Gathering Information: Data to Collect
FastTrac, Kauffman Foundation
In your market research to evaluate potential growth opportunities, you will need to research your customers. You must also have a clear understanding of your competitive environment. This information will help in your business planning process and is key in making informed decisions about your business.
A customer profile provides a clear picture of the type of person or business you are currently serving or planning to serve. This information helps drive your marketing strategy, promotional design, and sales tactics. For example, a tennis racquet manufacturer who is trying to identify the type of players most likely to purchase the product will want to characterize the segments of customers in this market.
This manufacturer needs to know demographics of the customers, where the customers purchase their racquets, how often they play, how often they buy a new racquet, how much they pay, what motivates them to choose one racquet over another, and much more.
Typically the customer profile will include customer demographics, buying patterns, and psychographic characteristics, which help determine why customers buy and their lifestyles preferences. For business-to-consumer markets (B2C), the standard tool to search for customer demographic data is zip codes. Industry codes (NAICS and SIC) will give you information on business-to-business (B2B) markets.
In order to assess the sales potential of various growth opportunities, you will want to find out as much as possible about competitors.
Direct Competition – Direct competition for any business includes entities that sell similar products or services in the same target market. Home Depot® and Lowe’s® are direct competitors in the home improvement market. H&R Block® and Jackson Hewitt® are direct competitors in the tax preparation market.
More so now than ever before, direct competitors are not always located in the same geographic area as a business. Many businesses are using mail order, telephone sales, or Web sites to sell their products or services. To identify direct competitors, you can use the Yellow Pages® and Internet, or conduct surveys to learn where people currently purchase similar products or services.
Indirect Competition – Indirect competitors can be more difficult to identify. The indirect competitor is one that sells different products or services as a primary business but can also fill the need for your product or service. If your business provides marketing consulting to other small businesses, your most likely direct competitors are other marketing consulting firms. But what about specialty and print advertising businesses that consult with clients on their marketing as a part of the sales process, or a nonprofit community resource that offers marketing advice free of charge? You may have more competitors than you think.
Indirect competition can also be the customers, as they may provide the product or service themselves or eliminate it entirely when times are financially tough, especially for services such as housecleaning, lawn-care, or food preparation.
Future Competition – Entrepreneurs should always consider how much time they have before another company begins competing for their existing customers. You may have an advantage in the market today, but others will note this and counteract with a competitive strategy. You will also benefit from anticipating customers’ future needs. As time goes by, your customers’ needs may change. If your competition is more in tune with their changing needs, then they will steal your market share.
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.