Why is market research important for new business ideas?
- Theme: Plan to start your business
Market research should never be underestimated. Many successful new businesses enjoy longevity because their owners conduct regular market research to understand their target market, identify consumer problems and pinpoint realistic competitors.
It’s the simplest way for entrepreneurs to keep up with market trends and maintain a competitive edge by sizing up your business opportunity.
Market research can be carried out at various stages of a business life cycle, from pre-launch and beyond. Having a greater understanding of your marketplace from the very start will enable you to create a sound business strategy to establish and grow your brand into one that’s better than the competition.
Define the objectives of your market research
The scope of the market research you’ll undertake is influenced by your overall objectives – what do you want to learn about your market and the external factors influencing it?
The objectives will also determine the types of market research that you need to undertake in order to be successful:
Primary market research covers the following:
- Monitoring the effectiveness of sales
- Ascertaining the quality of services provided by competitors
- Understanding the channels of communication used by competitors
- Assess the active competition within the market
Secondary market research covers the following:
- Published company reports data
- Existing surveys and studies
- Newspaper reports
- Government data
Primary market research is a kind of market research that can be carried out individually or as a business, with the aim of collecting unique data that can be used to improve products, services and overall functionality.
Secondary market research is a different type of market research as it relies on information that’s already available from a variety of sources.
The key steps of successful market research
There are four important steps to any successful market research study:
- Investigate whether similar research has previously been carried out
- If so, analyse the existing relevant data that meets your objectives – providing it meets your budget
- How will the existing data be used and by whom?
- Do you need to conduct your own primary market research too? If so, with whom?
Understanding the types of customer you’ll encounter
Most new businesses will encounter three different types of customer; market research gives you the ability to understand how your target customers think and adapt to their needs in order to turn them into regular customers and brand advocates.
The ‘savvy’ purchaser
This type of customer is someone that’s not necessarily concerned with the quality or effectiveness of a product or service, but is intent on getting the best possible value. A ‘savvy’ customer is someone that’s likely to be aware of all the prices offered by your major competitors, so you’ll need to carry out secondary market research to understand whether your products or services will be priced competitively.
If it transpires that your products or services will not be the cheapest it’s best to know now in order to provide compelling evidence to potential purchasers why they should continue to buy through you; perhaps based on quality and reliability.
The industry influencer
An industry expert or influencer is someone that is not only highly knowledgeable about your target market, they can influence other prospective customers that trust their opinion.
An industry expert will not be fixated on the price of a product or service, they are often more concerned with the value and quality. Industry influencers make for ideal candidates to use for primary market research, allowing them to use your products or services, garnering their opinion on them and the market as a whole.
An end-user is a customer that will actually use your products or services on a day-to-day basis. End users also make for excellent candidates for primary market research, allowing you to understand their frustrations and limitations – ideal if you’re still in the process of developing and designing new products, giving you the edge over the competition.
The value of market research reports
Aside from talking to target customers, there is significant value in published market reports. Many of these are freely available in libraries, business groups and trade associations.
At the Business & IP Centre you can get access to more than £5m worth of current market reports from leading publishers such as Mintel, Frost & Sullivan, Passport and many, many more. They’re all exceptionally useful for keeping abreast of changing trends and investigating new markets.
However, it’s important to interpret these market research reports in isolation. Some of the more generalised industry research may not be wholly applicable to your target market; nor is it a guarantee of consumer demand in your area. Be sure to take note of the date of publication too. In fast-changing industries such as technology, a report that’s even a year or two old could already be outdated.
If you think you’ve developed a great business idea, it’s vital that you test it against what’s already available on the market. Product placement is everything to get maximum exposure.
Many new businesses start off as an idea in the mind of an aspiring entrepreneur or business owner. Turning these ideas into viable business propositions is the undoubted challenge. Sign up to our ‘How do I research a business idea’ workshop to understand how to develop a strategy for identifying and finding the information that will help deliver this knowledge.