Entrepreneurs have to wear a lot of different hats and it’s easy for market research to take a back seat to the day-to-day operations of your business. But market research is one of the most important things you can do to attract and retain customers, maintain a competitive edge, and increase your business revenue over time.
You may think of market research as being reserved for large companies, but everyone from solopreneurs to multinational corporations can benefit from data-driven insights.
Whether you’re running a restaurant or selling your art online, market research is an important tool in business planning, effectively marketing your business and standing out against your competitors. Here’s how market research can help you achieve your business goals and earn greater revenue.
What is market research?
Market research is the activity of collecting information about your target market and potential customers. A critical part of any business plan, market research helps you better understand your industry and more accurately predict if your small business can be profitable. Even if you bring previous industry experience to your small business, market research is essential to help you look past any biases or unconscious assumptions you may have. It allows you to connect your instincts with real-world data, and can help you avoid potentially costly business pitfalls.
When to conduct market research
Market research is an important step for new business owners. You may think you have a brilliant idea for a product or service, but it’s wise to determine if there’s a market opportunity for it before you financially invest. Conducting market research early in your business development process can also help shape many key elements of your initial business plan, such as how you intend to reach your target customers and how much to charge for your product or services.
But market research isn’t just for new business owners––in fact, it’s an essential part of any long-term business plan. You can revisit your market research when moving into new markets, as well as when planning the launch of new products or services. Even if you’re not expanding your business, periodic market research helps your business stay competitive and relevant as your industry and consumer needs evolve over time. It will help maximize your business revenue and keep your customers coming back year after year.
Types of market research
Market research can be broadly categorized into main types: primary and secondary.
Primary market research is first-hand research that you conduct about your existing customers and potential customers. Primary market research typically involves tactics like surveys, interviews, and field trials in which you release a new product or service on a small scale so you can observe how your target market responds. This type of research is particularly helpful in developing and refining your customer personas, as well as identifying gaps or issues in your current offering that, if addressed, could increase revenue for your small business.
Secondary market research draws on research already organized and published by others, such as trend reports, market statistics, or studies released by trade associations. Market research often involves a combination of primary and secondary research, but if you’re working with limited time or a tight budget, you’ll likely rely more on secondary market research. Secondary research can be especially useful in analyzing the business models of your competitors.
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Small business market research goals
When getting started with your market research plan, it can be helpful to outline your market research objectives. A clear sense of how market research aligns with your big-picture business goals can guide you to hone your strategy for collecting and using data about your target market. Let’s take a closer look at some of the goals you may have in mind as you begin to research market opportunities for your small business.
1. Learning about your competition
Competitor analysis involves identifying similar businesses that are top competitors for your target customers, and then examining the strategies they employ to connect with your audience.
If you don’t know who your competitors are, start by researching businesses that offer similar products or services to your own. Once you have a list of competitors, you can start to analyze and learn from the tactics they use to reach your potential customers. You can check out their website and social media platforms, study their marketing and advertising campaigns, look into their pricing structure, or read reviews left by their customers.
This research can help you recognize gaps in your current business offerings or potential areas of opportunity. For example, you may notice that your competitors’ websites are more user-friendly than your own and decide to invest in an upgrade, or you may find that you need to rethink your pricing structure if your competitors offer better value. Whether you’re an established small business owner or new to the game, market research on your competitors can spark ideas for honing your business plan.
You can also learn from your competitors’ mistakes. For example, if they released a similar product or service to one you’re considering offering and it didn’t work out for them, you can save time and money by not investing in those same strategies.
Competitor analysis can also provide insight into what sets you apart from your competitors and what you can do to make your business stand out. When you have a clear sense of what makes your business unique, you can emphasize what makes your business better than its competitors when you market to potential customers.
2. Understanding your current customers
Your existing customers are an invaluable resource for understanding how to reach new potential customers. Market research can provide key insights into your customer demographics, what they value about your product, what influences their buying decisions, and where they spend time online.
To gather this data, you can request customer feedback via email surveys, ask your customers questions via your business’ social media channels, or read reviews of your product or service left by customers. Survey your customers to understand what their challenges are and what they want from your product or service. This research can help you refine your customer profile, so you can market more effectively to your audience. It can also help you strategize on how to keep your current customers happy and encourage previous customers to buy from your business again and again.
3. Identifying new potential customers
Market research can help you flesh out your customer personas and better understand the needs of your target market. Anyone who matches one of your buyer personas represents a potential new customer. This knowledge is critical to your marketing strategy because it helps you create messaging and products that address the needs of your potential customers.
Market research can also help you discover unreached customer segments that could benefit from your product or service who may not know about your brand yet. There could be customers with certain needs or who fall within a particular demographic that you hadn’t considered in your initial business plan. With a few tweaks to your business’ offerings or marketing strategy, you could reach a whole new customer base and be on your way toward greater revenue.
4. Improving your products and services
Market research can uncover potential shortcomings in your product or service that, if remedied, could improve your revenue and customer satisfaction.
If your small business creates a product, investigate if its function, appearance, and packaging appeal to your customers. If you offer a service, evaluate if there are gaps in the way that service is delivered, or if there are unnecessary elements of the service you can eliminate.
This type of research is particularly helpful if you launch a new product, because you’ll want to verify that a market opportunity exists before committing to pricey production costs or dedicating your time to planning a new service.
For example, maybe the market size for your new product idea isn’t large enough to be profitable, but you instead discover there’s a different type of product for which there is high customer demand. Market research hones in on what your customers truly want and need, rather than what you think they do. There could be upsells, product bundles, or other enhancements to your product or service that you hadn’t even considered, but could potentially increase your profits.
For both current and potential products and services, market research can help you evaluate if your price is competitive. You might realize that your customers are willing to pay more for your product or service and you could generate more revenue with a strategic price adjustment.
5. Refining your brand positioning and marketing
Market research can give you the knowledge you need to better position your brand and make a more meaningful impact on your target audience. Investigate your target audience’s familiarity with your brand, as well as the associations that come to mind when they think about your business.
It can also be helpful to gather feedback on your brand assets, such as your logo, website, and social media feeds. This feedback can guide you to modify elements of your design and brand voice in order to form a stronger connection with your customers and make a positive impression.
If you’ve been running your business for some time, you can also narrow your focus to look at the effectiveness of prior marketing campaigns. Collect feedback from customers about their reactions to your marketing messages, and examine technical data such as how many people viewed your ads and the click-through rate on particular campaigns.
This analysis can help you understand what kind of marketing messages reach and resonate with your audience, so you can create more impactful campaigns in the future, as well as maximize your marketing budget by funnelling funds to the channels that offer the highest return on investment.
6. Staying on top of trends
Whether you’re a new entrepreneur or a seasoned veteran, your business goals need to continually evolve in order to succeed over the long term. It’s important to stay aware of trends around consumer purchasing behaviour, popular social media and advertising platforms, new technology relevant to your product or service, and other factors related to your specific product or service.
Market research around trends in your industry may inspire changes to many different elements of your business, from the products and services you offer to how you communicate with your customers. By staying ahead of the trends, your small business can gain a competitive advantage and you’ll put yourself in a better position for business growth and to continually expand your revenue.
7. Making informed decisions
Market research allows you to make decisions based on data, rather than instincts. It allows you to make choices about the direction of your business with more confidence that you’ll get it right the first time, instead of relying solely on gut instincts.
Whether you’re launching a new product or thinking about a rebrand, you might have a hunch about what your customers want and what will lead to success, but market research offers evidence about whether or not you’re headed in the right direction. You can feel more certain that your target customers will positively respond to any changes you implement.
Ultimately, having an excellent product or service doesn’t guarantee your business will succeed if you don’t have a clear picture of why you’re offering it and who you’re offering it to. Market research allows you to confirm and improve your business idea and make the most of your entrepreneurial venture.