The United States Small Business Administration (SBA) advises business owners that it is “crucial to understand your customer base from the outset.”
Fortunately, the SBA also offers practical advice to help business owners conduct market research and competitive analysis. It starts with identifying the economic conditions that will give you a sense of your customer base.
In addition to researching demographic information about your potential customers, the SBA suggests answering these questions as business owners begin their market research:
- Is there a demand for your product or service?
- How many people are in your market?
- What are the key economic measurements, such as income range and employment rate?
- Does the reach of your company extend beyond a specific geographic boundary?
- What similar purchase options already exist in your 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.
What follows is a market research primer, based on sound advice from the SBA and other reputable sources.
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. This information can be collected by:
- An email or telephone survey
- Focus groups
- Direct customer interviews
- Observing customer behavior, such as purchase habits in-store and online
- Analyzing current company sales data
Secondary research is the use of 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 close-ended questions such as when, where and who. Qualitative data reflects opinions or comparisons, answering open-ended questions such as why and how.
Each of these types of data can provide useful insight into customer behavior and attitudes. The way a business owner uses the data will depend on the goals of the research and how the analysis is conducted.
Methods of Market Data Analysis
The way data is analyzed often depends on how that data is presented visually, and that will depend on whether the information is
quantitative or qualitative.
Various visualization methods are available for quantitative data, including charts, tables, graphics and many more. Statistics and average values are common pieces of information displayed in a market research report.
Qualitative data is presented verbally, usually in a written report. The information gathered through qualitative research is often open to the researcher’s interpretation, which is why it is critical for a business owner to establish clear parameters for analysis before the data are gathered.
Companies that are on the verge of a launch or a major change often use market research to conduct a “S.W.O.T.” analysis. The acronym S.W.O.T. stands for:
- Strengths – What the company does well
- Weaknesses – What the company could do better
- Opportunities – Identifiable growth catalysts located outside of the company
- Threats – Identifiable obstacles outside of the company
Refreshing a company’s S.W.O.T. analysis can help a business owner determine what market research data is necessary. For example, if a S.W.O.T. analysis reveals that one of the potential opportunities is a boost in sales to an unexpected segment of the population, it is wise to conduct research into that occurrence to determine what, if anything, drew the new customers and whether that is replicable.
With properly conducted market research, a business owner will be able to develop a clear picture of the company’s customer base by combining knowledge of market share, barriers that might hinder growth, competitors’ influence on potential customers and best avenues for raising awareness about (i.e. advertising) the business.
One way to sharpen your market research skills is to earn a prestigious, online MBA from the Davis College of Business at Jacksonville University. JU online MBA students choose their time and place to learn, and gain knowledge of current theories and business practices, including techniques for thorough and useful customer research.