Often times, entrepreneurs may have a great business idea; however, many people
may not be interested in the particular product or may not be willing to pay for
the product(s) or service(s) offered. Small business owners simply cannot assume
that their business ideas are what people want without knowing who their target
audience is, the amount of money people are willing to spend for their product(s),
and who their competitors are. This is the very reason why market research is important
for a new business.
Questions every entrepreneur should ask themselves
The
entrepreneur
who is planning to introduce their new concept into the market needs to determine
the reasons for starting their new business. They should ask themselves the following
questions: What technical skills do I have that will contribute to my new business?
What do others believe are my strengths and weaknesses? Will I have the finances
to fully support my family when I decide to leave my job and start the new business?
How much available time do I have to invest in my
business idea?
Entrepreneurs planning to set up niche or highly specialized new businesses need
to answer the following: What new concepts or ideas will I be bringing forth? What
services or products will I sell? Is my idea practical, and will it fill a need
in the industry? Who are my competitors? What is my business’ advantage over existing
enterprises? Can I deliver better quality service over major competitors? How can
I create a demand for my business? Once an entrepreneur can successfully answer
these questions, they will discover that staring a new business takes much more
than talent or motivation; it takes ample research and preparation.
Benefits of market research
By conducting thorough market research,
entrepreneurs will be able to obtain valuable information about starting their new
businesses. First, market research will enable the business owner to learn of industry
trends and which products/services will be in demand. Second, they will be able
to see how the general public responds to their business ideas. This step is extremely
important because if a business manager cannot show investors (venture capitalists
or angel investors) that his/her great business idea(s) has/have potential, they
may not be able to secure proper funding for their venture.
Another advantage of market research is customer feedback. Through surveys, literature,
and questionnaires, business owners will be able to determine the overall satisfaction
of customers, and based on customer response, they can hone any imperfections to
make the product more marketable. Thorough market research can also be beneficial
in devising a viable business plan. Many investors will not even consider investing
in a company without a well-prepared business plan. These detailed business plans
are often flexible and can change throughout the development of a business. There
are also several formats of business proposals, which can range from mini-plans
to full length presentations. The latter type of business plan outlines the business
proposals as well as the financial outcome of the company. This is the format that
investors and financial institutions prefer the most.
In order for any great business idea to succeed in the market, business developers
need to learn about their leading competitors. By keeping track of market behavior
and the competition at hand, the business owner can develop great business ideas
targeted towards winning over new customers and increasing their profitability.
Types of market research
There are two distinct types of market
research.
A. In secondary research, the business owner meticulously gathers already
published data, which is easily accessible and nearly free to obtain. Information
such as consumer demographics, major competitors, and general usage of products
is often collected by government agencies and organizations, and made available
online and in books and publications. One disadvantage of this type of market research
is that the data collected may be difficult to validate and may even contain biased
information.
B. Primary market research is more specific in nature. It contains information
regarding a specific product that is brought forth by a company. Focus groups, field
studies, and simple observations of customer behavior are some ways in which companies
obtain primary market research. Many businesses that are planning to launch new
products rely on this form of research since they produce more specific results.
However, primary market research can be quite costly. Using both types of research
can certainly allow business owners to have accurate information regarding the market
and in making wise investment decisions.
Types of customers
There are three main types of customers
that every business will encounter. Depending on the product, its cost, and position
within the sales cycle, they may or may not be influenced to purchase a particular
product or service. It is up to the sales person or business owner to understand
their customers’ thinking in order to successfully win them over and make a sale.
A. The financier or “purchaser” is primarily concerned with the cost of
a product, not how effective a particular product may be. These types of customers
are aware of all the prices offered by major competitors and will often purchase
a product if they believe it is a good bargain. To target this type of customer,
the business owners should show how their prices are competitive. If the product
offered costs more than that of the major competitors, it is always good to reason
with the customer, show how the cost will be less throughout the life of the product,
or even how they will eventually break even.
B. The expert or “influencer” is not concerned by the cost of a product
but rather if the product being offered will be considered a good purchase. They
tend to be very knowledgeable about every characteristic of a product, including
technical features that the product offers. Their level of expertise may even influence
the buying behavior of others, especially if they believe the product is exceptional.
To target this type of customer, the business owners should be aware of every aspect
of their product and present to potential buyers what the product can do for them.
C. The end-user will not only be glad to purchase the product but s/he will
actually use the product bought. When enticing this type of customer, it is always
a
good idea to relate to them with their frustrations on their current situation
and convey how their new product will alleviate many of the limitations that they
may have encountered.
Conclusion
Overall, market research tests the customer response
to a product. When developing a great business idea, business owners first need
to think how their great business ideas will benefit customers. Shortly after developing
great business ideas, entrepreneurs are encouraged to analyze the market in order
to determine if their product is similar to what they are considering to develop
and if it is already available on the market. If there is already a similar product,
business developers then need to determine how they will place their new product
to differentiate it from the product already available on the market. The placement
of products born out of great new business ideas need to be carefully chosen to
attract the maximum attention of customers. In addition, it is product placement
that will differentiate this product from other similar products on the market.