Sadly many small businesses completely ignore market research. It is an indispensable tool in your marketing arsenal. There are three core areas to research, both before you start a business and even once you are already well into your business development, these being: Industry, Competition and Consumers. Let’s look at each one by one.
- Size of the Market – Knowing the size of your potential market will give you a good indication whether you have a viable product or service.
- Niches – Most markets can be segmented into sub-groups called niches. Evaluating the niches will help you to discover potential gaps which you can fill with your products or services. Some niches may be saturated with competitors making them unprofitable, whilst others may be “ripe for the picking”.
- Competition – You can identify your major competitors, determine whether you can realistically compete against them or how you can differentiate your business from theirs.
- Opportunities (Unmet needs) – Market Research can help you identify areas where consumers are not being serviced and, thereby provide you with the opportunity to meet their needs.
- Common Complaints – Most industries are perceived as having certain weaknesses. For example, I worked in the Financial Planning industry for a number of years. At the time, many financial advisers were criticised by potential clients for receiving product commissions from suppliers. Consumers believed there was a potential conflict of interest because an adviser may recommend a product because of the commission rather than on its merits.
In my business, we chose to charge “flat fees” (no commissions) and we used the slogan “uncompromised advice” which was highly effective.
- Product Testing – Got a great product idea, but not sure if it will work?
Whilst studying at university I did some part-time work for a confectionary business. One of my activities was to provide samples to potential customers and to determine:
- Whether they liked it; and
- Whether they would buy it.
- Who are they? – Have you identified all your competitors? Where are they? What do they charge? What is their niche?
- What do they do well? – What are they known for? What are the best aspects of their product or service? Can you replicate it? Can you do it better?
- What do they do poorly? – Your competitors may have some particular weaknesses that represent an opportunity for you. They may not be meeting all the needs of their customers. This may mean there is a gap in the market and a niche to fill.
- What is your Competitive Advantage? – What differentiates you from your competition? Do you have something distinct about you or your business which would make consumers choose you over the competition? Whilst this may seem difficult, it is vital that your communication and ‘core’ messages are distinct and highlight that Competitive Advantage..
- Can you compete against them? I wouldn’t want to be a bookstore owner these days! Whilst there will likely always be a place for books. The price of an online book makes it so much better value for the end consumer, that the trend towards online vs. bookstore will continue unabated.
- Demographics – What is their age? Gender? Socio-economic situation? Where do they live/work/shop? Can they afford what you offer?
- Motivations – What drives them? What are their interests? Hobbies? What are they looking for in their lives?
- Needs/Wants – Is your product or service something they need? (must-have) or is it a want? (nice-to-have).
- Niches – It is generally not helpful to think of your customers or prospects as one big group (i.e. individuals or businesses). Rather, it is more effective to segment them into smaller categories with unique needs and wants. You can then market to them as a group.
It is more than likely you will want to focus your marketing strategies on the few small niches in which you can compete.
- Complaints – What do customers complain about in relation to your industry? As I mentioned in “Common Complaints” (above), in my previous industry, we turned a common complaint into a major selling point for my business.
- Objections – What are some of the likely objections which you will face in selling your product or service? Will it be ‘you’re too expensive’, ‘there is not enough colours to choose from?’, ‘It is too big, too small’, etc. Preparing for objections can be vital to winning customers.
I will never forget for as long as I live, an incident during my first year in business. A potential customer asked me ‘what differentiates you from other advisers?’ I didn’t have a well considered answer, so I waffled on. This led to some fairly basic objections that, in hindsight, I could have dealt with very easily.
I lost a potential client!
Needless to say, you should list all the key objections you might receive and construct quality, ‘honest’ answers to those objections.
Market Research – your latest business tool!