Market Research for Your Business
Finding Information About Potential Customers and Competitors
As part of your business plan, and to get a better picture of the possibilities for selling your products or services in a local market, you will need to do some market research. Looking at a local market will give you information about the types of people who might buy your products or services, how far people will drive to get to your location, and what your competition is within that market.
Step One: Determining Your Market Area
Before you can do research on your local market, you will need to know the size of that market. The question to ask yourself is: "How far will people come to buy my products or services?" The answer depends upon two factors: (a) the type of product or service you are providing, and (b) the availability of other similar businesses providing that same product or service (in other words, competitors). If you have a unique business with no competition, people who want your product/service will come from further away to get it.
For example, if you are selling kitchen accessories and there is no other kitchen accessory store in the area, cooks will come from a distance to shop. If you are a dry cleaner, people probably won't go very far to use your service, because there are many other dry cleaners in the area. The "rule of thumb" is typically how far people would go to a grocery store.
Step Two: Create a Profile of Your Ideal Customer
Next, you need to figure out who are the people who will buy your products or services.
- What age are they?
- What is their income level?
- What is their education level?
- What does their family look like?
- What kind of jobs do they have?
- What do they like to do for entertainment?
The more exactly you can describe these people, the better you will be able to determine the size of your market and the potential you have for selling to this market.
Step Three: Determine the Size of Your Market
When you have determined the geographical area you can draw from, get a map and draw a circle around that area. Try to estimate the population in that area. One good source for this information is City-Data. Then start looking at this population to see how many there are who fit the characteristics of your ideal customer. To do this, use City-Data or go to the local Chamber of Commerce or local business development group. Gather as much information as you can.
Step Four: Find Out About Your Competition
Finally, Put Everything Together
You now have:
- A general idea of the geographic area you will be selling to,
- A "picture" of the type of people in that area you think will buy from you, along with a number of people in that area who fit the description,
- A knowledge of the competition within that market area for that customer group.
Now, you can use this information to plan sales estimates, decide on the best ways to advertise and promote to this market, and put this information into your marketing plan.