You might think that market research is out of your league or a costly venture better left to large companies. But the good news is that you can probably tackle it yourself if you follow a systematic, step-by-step approach.
The first rule of thumb is that market research drives your marketing plan. Basically, your research helps you understand your customer needs so that you can offer a product or service that precisely fits those needs. Keep in mind that effective market research is not just a one-shot deal. In fact, you should gather information on an ongoing basis, continually assess the marketing vehicles used to reach your customers and always be vigilant about what the competition is doing. In this way, you'll be truly keeping your eye on the market.
Here are some tried-and-true market research techniques:
Define your target market
Start by jotting down the basic demographics for your customers; find out their income, age, education, ethnicity and use this information to help you determine specific categories of customers. For example, Group A may be young, university-educated and urban. Group B may be elderly and live in rural areas. You may want to alter a product or service to fit a specific customer profile.
It's also paramount to get closer to your customers and understand exactly what motivates them to buy a specific product. An easy way to find out what drives your customer's purchasing decision, for example, is to simply ask them after the sale. If you are new business, start by asking customers in similar target markets. By getting direct feedback, you'll gain valuable insight into your customer's profile. For example, you may find your clients are looking for savings, a way to simplify their lives or just shopping for sheer pleasure. You can use this type of information to develop products and services that cater to their specific needs.
In the same vein, it's also important to know what keeps your customers away from your products or services; perhaps they find them too costly, risky or inaccessible. Once you have this ammunition on your side, you can take steps to make changes in your products or how you conduct business. For example, if your product is perceived as expensive, you might try to change that mindset by putting more emphasis on your lower pricing.
Define the size of your market
Facts and figures are essential to define the size of your market. Avoid working in the dark; ensure that you make real estimates about the market size and what piece of the market pie you can expect to carve out for yourself. These are some factors to consider:
- How much of your type of product/service does each household/individual/company purchase?
- What's the estimated population of potential buyers in the market where you intend to sell. (Multiply number of consumers by the amount they typically would purchase and you have the market potential.)
- Which segment of the market is the most attractive in terms of future growth potential, ease of entry, competition, profit potential and overall risk?
Assess your competition
Get to know your competitive landscape. Start by identifying your competitors, know what they're doing right and know what they're doing wrong. Look in the more obvious places first, such as in trade journals, on the Web and relevant trade shows. You'll want to arm yourself with competitive information such as: actual and potential size of competitors, market growth rates, market profitability, distribution methods and marketing strategies.
Build your company's strengths by knowing your competitor's weaknesses. For instance, is your competitor's customer service approach flawed? Are there obvious clients that they're ignoring? Are they priced out of the market?
To get answers to these questions, a little footwork can help. You can call competitors and pretend you're a potential customer, or talk to their existing customers to see if there are gaps that you can fill for them in your business, i.e., better post-sales service or more accessible pricing.
Another way to do a competitive analysis is to rely on the 4 Classic Marketing Ps - Product, Place (location), Price, and Promotion.
Product:
Look at the features and quality of your competitors' products and decide what makes you stand out from the crowd. Can you offer a something more such as a guarantee or return policy?
Place (location and distribution):
Decide where your target market could most easily and effectively access your product. Determine if your competition is in the same location, for example. You also have to decide how you're going to distribute your product or service (direct mail, wholesale, retail, etc.).
Price:
Do a price comparison with your competitors and assess what quality/features they are offering at that price. Decide what price and sales volume you need to achieve your profit objectives, keeping in mind that your goal is be as profitable as possible while remaining competitive in the marketplace. Consider these other major pricing factors: can you sell your product at different prices into different markets? Can you maintain your prices over time and what do you expect to happen to your competitors' prices?
Promotion:
Watch how your competitors package and promote their products and services. Ask yourself: is their advertising flamboyant, low-key or technically detailed? What media vehicles do they use; Web, print, television or other? How do they position themselves in the market? And how can you ensure that you distinguish yourself in the market?
Get expert help, if you need it
Depending on the complexity of your company and your needs, you can also consider getting help through specialists such as the BDC Consulting. Expert consultants can assist you with:
- Sales & market research: market potential, market share analysis, location studies, sales analysis, test markets, distribution channels, value vs. cost studies, sales incentive impact studies
- Product research: new product modelling, competitive product studies, pricing
- Business research: short/long range forecasts, business trends, profit/value analysis
- Advertising research: Local conditions, effectiveness studies, competitive advertising
If you need to research international markets, get free assistance from International Trade Canada. They can provide you services, such as:
- Export counselling and market entry support
- Information on international markets
- Pathfinding for export programs and services
- Recruitment of participants for trade fairs and missions abroad
- Recommendations for trade-related conferences and seminars
- Trade publications produced by Team Canada Inc. and others
