How to Do Market Research For Your Small Business
While consumers today seem to be more powerful than ever in the sense that they have so many different ways and means to check the quality of a brand, marketing tools and techniques have never been so sophisticated, versatile, and precise. Both of these factors need to be taken into careful consideration when starting a business as both can provide precious insights needed for success.
Business strategy based on thorough market research is vital for small businesses as their budgets usually can’t measure up with budgets big brands allocate for marketing and advertising. The value of the data and information you collect via market research lies in the fact they can help you craft the most productive marketing approaches and recognize and reach your target consumers in the most cost-efficient manner.
In this article, we’ll walk you through all the types of market research for your small business and suggest some free marketing and analytics tools that could be of huge help, so that you know exactly which type of research and what tools to apply in your case. But, before we dive into the topic, let’s just make it clear why market research is necessary.
Keep reading to find out more about:
The difference between a great business idea and a successful business is whether the people are willing to pay for what you’ve got to offer. The only way to determine this, other than to start a business and take the blind risk, is to conduct market research.
Only market research will get you answers to questions like:
Who are your consumers?
What are your consumers’ needs?
How do your consumers spend money?
Who is your competition?
What are the trends in your niche?
What are your competitor’s challenges?
What makes your target group convert from fan to buyer?
Who does your target group look up to?
How much of your budget share should you allocate to marketing?
Which marketing approach would be most lucrative for you?
The more questions you ask yourself both about your business and your target audience, the better are your chances for success. Consumers nowadays rarely rely solely on the claims of the brand when making their choice, but rather actively seek recommendations from other users of the product/service and explore the experiences of others, such as testimonials. The label-reading trend is on the rise and, generally, people tend to make well-informed decisions before clicking the Buy button. All this points to one thing – you have to know your target audience really well, you have to be able to earn their trust and establish an honest relationship however small or big your business is.
Since budget is very often the pain point of small businesses, let’s just make one thing clear from the very start: market research does not have to take a toll on your budget. Generally, two types of market research are recognized – primary and secondary. While it is not important to know what type of research falls into which category, it is important to know about all the types of research you can do so that you can decide which ones are the most useful for your business. Depending on the phase your business is in, some types of research may not be necessary at all, while others could save your sales from plummeting.
If you are starting a new business from scratch, you’ll naturally be inclined to observe the consumers within your target niche and collect all the relevant information first-hand. This is primary research. Its purpose is to help you understand general trends and predict possible challenges so that you can avoid or overcome them later on the road.
Primary research can be divided into exploratory and specific. Exploratory research naturally comes first and its main concern is to recognize potential pitfalls. The method that is often used in this phase is an open-ended interview or survey that involves a small but relevant number of consumers. After the exploratory research provides you with actionable insights, the next logical step is to conduct specific primary research where you will analyze a specific aspect of the possible challenge you recognized in the exploratory phase. You are still dealing with a small number of consumers here, and your main goal is to find more efficient ways to answer their needs, i.e. solve the problem for them.
Primary research can also be quantitative, where you collect plenty of numerical data so that you can perform statistical analysis later, and qualitative, where you use different tools to understand how to reach your target group, what motivates your consumer’s behavior, and what their needs are. This kind of research will help you understand the general, unwritten rules within your market so that you can begin to shape your initial business idea into a practical product/service. It is necessary for any type of new business but is also often needed in cases when an already established brand plans to launch a new product or service.
While the main objective of the primary research is to understand your target group and recognize potential challenges, the secondary research will mostly provide you with insights into your competition. When conducting secondary research, you will typically use all the available data you already have about your niche, such as market statistics, trend reports, sales data, industry content, and similar. To acquire this kind of data you can use public, internal, and commercial sources. Public sources are usually free to use and easy to find. Government statistics is a very popular public source as they provide accurate and relevant data about the target industry. Commercial resources provide valuable industry insights and often come in the form of market reports, but they are often not so easy to obtain and are rarely free to use. Internal sources include the data you already have about your business, and if you’re just starting out, you’ll probably have very little data to count on from this source.
Depending on the phase your business is in at the moment, you will probably be interested in getting specific data from different key areas of your business:
Targeting your consumers
Optimizing the marketing message
Generating repeated purchases
The following ten types of market research allow you to get explicit data related to one or more of these four key business areas.
It will be very hard if not impossible to distinguish your business from the competition unless you know who your competitors are and what they do. Competitive analysis is useful in many ways – it allows you to learn from others’ mistakes. By carefully analyzing which of your competitors are doing the best work and what kind of consumers they attract you can get a lot of data faster than via many other methods that aim at providing similar insights.
The real value of your product and the price of your product are two different things. That is something you have to understand so that you can set the optimal price for it. This kind of research implies exploring the prices of your competitors and gives you an insight into how much your target consumers are willing to pay for what you sell. Only when you have this kind of info, you can create a realistic and efficient pricing strategy.
This method helps you categorize your target audience based on the differences in their behavior. Generally, your consumers may have just a couple of things in common and the more different they are, the more segmented your market is, and the more versatile your tactics will have to be. For example, both a parent and a child can be interested in your product, but their behavior on your website will surely be totally different, and you have to speak to both of them.
A variety of very different people will become interested in your product/service. Regardless of their differences, your consumers will share the same need or a set of needs that your product/service solves for them. A buyer persona research helps you understand the typical challenges and needs your target consumers all share. You can create several most prominent buyer persona profiles depending on your findings about your consumers.
Your concept about the product and/or service you are about to offer can seem absolutely perfect, yet you can never be certain until you get real feedback from consumers. Product testing is of utmost importance as it provides so many useful and actionable insights. If you conduct it properly, you are sure to get answers to questions like:
What are your product’s competitive advantages?
How can you improve the product/service?
Which product characteristics are most important to your consumers?
What should be the highlight of your marketing strategy?
Bear in mind that this type of research requires the involvement of your target audience, the ones that are most likely to use the products, not random consumers who may not at all be interested in it.
The interview is a traditional and well-tested method that provides quick results. You can conduct both offline and online interviews with a selected number of your target consumers, where you will pay close attention not only to what they say but also to how they say it. Body language and nonverbal messages will provide plenty of information regarding your business/product/service. The key to making this type of research success is to think about the questions you are going to ask carefully, to design them in such a way that they solicit precise answers. You also need to make sure the conversation flows naturally, as this raises the chance of getting honest responses.
Observation-based research is equally useful in whatever phase your business is. It doesn’t require any special investments – you just need to observe attentively how your target consumers react to your product, what they appreciate the most, and what aspects of UX you could improve. If you have a team to work with, it is recommended to assign team members to observe the same things with you and take notes, which you can later analyze together.
Not all satisfied consumers are loyal consumers but understanding what makes a consumer satisfied raises the chance of making your consumers loyal too. The aim of this type of research is to improve customer retention by analyzing the factors that influence loyalty, identifying areas of the product or service that need improvement, monitoring overall consumer satisfaction, and determining factors that influence repeated purchase.
Before investing any amount of money into market research, you can use effective analytic tools like Google Analytics that provide plenty of useful information about your website performance and your visitors’ demographics, location, types of devices they use to browse your site, and similar. Google Analytics will also help you understand what types of pages and content are most popular on your website as well as at what point you are losing your users throughout the conversion process. Using Google Analytics may seem challenging for complete beginners, but there are plenty of tutorials that will help you use it to your advantage with ease.
A/B testing tools will help you determine what kind of approach in terms of design and message is most efficient on your website, and plenty of these tools come with a free version that includes just enough options to provide you with significant insights.
SEO tools often include a free or trial version too, and they can be of huge help in terms of optimizing your content and SEO analysis. When it comes to SEO optimization there are plenty of things you can do on your own without engaging SEO experts.
Social media are often used for marketing and advertising purposes but they are also an immense help in market research if you know how to use them. You can ask direct questions, start discussions, organize surveys and collect plenty of very accurate data about your consumers and their reactions to your product/service.
There are plenty more highly effective online market research tools worth exploring that can be of huge help in all the phases of setting up and running a small business.
All the categorizations in this article are offered with the purpose of helping you recognize which kind of research is the most adequate and useful for you. You can combine the methods that you find most relevant for you and your type of business, and also ignore others that you believe wouldn’t bring results in your case. Whatever your choice is, make sure you conduct your market research properly so that the information and data you get is relevant and accurate.
After you finish with all the market research, make sure to cross-examine, compare and summarize all the information you got from different sources. It is your common sense and knowledge of your market and business that makes all the data you collect valuable and useful. Make sure to compare the data you got against your buyer persona profiles, see how they match, and check if you should update the profiles you made or not. Realistic and on-point buyer persona profiles make all the other market research types more accurate and efficient.