How To Do Market Research: A Minimalist Guide
Not sure if you should invest in market research? Here’s why we think you should.
Some people take market research into overdrive, spending tens or hundreds of thousands of dollars on complex studies that may or may not produce valuable insights to help you run your business.
But some level of market research is absolutely fundamental for success, whether you are a new business, or an established brand with decades of experience in the industry.
Ask yourself these questions.
Would you ever go into battle without studying the lay of the land and your enemies?
Would you ever buy a house without researching the neighborhood, crime rate, schools and resale values?
No and no.
Would you ever invest in a business without understanding the competitors, audience, and trends inside your industry?
This answer should also be obvious. No.
You need to have this basic background knowledge of your market in order to make wise decisions about your business: how to position yourself and where to invest your budget.
If you don’t do market research, your business is just a gamble.
How much market research do you need to do?
The amount of market research that you need to do before getting started will vary greatly depending on your level of experience in the industry and your investment.
If you are an established brand, you likely know the market very well. So, if you are launching a new product, the market research will be minimal. You need to examine substitute products and competitors again for this new product and investigate the target customer (is it the same or different than your current target).
But the amount of market research required will be much less than if you are going into a market cold. If you are going into a market where you don’t have any industry experience and are building a business, then your effort in market research needs to increase substantially.
Do enough market research to feel confident that you understand the market. Know your numbers (beyond the size of your industry) and the characteristics of your competitors and audience.
How does market research affect your business plan and strategy?
Market research changes everything. It is the base from which to develop your business plan and strategy. Market research allows you to see the gaps in your industry and the areas of opportunity. Then you form your business plan around that to address a need that is currently not met effectively.
How do you do market research?
Start with a SWOT analysis of your industry. SWOT stands for strengths, weaknesses, opportunities and threats. Make sure that your analysis is detailed and includes actionable insights. Otherwise, this analysis is “Such a Waste Of Time” as many a business professor has said.
Then seek out answers to the following questions.
1. What pain point does your product solve?
And is your customer aware of this pain point? Most businesses either are improving upon a current solution or they are providing a truly new solution. In the second case, you need to know how aware customers are of the problem that you are solving. Do they currently identify this pain point as a problem in their conscious mind? This speaks to how much education you will need to do prior to trying to make the sale.
For example, check out Squatty Potty. The vast majority of people did not know the ideal posture for eliminating waste from your body. But it makes a huge difference! And once made aware of how much better your bathroom experience could be with the use of this simple stool, it is a huge success.
The first step for this brand, however, was to educate potential customers on the need.
2. Who are your competitors?
If you think you don’t have any direct competitors, you are wrong. There are other solutions to the pain point that you are trying to solve. Answer this question from the perspective of your customers. Who will they consider as alternatives?
3. How are you unique?
How is your solution different from the competitors solutions? List the top 3 ways that set your solution apart.
4. Who is your target customer?
This goes beyond demographic information. You need to understand the behavior and habits of your target customers as well as how they are influenced (through what channels and what other brands).
5. How well known are you?
Are you a known brand or not? How much trust do you have currently with your audience? This also speaks to how much education you need to do before trying to make the sale.
And finally, what is the plan in order to accomplish the above?
What resources will you need? What team do you need to build? What channels should you focus on? What budget will you need?
Where should you go to look for this market data?
We recommend searching for this data through 3 channels.
The first is through associations or networking groups. For example if you are opening a business related to healthcare, you should check out the American Medical Association. We are part of several such groups, and it helps to keep you current on the latest trends and developments within your industry.
The second is leveraging government information. This can be valuable to understand population density and trends, income levels, and hey, even the weather (what if you’re trying to sell snowboards… Hawaii certainly isn’t going to be on the list of target markets).
The third, and perhaps the most valuable, is the web. Check out the tools below to get started.
- Facebook.com (specifically their targeting and insights within advertising)
- Google Adwords (to do keyword research and understand trends)