Many of the draft business plans reviewed by Treasure Valley SCORE contain little evidence that market research has been conducted in support of the business propositions. Almost without exception, competition will exist for a proposed business. Competition is not the only factor deserving research, but such research will help identify issues that will require analysis and resolution to enable the business to succeed.
There are several key objectives in conducting market research:
Identify the wants, needs, behaviors of your prospective customers.
Identify your competitors and unique offerings they propose to customers.
Identify the size, stage and structure of your industry and its growth potential.
Identify the key success factors for your industry.
Here are five areas of research to target:
1. Your industry
The information you should gather includes the industry participants, the marketing strategies being employed, percent of sales spent on marketing (for small businesses this may not be available), growth rate, substitute or alternative products, dependency on suppliers and barriers to entry. Barriers may include high costs of capital, production and distribution; a dominant brand; and technical and training issues.
2. Your marketing environment
Research changes and factors that are out of your control: cultural and social trends, demographic trends, technological developments, the economy, and regulatory, legal and legislative factors.
3. Your company
Often prospective owners have difficulty being objective about their strengths and weaknesses. A friend or a business adviser can offer a reality check. Include an assessment of your marketing skills, your financial resources, the availability of skilled workers, and the status of your product's development, quality, availability and cost. The purpose is to determine what needs to be done to address weaknesses.
4. Your collaborators
Collaborators are not a part of your business but can be contributors to your success. Collaborators can include suppliers, distributors, wholesalers or sales representatives.
5. Your competitors
You may have primary competitors. They look and act like you. Secondary competitors sell a similar product but in a different business category. The third type of competitor may sell a substitute, namely, a product that meets the needs of the customer.
Think of the designer chocolates for Valentine's Day. There's the specialty chocolate shop, there's the supermarket and there's the florist shop.
Almost every business has a website. Start there.
Where to learn more
Information is available from a variety of sources, much of it at no or very little cost.
One of the best sources in the Treasure Valley is the Boise Public Library. The library subscribes to a host of databases and best of all has staff experts to help in your research.
Almost every industry has a trade association. Associations compile actual and market trend information.
Trade shows are another valuable source. So are various websites. Consider Alibaba, Kompass and OneSource.
What to do with the information
Develop your marketing strategy. Your research should help answer the question of who is the target market and how the information shapes the 4 Ps - product, place, price and promotion. Without performing the research, the target market and the 4 Ps will lack a clear focus and the basis for success.