Doing effective market research for small business
What is market research? Can it really shape the way you run a small business? How big an impact could it have on your company’s profit margins? As a small business owner, it’s easy to be excited and ignore the facts and figures. But to be a success, you have to find out what your market wants. This guide will explain why market research is so important for small businesses, and where to find some freely-available resources.
What is the definition of market research?
Market research is an activity that involves systematically gathering information and analysing it to better understand what that audience needs. The results can help you to make more informed decisions about your small business’s products, services, operations, and strategy. It’s not what you know about your customers today – it’s what you can find out about people who aren’t your customers, but could be.
You might have an inspiring service to promote, or a product that feels like an easy sell. But if you don’t know what appeals to your audience, specifically, then your proposition simply won’t get noticed. There are many market research experts out there who can offer support. The good news is that some market research doesn’t have to be expensive, and there’s a lot you can do yourself.
Why is market research important?
The more market research you can do when you’re starting a business, the stronger your business will be. The more data you collect, the easier it is to seek investment too.
If you understand what consumers are buying today, and what they want tomorrow, then you gain a commercial advantage. Insights about the way your audience likes to buy your products – online or in a shop, for example – help you to plan for how many staff you should employ in the short term. They can also help you to decide how soon to move to bigger premises, and how much stock you can hold from day one.
Plus, the more you know about your customers, the more likely you are to out-perform your competition. If you know how competitors’ products are viewed, and how things like legislation or environmental factors might change, then you can focus resources effectively. Market research helps you to put your profits up; it can also help to bring your costs down.
What types of market research are there?
There are really only two types of market research – primary and secondary. Primary information is the first-hand facts and figures you collect yourself. You control how it’s collected. Secondary information exists already. It’s things like statistics in government or industry reports, or even the information in magazines and newspapers, or on social media. You can analyse that information in ways that apply specifically to your business, but the data is freely available to other people.
You may also hear about ‘qual’ and ‘quant’. Qualitative ('qual') research is often used for exploring new ideas. It’s data-based. It qualifies insights into a challenge or about a subject numerically, helping to develop those ideas or hypotheses against a measurable framework. Qualitative research is far more varied in the way it involves gathering information. As an example: the ‘qual’ version would be, “How many apples have you bought this week?” And the ‘quant’ version would be, “What makes you buy red apples more than green apples - the colour, or the flavour?”
What kind of effective market research can I do easily?
As a small business owner, the chances are that you can collect most, if not all, the information you need yourself. If you’re running a larger small business, then you might want to get some expert help – making sure the value of that investment is likely to be offset against the results.
The advantage of using market research experts is that a professional team will know who to target and which questions will give the most valuable answers.
Look for free recent market research
Statistics are everywhere, and there’s a lot of market research that’s easily available free of charge. Make sure it’s recent. You’ll find more facts and figures than you need on the YouGov Sixth Sense website and in the archives of the Office for National Statistics. The challenge may be in using them in context, as both portals take a broad approach to pricing, demographics, and people's spending habits.
Start with the simple approach – talking to people
There’s very little to compare with asking people about your proposition, inside and outside your business. It all depends on what your business is, but even people you meet in the supermarket may have valuable insights. Friends and family can also be a starting point.
Explain what you’re trying to achieve, and ask them to be honest with you. Make it clear that you’re not trying to make a sale. Quite the opposite. You may meet someone who’s very keen to share their thoughts on your product or business strategy. Unless you have a very restricted market, however, it’s important to remember that one opinion doesn’t constitute an in-depth bank of market research.
Run an organised focus group
As a small business owner, you may have a ready-made focus group in the form of loyal customers. Or, if you need to, you might offer a discount or a freebie to potential customers in exchange for their help. Focus groups work best when the information being collected is organised, and analysed in context.
Everyone interprets questions a different way, and people’s opinions do change over time. But the more thought you put into framing questions carefully, the more valuable and consistent answers will be. Don’t worry if the results aren’t what you expected. Every piece of feedback can be valuable in its own way. It’s worth seeing focus group exercises as a regular form of feedback. As your business grows, so should your appetite for reaching out to the market.
Do I really need to do market research?
Market research can have a positive impact on your business, even in the short term. It may also surprise you what qualifies as market research. Here’s a very simple example in four parts.
Imagine you are the owner of a large, successful garden centre. You’re selling plants and gardening materials to people in your area, and you have an online shop:
On your way to work every day, you’ve noticed that many homes in the area have camellias, acers, and rhododendrons in their gardens. This means the soil is probably acidic. To grow well, your customers’ plants need you to stock more ericaceous compost than any other type – and that’s good market research.
There’s another garden centre in the area. You know it holds a well-promoted tool sale at the end of October, every year. However, with your connections to a local market-garden, you also know you can buy cheap pumpkins. A pumpkin-carving competition ties in well with a family day, promoting your tool stock one week earlier than your competition.
Watching the TV listings, you see a celebrity gardener focusing on water features this Friday evening. You can’t get extra stock in that quickly, for the questions you know you’ll get at the weekend. But you can print some simple flyers to promote a “Build-your-own Water Feature” workshop, promising a discount on future stock.
And, although you’ve got a busy website, you’ve seen that many customers aren’t using a department-specific online shopping voucher. You get your checkout team to ask customers, directly, “Would you like to get a choice of discount vouchers when you’re shopping online?” The answer is yes. Sales go up, immediately.
To be effective, make sure you record what you research, why you’re researching it, and exactly how you go about it. On every scale, tomorrow’s market research is only useful if you can measure how it’s changed from today.
Crucially, it’s important to remember every business has research ambitions that are different in some way. Being unaverage - being a small business that’s using its individuality as a strength - is how you grow and compete effectively in the market. If the idea of embarking on a programme of market research seems complex and daunting, try to see it as a sign of just how much you could be about to discover about your own commercial potential. The sky’s the limit.
Please note that these guides are provided for information purposes only and not as advice or recommendations. Before deciding to undertake any course of action you may wish to seek independent professional advice.