Yes, you too can conduct market research

One of the most important steps in starting a new business is conducting a thorough market analysis that can serve as the basis for a marketing plan and provide support for sales projections. As critical as it is, it presents a huge challenge for most start-up businesses.

Simply stated, the market analysis or market research should yield answers to these very basic questions:

  • Is there demand for my product or service?
  • Who will buy my product or service?
  • What price will they be willing to pay?
  • Where are customers located, and how many of them are there?
  • Is the market oversaturated?
  • Who will be my competition?
  • Why will customers do business with me instead of my competition?
  • What does the future look like for the industry?

Answers to these questions can provide a solid foundation for the state of your business. The following is a simple list of steps to follow in order to evaluate a market prior to entry.

Begin with your local area chamber of commerce. Many chambers offer a wealth of area demographics. The chamber can also give you a list of how many similar businesses are operating within your market area. However, there is one caveat: Not all businesses are chamber members. Joining the chamber can provide you with countless networking and low-cost marketing opportunities.

Search for another perspective on demand for your product or service and a list of local competitors. Internet ads are expensive but may be necessary. The quantity and size of the competitions’ ads will give you some idea as to whether or not you need to advertise there as well. For example, attorneys, florists and any business involved with automotive repairs generally have a strong Web presence. Most consumers seeking these services go there first. On the other hand, a gift shop or specialty retail shop may only need to have a simple phone and address listing.

Pay them a visit. Now that you have the names and locations of competitors, pay them a visit. Pretend to be a potential customer and gather all types of useful information such as product offerings, packaging, store design or layout, business hours and price ranges.

Have a mental picture of your business. You should already have a mental picture or vision of how you want your business to look and operate. By visiting a similar business, you can create a visual checklist of how your business compares to the competition. List your competitors’ strengths and weaknesses. What will you offer as a unique feature that will be of benefit to a potential customer? Analyze ways to make your product or service distinct. Why will a customer of the competition leave them and do business with you? Will you compete on price, quality, reputation or service?

Talk to them. Small business owners love to talk about themselves and their businesses. Visit businesses that are similar to yours but geographically separated so that you will not be a direct competitor. You eventually will run across an entrepreneur willing to share his or her experiences. Interviewing this person could help you gain a wealth of information on things such as pricing, seasonality, unforeseen start-up obstacles, things they would do differently and expectations for the future.

Find a trade association. Most industries or businesses have trade associations through which you can gather useful information. Find out if there is a trade association for the industry you are researching, and contact it. Most trade associations hold shows or conventions at which you can meet with fellow business owners, suppliers, vendors, potential customers and other industry associates. Many trade associations produce monthly, quarterly or annual publications such as newsletters or magazines filled with industry-specific information. Consider joining at least one trade association, and be an active participant.

Talk to vendors and suppliers. Vendors and suppliers are another valuable source of market information. They can share facts on industry trends, hot selling products and market saturation. These suppliers will most certainly want you to succeed to keep you as a customer. Their information will be useful and valid.

Stay abreast of any business and professional meetings being held in your area. Attend as many of these meetings as you can, and use them as networking opportunities. Try to determine the current and anticipated trends for the industry or business.

Talk to friends and family members and interview potential customers. Try to uncover a need or desire that is not being fulfilled, and try to modify your product or service to fill that void. Simply ask 100 people what they think of your product or service. Would they use it or buy it? How much would they be willing to pay? Don’t be upset, turned off or discouraged by a negative comment. Listen closely, pay attention and make note of those less than desirable comments. They may turn out to be more valuable than praise.

And don’t forget all of the free resources at your disposal, including the MO SBTDC, Internet, local libraries, colleges and universities and business schools. They hold a wealth of information you will find valuable as you start to market your product or service.

You needn’t have a research staff at your disposal to find out what you need to know about your market. Be persistent, comprehensive, patient and creative. You’ll find the answers you need.

For personalized assistance, contact a business development specialist at a Small Business & Technology Development Center. Visit our courses for a listing of business training events in Missouri.

– This article originated from the Georgia SBDC, authored by Cecil McDaniel. It was adapted for MO SBTDC by Mary Paulsell. Used with permission.