You feel it in your gut.
The idea for the next big product or the best way to deliver a service that you’ve been obsessing over for months or maybe even years is simply too good to not do. And now you’re ready to jump and become a bona fide entrepreneur.
And what’s even better is that all of your friends think it’s amazing too. With that kind of affirmation, how can it fail?
Most small businesses come to be because of noticing a need in their world or an improvement in something they use. Or they've seen a market that is hot and they want to be involved in some way and take advantage of the demand. And generally, the same would-be entrepreneurs test these ideas out a little at a time by sharing them with their friends and family members through an informal market research and validation process.
However, our friends by definition are people we are bonded with through mutual affection, so responses to our dreams & ideas are almost always "That's a great! You should do it!" and often have no basis of a real business evaluation. It’s almost always an emotional response and not a practical one.
Now, occasionally someone rains on your parade but that is not as often and so you press on, firmly uplifted by the support of the people closest to you that your business idea is pure genius!
The reverse is also true. Sometimes you have a great idea and NO ONE thinks it’s going to work. But again, that gut inside you says otherwise and you’re determined to try anyways. (I know that feeling myself!)
But starting your business out solely based on the fact that your mom is proud of you and thinks anything you do is amazing is not a wise business decision. Nor is pushing ahead on your “gut feel” despite what everyone says.
So, unless your friends and family members are truly representative of the market you are attempting to enter and they are capable of providing you with honest feedback, you need to get some real criticism on your business concept no matter how small or uncomplicated you think it is. And this is called market research.
But is market search complicated?
It can be. But for a start-at-home business or even a small main street business, it doesn’t need to be in order to be powerful.
Market research is really two-fold. First, it involves seeing who is already out in the market doing your business, i.e. your competition, and what they are up to. While the second part is getting information from potential clients or customers to find out their needs and how you can deliver a special experience for them that’s different and better than the competition.
So, now t's time to put on your thinking cap and start doing a little market investigating, Sherlock, and here’s how.
1 | Hello? Who's Out There?
The first step in market research is to identify the competition. And this can be done simply with online research and developing a list of the competitors. You can also, casually, ask people who they purchase from and take note. This is a place where your friends and family can be good resources because if you marketing to people like them (your target customer), then adding their opinions in the mix is not a terrible idea.
Then, you should put all of the information into a spreadsheet so that you can analyze it and figure out if you need to do some further research work like calling people and asking a few more questions or doing some interviews.
The analysis part of your competition should include reviewing the following:
How much market share do they have? i.e. popularity, sales figures, etc.
What are their strengths and weaknesses? What would you like to copy or avoid?
Do your competitors only focus on your service or product or do they have other customers they market to? For example, are they a wedding photographer that also does business headshots? Are they a contractor that specializes in residential work or do they also do larger, commercial projects?
Where are they located in relationship to you and your business?
What are they charging for their products or services?
Are there any indirect or secondary competitors who may impact your success? For example, if you want to have a floral shop that sources locally are there any u-pick flower farms nearby?
This phase of your market research is called “quantitative” research. That is, you are collecting information that can be transformed into either numerical data or a statistic of some form. It will give you a set of generalized results and you can form a picture of where you may or may not fit into the results with your business.
Quantitative research is super easy to do because most of it can be gathered online in a very short period of time. But gathering data isn’t the only part of market research and figuring out if you have the right course for your new business idea or product. The next part – the qualitative analysis – is where the gold lies!
2 | Yes – But What Did You Mean?
I was first introduced to qualitative analysis while I was getting my Master’s degree and writing research papers on social topics such as environmentalism and sustainability. Since qualitative analysis is the art of reading between the lines, in social research it’s important to helping uncover people’s feelings and thoughts on topics rather than just an inventory on their behavior.
So, at the expense of you losing you and having you become concerned that you’re not capable of doing this, let’s cover the basics.
The first rule of getting qualitative information is that you remember while interviewing people to ask open-ended questions and not just ones that can be answered with a “Yes” or “No.” If you only ask closed questions, you’ll never get the respondents to open up and share.
So, you want to make sure that you don’t ask only questions like:
“Would you pick product A, B, or C?”
“Rank these features in order of importance.”
While those are definitely useful, you have to also include in your interviews questions like these:
“What do customers struggle with when it comes XYZ products?”
“What are some of your favorite services at XYZ stores?”
“Tell me about one of your favorite experiences at the XYZ restaurant?”
“If you could design the perfect XYZ product, what would you do?”
You can also find qualitative information by researching blogs, social media posts and other review sources relevant to your industry to see what customers are saying about different businesses and their products or services.
Then, once you have all of your notes complied, you start to look for trends in the answers. This means did people say the same things when they were asked about what they liked and disliked about products? Did you hear anything that you hadn’t considered before? Did more than one person mention it?
This will help you start to put together customer motivations and uncover opportunities. Most importantly, sometimes, the qualitative analysis will reveal the truth about the how the market feels about certain products and services that might be in contrast to your assumptions and it can help you from making a poor choice in direction for your business idea.
For example, vanilla ice cream might be the number one flavor year in and year out on paper, but don't assume the reason is because it tastes great. Sometimes it's the safest choice when you can't find the flavor you really want.
So, if you ask the Quantitative question “What ice cream do you buy the most?” And you get the answer “Vanilla”, if you stop there you would say to yourself “Well, Vanilla is clearly the way to go.”
But, if you follow up with the open Qualitative question “Why do you buy Vanilla a lot?” You might get surprised by “Because the other options at my store are limited and I don’t like them. I wish they carried salted caramel.” See the difference?
Now I can already hear it from some of you reading this - "Yeah, but you just told me Vanilla is a sure thing and I want guaranteed sales." To which I'll reply – ice cream sales are about volume and as long as you can keep creating inventory, your sales will go up. So, sure then be vanilla all day and night.
But, if you are in a business that that doesn’t have unlimited inventory, such as selling your time as a consultant or hours as a bookkeeper, then you have finite resources to sell. And in that case, it's a far better strategy to find a niche market and make yourself attractive to that niche, than it is to get a smaller piece of a large pie because there’s simply nothing memorable or interesting about your business.
And that’s the beauty in the qualitative analysis - the information gathered through the open questions and interviews is what is used to help you uncover and define the niche you want to operate your business within. Or to find ways to do better than what the market current offers.
3 | Conclusion
The point is, no matter how sure you think your business idea is or even how small it may seem, market research is vital to a business strategy and to a marketing strategy. It will either affirm or contradict your assumptions and also help you have a better understanding of the target customer, which helps with figuring out a plan to market to them.
It doesn’t have to complicated but it does have to be done.
ACTIVITY GIRL offers market research assistance to small businesses from planning, focus groups and reporting results or coaching a business owner through doing it on their own. Contact me for more information.