Want to win over new customers and retain your old ones? You’ve got to know them, their needs and their preferences first.
That’s the advice from the United States Small Business Administration (SBA), which informs people it is “crucial to understand your customer base from the outset.”
Fortunately, the SBA offers practical advice to help business owners conduct market research and competitive analysis. The first step is to identify the economic conditions that will give you a sense of your customer base. That begins with researching demographic information about your potential customer base. To begin, answer these questions:
- Is there a demand for my product or service?
- How many people are in my market?
- What are the key economic measurements, such as income range and employment rate?
- Does the reach of my company extend beyond a specific geographic boundary?
- What similar purchase options already exist in my market?
- How much are potential customers currently paying for similar products?
Demand, market size, economic indicators, location, market saturation, pricing—these are the key items to consider as you seek to know your customers. Of course, knowing what you need to learn about is only half the challenge.
The real work is conducting the research itself. In its online crash course in market research, the SBA recommends that business owners should conduct market research “when a business intends to introduce or enhance a product or service.” Geographic expansion and a search for a different target market are other occasions for refreshing a company’s existing market research.
Here’s a market research primer—not the last word on market research, to be sure, but a primer to help you get started. A well-rounded business program, such as an MBA, can give you the tools, skills, experience and confidence to take your market research activities to the next level.
Where to Learn About Market Research
Because market research is so important to business, it’s an integral part of any business education. As an associate, bachelor’s or MBA student, you can expect to learn the basics of market research and perform exercises to gain experience and confidence in this area.
Know Where (and How) to Look
The SBA identifies two main categories of market research: primary and secondary.
Primary research is the gathering of original data, which can be collected through such techniques as:
- Email or telephone surveys
- Focus groups
- Direct customer interviews
- Observing customer behavior, such as purchase habits in store and online
- Analyzing current company sales data
Secondary research uses existing data gathered and shared by another authoritative entity. In using secondary data, a business owner must be prepared to categorize, sort and analyze raw data collected from reputable sources such as:
- The Consumer Expenditure Survey
- The S. Industry and Trade Outlook
- The U.S. Bureau of Economic Analysis
- The U.S. Census Bureau
- The SBA
- Trade journals
- International institutions (World Bank, International Monetary Fund)
Thorough market research typically requires a combination of quantitative and qualitative data. Quantitative data includes information that can be numerically measured or answers closed-ended questions, such as when, where and who. Qualitative data reflects opinions or comparisons, answering open-ended questions, such as why and how.
Each type of data can provide useful insight into customer behavior and attitudes. The way you use the data will depend on the research goals and how the analysis is conducted.
Methods of Market Data Analysis
Gathering the data is important, but now comes an equally important task: understanding what the data actually means. To do this, you’ll have to put the information in a format that you can analyze and use to take action.
You’ll want to use visualization methods such as charts, tables, graphics and many more for quantitative data. Statistics and average values are common pieces of information displayed in a market research report.
Because qualitative data is less dependent on hard numbers, the results are usually presented verbally or in a printed report. The information gathered through qualitative research is often open to the researcher’s interpretation, which is why a business owner must establish clear parameters for analysis—asking the wrong questions results in less useful information.
Companies often use market research to conduct a SWOT analysis. SWOT stands for:
- Strengths: What you do well internally
- Weaknesses: What you can do better internally
- Opportunities: External ideas for growth
- Threats: External obstacles
Don’t worry if your SWOT analysis shows that more data needs to be collected. Sometimes, you won’t know what questions you need to ask at the onset of market research; refining your questions and going back to primary and secondary sources after some research is normal.
The Bottom Line
Market research won’t be easy—it takes time and money—but the results can be instrumental to helping you connect with customers and giving you an edge over competitors. Start by using the market research tools at your disposal, such as the resources available from the SBA, and when you’re ready, go deeper into the topic with a graduate or postgraduate business program.