Market research is essential to fully understanding your consumers and competitors. To perform successfully, business owners and managers must know their markets, customer attitudes and needs, competitors and their competitive position. Inadequate knowledge about consumers puts a company at a distinct competitive disadvantage.
One of the harsh truths in business is that few people have unfailing intuition or reliable ‘gut feelings’. Subjective thinking can be the downfall of many entrepreneurs. Fortunately, you can use market research to verify your ‘gut feelings’ which leads to more accurate decision-making.
Spending money or time on professional market research is rarely wasted because it can mean the difference between a successful venture or avoidable failure.
In fact, market research can actually save you money and identify opportunities to improve profits.
Listed below are four ways market research can be used to improve your bottom line and eliminate costly mistakes.
1. Determine your Target Market
Did you know that last year, 7115 patents were granted by Intellectual Property (IP) Australia? It is estimated that less than 50 of those patents will be successful. Why the poor success rate? Sadly, while the creators had the talent to invent the items, they lacked the ability to research whether there was a market for their ‘baby’.
One of the most prevalent traps in developing a new product or service is assuming it will fill a market need. Strangely enough, customers are finicky creatures and want products that suit them perfectly. Creating a product or service that you think people will want can spell disaster.
Before launching a new product or service, it is essential to know:
1. Who has a real need for the product or service I intend to sell?
2. How many potential consumers are out there?
3. Where are my potential customers?
4. How much are my customers willing to spend on my product or service?
5. Does my product or service save my customer money or make them substantial amounts of money?
6. Why will they buy my product or service?
By identifying your target market, you will be able to evaluate the viability of your new product and service and understand the enhancements needed in order to increase sales.
Target market definitions also feed into the development of your promotional and sales strategy. By understanding your market, you are less likely to waste your advertising dollars on promoting to the wrong demographic. Further, by understanding your market you will know which benefits are conducive to sales, which will facilitate more effective selling strategies.
Once your target market is defined, further market segmentation can be undertaken which is the foundation for marketing and advertising strategies.
Another common business trap is to have previously identified your market and assumed it was set in stone. The chances are your market will keep changing due to emerging industries, new technology or even changes in company decision-makers. Redefining and reviewing your market should be undertaken regularly.
By fully understanding your target audience you will have the ability to develop a relationship with it. This relationship can bring mutual and substantial benefits to both parties. From your knowledge, you will be more capable of foreseeing market trends and identifying market opportunities. This will enable you to provide further products and services to fill market gaps.
Defining your target market can be achieved by undertaking either primary or secondary research (or both).
Primary research (or original sources) involves gathering actual data among those using or likely to use your product or service. Questionnaires, in-depth interviews, focus groups and observation are all used to uncover information. It usually involves commissioning a market research company or consultant to conduct research.
Secondary research (or printed sources) involves data collected and produced by others such as trade associations, publications or the Government (eg: census data). This method is less time consuming and more cost effective. However, the data may not fit your product or service accurately enough, resulting in misleading analysis and bias. In untapped or niche markets, all of the secondary data in the world will be of no benefit to you.
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