Market research

You might be convinced you’re on to a sure-fire winner, but not testing your business idea before you launch means you’re asking for trouble. Even if response from prospective customers is overwhelmingly positive, you could learn something that enables you to enhance your offer and make selling that little bit easier.

The importance of market research

Long before you take serious steps to start a business, ask potential customers their opinions of your products or services. Find out whether they would buy at your prices, and if so, what and when would they buy. Ask them what they like and dislike about your competitors, because this could provide you with important lessons.

Getting pre-launch feedback enables you to make changes (great and small) so that your offer is more closely tailored to market demand. It’s easier to make changes before you start up as a result of researching your market, rather than later having to convince people to buy something they don’t want, which never works.

Simple, low-cost market research

Few small businesses need pay for professional market research. There are many simple, low-cost tests you can carry out. For example, if you want to open a shop and need to know how many people pass by, simply stand in your chosen location and take notes. Repeat the exercise at different times of the day and week to get a true picture. Politely stop people. Tell them you plan to open a shop nearby and ask what they’d like you to sell. Don’t forget to find out what they think about your planned prices.

If yours is a more specialist small business, contact target customers directly. If you plan to sell to other firms, ask whether they’ll meet you face to face, so you can tell them about your new business and the benefits it offers to them. Remember the value of asking about price. Your products or services might be excellent, but if people can’t afford them or won’t pay your prices, your business will fail.

Dealing with good and bad feedback

If people’s reponses are positive, fair enough. Perhaps you have a sound idea for a business after all (although there are no guarantees). Don’t ignore negative responses if they’re well founded and don't make excuses when you're criticised. Listen to feedback and act on it where necessary.

Speak to a representative sample of potential customers, not just friends and family. Depending on your type of business, you may have to do this at different times, on different days and maybe even in different locations.

Weighing up your competitors

You also need to find out what your competitors offer, when, where, how and at what price. Then you can work out whether or not you can compete.

This might simply involve walking around the area in which you plan to set up. You can even pose as a customer, pay a visit to their premises and see what’s on offer. You could check out competitor websites or ring them up for information (including prices). A quick scan through a local paper or business directory can also provide a list of competitors, while online searches can make the task quick and efficient. If you’ve already got some useful contacts, sound them out, too.

The job of market research isn’t complete until you have confidence in the scope and depth of your findings. The more information you gather, the less likely you are to set up a business that is odds-on to fail.

More on this topic:

• Q&A: Market research for start ups
• How to carry out market research
• Q&A: Pre-launch marketing

For more complex or in-depth marketing advice visit the Marketing Donut