Every business, whether it’s a coffee shop or an aspiring tech startup, needs an in-depth understanding of the market it will serve. One of the essential components of a successful venture is knowing what your clientele needs and what influences their decisions.
The data you’ll collect during your market research will be an invaluable source of inspiration when planning your marketing strategy, the pricing of your services, and a host of other important facets of your business.
In this article, we’ll take a look into the reasons why you should meticulously study your market and, more importantly, how you should do it.
Let’s dive right in, shall we?
This is how you research the market
Information is everywhere, and the hard part is knowing how to extract it. Luckily, we have lots of tools within our reach that help us gather insight about our potential clients’ needs and the current state of the market. There are two types of research, which we need to set apart — so let’s take a look at how to differentiate them.
Primary market research implies reaching out to your potential customers directly. Think of it as first-party data — you collect it from the user, and there is no intermediary between you and them. Typically, you’ll compile raw data in the form of surveys, focus groups, interviews, test marketing, and even simply observing your potential customers’ behavior in a particular environment, like inside or outside a store.
Secondary research, as you may have already guessed, uses data that has already been compiled by somebody else — reports, studies, government statistics, and so on. This type of market analysis is very reliable, especially if the publisher is a reputable research center like Pew, Gartner or PwC. However, the central shortcoming is that you lack flexibility, and you have no saying in the design of the study. You work with what you have.
Here are some great sources for secondary research:
- Google’s Consumer Barometer
- Google Trends
- The Census Bureau (US)
- Small Business Administration (US)
- Marketing Charts
Think of what types of analysis will provide you with the most valuable and actionable insights. Combine these different sources of information to understand the passions and the fears of your clientele.
We need to ask the right questions
Now that we’re familiar with the instruments we can use to conduct in-depth market research, let’s think about the essential questions we’re trying to address.
1. What is the size of my market?
This is an essential question every company needs to tackle. In business, we call this “total addressable market,” also known as TAM. Understanding the size of your market will tell you what the revenue and the market potential is for your product or service.
- Related: https://youtu.be/KaftxzizjYY
2. Who is my customer?
To understand what moves your customers, you need to understand who your customers are. This is a question you’ll have to ask yourself on a regular basis, even when your company has a solid client base. This will allow you to continually adjust your prices and marketing strategy to their needs.
If your business is already up and running, ask yourself the following questions:
- Who are my best customers?
- What qualities do they share?
- Why do they use our services?
- What is their most significant pain point that we’re addressing?
- What do they get out of working with us?
If you haven’t yet kickstarted your business, design your research to answer the following questions:
- What is my average customer’s age, gender, salary, and education? Where do they live?
- Which type of marketing message appeals to them most?
- What are their primary goals in life? How about the challenges associated with these goals? How does my service/product help them achieve them?
- What is their job title? What are their values and fears?
Pro Tip: Did you know that IdeaBuddy can help you with defining your target customers?
3. Who’s my competition?
Another crucial part of your analysis is the assessment of the field in terms of competition. Who are they? Elaborate on their qualities and weaknesses. How are you planning to differentiate yourself from the rest of the players in your market?
Great! Once you’ve answered these questions, take a second to shift your perspective. Ask yourself the following questions:
- How do customers see my competitors?
- How do my competitors see themselves?
The first question helps you see them from a strength/weakness perspective, but from a consumer’s point of view. The second question allows you to see their weaker sides in a marketing viewpoint, and how these businesses are trying to compensate for them. This will shed a lot of light on the qualities your brand needs to enter the market effortlessly.
4. How much is too much?
Setting the right price for our products and services is one of the key elements of success. Ask yourself, how much would you realistically pay for what you’re offering. But also, put this question into context — the context of the market you’re about to enter. Your potential customers and your competition are critical factors when defining your pricing strategy.
5. What does the market need?
It is also essential that you establish what makes a product successful in your field. More importantly, we need to find out what the market needs in its current form. How is your product different from what your competition can offer? What is the need gap that your product is addressing? Will your customers be willing to pay for your services? Your market research should be geared towards proving that your clientele needs your product.
Bear in mind that while you’ll be studying the market need, your competition isn’t the crux of your study, it’s just a reference point. By understanding your competition you will be able to identify industry trends and find the ways how your product can take advantage of them.
6. What are my entry barriers?
Before looking into the nature of your entry barriers, let’s look at what they can be. Anything that is an obstacle preventing your business from entering a certain industry can be considered an entry barrier.
These hurdles range from patents to high customer loyalty or high customer switching costs. Having an in-depth understanding of these barriers will save you a lot of time, money, and effort, preventing you from investing them in a business that is bound to fail.
And yes, we know, thinking about all the stuff that could go wrong with your company is nobody’s favorite daydream. However, having an objective picture of the playing field is what makes you a successful entrepreneur.
What is the data telling me?
Now that you’ve collected all this information from your potential customers, we need to analyze and visualize it. Use spreadsheets to have a better idea of what this raw data is trying to tell you. Don’t forget to neatly and intuitively structure your documents. Once that’s done, use software like Excel, SPSS, Minitab, and Google Fusion Table to visualize all the data that you’ve compiled.
Visualization will allow you to have a different perspective and uncover a more profound meaning in a fog of data. Also, structuring information in an organized manner will help you identify patterns in the research that you’ve conducted, leading you to superior decision-making.
You did it! Now put it all to work
Now that your research is done, it’s time to take action! Your main goal now is to start working on your marketing strategy and use your findings to win your customers’ hearts and minds.
The data you’ve extracted is never definitive. It goes through continuous change, and it is your responsibility as an entrepreneur to stay aware of the market’s growth and development. This way, you’ll be able to feel the market’s pulse, stay in touch with the industry, and find ways to improve your product, thus appealing to your customers even more.
The more you analyze your market, the more you know about your marketing personas, which will lead to higher brand loyalty and revenue.
Knowing more about your clients will inform the types of advertising you’ll use, the marketing channels you’ll explore, the nuances of your copywriting, and even the design of your website, app, and even products.
The take-home message
Conducting a thorough market analysis is one of the most significant investments you can make to build a successful business. It’s also worth mentioning that researching your market is a highly creative task. You have lots of tools at your fingertips to get ahold of the most relevant data and make informed decisions regarding many important facets of your venture.
As a result, you’ll be able to:
- Locate market opportunities to provide specific groups of customers with the products and service they need
- Understand the actual size of your market
- Identify the best way to meet your clients’ needs
- Understand who your competition is
- Identify the best approach to marketing and advertising