Many small business owners dismiss market research as a complicated effort that produces unneeded and unnecessary details at an unjustified expense. Others believe that research into who and where their customers are will not tell them anything they didn’t already know.
The fact is that market research does not just paint a picture of who the customers are and how they behave, it puts those customers and others into the context of economic trends and how market factors will affect their behavior. This knowledge is vital to a business plan and helps define what it takes to be a successful small business owner.
The U.S. Small Business Administration says a market research project should begin with some basic demographics of those people most likely to be interested in your product or service. This includes age, family type, household income, hobbies and interests and anything else that connects a product or service to a customer.
Next, the project should attempt to answer a few basic questions, including:
- Demand: Is the product or service something that people are actually interested in buying now and in the future?
- Size of market: Is the product or service of interest to a wide range of people or more of a niche offering?
- Economic context: Do current and future income and employment indicators shows customers with the income to purchase, or is it only for upper income buyers?
- Access and location: For a brick-and-mortar business, are customers nearby or is demand sufficient to draw customers from a distance? Is the product or service something customers would expect to be available online?
- Competitive pricing: If there is a similar product or service in the area, what is the going rate?
Free Data Available
Some basic research can be done by the business owner directly. However, a variety of market specific and up-to-date data are available for free through the SBA’s small business guide pages.