Market research is the process of gathering, analyzing and interpreting information about a market, a product or service to be offered for sale in that market, and about the past, present and potential customers for the product or service; research into the characteristics, spending habits, location and needs of your business’s target market, the industry as a whole, and the particular competitors you face.
Accurate and thorough information is the foundation of all successful business ventures because it provides a wealth of information about prospective and existing customers, the competition, and the industry in general. It allows business owners to determine the feasibility of a business before committing substantial resources to the venture.
Market research involves two types of data:
- Primary information. This is research you compile yourself or hire someone to gather for you.
- Secondary information. This type of research is already compiled and organized for you. Examples of secondary information include reports and studies by government agencies, trade associations or other businesses within your industry. Most of the research you gather will most likely be secondary.
In first case – primary research, you gather two basic types of information: exploratory or specific.
Exploratory research is open-ended, helps you define a specific problem, and usually involves detailed, unstructured interviews in which lengthy answers are solicited from a small group of respondents.
Specific research, on the other hand, is precise in scope and is used to solve a problem that exploratory research has identified. Interviews are structured and formal in approach. Of the two, specific research is the more expensive.
When conducting primary research using your own resources, first decide how you’ll question your targeted group: by direct mail, telephone, or personal interviews.
If you choose a direct-mail questionnaire, the following guidelines will increase your response rate:
- Questions that are short and to the point
- A questionnaire that is addressed to specific individuals and is of interest to the respondent
- A questionnaire of no more than two pages
- A professionally-prepared cover letter that adequately explains why you’re doing this questionnaire
- A postage-paid, self-addressed envelope to return the questionnaire in. Postage-paid envelopes are available from the post office
- An incentive, such as “10 percent off your next purchase,” to complete the questionnaire
Even following these guidelines, mail response is typically low. A return rate of 3 percent is typical; 5 percent is considered very good. Phone surveys are generally the most cost-effective. Here are some telephone survey guidelines:
- Have a script and memorize it–don’t read it.
- Confirm the name of the respondent at the beginning of the conversation.
- Avoid pauses because respondent interest can quickly drop.
- Ask if a follow-up call is possible in case you require additional information.
In addition to being cost-effective, speed is another advantage of telephone interviews. A rate of five or six interviews per hour is typical, but experienced interviewers may be able to conduct more. Phone interviews also can cover a wide geographic range relatively inexpensively. Phone costs can be reduced by taking advantage of less expensive rates during certain hours.
One of the most effective forms of marketing research is the personal interview. They can be either of these types:
- A group survey. Used mostly by big business, group interviews or focus groups are useful brainstorming tools for getting information on product ideas, buying preferences, and purchasing decisions among certain populations.
- The in-depth interview. These one-on-one interviews are either focused or nondirective. Focused interviews are based on questions selected ahead of time, while nondirective interviews encourage respondents to address certain topics with minimal questioning.
Secondary research uses outside information assembled by government agencies, industry and trade associations, labor unions, media sources, chambers of commerce, and so on. It’s usually published in pamphlets, newsletters, trade publications, magazines, and newspapers. Secondary sources include the following:
- Public sources. These are usually free, often offer a lot of good information, and include government departments, business departments of public libraries, and so on.
- Commercial sources. These are valuable, but usually involve cost factors such as subscription and association fees. Commercial sources include research and trade associations, such as Dun & Bradstreet and Robert Morris & Associates, banks and other financial institutions, and publicly traded corporations.
- Educational institutions. These are frequently overlooked as valuable information sources even though more research is conducted in colleges, universities, and technical institutes than virtually any sector of the business community.
Public Information Sources
Government statistics are among the most plentiful and wide-ranging public sources. Helpful government publications include the following.
One of the best public sources is the business section of your public, or local college or university, library. The services provided vary from library to library but usually include a wide range of government publications with market statistics, a large collection of directories with information on domestic and foreign businesses, and a wide selection of magazines, newspapers and newsletters.
Almost every county government publishes population density and distribution figures in accessible census tracts. These show the number of people living in specific areas, such as precincts, water districts or even ten-block neighborhoods. Some counties publish reports that show the population ten years ago, five years ago, and currently, thus indicating population trends.
Other public information resources include local chambers of commerce and their business development departments, which encourage new businesses to locate in their communities. They will supply you (usually for free) information on population trends, community income characteristics, payrolls, industrial development and so on.
Don’t overlook your bank as a resource. Bankers have a wealth of information at their fingertips and are eager to help their small business customers get ahead. All you have to do is ask.
Commercial Information Sources
Among the best commercial sources of information are research and trade associations. Information gathered by trade associations is usually limited to that particular industry and available only to association members, who have typically paid a membership fee. However, the research gathered by the larger associations is usually thorough, accurate, and worth the cost of membership.
Local newspapers, journals, magazines, and radio and TV stations are some of the most useful commercial information outlets.
Finally, there are educational institutions that conduct research in various ways, ranging from faculty-based projects often published under professors’ bylines, to student projects, theses, and assignments. You may be able to enlist the aid of students involved in business classes, especially if they’re enrolled in an entrepreneurship program. This can be an excellent way of generating research at little or no cost, by engaging students who welcome the professional experience either as interns or for special credit. Contact the university administration and marketing or management studies departments for further information.