Big boys, like Microsoft and Apple, spend tons of money every year on market research. But you are just a new kid on the block who’s high on dreams but low in cash, so should you give market research a skip?
Not doing market research is the biggest mistake a newbie can make. For sure, you wouldn’t want to start your career as an entrepreneur by putting a wrong foot forward — would you?
Market research builds a solid foundation for your business, preparing it for any weakness or threat that may hit it hard. From exploring potential rivals to learning more about your audience, market research lends your company a competitive edge — and often can be difference between whether your business makes it big or sinks into oblivion without a murmur.
In short, market research provides the building blocks fundamental to your business’s health and growth. Ignore it at your own peril.
Here are Five Key Benefits of Conducting Market Research
Lowers Risk Factor
Every business action has some risk attached to it. You cannot do away the risks altogether, but you can make efforts to better understand the risk you’re taking. As famous British entrepreneur Richard Branson once said in his book “Business Stripped Bare”, it is crucial to always protect your downside, and in order to do so, you need to take a calculated risk. The emphasis here is on the word “calculated” which means known risk or even better, evaluated and controlled risk.
Good market research helps you do exactly that — and that is why it is so important.
It tells you the risks involved with various actions. Conducting a detailed and thorough research will help you understand whether implementing a certain decision is likely to pay off in the future or not. It helps you evaluate the level of resources you need to invest in a risky venture that has a potential for generating profits and gives you estimations with regards to the probability of success. In other words, will you recoup your initial investment and make additional profits or is it more likely that you will lose everything you have invested?
No business venture comes without risk. In fact, finance 101 tells us that the higher the expected returns of a certain venture, the higher the risk involved. Many theoretical models and formulas have been created by various business experts throughout the years in an attempt to evaluate risks related to business ventures and companies, but experience tells us that this doesn’t eliminate the need to conduct a proper market research.
A market research is a pragmatic, practical and highly effective way to get a sense of what’s happening tangibly in your niche or business sector.
In case your market research predicts a good chance of success, by all means, go ahead with your plan. On the other hand, if the market research doesn’t give much cause for confidence, perhaps it would be best to shelve the plan, till conditions become more favorable.
If a certain activity needs a significant upfront investment, market research can help you decide if it’s worth taking this risk, saving you from losses that you can ill afford.
Did you know that 50% of businesses fail within the first 5 years?
Part of the reason for this high failure rate is that many businesses are not sure about whom to sell to or how to sell. And as you can guess, this can be a costly mistake — one which can send a business to an early grave, regardless of how promising the whole idea was.
To cut a long story short, knowing your target audience and how to sell to your prospects is invaluable.
The second-part is just as bit important. If you approach your target customers on a platform they don’t use, your sales will remain low. For instance, if your target audience is active on social media, not much is going to come out from a marketing campaign that focuses primarily on print media.
Market research allows you to understand your target customers better. No less importantly, it helps you determine the best platforms to connect with them.
Knowing the shopping behavior of your prospects is crucial to connect with them and grab their attention. However, market research is not only important for winning new customers; it also about just as important for engaging with existing customers and earning repeat business.
Asking customers business-specific questions can help you get honest feedback, which can prove invaluable both in the short and long run. Ask them what they most like about your products or services or what improvements they would recommend? How do they perceive your brand?
Answers to such probing questions will help you see how consumers think about your brand and improve customer relations, which can help you win more customers and turn new customers into repeat customers.
Know your competition
Are you aware of your competition? Do you understand how their business might threaten yours?
If not, do market research without any delay.
It is imperative for any new business to find out who its competitors exactly are and how they may ruin its chances to make it big. If you are not privy to this information, you may have to soon pull down the shutters.
Yup, that’s right, ignore is not always bliss. For a business, access to the right kind of information is often the difference between success and failure.
When you know your competitors, direct and indirect, and how they may pose a threat to your business, you can combat them better and remain competitive. Otherwise, you may perpetually remain a small fish—unable to get a big slice of the pie because you are unaware of the competition around you.
OK, so you have successfully launched your business and managed to get a few customers — but now what?
Many questions come to mind.
How can you take your business to the next level?
How can you identify more lucrative opportunities and, even more importantly, grab them?
Is penetrating this or that new geography a good or bad idea?
Should I launch a new product or service line and what do I need to make this happen?
What are the potential merger or acquisition opportunities in this emerging market allowing my business to exponentially expand and grow?
Should I digitize my business and move part or the totality of my business online?
What are the growth opportunities involved with starting to serve the B2C segment now that we have succeeded in serving the B2B group?
Enter market research.
Use this tool to explore more opportunities to boost your sales and expand your operations. To grow your business, you will have to deliver something that others don’t. But in order to offer something truly unique and a differentiated value proposition in a new market or environment, you need to get a sense of the current situation which justifies your efforts in conducting proper market research.
By understanding the way business in currently being conducted in your potential target market, you will be able to gauge what’s happening on the customer, supplier, competition and strategic levels and gaps will undoubtedly appear.
Once you identify a solid opportunity, you will be able to create the right product or service to fill the unmet need. This, in turn, will lead to many happy customers, who will gladly give you repeat business and spread a word about your products and services.
Measure brand reputation
Last but not the least, doing market research helps you measure your brand reputation. Don’t forget that brand perception is everything. Customers and people in general are very much affected by how they perceive your brand rather than by how your company really is. In other words, customer behavior is mainly motivated by the perception of your brand’s competence rather than by the actual competence of your company. This is a key insight not to underestimate. Of course, with repeat business, your customers will be able to align how they perceive your brand with how you actually perform and in case there is a strong mismatch where you don’t actually deliver on your promise, don’t be surprised to see them leave.
In all cases, it is crucial to conduct interviews and surveys specially dedicated to understanding what your customers think about your brand and how this impacts their business relationship with your organization. These activities will help you gauge customer satisfaction, measure your brand reputation and take appropriate action to improve your company’s standing in your particular niche or sector.
Don’t underestimate the power of market research when it comes to improve your brand image. Many companies have decided to revamp their brand identity or even operate a major shift in their business practice following the results of a solid market research.
This is a great way to find out how much progress your business has made over time vis-à-vis your main competitors, as well as how you can improve further.
To sum it up, market research is important for every new business. A detailed analysis of the marketing trends, business environment, and consumers can help you develop a better understanding of what your business should do to make an impact. It gives you a deeper insight into what might work and what might not.
It is important to note that you have many tools in your arsenal to help you conduct proper market research and these include surveys, interviews, focus groups and many others.
Experience has shown that every entrepreneur should conduct at least three interviews before they launch their business. Interviews are very effective means to gauge the appetite for your product or service and most importantly, they can be conducted in a rather inexpensive way.
Interviews are great for finding out what people love or hate about your offering, understanding the customer’s current habits and finding out why a certain solution has been adopted. On the flip side, interviews are bad for predicting future purchasing behavior or making assumptions about demand for your product or service. Interviews are particularly bad for determining definite pricing for whatever you offer, so make sure to use them with caution.
The big question with interviews is figuring out who to interview in the first place. Well, thankfully, there is a sizeable list of targets to choose from including:
Potential clients or end users. This group includes individuals who have the problem you are trying to solve.
Potential distribution partners. In certain industries, these actors are key players you must approach to understand the ins and outs of your business. These include store managers, retailers, wholesalers…etc.
Subject matter experts. This group includes industry experts, specialized lawyers, journalists, influencers and other relevant professionals who may help you better understand the market or sector you are trying to penetrate
Experts agree that surveys should be usually done after interviews. The purpose of a survey is to help you analyze a certain market trend or demand, or help you build a certain case. The challenge with surveys is to find a relevant sample.
Samples can be generated from convenience samples (like schools or friends), purchased samples (like using Google Surveys) or generated through online ads (by using PPC or Facebook ads for example). Of course, the bigger and less biased the sample (Your friends are more biased than complete strangers when it comes to evaluating your business idea), the better.
Keep in mind that interviews and survey are by no means enough to conduct a proper market research. These are undoubtedly core building blocks however you must complement your market research with other important components such as a proper competitive analysis and for more advanced cases, the use of data analytics if needed.
In short, market research helps you make better business decisions, boost sales, and remain at the top of your game.
So embrace market research whole-heartedly. It’s a good friend. One that will stand in good stead and help you realize your dream of becoming a successful entrepreneur.