Simply stated, market research is defined as the process of gathering data on goods and services to determine whether the product or service will satisfy customers' needs. Market research can identify market trends, demographics, economic shifts, customer's buying habits, and important information on competition. You will utilize this information to define your target markets and establish a competitive advantage in the marketplace. For market research to be useful, the information must be timely and relevant to your business.
A successful new venture sells customers goods and services they want or need and continually grows a base of satisfied customers. Hundreds of thousands of people consider starting new businesses each year, and each of them will ask themselves the same questions: Does my product or service fill a need? Who will buy my product or service? What will my price point be? What are the trends in my industry? Who are my competitors?
This information isn't just interesting or "nice to know." Rather, it is essential information to guide you in making strategic business decisions. By gathering research about your business concept, industry, potential customers, and competitors, you can uncover or verify unmet customer needs in the marketplace, and, many times, discover new ideas for products or services. Market research can provide you with value that should exceed the time and cost of the research itself. It can help you minimize your financial risks by determining if your product or service will succeed or fail in the marketplace, and perhaps save you from making costly mistakes.
Market research helps you to:
- Communicate effectively to your target markets through advertising and promotions. By researching your customers and their spending and buying habits, you can create marketing campaigns to meet their specific interests and needs.
- Identify and understand opportunities that exist in the marketplace. For example, through preliminary market research, you might find an opportunity to start your business in a geographic location you had not considered before, where little or no competition exists for your product or service.
- Pinpoint potential obstacles or problems with your business concept. Through research, you may uncover direct or indirect competitors you had not considered before who may inhibit your ability to gain a competitive advantage in the market. You might also discover future development plans that could include big-box retailers in your target market location. This information is important to discover because it can help to minimize your short-term and long-term financial risks.
- Benchmark and evaluate your success. By knowing the size of your market, how your competitors are doing and who their customers are, you can set goals to reach your market, grow your customer base, and track how you are doing in relation to the competition.
Consider this example of how research can lead you to a market opportunity: The idea for PROTEC® came to founder Michael Matthews while he was a police officer attending law school. Researching a paper in employment law, he learned about the high cost to employers of employee liability lawsuits and rapid changes in employment law. Thinking there might be a demand for employee screening services, he spent seven months interviewing employers, studying competitors, and researching public record and law databases. Today, his firm keeps clients abreast of their employee obligations and verifies prospective employees' Social Security number, criminal history, motor vehicle records, civil record, and much more. Because he took the time to research the market, competitors, and relevant legal issues, Matthews was able to develop a feasible idea into a successful business.
Whether you are buying an existing business and looking to expand into new markets or introducing a new product or service, primary and secondary market research will provide you with valuable information to help you develop a strong Marketing Plan.
Market research can provide you with information about your industry-its current size, growth potential, and general operational patterns. Market research can also tell you about customer characteristics in a particular market segment and about how your target market spends money. It can reveal motivational patterns and other psychological aspects of your target market, including customer perceptions, values, and opinions. Market research also provides you with information about your competitors and how economic, political, or environmental trends in the marketplace could affect your business.
Whichever style of market research you opt for-and you should consider a blend of several approaches-you need to focus on the value of the information, its accuracy, and relevance to your business concept. Many key business decisions will be based on the information you gather.
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