Market Research
What is Market Research?
Market research is a search for facts that will prove or disprove your assumptions about your market. It a process that will help you avoid risk, the hallmark of a successful enterprise, but can also burst bubbles if you find that a cherished idea isn't likely to work. Don't be discouraged: for every idea that doesn't work, there are several that do.
This page explains the why, what and how of market research. Here are some tools that can help as well:
The Importance of Market Testing
Why Bother with Market Research?
The main reason for doing research is to make sure that there are sufficient potential buyers of your product or service to make your venture financially successful. In addition your research will help you:
- establish realistic goals
- determine the most profitable market segments
- develop an adequate product line
- assess the size & strength of your competitors
- discover the most cost-effective methods of promoting your business
- determine your pricing strategy
- formulate a sales plan
- choose an appropriate location of the right size
- discover reliable suppliers
- ascertain equipment & supplies required
- calculate start-up & working capital required
The information gathered is critical to making sound business decisions, for preparing a credible & workable business plan & for forecasting cash requirements.
How to do Market Research?
Here is a 10-step process that should help you to carry out the research you need to make sound business decisions:
- brainstorm ideas
- hypothesize
- identify the information you require
- research secondary sources
- check your hypotheses; return to step 1 if necessary
- research primary sources
- analyze and interpret the data
- check your hypotheses again; return to step 1 if necessary
- make a decision
- develop your marketing plan
What Information is Required?
There is so much information available in today's world that it can be overwhelming. Use the 10-step process to stay focussed. A good way to organize your research is to think of it like a funnel, starting with a large amount of general information, becoming more focussed then down to specifics related to your idea.
The information you require can be further divided between three categories:
1. Industry (Community)
2. Customers
3. Competitors
Here is a list of some of the information to look for:
General:
- demand in industry
- structure of the industry
- regulatory environment
- business cycle
- seasonal fluctuations or patterns
Focussed:
- most profitable/viable market segment
- customer profile: demographic & psychographic
- who competitors are
- what business model competitors use
- which government regulations apply to business
Specific:
- customer purchasing criteria
- who is the decision-maker
- how are buying decisions made
- where do customers currently shop and/or live
- price sensitivity
- reaction to various stimuli (eg. packaging/signage)
- how do customers find out about the product/service
- frequency of purchase
- how large a market share competitors have
- what image or reputation competitors have
- where competitors are located, other physical features
- what prices competitors charge
- competitors advertising & promotional strategies
- acts & bylaws relating product or service
Where to Obtain Information
Researchers separate sources of information into two categories: Secondary Sources and Primary Sources.
Secondary Sources
Information that is gathered for general purposes, such as that compiled by Statistics Canada, or for a project other than yours, is secondary source of information. There is a huge amount of information available from secondary sources; the challenge for the market researcher is in identifying what information is relevant to the project and where it can be found.
In most cases business information can be gathered at no charge. Most published information can be found in these locations:
- Canada/Ontario Business Service Centre web site
- Statistics Canada web site
- Industry Canada web site
- University or community college, business schools
- City or Municipal Hall
- Advertising agencies
- Business associations offices (Boards of Trade, Chambers of Commerce)
- Business section of municipal Reference Library
Primary Sources
Primary sources of information are sources that you use to generate data specifically for your business plan, focussing on your products or services, and their features and benefits.
- Surveys
- Focus groups
- Conversations
- Test marketing
- Observation
- Trade shows
Tips for Market Research
- Know exactly what you are researching
- Never use one information gathering technique
- Use the KISS principle (keep it short and simple)
- If necessary, hire a professional
- Make the decision
