As entrepreneurs, we’ve all had moments of clarity where we feel like we’ve come up with the next big thing. These ‘eureka’ moments seem fantastic when written on a napkin, but there’s a process that needs to be followed to properly evaluate your business idea.
How Market Research Can Evaluate Your Business Idea
Market research is one of an entrepreneur’s best friends. It can be leveraged to discover the common characteristics and preferences of your customers, who your competition is, and what current and future trends can affect your business.
By thoroughly diving into your customers, industry and competition at start-up, you can make an educated assumption as to the viability of your business idea. Start with Small Business BC’s Evaluate Your Business Idea handout.
Methods of Researching
Market research comes in two different categories, Primary Research and Secondary Research.
Simply put, primary research is information you gather yourself. This can take many forms, from questionnaires, to surveys, focus groups and even field testing. The main advantage of this type of research is you can set the questions to address exactly what you need to know.
This kind of research gives you an intimate understanding of your customers. However, it’s time-consuming and often labour-intensive work to carry out.
Information can also be culled from reports created by others.
Finding the Data You Need
The good news is that the data you need is readily available to you. You just need to know where to look.
Your Target Market
We’ve previously written about how to identify your target market, and correctly identifying these people will be one of the keys to the success of your business. 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, while Bizmap can help with neighbourhood and commercial profiles.
This partnership between the City of Vancouver, Small Business BC and 16 partner BIAs provides easy access to market data tailored to customized business districts. Presented in a clear and relatable way, the area-specific information enables local businesses, organizations and interest groups to understand neighbourhoods better and unlock their potential. Here’s a guide to how it works.
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 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.
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.