There is perhaps no other single factor that contributes to the failure of small business as much as a lack of market research. Small business success isn’t something that happens by accident. Success is a result of conscientious market research and copious planning. Entrepreneurs are optimistic by nature. They tend to see what is possible, rather than becoming mired down in the negative or paralyzed by the claims of naysayers. Optimism and initiative are fantastic, but they won’t turn a profit without being coupled with proper market research and planning.
Hard work and dedication alone won’t guarantee success or profitability. Before you pin your future and your life savings on any small business venture, you need to determine that you can actually earn enough to support yourself with it. The only way to make sure this is even possible is by conducting market research. There are several questions to ask yourself throughout the market research process. Here are a few of the most important questions you will need to answer throughout the process:
Can I actually make money doing this?
This seems like a silly question, but it is one many small business owners never bother to ask. Starting a small business is not an “If I build it, they will come…” situation. The truth is that there are some products and services that cater to a very small niche market. You will need to build a fundamental understanding of the types of consumers and/or businesses that are most likely to buy from you, what their wants, needs and expectations are, what they’re having trouble getting and what will set you apart from your competition.
How can I meet my target market’s needs?
The best indicator of what your target market needs is what they’re currently buying. Find out what products and/or services within your chosen industry are selling well and which are experiencing a lull in demand.
What is happening to your target market as a whole? How are their needs changing? Will their needs change with age or will you continue to target a specific age demographic indefinitely? Do the members of your target market have children and does having children, or not, have an impact on their demand for your product or service? What are your competitors currently offering and what can you do better, or differently, to better meet a customer’s needs?
What are the price points for your products or services?
What are people currently paying for something comparable to what you will offer? Are people willing to pay more if the quality and perceived value are higher? Evaluating what people are willing to pay for a product or service can be difficult, but the most difficult information to gather is typically the most valuable in the long term.
Consider surveying your target market and ask them directly what they would be willing to pay. Social web platforms like Twitter, popular blogs and online forums can help you establish a direct link to your target market that will help make gathering this information much easier today than it was 10 years ago.
Study your competition. Find out what people are already paying for comparable products or services. Organizations like Mediamark Research & Intelligence – http://www.mediamark.com/ and Experian Simmons – http://www.smrb.com/ are invaluable sources for such information.
Who is your competition?
Identifying the companies that currently offer products or services similar to those you want to offer is critical. While you may believe your product or service is totally unique and that no one else offers anything comparable to what you will offer, that is incredibly rare. There may be no product or service out there that will mirror your offering exactly, but there is inevitably a comparable or substitute out there that already exists. Identify these companies and learn everything you possibly can about them, what they offer and who their target market is.
What can you learn from your competitors?
It’s not as if you can just call up your competition, run down a laundry list of questions and expect that they’ll answer you. On the other hand, we’re smack in the middle of the Information Age. Competitive research is easier now than it has ever been. The Internet is a gold mine for anyone conducting market research today. Not only can you look at your competitors’ websites specifically, but resources like Alexa and Compete can provide valuable data and outstanding insight.