It is difficult to emphasise the importance of market research when setting up a new business quite enough. It is essentially the equivalent of giving yourself a head-start or, alternatively, blindfolding yourself. No matter how good you think your product or service is, without research into the competition and the demand for it, you could be selling yourself very short.
But let’s not focus on not doing it, and look at effective methods and their benefits. The two classifications (overlords, if you will) of market research are primary and secondary. Primary research is that which is conducted by yourself and is often done through direct communication. Surveys are the most common and popular method and can give you vital insight into your market. They can also give you an idea into the size of your potential market, and help you forecast sales and success. One of the benefits of surveys as a form of research is the capacity to shape it to guide you in various areas. For example, after discovering (again via that little diamond, research) you have significant competition in your market, you can ask what it would take for a customer to select your business over the competition, enabling you to differentiate your product. Surveys, however, can have a low response rates, perhaps requiring an incentive, and also are not time-effective. This can be avoided by conducting the questionnaires over the phone, ensuring prompt, clear responses. However, this can still be time consuming and not necessarily an honest reflection of the market.
Secondary Research
Secondary research, information collated by someone other than your business, presents an accessible and less time consuming alternative to primary research, though accuracy and specificity may be compromised. The research can be collected from, to name but a few, books, local records, statistics, newspapers and the internet. This can give you an insight into the success rates of similar businesses, and help you construct a financial forecast. The scope of source materials gives you access to a wide range of data, enabling thorough research into the viability of your product. Secondary research can be conducted with relative ease, though some records will require payment for access. As with primary research, secondary research presents various drawbacks. It should be acknowledged that the information collated by secondary research may be inaccurate, ambiguous or outdated, and therefore could be counter-productive if the necessary attention to detail is not paid. Also, certain information may have been copyrighted, and as such, unpermitted use could have legal ramifications.
When starting up a business or going self-employed, it is advisable to undertake both primary and secondary research, ensuring as many bases as possible are covered, giving a broad view of the market. By combining the two types of research, you receive a combination of direct feedback from consumers, as well as information offering an insight into the potential snags and opportunities you may come across when starting up your business, as well as giving you the necessary tools to draw up a mouth-watering (yep, that’s the adjective I’m going to stick with) business plan.