at libraries)
- Risk Management Association (RMA) Annual Statement Studies (At libraries or www.rmahq.org)
- Bureau of Economic Analysis http://www.bea.gov
- Bureau of Labor Statistics http://www.bls.gov
- D&B http://www.dnb.com
- Hoovers http://www.hoovers.com
- NAICS http://www.census.gov/eos/www/naics/
- SEC www.sec.gov
- U.S. Census www.census.gov
Consider market research an investment in your future. If you make the necessary adjustments to your product or service now, you’ll save money in the long run.
Copyright ©John Trenary 2019