How Market Research Will Help To Determine The Viability of Your Business

Market research is a term used to describe the need to research your potential market before setting up in business. Although it is time-consuming to acquire, a thorough and reasoned knowledge of your market is invaluable to the future success of your business.

With a true picture of your potential customer base, you can honestly assess the viability of your small business.

Resist the temptation to rush ahead, analyze your research results hurriedly or cut down the amount of research — it could make the difference between success or failure of your marketing strategy.

What is it all about?

This page answers four key questions associated with a market research, and how using them effectively would enable you to know if you can gain a viable share of your target market.

• What you need to know.


• How to exploit existing information sources.


• How to conduct market research.


• How to analyze and act on your results.

Deciding on what you need to know

Identify potential customers.
It is likely that you have an instinctive idea of who your customers could be.

• If you intended to start a retail business selling children’s hair accessories, the main targets would be mums or young girls.


• If you were setting up an ironing service, single business people or busy parents would be two possible market sectors.

You need to find out what we commonly refer to as the five Ws. These are: who, what, when, where, why — as well as how.

Who your potential customers are.

• If you intend to sell to individuals, you need to know their sex, age, marital status, occupation, income and lifestyle.


• If you intend to sell to businesses, you need to know their size, industry type, product-buying patterns and service requirements.

What they buy and in what quantities.

• A printing firm should understand if its customer base will want a thousand postcards or a million brochures.


• A successful sandwich shop will predict its top-selling sandwiches and how many of each they expect to sell each day.

When they will buy.

• Customers of a toys manufacturer will buy more towards the end of the year so that they are fully stocked for the pre-Christmas trading period.


• A minicab firm will expect more business on Saturday evening than Monday evening.

Where customers prefer to buy.

• A bookseller will know that while many customers like visiting a shop, some also buy books through the internet.


• Do a hairdresser’s customers want to come to the salon, or would they rather have their hair done at home?

Why they may prefer to buy your product or service.

Every start-up has to know why customers will buy from them and not the competition. This will become your unique selling proposition.

• Your research should test how effective this is.

How customers buy.

You have to understand the needs of your customers and the position of the market you are going into.

• If you are going to manufacture office furniture, you need to know how often your target customers will want to renovate their offices, and how regularly they need replacement equipment.

Conducting Your own Market research

The research technique you use will depend on whether you need numerical information about people’s attitudes or a deep understanding of their views and motivation.

Quantitative research is the type of survey in which every participant is asked an identical set of questions.

The answers provide key statistical information.

• For example, a survey by a golf club developer may find that 12 per cent of local adults play golf, four per cent are already members of a club and six per cent would like to join a club.

Using this information, the developer can decide where to build a new club and how large it should be.

Qualitative research explores people’s feelings and attitudes by letting them discuss things (eg ‘Why do you like playing golf?’).

The questions can be answered in a focus group — usually six to eight people — or in one-to-one interviews.

• The golf club developer might discover from the market research that most people join golf clubs to make new friends and so decide to add a swimming pool, bar or cafe to the building plans.

Insights like this can give you a significant edge over your competitors.

Find a sample of your target market, get them to try your product or service (discounted or free) and let them give their objective opinion.

How to Analyze Results Fairly

It is important that you remain objective about your research findings to avoid interpreting the results unfairly.
Keep your distance from any research.

• Do not base market research findings on the opinions of friends and family. You risk hearing what you want to hear, rather than honest opinions.


• Record any comments from a focus group or you may forget criticisms that would enable you to improve the product or service.


• If possible, hand the analysis over to someone who is not immediately involved in the project.

Do not take negative comments personally.

• You can often learn more from criticism and improve on the performance of your business as a result.

Check out what your competitors have to offer.

• Try the competition’s products or services.

It is the easiest way of understanding the market and what you will face when you become part of it. Carrying out a detailed analysis of their strengths and weaknesses will give you an idea of what you can do to establish a niche in the market research area.

• Look at the potential the competition has to improve its service or upgrade its product.
  Work out how you can stay one step ahead.

Consider if the demand for the product or service will change over time.

• Selling a must-have product cheaply might be a success, but if it has a long lifespan then customers will not return frequently enough.


• Make sure customers have a need to keep coming back — this could be because the product has been updated, the old one has run out or worn out or because it is so good they want more.


• Could the market be affected by external factors, such as the economy or legislation? Are there any protective measures you could put in place?


• Look ahead to possible problems; you may be able to develop your product to a wider selection of markets to increase chances of survival.

Your market research will have given you an idea of how many potential customers there are.

• But be aware that new markets will attract competitors if they see you are successful.

Tip on framing Open/closed questions

When asking people to comment on your product or service, there are a few useful tips to remember.

• Asking a closed question will gain a limited response. ‘Did you like X product?’ is likely to be answered with a simple ‘yes’ or ‘no’. While these answers are easier to collate, they are not as useful in determining why the potential customer does or does not like your product or service.
• Asking an open question is likely to get a more detailed response. ‘What do you think can be improved?’ will be interpreted as a request for more than a one-word answer. Open questions will allow you to find out more useful information. It is beneficial to find out if they found the product or service useful — but it is more useful to find out why.

Consider how you want to use the answer to a question when forming it.

For example, if you are thinking of opening a high street flower shop, stopping people and asking them ‘Would you like to see a flower shop here?’ may provide you with a high positive response rate.
But asking ‘If there were a flower shop here, how often would you use it? will provide much more valuable results for your market research.

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