The Importance of Market Research
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- Melvyn Kelley
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1 The Imprtance f Market Research 1. What is market research? Successful businesses have extensive knwledge f their custmers and their cmpetitrs. Market research is the prcess f gathering infrmatin which will make yu mre aware f hw the peple yu hpe t sell t will react t yur current r ptential prducts r services. Whether yu are aware f it r nt, as a business wner yu cnduct market research all the time. When yu talk t custmers abut yur business r check ut the prices f yur cmpetitrs yu are cnducting market research. Frmalizing the prcess can prduce a wealth f infrmatin abut yur prducts and services, yur custmers and the marketplace yu perate in. The level f cmplexity used in yur market research campaign is up t yu, as market research can cver a brad spectrum f activities. Yu can undertake simple activities that can be dne n yur wn, such as creating a shrt custmer satisfactin questinnaire r studying demgraphic data fr yur area, r undertake cmplex nes that require assistance frm a prfessinal market research firm. Regardless f the size f yur market research budget, the time yu have available r yur level f experience, sme frm f market research is pssible and it can help yu t imprve yur business decisins. 2. Why cnduct market research? The gal f ding market research is t equip yurself with the infrmatin yu need t make infrmed business decisins abut start-up, innvatin, grwth and the 4 Ps : prduct, price, place and prmtin. Prduct Imprve yur prduct r service based n findings abut what yur custmers really want and need. Fcus n things like functin, appearance and custmer service r warranties. Price Set a price based n ppular prfit margins, cmpetitrs' prices, financing ptins, r the price a custmer is willing t pay. Placement Decide where t set up and hw t distribute a prduct. Cmpare the characteristics f different lcatins and the value f pints f sale (retail, whlesale, and nline). Prmtin Figure ut hw t best reach particular market segments (teens, families, students, prfessinals, etc.) in areas f advertising and publicity, scial media, and branding. Part f being prepared with market research is aviding unpleasant surprises. Intuitin and experience can be helpful at times, but research and facts ften paint a mre accurate picture f yur market. By cnducting research n a regular basis, yu can keep up with the dynamics f the ecnmy and demgraphy. Yu can als adjust t new regulatins and technlgical breakthrughs. Market research can help yu: Understand yur custmers and their preferences (4 Ps) Prfile yur custmers (lcatin, age, gender, incme level, etc.) Create mre effective marketing campaigns Find the best business lcatin Curtesy f Business Develpment Bank f Canada (BDC)
2 Identify pprtunities t grw and increase prfits Recgnize changes in demand Offer new prducts r services fr the new demand Find new markets within and utside f Canada Recgnize and plan fr industry and ecnmic shifts Shift inventry, price and staff levels as needed Mnitr the cmpetitin in yur market Identify cmpetitrs Get infrmatin n hw yur cmpetitrs perate Learn hw custmers cmpare yu with yur cmpetitrs Mitigate risk in yur business decisins Use infrmatin, nt just intuitin, t drive yur business decisins 3. When t cnduct market research Market research is widely viewed as a cmpnent f the planning stage f a business. Indeed, market research is critical fr new start-ups and shuld be a key element f any entrepreneur's business plan. Market research data feeds int a number f areas f the business plan, cntributing t sectins n: Determining the sales ptential f yur prducts and services Identifying the demgraphic characteristics f yur custmers Selecting the apprpriate business lcatin Setting the price fr yur prducts and services Attracting custmers t yur business Establishing yur cmpany image Setting prices fr yur prducts and services Ensuring advertising is n target Selling t custmers and earning repeat business Business plans and market research are nt slely fr new businesses. Accurate assessment f the market and develpment f an effective plan is critical t the success f bth new and existing businesses. Businesses cntemplating significant changes, such as business expansin and relcatin, are als wise t use market research t supprt their decisins. Examples f situatins that might call fr market research include: New advertising campaigns Opening a new lcatin r changing business lcatins Increasing prductin levels Intrducing new lines f prducts r services Curtesy f Business Develpment Bank f Canada (BDC)
3 The kind f infrmatin gathered thrugh marketing research during the planning and grwth stages f yur business can als be very useful in its day-t-day peratin. A regular flw f market research infrmatin can help yu t maximize the ptential f yur current business activities and help yu t create a radmap fr future grwth. 4. Hw t cnduct market research First, it is imprtant t establish clear gals fr the market research activity yu will undertake. Yu need t make sure yu have defined what yu need t knw and why. Once yu have established yur gals, it is imprtant develp a strategy and select techniques yu will use t gather data. The tw brad types f research yu can use are primary and secndary research. Primary research Primary research is riginal infrmatin gathered thrugh yur wn effrts (r n yur behalf by a hired research firm) t respnd t a specific questin r set f questins. This infrmatin is nrmally gathered thrugh surveys, bservatin, r experimentatin. The fllwing are examples f questins that can be addressed thrugh primary research: Wh are my custmers and hw can I reach them? Custmer prfiles Prspective business lcatins Marketing strategies Which prducts and services d buyers need r want? What factrs influence the buying decisins f my custmers? Price, service, cnvenience, branding, etc. What prices shuld I set fr my prducts and services? Custmer expectatins Wh are my cmpetitrs, hw d they perate and what are their strengths and weaknesses? Sme drawbacks f primary research are that it can be time cnsuming and expensive if nt perfrmed yurself, and the results are nt available immediately. The benefits f this type f research are that yu can specifically target desired grups (such as yur custmers r the gegraphic market fr yur business) and can tailr yur research instrument t answer specific questins. In additin t keeping the csts dwn, an added benefit f ding the research n yur wn is that yu will get t knw the market fr yur business better. Surveys are the mst cmmn way t gather primary research. Surveys can be cnducted: Thrugh direct mail Hand ut at the place f business r mail ut with survey returned in persn r via mail Questinable effectiveness; fllw-up reminders necessary Over the telephne Cst-effective Curtesy f Business Develpment Bank f Canada (BDC)
4 Can be difficult t reach participants Little appetite in the public fr telephne interruptins On the web r via Allws participants t cmplete the survey n their wn time with little effrt Cst-effective In persn Persnal interviews r fcus grups Can intrduce fllw-up questins r change the fcus f the survey n the spt Can be difficult t recruit participants When designing yur wn research questinnaire, be sure t: Keep it as shrt and simple as pssible Make sure it is visually appealing and easy t read Mve frm general questins t mre specific questins Make sure questins are brief and easily understd Avid leading questins, questins with ambiguus wrds, questins that are t difficult t answer (due t recall prblems, etc.) Make sure any respnse scales used are lgical with categries that are mutually exclusive Always pre-test yur questinnaire t identify ptential prblems The web is a gd resurce fr sample questinnaire questins that can be adapted t answer yur suit yur particular research needs. There are als a number f cmpanies that allw yu t create and cnduct surveys nline. Sme business wners are reluctant t ask their custmers t cmplete a questinnaire fr fear that their custmers will be made t feel uncmfrtable r annyed at the incnvenience. A gd way t reduce any awkwardness is t ffer yur custmers an incentive t fill ut a questinnaire. Yu might reward them with cupns r hld a prize drawing fr custmers that turn in a cmpleted questinnaire. Gd infrmatin n yur custmers can ften be btained withut engaging them directly. Interviewing yur emplyees can prvide excellent insight, as they are in cnstant cntact with yur custmers and can prvide infrmatin n: Custmer prfiles Gds and services that custmers demand Satisfactin with price levels and quality f service Experiences with yur cmpetitrs Secndary research Secndary research explits existing resurces like cmpany recrds, surveys, research studies and bks and applies the infrmatin t answer the questin at hand. It is nrmally less time cnsuming than primary research, and can be less expensive as well. Curtesy f Business Develpment Bank f Canada (BDC)
5 While secndary research is less targeted than primary research, it can yield valuable infrmatin and answer sme questins that are nt practical t address thrugh primary research (such as assessing macr-ecnmic cnditins) r questins that may make custmers uncmfrtable if asked directly (such as questins n age and incme levels). The fllwing are examples f questins that can be addressed thrugh secndary research: What are the current ecnmic cnditins that my business is perating in and are these cnditins changing? Internatinal, natinal, prvincial and lcal ecnmic cnditins What trends are influencing the industry my business perates in? Cnsumer preferences Technlgical shifts Prices fr gds and services Are there internatinal markets fr my prducts r services that culd help me t grw my business? What are the demgraphic characteristics f my custmers r where d they live? Ppulatins, age grups, incme levels, etc. What is the state f the labur market? Hw many peple have the skills I require? Hw much shuld I expect t pay my emplyees? Existing cmpany recrds such sales invices, receipts and frmal cmplaints are imprtant secndary resurces that businesses can utilize. Often times these recrds shed light n the same issues businesses seek t address thrugh primary research, and therefre an examinatin f cmpany recrds shuld be dne befre cnsidering a custmer survey r ther frm f primary research. Sme specific examples f using existing cmpany data in market research include: Examining sales receipts t find trends in the demand fr particular gds and services Crss referencing sales receipts with custmer addresses r prducts and services t determine the effectiveness f advertising Cmpiling cmplaints t determine areas fr imprvement in custmer service, prices r prducts and services ffered Anther key secndary resurce is statistical data frm fficial statistics prviders and ther rganizatins. These statistics in turn can feed int analytical papers and market prfiles that can help t put the numbers in cntext. Identifying statistics and analysis that can help yu with yur business decisins can be difficult, and sme datasets are expensive t purchase. There are, hwever, a number f quality statistics and analytical resurces available t yu, as well as guidance t help yu make sense f all the materials available. The Research and Statistics sectin f the Canada Business Netwrk website ffers a number f categrized links t data and analytical resurces, many f which are free t access. Other surces f secndary research materials include libraries, universities, industry assciatins and gvernment departments at varius levels. Curtesy f Business Develpment Bank f Canada (BDC)
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