For many beginning entrepreneurs, market research is a waste of time.
They kind of understand that market research is beneficial for business, but very often they take for granted that their ideas are great. They don’t want to check if their potential customers think the same way because they assume that they will love it.
In this post, I’m going to give you some insights into how to do market research so you don’t invest your time and money in risky ideas.
Why is market research important
Thanks to market research you will get to know if someone is potentially willing to buy your product or service. It helps to understand what your customers need and what they love so you can tailor your product or service to their needs.
There is another thing you’ll find out: it’s how your competition is doing and what they offer.
For example, what will happen if you decide to become a product photographer and you won’t do business research? You won’t know how many photographers are out there and what level of professionalism they represent.
If there is one photographer and his education stopped in the early 90s, you’re very likely to succeed. But if there are many talented photographers who already have professional equipment, contacts, experience and a nice portfolio… Then you should probably reconsider.
That’s why doing market research is so important - it helps you to evaluate your idea and give you a hint on how much money, effort and time you should invest in your business.
I know, once you’re starting a new business, the last thing you want to focus on is failure, but the truth is that you need to know what’s the risk of not being prepared for every eventuality.
Golden rules of market research
1. Spy on your competitors
There are a couple of things about your competition you should know before you start your own business:
- How does their website look like?
- What information does it contain?
- What’s the price of their product?
- Do they run social media channels?
- What do people say about their products?
You can start looking for this information from Google Alerts. It’s a very simple tool that will send you an email about you or your competition once you are mentioned online (I have explained how to configure Google Alerts in “How to Handle Negative Comments on Social Media”).
A more interesting tool is Website Grader, where you can check how your website is performing along with your competition. You just need to paste a link and it will tell you how strong the website is and will suggest a couple of improvements. Google Alerts and Website Grader are both free.
Another nice website is Alexa. It’s a tool helping to find out how much traffic your competitors are getting and from where it comes. It will also tell you what your web ranking is and how well your site is doing compared to others. You’ll see your competitors top keywords and what percentage of visitors come from search engines.
Alexa is not free, however it offers a 7 day free trial, definitely worth trying.
Depending on your business, you will find websites with product and service reviews. Such websites are great to learn what your competitor’s customers are thinking about their products. It’s also a good way to find out what’s your competition’s weakest points!
2. Talk to your potential customers
Before you start your business, as soon as you start it and as long as you run it, you have to gather customer feedback. The process of gathering it directly from your customers and website visitors is called primary research.
If you’ve read Jacob’s post about “How to Use Customer Feedback Effectively,” you might remember the most important ways it can be done:
- Customer surveys – you can place a survey on your website or send them via email or chat. They include a mix of open questions about your product, or questions with predefined answers.
- User testing – an indirect way of gathering feedback is checking the way your customers use your products.
- Approaching customers via phone and email – you can directly ask customers for feedback via phone and email. This can be either a follow up after previous contact or an independent attempt at asking the customer for an opinion on your product or service.
- Social media – network sites give you an opportunity to host focus groups, conduct surveys and polls, ask industry experts and monitor brand mentions.
3. Analyze data that is already published
As called secondary research is looking for valuable information in reports and benchmarks that are already published.
It can help you to identify your competitor’s strong and weak points and it’s great knowledge about what can be improved in your industry. You can use it for your advantage!
An example of such benchmarks is something that we have done for our customers: Customer Service Benchmark.
This report contains information about over 4000 companies from 21 industries. Our customers can check the customer happiness for their industry, average number of chats per day, average response time and average handling time.
If you want to check your live chat benchmark, thanks to this report you could evaluate if your results are better than your competitors. It will give you information about what you can improve or where you’re better than your competitors.
Look for similar reports that will be suitable for your industry and check them regularly as they can be a great source of knowledge, so don’t forget to check them on a daily basis. You can also introduce to your workflow ecommerce tools like LiveChat. Thanks to that you can chat with customers and gather valuable info at the same time (you can start the 30-day trial and test it on your own).
The price of not doing market research
Maybe you’ve heard about how Coca-Cola made a decision to introduce a new product in the mid-80s. They’ve had the evidence that the taste is the most important thing for Coke’s customers, so they tried to introduce a new beverage that could replace the original Coke.
They’ve done 200 000 blind tests in the US, and more than half of the participants favored the new Coke over both the original Coke and Pepsi. Based on that, the company decided to introduce the new product and the original one was withdrawn from the market.
It turned out to be a terrible mistake as no one wanted to buy the new Coke. The company has reintroduced the original recipe but kept the new Coke on the business market hoping that eventually people will love it.
It did not happen.
What went wrong?
It turned out that market research was done wrong. The company assumed that the taste was the most important factor for the buyers. They did not think about different factors like symbolic value or emotional engagement people had with the original Coke.
It proves one thing: if you want to do market research, you need to ask the right questions and draw good conclusions.
So, if you’ve never done market research before, it might sound expensive or time-consuming. But the truth is that not doing a research or doing it the wrong way, can cost you much more.