Do Your Homework Before You Take the Plunge
Market research is the process of discovering the common characteristics and preferences of your customers, who your competition is, and what current and future trends can affect your business.
By thoroughly researching your customers, industry, and competition before launching your business, you can determine whether your business idea will be viable. Refer to our Evaluate Your Business Idea handout.
Research also helps you become an expert about every aspect of your business, including your products and services, your competitors, the demographic you are marketing to, as well as the market conditions that will affect your business. The more you know about all of these factors, the better you can plan for success.
Two Ways to do Your Homework
Market research falls into one of two categories:
1. Primary research
You can source this kind of information yourself by creating questionnaires, and conducting your own surveys, focus groups, and sample or field testing. The advantage of primary research is that you can form questions that will address exactly what you need to know.
By conducting your own research, you’ll have a better understanding of your customers as well. The disadvantages of primary research are that it’s time-consuming and labour-intensive.
2. Secondary research
You can also gather information from reports other than your own.
The disadvantages of secondary research are that the questions were asked by someone else and might not directly address your needs, and you won’t get as much information as you would by gathering opinions yourself.
The advantages of secondary research are that it’s fast, less labour-intensive, and relatively inexpensive.
Three Factors to Keep in Mind
1. Your target market
A target market is a group of people that share certain common characteristics such as age, income, education, lifestyle, and values, among others, and that are most likely to buy your product or service. When you think of your target market, you should concentrate on the characteristics for the majority of your customers, but not all of your customers.
You should also think about ranking the characteristics in terms of “likeliness to buy from you”. Age may be more important than education, income may be more important than occupation. Maybe your target customer is a post-secondary student living away from home for the first time, or a middle-aged, upper-income homeowner. Each of these types of customers will require a different message when you market your business.
Once you have a list of important characteristics of your target customer, you can search for information on where they are located and what trends are happening within your target group.
Local, provincial, and federal governments are excellent sources of demographic information. For example, the BC government publishes Neighbourhood Income and Demographics and BizMapBC puts out Neighbourhood and Commercial Profiles.
2. Your competition
You will need to know about your competition to understand how you can get your target market to buy from you and not from someone else. For example, promising better service to your target market is not going to increase your sales if all of your competitors are promising the same.
By researching what your competition is doing for their customers, you can work on differentiating yourself from the rest of the pack. You can also broaden your sales by offering products and services that your competition isn’t providing. You can use company directories, the Internet, or licensed databases to identify who your competitors are, where they are located, and what their advertising strategy, product lines, and web presence are.
3. Industry trends
You need to be aware of the current and the long-term trends that could impact your business. visit online sources such as Springwise or Trendhunter to research industry and societal trends. You can also search licensed periodical indexes for relevant magazines and newspaper articles. Your local city hall’s planning department can provide information regarding density and future developments.
Refer to our Resources for Market Research handout for a more comprehensive listing of useful websites to visit when researching your business concept.