Perhaps you have an idea for the next top-selling gadget, an app to help make people’s busy lives better or a method to sell professional services in an innovative way.
Once you’ve come up with a business concept and decide you want to bring it to market, it’s time for planning and preparation. Performing market research before launching a new business idea is an important step to help ensure your new endeavor will be successful.
What is market research?
Market research is the process of learning why consumers will want to purchase your service or product. The details you gather will show you what your target market’s needs and preferences are. You can learn what consumers’ spending habits are like and the types of purchasing decisions these people make. Having this information and analyzing it thoroughly can help you figure out the best way to make your offerings known and price them in a way to attract the most customers.
The following steps can help you get started.
How to do market research
1. Read about the market.
There are market reports for most industries. Even if your idea seems unique, such as a new type of toy, you can find information about different aspects of the toy market, including pricing and what toys are selling well. Reading these reports and those in trade journals can show you current and predicted trends, which gives you a better idea of how your product or service might perform.
2. Perform customer research.
You’ll want to know a lot about the type of people who may be your future customers. This includes information about who they are, such as their age, education level, location and occupation. You’ll need to review their current buying habits and whether they’re willing to pay more for quality or they’re adhering to a budget and using coupons while focusing on cost.
Much of this demographic information is available on the U.S. Small Business Administration’s website. You can use this data to determine which groups are more likely to purchase from you than others — and if there are other groups you want to target and sell to.
You’ll also need to analyze information to determine why your target group would buy your product instead of something from another company. Start by finding out who the customers are for similar products or services, based on market reports.
3. Interview potential customers.
Once you find these potential customers, you’ll want to ask about their needs and what they want in a product or service. You can do this with an online poll or survey on social media. Sending out a survey link to online groups where these potential customers spend time is a good option.
For example, if your target customers are mothers of young children, put the link on a social media platform where these women share tips, or ask a few specific women to share the link with others who meet that description.
Reaching out to potential customers is essential for understanding if or how your product will be relevant in market. Some key answers you can gain from this include:
- What products or services already exist?
- How much are customers willing to pay?
- How can products or services be better?
4. Understand the competition.
Learn about other companies in the same or a similar industry. By comparing companies that have similar products, you can better understand the business landscape and learn how they’ve succeeded. This can also help you determine your chances of success. Company size doesn’t necessarily matter here. You can research established firms of a similar size or start-ups, be they private or publicly traded.
Speaking with potential customers can also clarify what they currently like about the competition and areas where they feel their needs aren’t being met. Reading online reviews, talking with customers in person or online, and conducting surveys are all useful ways to obtain this information.
5. Testing the business idea
The last step is testing your business idea. You could offer a business service to a few customers to get their opinion and see how it works in real life. If you’re making a product, create a prototype and let others use it to get their feedback on whether it’s useful, if it fits a need and how much they would pay for it. You can modify your business idea based on what you learn.
Launching a small business can be challenging, even with a great idea. Find more tips on how to successfully start your business, and consider how you plan to protect your company from potential damages. With small business insurance, you can have the peace of mind that you’re covered if the unexpected happens.