So you’ve got a terrific idea for a new business or product you’d like to bring to market. But where do you start?
One of the most important elements in developing your idea is market research. Why? Think about it this way: Before you dive into a lake, would you prefer to know its depth or just wing it? As Derek Bok, former president of Harvard University, once said, “If you think education is expensive, try ignorance.” With a little preparation and some know-how, market research can help move your idea from concept to market.
Secondary and Primary Market Research
Every business concept needs two types of fundamental market research. One type, called secondary research, looks at existing research important to your business idea and market. For example, if you want to open a bakery in town, you’ll want to know the neighborhood demographic, your competitors and how bakeries have historically fared in the region. Data from the U.S. Census Bureau, libraries, journals and newspapers are excellent sources for secondary research. But secondary research is limited because it doesn’t provide insight into your specific business plan and information may be outdated or one-dimensional.
That’s where primary market research comes in. It answers questions specific to your business model or product through surveys, focus groups, observations and field studies you — or the team you hire — design. For example, if you’re looking to create a product that solves a problem, a field study provides an opportunity to observe consumers’ unfiltered behavior with an existing product, which can yield insight into their needs and frustrations, strengthening your product’s design. Primary research tests your hypothesis and informs your business plan.
Saving Money on Secondary Research
While secondary research is often free, time is money, especially to an entrepreneur. So here are tips to help you recognize key patterns and underlying trends as you conduct secondary market research:
- Google Trends documents users’ searches according to regions, providing entrepreneurs with insight into markets, consumer trends, interests and behaviors. This data can give your business a leg up by informing your business plan or product’s design, and helping you identify the best opportunities to funnel limited marketing funds.
- The Small Business Administration provides resources to help you with your market research and competitive analysis for that competitive advantage.
Go beyond the first level of data to understand not just what the research tells you, but what it means for your business. For example, in 2015 when the Avian flu claimed millions of egg-producing hens, that was bad news for the poultry business — but it was also meant it was an inopportune time for restaurants to launch a new chicken-wing dipping sauce. Keep these important connections in mind to stay strategic and competitive in your market.
Ask why. For example, let’s use a study by Ohio State University, which cited 80 percent of restaurants fail within their first five years. This may give most would-be restaurateurs pause; however, researching the reasons why so many restaurants fail enables you to addresses these issues in your business plan before they become problems.
Save Money on Primary Research
While primary research can be expensive, online tools offer low-cost options to garner and analyze data. For example, Twitter offers instant access to a mass market of consumers, allows you to conduct free market research by eliciting feedback, and you can track trends and competitors. Or track your competitors with Foller.me and identify influencers with Klear. SurveyMonkey has slashed the amount of time and money it takes to get important feedback from your target market.
However, online feedback is largely theoretical and subjects may not provide you with what they’d do in real-life. The Wall Street Journal recently reported that 82 percent of would-be renters claimed an on-site gym as an important feature, but only 40 percent of tenants use it. Capturing data in a natural setting can provide a more accurate representation of how the product will be used.
Look for opportunities to partner with local stores and events. If you’ve developed a product for new parents, reach out to stores like Babies R’ Us or scout the pages of your local parents’ magazine for upcoming events where you could host a focus group to test your product. Races and festivals also provide you with a viable audience to test your products and ideas.
Once you’ve completed your market research, you’ll package this information as part of your sales pitch to prospective investors to show you’ve done your homework. Remember a good presentation won’t be enough to impress. But your ability to read the market and harness the opportunities you discover to shape your product or business model into a quality solution just might be.