Market Research: The Basics

What is market research?

Market research is an orderly, objective way of learning about people - the people who buy from you or might buy from you.

It can provide unbiased answers to questions such as:

Who will buy your product?

What are the requirements of your customers? What price will they pay for your pickles? What size of jar do they prefer? What are their requirements for shipping that would affect jar size and/or shape? Where do they want to be able to buy your pickles? Are there other types of pickles they would buy?

What are the characteristics of your customers? Who buys and eats pickles - what is their age, gender, income level? Where do they live?

What are the attitudes and perceptions of your customers? Are they looking for new and different pickle products? Is the combination of dill and carrot an appealing one?

Who else is producing the same or similar product - at what cost? Can you compete with their price, quality, etc? If no one else is producing such specialty pickles, why?

What advantages can you offer that your competition can't or doesn't? It may be that your carrots are organically grown or that your pickles are an Alberta made product.

What marketing constraints exist? Are there expensive start up costs involved with going into pickle production? Are there major legal requirements needed to get the name or label information you want?

Is the market saturated or is there room for your company? Will you be one of many companies selling pickles to people in your market area?

Is this an area with an expanding market or one that is declining? In other words, can you make a profit at it? Does trend data indicate an increasing consumption of pickled products? Is there a growing or shrinking body of scientific evidenc about possible health risks associated with eating too many pickled foods? How might this affect people's consumption of pickles?

What do you see as the future for your business? Do you visualize your pickles to be on the shelves of all Canada Safeway stores in Alberta?...in Western Canada?

Why do market research?

It's impossible to sell people what they don't want. That's obvious. Just as obvious is the fact that nothing could be simpler than selling people what they do want. Market research is essential in helping you find out what people want.

Market research provides what you need to get sound information about your product, service or market so you can develop good marketing and business strategies.

Who should do market research?

All businesses, big and small, old and new, need to do market research. A common feeling of many small business owners is that they don't need to do market research since they already have a feel for their customer market, given their long experience. However, experience, though useful, can lead to a false sense of knowing. Be careful; information gathered randomly over the years may be out of date, vague, biased or of a folk tale nature.

Business owners can't afford to make errors in judgement. Their savings, their families' future and their business reputations are at stake. Market research is a critical step.

When should I do market research?

Market research is not a one time only activity. It needs to be done on an ongoing basis and whenever a major business decision needs to be made. It usually needs to be done:

• before starting a new business
• when introducing a new product or service
• to maintain your existing business

Before starting a new business:

Innovative ideas and gut feelings aren't enough when it comes to predicting success for a product or service.

Just because your friends and relatives rave about the great parties you throw, doesn't necessarily mean your party planning and catering business will be an overwhelming success. Up front, you need to know:

• Is there a need for this service?
• Who is likely to buy your service?
• Are there enough of these people in your market area?
• How are you going to find these customers?
• Is a competitor meeting the need? If so, can you offer something they can't?
• How much are these people willing to pay?
• Will finding customers cost more than the profit margin will allow?
• Is there a profit margin?

When introducing a new product or service:

Again, a good idea, experience and intuition just aren't enough when it comes to predicting success. Without market research at this stage of a business, you could end up with a basement full of jars of your gourmet mustards which didn't sell nearly as well as your popular line of flavored vinegars. Or, you might face competing products sold at local delis, supermarkets, gift shops and farmers' markets that you didn't even know existed. Or, adding a fried pastry product to your existing line of healthy muffins may damage your company's reputation for healthy snack foods.

To maintain your existing business:

Success today doesn't necessarily mean success tomorrow. Changes in markets, competition, technology and customers mean you can't rest on your laurels. You need to constantly be sure your product or service fits with these changes. You need to know what your customers think of your specialty dog biscuits.

• Is there a new untapped market - perhaps lower calorie biscuits for older, less active dogs?
• Are your customers ready for a new product?
• Are your prices in line?
• Is there new technology that would enable modifications or substitutions for an approved product?
• Has your target market become more concerned about the health and well-being of its dogs?
• Are competitors introducing new product lines?

How to do market research?

It's to your advantage to do at least some of your own market research. The more you do, the less money you'll pay to consultants and the more insight you will have regarding your product/service and market.

Start by doing some indirect market research. Gather information that is already done and available to you at little or no cost. Existing businesses can look at their records and talk to employees. All businesses are well-advised to read government reports, industry magazines, trade association surveys and other documents. Be sure to talk to people directly and indirectly involved in your industry. Some good initial contacts include provincial government economic development agencies, municipal offices and chamber of commerce offices. Check to see what your competition is doing.

You may then find you need to do some direct market research. In other words, generate some information yourself. It might include such things as conducting a taste test of your new product, doing a telephone survey, or observing the numbers and types of people who shop at the local competitors. This type of market research, since it is often more complicated than indirect market research, can benefit from the expertise of a market research professional. This doesn't necessarily mean turning the entire research project over to a consultant. Rather, it may mean the consultant does some work (e.g. develop a questionnaire) and you do some work (e.g. conduct a taste test of your vegetable dip at the local farmers' market and have tasters complete the questionnaire).

So, although there is a need for specialists and consultants, they aren't needed to solve every problem. With additional reading on the subject, even those with no formal market research training can take an active role in conducting their own market research.

Where to do market research?

Much of your market research can be done at home or close to home since you need to know as much as possible about the market in your target area. Your local public, college or university library, chamber of commerce and government departments are excellent places to begin your search on local and global market information. Many government departments have libraries containing valuable information for doing market research