How To Do Market Research for Your Home Business
Doing Market Research Will Save Your Home Business Time and Money
Have you ever been stuck in a place you'd never been with the lights off? Or had to drive through a town you didn't know in the dark?
Starting a home business without doing market research is a lot like navigating a room or a town that you can see very well. You can literally stumble around blindly, hoping to avoid getting waylaid by some major road block.
Whether your business aims to sell make-up door-to-door or operate a commercial cleaning franchise, you must do market research. This is true even if you're starting a single-person sole proprietorship.
It's true that if you fail to plan you plan to fail...and a good plan starts with market research. In Market research you learn about potential customers and your competition so you can map out the best possible market approach, and assist you in writing your impending business plan.
What Am I Researching?
Market research is seeking out the answers to help develop your business plan. The best and most efficient use of your market research time will be to research the following areas (which coincide with a typical business plan outline):
- Industry: Trends, threats, major players, growth rates, sales data
- Competition: Direct and indirect competitor profiles, including what they do well and poorly
- Ideal Customer (also referred to as a Target Market): Demographics, geographic location, profile, how needs are or are not being met
- Products & Services: Description of your offering, how it will be developed, produced and distributed
- Operations & Management: How you plan to structure the business and management structure
How To Do Market Research
Market research consists of two separate information collection strategies, primary and secondary research.
Primary research is the information you need that doesn’t currently exist. It is customized research that you create and conduct, in order to answer specific questions you have about your business.
What Types of Questions Could Primary Research Address?
Primary research is specific to your business and situation, so there is no single set of questions to answer. Your goal is to figure out what you don't know that you need to know in order to write an effective business plan. For instance:
- How will your potential customers respond to your company name?
- How much are your potential customers willing, if anything, to pay for your product/service?
- How important is home delivery?
- How important is the ability to purchase online?
- What is the best segment of the market and are there enough of them to support a business?
How Do You Conduct Primary Research?
- Face-to-Face Interviews: This could be people you know or don’t know. It could be as simple as asking your friends or family, although they might be as objective as you like. You can talk to people in stores or in situations related to your business. For example, if you want to start an errand business, you can talk to people who are out running errands.
- Focus Groups: This involves talking to a small group of individuals who represent your ideal customer. A facilitator is present to conduct a group discussion.
- Online Surveys: There are many online survey services available to assist you in creating an electronic survey, including SurveyMonkey, Google Surveys, and Wufoo.com. The key is to survey people are your ideal client or customer.
- Phone Interviews: Outside of normal phone interviews, consider clandestine methods, such as calling a competitor and posing as a customer to get their rates.
A Word of Caution:
Conducting primary research can take you outside your comfort zone, which might scare you away from doing it with strangers, and instead stick with people you know. The problem is that friends and family are not always in your target market and even if they are, they may not be completely honest with you because they want to spare your feelings. To get the most useful and accurate information, you need to seek out the right kind of potential customers to learn their needs, wants and expectations.
Now that you understand the basics of conducting customized primary research, it is time to understand how to use secondary research to garner even more knowledge about your industry and customers.
Secondary research involves seeking out and reviewing already published information from the Internet, industry reports, and media publications.
What Information Can Secondary Research Provide?
- Market Analysis: A snapshot of your market size and its growth potential.
- Industry Perspectives: Does the industry face certain threats?
- Customer Profiles: Figuring out who your ideal customer is (also referred to as target market.)
- Competitors: How many are in your area? What makes them so successful? What types of marketing are they using…etc.
- Product Pricing: Compile a spreadsheet of competitor pricing. This can help you determine where your own prices should fit within the marketplace.
How Do You Conduct Secondary Research?
Utilizing the Internet and local libraries will give you access to already published and useful information. Exhaust your various searches with Google and other search engines. Also consider seeking out information from some of these great online sources:
Company reports and websites are easily accessible and contain a limited amount of information, especially for public companies. Consider doing a Google search of similar companies in your area. This should detail those in close proximity to you and offer contact information. If you are in the business of direct sales (i.e. Avon), contact your local office and find out how many representatives are already in your area. Also seek out information on representatives from competing companies (i.e. Mary Kay).
You can check out your online competition in the case of Internet businesses. For example, if you plan to start a food blog, check out other food blogs to see what they offer, what they cover, and determine areas you can be new, difference or better.
Seek out organizations or publications focused solely on your industry. Often times they will conduct their own market studies and publish results. For example, if you plan to be a massage therapist, you can check out The American Massage Therapy Association.
- PR Newswire: Offers access to nearly every press related story. Search by industry, keyword or competitor.
- News organizations: Cable news, newspapers, and online news stories can keep you informed of news and trends that can impact your business.
A Word of Caution:
Don’t rely solely on the published work of others to give you the full picture. It is a great place to begin, but the information you get from secondary research can be outdated or just plain incorrect. You can also miss out on other factors relevant to your business.
Don’t use the Internet as your only research source. When you use search engines like Google, your search results come up with articles they think are the most relevant to your search, but this may or may not be true. For broader and more targeted information, consider visiting your local library or nearest university.
Market research will provide the insight necessary to get your business on the right footing. It will also prove invaluable as you write your official business plan.
Now that you understand market research basics, get into the habit of studying your market regularly. Business landscapes and customer preferences are always evolving and market research will help keep you one step ahead.
This article is part of a 10-Step Guide on How to Start a Home Business.