How To Do Market Research Before Starting Business – All You Need To Know
Market research before starting business is key to success.
Appearances can be deceiving and such is the case when starting a new business.
An industry that looks ripe for the picking might be experiencing a downfall. And a saturated market might be ready to experience innovation.
This is why it is essential to do market research before starting business. If you don’t, you usually end up with disappointing sales and some really good hindsight.
Take for example the Xbox 360, which opted to use the HD DVD instead of the superior Blu-Ray in 2005. We all know which optical disc format won the ‘war’.
And the console, while doing well soon realized the limits of its decisions towards the end of its lifecycle.
In this article, we talk about how to conduct market research before starting business that will align you with your consumers’ needs.
1. Look Towards Industry Trends
Before you begin analyzing competitors, customers, or products, look at where the industry is heading. There are a few ways you should go about this:
Use secondary resources. Many resources such as theUS Census Portal, The Google Scholar, and The Pew Research Center, among others, are great free resources to conduct secondary research.
Use these resources to look at monetary growth/ trends. Has the industry been growing in the past 5 years, past 1 year, etc…? A good indicator is stock prices, revenues and sales, and industry-wide profits. Numbers don’t lie, after all.
Learn about the pathos surrounding the industry. Reading articles on what the perception is surrounding the industry is a good indicator of where its long term future lies.
For example, the coal mining industry is slowly and steadily being attempted to be replaced, because of how it harms the environment.
While it won’t happen for a long, long time a business trying to make a mark in the industry is better off at looking towards renewable energy, since that’s where the long term future of energy lies.
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Read about mass hires in the industry. Another good indicator of how an industry is doing is hires. However, this factor is very indirect in nature.
2. Look Towards Competitors
Once you have an idea of how the industry is doing, it is a great idea to include competitor analysis as part of your market research before starting business. Some ways to do this are:
A. Research local competitors
While businesses have gone global thanks to the Internet, small companies are still most affected by their local competition.
Depending on the geography and size of your competitor, this research might have to be primary as good resources may not be readily available online. Some things to look at are:
Pricing Strategy: If you’re a B2B you’re directly competing for the end consumer.
If you’re a B2C, you’re trying to keep your bids as competitive as possible. It is always a great idea to see what’s being quoted and what’s being charged.
Marketing Strategy:While OnePlus and Apple compete in the smartphone market, their strategies are completely different.
One focuses very heavily on art and elegance, while the other on heavy-duty performance.
How is your local competitor marketing themselves? Finding this out will help you differentiate yourself.
Business Growth:
Have your potential competitors opened up new branches?
Have they expanded beyond your city/town?
Have they gone public to raise more funds?
Have they made mass hires?
Some of these questions will help you understand how your industry is doing locally.
B. Research global competitor
There should be plenty of secondary analyses available for global competitors for you to conduct market research before starting business.
The factors of research mostly remain the same as those for your local competitors. However, the global competition also shows you one very important thing that local businesses may be lagging on:
Product & service innovations: Thanks to their superior research and development teams, global businesses end up innovating their products and services more often than their smaller counterparts.
The best part is, it’s always in the news.
For example, if a marketing agency is focusing on developing its editorial content, how can you translate that to your business model before you start out?
It’s all about learning from the giants and building on top of their knowledge, one brick at a time.
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3. Look Towards Consumers
A combination of primary and secondary research on customers is a vital part of market research before starting business.
Customer research, or the lack of, can make or break your business plan.
It can leave your business saturated, or give you a channel for an innovative business model.
A. Secondary Research
Secondary research on customers is great for quantitative factors, such as:
- Target market’s growth in numbers
- Target market’s grown in revenue and purchasing power
- Geographical concentration for your target market
- Points of contacts that a general demographic prefers, among other things
B. Primary Research
Especially great to gauge your local consumer base, primary consumer research should be a core part of your market research before starting business.
Some ways you can use your primary research are:
- Conduct mass surveys to see how consumers in certain areas feel about the product/ service you plan on starting and how much they’d pay for it.
- If the above lean positively, you can conduct focus groups and controlled observations to test out your products/ services, if there is something unique about it.
- You can also set up a small test market and focus on one geographical area, customer base, or even make your product/ service invite-only as many apps do.
Primary research is expensive but can help you build the most accurate consumer persona for your local market.
You’ll have a better idea of income, consumer tastes, and interests.
This, in turn, will help you modify your business plan to more accurately fit your local target market.
4. Look Towards The Product
Seeing where your products and services stand in the competitive landscape is important.
Imagine being the person who just started the floppy drive business when CDs came out.
Such a startup may or may not have existed, but an entrepreneur can avoid such a calamitous decision by conducting product-related market research before starting business.
A small business does not require you to start a research and development wing of your own.
However, secondary research on innovation in your industry will allow you to invest your funds in the right place, if not become a potential early adopter yourself.
Look Towards A Bright Future
Starting a business is often romanticized.
While hyperbolic literature isn’t wrong- it’s always exciting to start a new venture, the sense of adventure may make you forget that a lot of work is put behind startups.
Conducting market research before starting business irons out all the wrinkles in your business plan.
Market research may enhance what you have in mind. Or, it may make you change your business plan altogether.
One way or the other, it is quite impactful.
There is a plethora of research you can conduct, and a variety of things you can look at. The more the better, as long as it doesn’t stop you from getting the ball rolling.
However, the points mentioned in this article are a necessity and should get you going in the right direction.