Market
Research
Market Research is a term that describes the
process of finding information for the purpose of completing a
business/strategic plan. It is a methodological process for identifying
the information needed, describing potential sources for that
information, outlining an approach to finding that information, and
finally, organizing the data to provide the desired benefits.
Although many companies sell ‘market
research’ data, it is far better for the business owner to do the
legwork, as it is thorough this process that you learn the intricacies
of the market, competition, pricing, customer dynamics and demographics,
etc. A significant by product of this work is that you can speak with
great confidence about the data and what it means. That confidence is
both critical and apparent when speaking to investors, banks and others
about the business.
So what are the normal goals of market
research? As the name implies, finding out about the size and content of
the market for potential sale of goods or services is normally the first
goal. Any prospective business entrepreneur wants to know if there is a
large enough market, at a price, in a specific area of interest, so that
he can be successful without obtaining an inordinate market share. As an
example, it is desirable to show that a shoe store could be profitable
with a small market share of sales in a given neighborhood rather than
needing to sell to half of the residents. Other concerns and questions
about markets include whether the market is growing or shrinking. It is
certainly preferable to enter a business when the market is growing.
In order to do research about the market
size, it is first necessary to define the target market for which the
product or service is targeted. Is it aimed at adults, children, men or
women, of a given age, ethnicity, financial status, early adopters,
seniors, etc? So the first step is to think through the primary target
for sales. Clearly, one will be happy with sales to other demographic
segments but it is critical to clearly define your target market. This
will also be critical when one seeks to build awareness with this target
market of the product or service offered.
A methodology for market research is
straightforward. Having defined the product or service and the target
market, write down a list of the things that you need to know to
complete your plan. Then for each of these items write down a question
or two that you can ask to get this information. Make sure that these
are a mixture of fact-finding questions, feeling questions, open-ended
questions.
Then sit down a make a list of potential
sources including both human and data sources. Data sources should
include a variety of search terms used in Google, Yahoo or other
search engines.
Take the list of questions that you have
developed and ask each of your sources the entire set of questions. Use
the same set of questions over and over again. It will become readily
apparent rather quickly which questions are giving you the information
you want, which are not, and potential new questions that require
answers. The key is to use these questions repetitively so that you can
compare the answers of many different folks and data sources. That will
make the information relatively easy to organize, once you have done
sufficient work. How much is sufficient? When the answers become
repetitive, you have sufficient data.
Take all this information, put it into you
business plan in concise form and then see what more is needed. This may
entail a second or third round of questioning, as this is an iterative
process. Once having done this work, you will be very knowledgeable as
to whether your business idea can succeed and if you can make money at
the venture. You should also be positioned to talk to lenders based on
your new knowledge.
Mark Levi is a counselor with the Silicon
Valley Chapter of SCORE. You can arrange a counseling session with Mark
by calling the office at 408-288-8479
