Before you start writing your business plan, take some time to conduct market research. Market research provides relevant data to solve any marketing problems and determine your business idea’s potential. There are some marketing strategies, such as market segmentation and product differentiation, that are nearly impossible to successfully pursue without market research.
When you’re conducting market research, you’re trying to answer four core questions:
Who are my customers?
What do they buy now?
Why do they buy?
What will make them buy from me?
There are two ways to collect the data you need for your market research: primary data and secondary data.
Primary data is data you collect and compile yourself.
To collect primary data, first conduct exploratory research. Exploratory research is open-ended and involves detailed and lengthy interviews from a small group of respondents. The goal of exploratory research is to help define a specific problem.
After your exploratory research has uncovered a specific problem, you can use specific research to help you solve that problem. Specific research interviews are more structured.
There are four main ways to collect primary data: direct mail surveys, phone surveys, online surveys, and personal interviews.
Direct Mail Surveys
You can send a questionnaire to potential respondents. Direct mailing can get expensive because you have to pay for printing, envelopes, and postage, and the response rates are always low, sometimes below 5%. If you want to send direct mailings, there are a few steps you can take to increase your response rate:
Make questions short and to the point.
Address the survey to a specific person.
Limit the length of the survey to two pages.
Include a professional letter explaining what you need.
Send a reminder about two weeks after the initial mailing.
Include a prepaid, self-addressed envelope.
Phone surveys are one of the most cost-effective research methods. To conduct successful phone surveys, try to avoid pauses as much as possible to keep your respondent’s interest. If you will need additional information after the initial call, make sure to confirm that a follow-up call is possible, so the respondent will answer a second time.
Online surveys are becoming increasingly popular because they are extremely cost-effective. You can use websites like SurveyMonkey® or Amazon Mechanical Turk to create and collect data. Many websites have free options and paid options, depending on how many responses you want, how many questions you want to include, and how much you’re willing to pay.
When conducting online surveys, divide your questions between customer satisfaction questions and customer demographics questions, with an emphasis on customer satisfaction. You can also end the survey with a suggestion question, such as “What can we do next time to make your experience exceptional?”
Personal interviews are the most expensive way to collect primary data, but they can be incredibly useful because the conversations can go in any direction and can uncover topics and issues that you had not thought of.
There are two types of personal interviews you can conduct, depending on what you want to accomplish and how much money you’re willing to spend: group and in-depth interviews.
Bigger businesses use group interviews more often than small businesses. Group interviews are costly, but they are useful as a brainstorming tool and can result in product modifications and even new product ideas. They can give insight into the buying preferences and purchasing decisions of a certain demographic. Group interviews are the most effective when a professional interviewer conducts them because the interviewer is not biased toward your business. Professionals can steer a conversation back, if it veers off course.
In-depth interviews are one-on-one interviews and are either focused or non-directive. You’ll use a specific list of questiosnt to conduct a focused interview. A non-directive interview encourages respondents to address topics with little guidance from questions. In essence, the respondent leads the interview.
Secondary data has already been collected and organized for you. Take advantage of secondary data sources because someone else has already done the heavy lifting. You can find secondary data reports from public, commercial, or educational sources.
Public sources are often free and include governmental departments, public libraries, and your local Chamber of Commerce.
Commercial sources for market research include research and trade associations. Often, these associations will charge a subscription cost or association fees, but the price can be well worth the data you receive in return.
If you’re not sure which associations would have the most relevant data for your business, check out the Encyclopedia of Associations or the Encyclopedia of Business Information Sources from your local library.
Educational sources are often overlooked when conducting market research. Universities and colleges are conducting more research than almost any other sector in the business community. You can find many research reports at your local university’s library. If you cannot find any market research for your industry, speak to professors on campus; they may allow students to conduct market research as an internship for your company or in exchange for course credit.
To conduct useful market research, you will have to combine primary and secondary data sources to see the full picture of your market.