6. Find out about the market for your business's products or services
You need to research your market before starting your business, and you need to present this information in a Marketing Plan within your business plan to convince potential funders that your business idea is feasible. The steps are simple, conduct your market research, develop your marketing strategy and write your Marketing Plan!
What is Market Research?
Market Research is the process of collecting information about the market place in which you intend to operate. This should include information about the size of your market (annual turn over etc) and trends within it, who your customers will be, who your competitors are and what they are doing. You should also look at environmental factors that could influence your market sales e.g. Government legislation, economic downturn etc.
In short, market research:
Identifies customer needs and wants
Determines if the product or service meets customer needs
Identifies potential target markets
Determines the best advertising technique for each customer group
How do I do it?
To conduct effective research it needs to be well planned – the starting point should always be deciding what information you need and what would be useful, then you can plan how you can obtain that information and how you will use it! So as a starting point you should consider:
What information do you need?
Identify the most appropriate research methods.
Set a timeframe for conducting the research.
Decide how much you can afford to spend undertaking the research.
Compile the information, identify trends and influencing factors and analyse the results.
Present the results in a plan.
Good research usually combines both primary and secondary (MS Word downloads) research i.e. research you conduct yourself and research conducted by others. It is important to remember that good research is based upon good quality information gathered from an appropriate number of respondents to be representative of the overall group that you are trying to make generalisations or assumptions about! You wouldn’t want to base your opinion of your enterprise’s success (and invest your money) on the opinions of five close friends – would you?
Budget Market Research Activities
Remember the market research process does not have to be very academic, you don’t have to spend hours in libraries but you do need to talk to people and get information from them – be they people with experience in running a similar type of business or people who are your potential customers. Even if you little to no budget, you can conduct simple but effective market research.
The Internet has made information gathering very easy but sometimes the best information is found much closer to home, with real people. Take a look at other businesses similar to your social enterprise as a starting point. If you're looking at starting a new venture, you are probably starting one similar to one you either already know or one that exists somewhere else. You can learn a lot by looking at other similar businesses. Here are some practical examples:
If you are planning a community cafe, for example, spend some time looking at existing community cafes and commercial ones too. How long do customers spend in the café? How much do they buy at breakfast, at lunch, at dinner? What prices are they charging? When are the busiest periods when you will need more staff? How extensive is their menu?
If you are planning a business that exists somewhere else, identify and telephone those other businesses who are far enough away so as not to consider you as being in direct competition. Explain your situation and ask them for advice and guidance – other social enterprises are usually very approachable but commercial businesses can be too!
You should shop with your competitors – eat in local cafés, visit similar shops etc. You should continue to do this regularly when your business is established too – it helps keep you informed of your market e.g. competitors’ new products, services or prices. Large Supermarkets do this regularly and quite openly ring or visit their competitors’ stores to conduct a “price check.”
Visiting and studying competitors’ or similar businesses, also provides a direct access route to potential customers – you can ask them directly about their needs, interests, buying habits etc.
Don’t forget to keep talking to your customers once you have them! They say 80% of your business is generated by 20% of your clients – identify that 20% and get in touch with them every so often to ask how you are performing? Are they happy? How could you improve your service? This invaluable feedback from your main users could help you to improve your products or services and attract more customers!
What information am I looking for?
As we discussed in earlier modules, you need to be sure that you have enough people in your market that would be willing to pay for your product or service, and that price has to be enough to allow you to make a profit!
Firstly you need to identify who your customers are likely to be – businesses or consumers.
You should also have gathered the relevant information to allow you to understand your customers needs and wants – what are their buying motives?
Then you should be able to identify how you can meet your customers’ needs and wants and differentiate yourself from your competitors.
You also need to research your competitors and the wider market environment.
Module 2 outlines the types of information you need to gather - the Market Plan headings in the next section night also refresh your memory!
