Market research or market analysis forms the backbone of any business. Whether the business is in the starting stage or if its well established, market research remains just as important. If you have a business plan in place, research would help you identify if its working, and why its working. If its not working, it can help you pinpoint the shortcomings and come up with solutions or alternates to the issue. Good research will also help you develop a business plan from scratch and increase the odds of it succeeding. From the inception of the business idea, to all the activities involved in its execution, every decision should be backed by good market research, both as preparation and reflection.
Organizations usually keep quite a bit of their budget aside to cater for extensive market research. Not everyone can afford lavish budgets for this though. With the resources available today, having a tight budget does not really set you back. In fact, if done smart, you can conduct more efficient market research and cut off any unnecessary data leading to confusion.
What is market research? It is the process of gathering qualitative and quantitative data pertinent to your business (idea, product or service). This data will further help you establish short-term and long-term goals and map the path to achieve both.
You can divide your Market Research into two stages.
- Inception stage
- Implementation stage
Inception stage: This is the developmental stage of your business idea. Be it a product or a service, before starting out you need to know what its scope is. Is it actually worth pursuing? If not, then can tweaking the concept help with its viability?
To answer these, the following questions need to be addressed and answered:
- Who is my Target market? This is a question that would probably have been answered before the inception stage itself. The easiest way to identify the target market is to design an ideal customer. Define the gender, age bracket, income bracket, geographic location and so on. Be as specific as possible. You can have multiple ideal customer identities as long as they are not contradictory or confusing. Furthermore, identify behavioral patterns in your ideal customer. What is their lifestyle like? What are their spending patterns? Is there any gap which your product/service can fulfill? What would make them interested in your offering? Conduct a survey and study the results. A simple google questionnaire is both free of cost and effective for a small study pool. You can start with the people you know and grow further. The answers to this question will help you define your “value proposition”.
- What is my demand? To answer this, study similar offerings in the market. Are you one of a kind? Or an iteration of another product/service. Can your offering make a significant difference to your ideal customer? It can even be a combination solution; I.e. can it solve two or more gaps for the ideal customer. Take camera phones for instance. They have now replaced landline phones, personal computers, cameras and watches when it comes to utility. Conduct a S.W.O.T analysis on your business proposition. Design a product description to pitch to your ideal customer base and gauge the response, this can give you a clearer idea about the response you can expect in the future.
- • What is the ideal price of my product/service? The simplest way to set the price of a product/service is by adding the desired margin to the cost of production. This is also one of the easiest ways to get it wrong. When it comes to simple goods, which are more manufacturing centric and are standardized across the industry, this method works. But for products/services which are more qualitative than quantitative, this pricing strategy can fall short. Often customers are seen paying for the brand name, or the additional services offered or sometimes even the place of origin. How can you cater for such factors while deciding the price? That is where good research comes in. From studying the pricing of similar existing products to conducting a survey on your ideal customer base to understand how much they are willing to pay; good research can go a long way in helping you decide the right pricing for your value proposition.
Implementation stage: Once you have completed your homework for the inception stage, you move on to the implementation one. Choosing a path of execution not strongly backed with research can be a waste of time, resources and not to mention highly demoralizing when you don’t get the desired results. If you choose a plan of action, you need to know exactly why you went down that path and what you should expect as a result. This is where research comes into play.
- • Industry and Competitor Analysis: Knowing the environment where you operate can go a long way in contributing to your success. The business ecosystem can get quite intricate, with multiple stakeholders and players. Competitors form just one small aspect of this. It is important to note that overlooking any aspect can be disastrous over the long run (downfall of airline companies due to fluctuating fuel prices further caused by political instability). Basically, to be thorough at this stage, conduct a separate industry analysis and then a more focused study on competitors You can conduct a PESTLE analysis to study the industry environment. PESTLE is an acronym for Political, Economic, Social, Technological, Legal and Environmental factors in the industry. Most of these factors can’t be controlled. But the effects can be mitigated by taking them into consideration while planning the implementation of your idea. Competitor Analysis should ideally be divided into two major categories. One in which you analyze the key players in the industry, and the other in which you study your immediate competitors. Identify the right competitor base. Are you planning to enter an already saturated market or is it a blue ocean? Your entry strategy should be designed accordingly. To choose the relevant competitor, apart from the value proposition, compare the scale of operation, locations catered to and most importantly the target market. You should also study the key players in the industry and analyze their strategy and offerings, not necessarily to directly compete with them but to understand what they are doing and why.
- • Segmentation: The target market defined at the inception stage can be quite heterogenous. Hence, standardized marketing strategies across platforms can become tedious and ineffective. Dividing the market further into smaller homogenous groups can go a long way in streamlining and customizing marketing efforts making it more efficient. This process is termed “Segmentation”. The division can be done based on geographic locations, demographics, behavioral and so on. Make the segments as specific as possible to develop a tailor-made strategy for it.
Businesses operating on the bases of thorough market research is more likely to succeed than those just shooting in the dark. Many a time, failure is attributed to luck. In fact, the truth is that most of the time failure can be thwarted by preparing for as many situations as possible. And this can be done only with good knowledge of the ecosystem around. That’s where market research comes in. With the rise of the digital age, there is no lack of resources at hand to conduct good research at any budget. Get started now.