Even the best entrepreneurs are prone to making one fatal mistake: falling in love with an idea. No matter how good your idea is, it won’t make you any money if there isn’t a market for it. You need to base your business on an idea that is unique—an idea that isn’t easily replicated by anyone else out there. Marketable ideas solve a specific problem, and a targeted customer base will pay for that solution. The only way to find out if your business idea ticks these boxes is through market research.
Doing your market research for a business plan can define and refine your idea into a viable business that is attractive to both investors and customers. Let’s take a look at what market research is and how to use market research for a business plan.
What is market research?
Market research is gathering and analyzing data and other information about the market you intend to enter and the product or service you intend to sell. Market research defines potential customers, including their demographics, characteristics, location, and spending habits. It describes the industry as a whole and identifies competitors. The primary goal of market research is to figure out how your business contributes to the industry and what makes it different from the competition.
Doing your market research for a business plan is the best way to refine your idea to ensure that it is unique from the competition, solves a specific problem, and targets a definable customer base. Basically, market research helps you decide if your business idea is worth pursuing, and how you can adjust it to make it more marketable. Market research helps you understand the behaviors of your target consumers and the many factors that influence that behavior.
There are two basic sources for customer information in market research. You will likely use a mixture of both to paint a full picture:
- Primary research: This is information you gather yourself about your market and customers, including phone or online interviews, polls and surveys, or focus groups.
- Secondary research: This is information that others have already collected about your customers that you can analyze to add to your understanding. These sources include online reviews, industry blogs or publications, information on websites—including competitor websites—and published statistics and studies.
How to do market research
Overwhelmed with how much there is to do in market research? Take it one step at a time and get started with these concepts:
Identify your target market
Define your ideal customer. Find out demographic traits—gender, education and income levels, location—along with their interests, life stage, and habits. Depending on your business, your customers may be everyday consumers, or they may be employees or leaders at established companies. Try to determine how large your market is—if it is too broad, you might face too much competition; too narrow, and you won’t have much room to grow.
Decide what you want to know
Now that you know who your customer is, what would you like to ask? Here are some ideas, and there will likely be some variation on these questions:
- What do customers use or buy now?
- Why do they buy it?
- What will make them buy from you?
- What price ranges are deal breakers?
- Does your business idea offer a viable solution to their pain points?
Talk to potential customers
Time to get out of the office and actually meet the people whose lives you are trying to improve. Visit potential customers at home and work. Online surveys can be helpful, but there’s nothing like some real facetime.
One method to start up conversations with real people is to try to sell your product or service as-is, knowing that it still has flaws. Chat with potential customers, ask for feedback about why they do or do not make a purchase, and revise based on their feedback.
Review competitor offerings
Find out what your target market is currently using to solve the problem or pain point your new business addresses. Ask them yourself in interactions or focus groups, and research options or offerings currently on the market. Determine how your business could be either different or better than what’s already out there.
Document your findings
Describe and document everything you discover in your market research. Your notes will help you keep track of your findings. Also, consider typing up a formal report that can be shared with partners and stakeholders or included in your business plan.
Low-cost market research sources
Money is tight in a small business. For low-cost market research, get creative in looking for readily available information. Get started with these ideas:
If your business targets a smaller, local market, you might find great secondary research options close to home. Small business development centers, commerce groups, or startup networks can help you develop surveys and find access to local market data.
Unhappy customers have long used the internet to air their grievances. Take a look at what online reviewers are saying about your competition or similar services and products in other markets. Reviews can reveal customer pain points and help you know what concerns to address and mistakes to avoid.
Facebook groups have become a great platform for business and industry communities to connect. Look for groups, local and otherwise, that discuss topics relevant to your industry or groups that may be of interest to your target market.
Asking questions and searching content and conversations in these groups can give you a great resource for free, simple market research. Make sure to read the group’s rules; many don’t permit selling or business promotion. Other online communities, such as Reddit and Quora, may also be great sources of information about customer complaints, pain points, and habits.
Market research for a business plan is key to building up a business that will actually attract customers, impress investors, and turn profits. For more essential startup how-tos, register for a Daymond John’s Success Formula event today.