Entrepreneurship. Rhonda Abrams
in the industry
— Total employment in the industry
— Market share distribution of each company
☐ Industry’s performance in relation to your target market (geographic and demographic), including:
— Total revenues and profits from that target market
— Number of companies serving that target market and market leaders
— Trends relating to that target market
☐ Impact of seasonal changes and economic cycles on the industry
☐ Trends and forecasts, especially the projected future growth rate of the industry
☐ Industry resources, including major suppliers and vendors, trade publications, associations, and research companies
FINDING MARKET DATA HELPS YOU
Determine the size of a market and whether it’s large enough to sustain your business.
Understand the characteristics of your potential customers, what motivates them, what they buy, and where and how they buy.
Gain insight into the trends affecting your target market so you’ll be better prepared to respond to future changes in the market.
Become more aware of your customers’ preferences, actions, and tastes, especially in response to your specific product or service.
Market research
“Will the dog eat the dog food?” This well-known quote comes from famed entrepreneur and venture capitalist Eugene Kleiner, one of the founders of Silicon Valley. In short, Kleiner’s question asks: Will customers actually buy what you sell? You must find out what dogs like, meaning put the bowl in front of Fido. You must do some market research.
While the term “market research” most often applies to original research about potential or current customers, you engage in market research any time you seek data about your target market. For example, you conduct market research when you look for census data about the geographic area in which you plan to run a business or launch a product.
From a business perspective, conducting primary market research—by interacting with prospective customers directly—often provides critical insight into whether customers truly want your product or service. If you plan to introduce an organic dog food, for instance, you could do a great deal of secondary research and still not find crucial information. You could determine the number of dogs in the market, the sales figures for all dog food, the sales figures and trends for organic pet food, and so on. But you’d still want to know, “Will the dog eat my dog food?”
Know thy customers
Early in your entrepreneurial venture, you need to clearly define your customers, as many of the decisions you make about your business will follow from knowing who they are. Chapter 5, which focuses entirely on the topic of customers and target markets, provides further, in-depth guidance to help you identify your customers.
HOW TO CONDUCT YOUR OWN MARKET RESEARCH
Some of the most important information you need will not be available from any published source, particularly information that’s quite specific to your market or new product. To obtain this data, you will have to undertake your own primary research. You have several means to choose from.
■ Personal observation. One fundamental way to gather information—and also one of the easiest—is through personal observation. Watching what goes on in other businesses or the way people shop gives you insight into factors affecting your own business. You can observe automobile-traffic and foot-traffic patterns near a selected location, how customers behave when shopping in businesses similar to yours or for similar products, and how competitors market or merchandise their products or services. You can also observe research subjects interacting with your product by inviting individuals to try your product before launch. Technology companies typically have user labs to find out how customers actually use their products. Personal observation is a vital tool in your planning process and is applicable for almost every business, large or small.
REAL-WORLD RECAP
Primary market research methods
■ Personal observation
■ Informational interviews
■ Surveys
■ Focus groups
■ Beta testing, samplings, and taste tests
■ Informational interviews. The second principal method of market research is informational interviewing. Since your own perceptions limit the amount of information you can garner from personal observation, you should talk with as many people as possible who can provide you with information relating to your business.
Some of these interviews may be highly structured. For instance, you might make personal appointments with those you want to interview and prepare a list of questions. In other cases, such as when you go into a competitor’s store and chat with a salesperson, your questions will appear to be more casual.
■ Surveys. If you decide you need information from a large number of people, you may want to conduct a survey, whether by phone, mail, online, or in person. Surveys help you both to spot trends and to assess customer needs and desires. You can conduct in-person surveys by going to an appropriate location and interviewing subjects on the spot. Develop a questionnaire of the most important concerns to ascertain from interview sources. Don’t make your survey too long, or people will refuse to participate. Many online tools and apps make conducting online or mobile surveys easy and inexpensive.
■ Focus groups. A popular form of market research, the focus group brings a small gathering of people together to discuss a product, business concern, or service in great detail. For example, a few joggers might be brought in to examine and evaluate a new pair of running shoes. Focus group participants are often paid a small fee.
Focus groups typically evoke candid opinions. Market research firms conduct focus groups for businesses, bringing together the participants and leading the group discussion in a room with a one-way mirror, so that the participants can be observed. However, if you lack the funds to hire a market research firm, you still might consider assembling a focus group of your own, perhaps a group of potential consumers. Try, though, to find focus group participants you don’t know personally, to get objective results.
■ Beta testing, samplings, and taste tests. One fast and easy way to get real-world feedback on your new product is to ask prospective customers or clients to try out your product or service and give you feedback before you release the product or service or offer it for sale to others. In the technology world, this is typically referred to as beta testing. (Originally, “alpha testing” was internal testing of a software product, and “beta,” or second, testing was done by those outside the company. The term “beta testing” has become more broadly used for most outside testing of prerelease technology products or services and has even crept into nontechnology products and services.) Giving samples of your product to potential customers, or conducting taste tests or other kinds of trials while your product or service is still in development, can give you valuable information