Regardless of what industry you’re in, or the size of your business, conducting market research is crucial. In order to be successful, you must understand the social, cultural and economic context you’re trading in. You need to know about the market in your location, what your competition is doing and how much people will be willing to pay for your products or services.
Debbie Bray, Director of Research and Creative Development at Morph Research advises that starting your market research as soon as possible will save you money in the long run, because you’ll be ensuring that you invest your time and money in the right sectors and the right products. She says, “If you’ve got the name wrong, or maybe the ingredients list wrong, that can have fundamental impacts later on.”
Jose Scheuer is a Lecturer in Business and Marketing at the London School of Business and Finance. For her, market research is important because the competition is so much tougher these days. She revealed, “Whereas in the past a small business had competition from other, often local, small businesses and their customers were known, today a small business competes in a much larger field. Not only does it face competition from local as well as international companies, often these competitors are much larger and have greater negotiating power to source and sell at cheaper prices. In addition to this, small businesses face competition from the unstoppable growth from e-commerce.”
So you know that market research is super important. But how do you go about it? Here’s a range of useful tips to get you the insights you need.
What steps do I take when conducting research?
Step 1: Decide what information you need
Step 2: Decide which questions will give you the answers you need
Step 3: Decide how you’re going to collect the information
Step 4: Decide how you will analyse the info
Step 5: Decide what you’re going to do with the results
It’s important to get these steps right. If you ask questions that are not worded in the correct way, you could get misleading information. You don’t want to make bad business decisions based on the wrong info.
When should I be conducting market research?
- At the beginning of a business venture
- When developing a new product or service
- When changing your product portfolio
- When changing your prices
How do I conduct research?
There are two types of market research – primary and secondary.
Primary – this is research that you conduct yourself
Here are some ways you could go about this:
- Create focus groups
- Create a cheap online survey (try SurveyMonkey)
- Talk to your existing clients
- Put questionnaires up on Facebook and LinkedIn
- Email questionnaires to your contacts
- Go out and hand out hard copy questionnaires to prospective customers
Secondary – or third party research
This is information that already exists, that you just need to search for.
Sources of secondary research:
- The web pages of your competitors
- Statistics on the ABS website
- Census data for info on geographic locations, age groups, occupations etc
- The ABS publishes an Annual Business Characteristics Survey – check it out here
Should I hire a market research agency?
Thorough research does take time and effort. It can be worth hiring a market research agency to handle it for you. However, if you are going to do this, we would recommend you conduct your own research first. Once you’ve done some DIY research you should start to get an overall image of the industry. This way you’ll realise if there is something in particular you need to know that is too big for you to do by yourself. That’s when specialist analysis can come in handy. That’s when you should consider hiring a professional to get the answers you want.
How do I conduct a competitor analysis?
To be successful, you will need to create and maintain a competitive advantage in the marketplace. To do that, you need a thorough understanding of your competitors. You want to cover:
- How your potential clients look at the competition
- Your competitor’s strengths and weaknesses
- A strategy built from your understanding about your competitors
Try the 80/20 rule
You won’t have time to research every competitor, so to save time, assume the 80/20 principle – that 80% of the profits in your industry are earned by 20% of the competitors. Keep your eye on that top 20%.
The 4 steps to competitor analysis
- Conduct research,
- Gather competitor information
- Analyse the information
- Determine your position
What information should I look for?
Use this following information from Bizbee Solutions to guide your research.
- Who are my competitors and what products do they offer?
- Are they making a profit?
- Do their businesses expand? Or they scale down?
- What is positive about them in my customer’s eyes?
- Negative about them in my customer’s eyes?
- What makes my business different from my competitors?
- Do I have any competitive advantage over my competitors?
- What are their marketing strategies?
- Their product promotion strategy?
- Do they operate in my geographic area?
- What is their pricing system?
- Their market share?
- What is their total sales volume in the market?
- Their growth rate?
- How good is their customer service?
- Is their product better in quality than mine?
- How many employees do they have?
- What kind of resources do they own?
Analyzing the competitive information
When you know you have every information that you need for your competitors, it is time to analyze it. The purpose of this analysis is to discover product information, market shares, marketing strategies, and to identify strengths and weaknesses.
When it comes to product evaluation, the customer feedback is the most important source of information. The evaluation factors that you need to look into are:
- Product quality
- Durability and Maintenance
- Design and perceived value
- Product’s social image
Either the products of your competitors have these features or they don’t. It’s really straightforward. The next thing you should do is to evaluate your own product and see how you stand with the competition. Which features are unique about your product?
Also, evaluate yours and your competitor’s pricing system. Just because you offer the same or similar product in the market does not mean that you will offer the same price. Pricing is affected by production costs, packaging costs, shipping costs and marketing costs. If your competitor’s product is exactly the same as yours but they still want to offer it at a much lower price, it means that they might be in financial trouble and that’s an extremely valuable information that you can use to position yourself even stronger in the marketplace.
The best indicator of a company’s sales performance is the market share. Even if your competition has a product that is lower in quality than your product, if the competition generates enough sales, they can define product standards in the industry and influence perceptions about the product or service.
Objectives and strategies
For each of your main competitors you need to determine their market goals and what strategies do they use to achieve them. Do they try to maintain or increase their market share? Maximising short-term or long-term profit? Do they want to introduce innovation in the market? Or they want to become market leaders?
Once you know what your competitors want to achieve, you will have to assess what are the strategies that they use so you can counter-punch them with your own strategy.
Identifying strengths and weaknesses
To develop a thorough strategy for your SME, you need to make a pragmatic assessment of your competitor’s strengths and weaknesses. Why are some competitors more successful in the market than you?
To conclude, you need to do competitor analysis on a regular basis if you want to know how the competition operates their businesses and how to beat them in the process. Competitor analysis is a never-ending process. Markets change quickly, and so does the competition. New players come and go in the market, and the economy falls and gets back up. You can evaluate your position in the marketplace only if you understand your competition. There’s no other way around it.