Gathering Market Research
“Gathering Market Research”
Looking for an edge against the competition? Market research can help you anticipate customer needs, reduce risk when introducing new products and keep an eye on your competition.
Gathering information about your market is critical to your company’s success. Ongoing market research lets you discover how your company actually meets, exceeds or falls short of your customers’ or clients’ expectations. You can learn to anticipate your customers’ needs and reduce the risk of introducing poorly received products. Additionally, your research can act as an early warning system to identify competitive threats and opportunities.
In this Quick-Read, you will find:
- The types of primary and secondary market research you should gather.
- Do-it-yourself strategies for gathering market research.
You may also want to see Quick-Read "Issues to Consider When Outsourcing Market Research."
Even if you think you understand your market now, changes in the business environment can lead your customers away from your business. Continual market research is extremely important if you wish to stay competitive.
Identify Your Data Sources
There are two categories of market research data. Primary market research is based on data you collect from your customers, competitors, employees and suppliers. Secondary market research is extracted from industry studies, books, journals and other published resources. You should look to both sources for a complete picture.
What to look for
- Basic demographic information. The age, sex, geographical region, marital status and so on of your existing and potential customers and clients. More in-depth demographic information provides details on their personal preferences and buying habits.
- Customer ideas and opinions. Information such as product quality preferences, motivators of buying decisions, color preferences, and so on.
- Buying cycles or patterns. Do they buy weekly, monthly, yearly? Are the purchases spontaneous or planned? Is it a purchase for self or a gift for others?
- Trends for new or improved products and services. What needs do they want to have filled? What’s missing in the marketplace?
- Strategic alliance opportunities. Who else is doing what you do? What companies could complement your product or service offerings if you worked together?
- Opportunities for beating your competition. What’s important to your customers — Price? Quality? Features? Prestige?
How to Gather Customer Information
- Focus groups and surveys. Unless you have experience in this area, hire an organization to conduct these projects for you. Focus groups give you the chance to talk directly to your customers and have them talk to each other. Your job is to listen to what they have to say about your products. Focus groups usually are small, and you typically have to pay customers for their time. Surveys give you a wider audience and cost less, but they don’t allow you as much flexibility in your questioning. Surveys rely on multiple choice questions that can be quantified.
- Industry studies. These will provide the results of studies conducted by your industry group. The questions won’t be tailored to your specific needs, but the study can give you insights into the customers in your industry.
- Internet discussion groups. Chat rooms and forums can give you a sense of what your customers’ frustrations are. People tend to be blunt and honest on the Web so you can get plenty of unfiltered feedback about your products.
- Employees. Talk to your employees. Your sales team, administrative assistants and front-line staff deal firsthand with your customers and distributors. Ask them for feedback on what customers want.
- Complaints. Complaints are possibly your best opportunity to understand what customers expect and how your products are not measuring up. Remember, for every customer who takes the time to complain, there may be many others who feel the same but don’t tell you.
How to Gather Competitor Information
- Read your competitors’ annual reports, newsletters and sales literature.
- Tap competitive-intelligence gathering databases.
- Check the Internet. This can clue you in to new competitors as well as let you know what kind of marketing plans your competition has going.
- Talk to your clients and suppliers. Ask them what your competitors do well (and what they do poorly), and you may uncover a wealth of information.
- Hire M.B.A. students to do research for you. M.B.A. students are trained to do competitive research, and they have access to university resources. They get experience; you get information; and the cost is relatively low.
- Off-the-shelf reports. Their usefulness may be hit-or-miss, but they’re worth checking out. Get a business librarian at your local library to help you find appropriate reports. Or look on the Web.
How to Gather Information on Suppliers
You are dependent on your suppliers to provide your goods and services. Suppliers who go out of business can leave you in the lurch. Alternately, suppliers who are doing well may raise prices. Monitor your suppliers’ pulse by:
- Asking questions about their operation and business flow.
- Visiting them regularly to observe their business processes.
- Reading industry journals.
- Talking to your business peers. Your business network can help you keep up with what is happening with suppliers in your industry.
You may also want to see Quick-Read, "Protect Yourself from Supplier Dependence."
Compiling this data should be an ongoing process, so you’ll need to have a system in place for storing and maintaining your information. Some organizations have a business librarian to search for and filter data just to keep the CEO apprised of developments among customers, competitors and suppliers. Or you may have one person in your marketing team whose primary responsibility is keeping on top of these areas. A third option is to hire a market research organization. They can handle a portion or all of your market research needs, but expect to pay $5K-$100K to retain a good quality firm. Make sure there is a follow-up process to deliver your findings to the appropriate parts of your organization.
REAL-LIFE EXAMPLE [top]
If you cannot afford formal market research, consider one entrepreneur’s bootstrap approach. When Karen Scott got started in the mail-order baby products business, she put together her own focus group — using the local newspaper. Scott clipped 250 birth announcements, and then contacted the new moms. She sent them surveys and conducted phone interviews, asking what products these young mothers sought. Based on the responses, Scott added more travel products at her company, Chelsea & Scott, in Lake Bluff, Ill. Ten years later travel products are still top sellers for the $28 million business.
When researcher Mike Mitchell and his team contemplated launching a new E-commerce site, for a division of Portland General Electric, he knew its success would be based on more than a good idea.
“The idea is half of it, but then you have to research and identify the
scope of the market,” Mitchell said. For the community information services Web site MyTownNet.com, the market would be targeted to the people in Northwest Oregon who are relocating. (MyTownNet.com later combined with another service portal, MakeAnOffer.com to form yourEmarket, now TownHound).
After identifying the market, research and development teams dug deeper to examine the needs of the people in that market. Mitchell sought answers to some very specific questions including: Is there a demand for a service like this? How do people in the target market spend their money? What else is happening in the industry? He evaluated growth projections and looked at company data. And he considered the financials, making cost assessments and revenue projections.
Sometimes the research shows a project is not needed and work should be suspended. But too often business leaders launch products or services that they like, without doing the research to determine if anyone else does. This opens the business up to far greater risk. While money and time may be spent on research and development only to discover the project is a bust, it means fewer expenses and less opportunity or negative exposure than pushing forward with an inferior or unnecessary product.
With many proposed projects, research conducted in only a few days can determine whether the project has merit and the process should continue. But R&D should be invested in any product or service that the company has an interest in producing and marketing, particularly one thought to be a revenue-generating element. Research may show otherwise.
“Research is always cheaper than a failed business,” Mitchell says.
DO IT [top]
- Survey your regular customers at least quarterly. Design a one-question poll, asking everyone during a designated week or month.
- Challenge an M.B.A. team with your market research project. Locate a Small Business Institute (SBI) program at a nearby college or university. Qualified students are available to tackle real-life problems or projects from local businesses.
- Check out your competitors online. Subscribe to listserv discussion groups for your industry. You will be able to hear or read about the happenings and challenges in their businesses and the strategies they are using to grow.
- Contact your industry or trade association. Inquire about research reports or recent survey data available to members.
- Get on critical mailing lists. Give yourself an advantage by regularly receiving information for your industry. Sign up for free electronic alerts, newsletters or bulletins offered by your competitors, suppliers, or other information sources you rely on.
- Exhibit at specialized events. Business-to-business events give you an opportunity to sell, promote, network and check out the competition all at once.
- Turn unflattering feedback into an opportunity to profit from change. When a customer or client complains, listen to their comments about how to make your business better. It may lead you to another profit center for your business.
- If you have data on sales from point-of-sale scanners and computers, analyze it to find purchase patterns and trends. Is there a demand cycle for selected products that should determine when what gets advertised? Are most purchases made on weekdays? Late in the week? On weekends? What products should be offered in greater variety or greater quantity?
Market Research Made Easy, 2nd edition, by Don Doman, Dell Dennison and Margaret Doman (Self Counsel Press, 2002).
State of the Art Marketing Research, second edition, by A.B. Blankenship, George Edward Breen and Alan Dutka (NTC Business Books, 1998). Unlike many market research books, the practical advice here doesn’t require the reader to be fresh from a statistics class.
Handbook for Focus Group Research, second edition, by Thomas L. Greenbaum (Sage, 1998). Greenbaum offers lots of tips for getting the most value for focus group expenditures. He offers extensive advice on how data should and should not be used.
American Marketing Association (AMA)
311 S. Wacker Drive, Suite 5800, Chicago, Ill.; (800) AMA-1150; (312) 542-9000
Maintains a directory of marketing experts.
Offers detailed profiles of public companies.
Liszt [now Topica]
Offers a searchable directory of e-mail discussion groups.
Market Research, Rutgers University Libraries
Business Information Centers (BICs): These nationwide centers offer free access to databases and provide information about product and service development and market research using Census Bureau and other data. For local center information, call (800) U-ASK-SBA or visit http://www.sba.gov/bi/bics/.
Small Business Institute (SBI): Located at nearly 300 colleges and universities nationwide, qualified M.B.A. and senior undergraduate business students tackle real-life problems faced by a local business. For local program information, call the Small Business Advancement National Center at (501) 450-5300 or visit http://www.sbaer.uca.edu/.
Writers: Kimberly Stans