Market research – Basics
The business startup process, especially drawing up the business plan correctly, are vitally important, part of which is the correct and accurate market research Whether it is a trading business, a retail business, a service providing business, or whatever, knowing the market and economic conditions, including the direct competition in your area, are crucial. Without this information you will be taking a shot in the dark, hoping to hit, but the chances are pretty big that you will miss, and you may lose a lot of money this way.
I'm sure that this is not what you want at all. Take this word of advice – do not skip this step, but rather do it well and comprehensively from day one. You see, you will be basing most of your business and strategic decision on the facts that you will establish once you have completed the market research. These decisions will include:
- Is there place for me in the market in my area or is there already already too much competition?
- Will my prices suite the economy of the area?
- Can I afford to pay the rental in the area, and will I be able to keep my prices reasonable for the perception capacity of the people in the area?
- What do I expect my monthly income to be? Or will I need to enlarge the area I cover in order to fully recover my costs and make a profit?
- How many people live in, or do business in, my area?
- What percentage of them may want my products or services?
- How regularly will they want or need my products or services?
- Is there due to any economic expansion in my area, or is there an economic meltdown about to happen?
- Over what period would I be able to sustain a business in the area in the present economic circumstances?
- How long will it take to recover my initial capital outlay?
Once the above decisions have been made, based on data discovered through the research and decision-making process, you can tackle the following tasks.
Primary Market Research
Primary research involves gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus-group interviews to learn about consumer preferences. Secondary or professional market research can be very expensive, but there are many books that explain to small business owners how to do effective research themselves.
The Marketing Plan
In your marketing plan, be as specific as possible; use reliable statistics, numbers, and sources. The marketing plan will be the basis, later on, of the very important sales projection. This is very important as it will also determine purchases of raw materials and retail products, the storage of them, and their production and distribution plans.
Products and services
You need to clearly describe and define your products and services, in your terms. Be as descriptive and specific as possible, especially where multiple types and models of the same products exist.
Now describe the products and / or services from your prospect and your customers' perspective. How do the customers perceive them to be, what would their expectations be, and how could you improve on your competitors' products and services; not only bettering their up-front prices.
Features and Benefits
List all of your major products or services.
For each product or service:
- Describe the most important features. What is special about it?
- Describe the benefits. That is, what will the product do for the customer?
- What after-sale services will you provide? Some examples are delivery, warranty, service contracts, support, follow-up, and refund policy.
- Are there any other benefits or gifts that you can include in the supply of your products and services.
Identify your targeted customers, their characteristics, and their geographic locations, otherwise known as their demographics. You may have more than one customer group. Identify the most important groups. Then, for each customer group, construct what is called a demographic profile, which includes:
- Income level
- Social class and occupation
Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world and, in a much narrows sense, the society that you intend to serve. In one short paragraph, define your niche, your unique corner of the market and your area of specialty.
The SWOT Analysis
SWOT stands for strengths, weaknesses, opportunities and threats, as they relate directly to your business, your products and services, your marketing plan, your customer base and area, and other important factors.
The SWOT analysis is covered in a separate article and tutorial.