How to conduct market research
Tips for new entrepreneurs planning to enter the marketplace
So you’ve got the best business idea ever, a new product or service that everyone will love.
Maybe it’s something you’ve come up with yourself, or it’s based on one of the thousands of inventions available to businesses and entrepreneurs.
Now that you’re going into business, you’ve got a lot to think about, and experts say conducting market research is a necessary step in planning your launch.
What is market research?
Market feasibility research is the information that will help you assess the overall appeal, i.e., customer interest and demand, for the product or service you’re proposing.
The market assessment is often a reality check for entrepreneurs and can help you refine your product or service idea to make sure it is appealing to your future customers.
Market research helps you answer questions like:
- What is the demand for the product or service?
- What are the customers’ needs and price expectations?
- What kind of competition will this product face?
- What are the strengths and weaknesses of the competition from the customers’ point of view?
- How will you keep customers coming back to your product?
How to conduct market research
The high-level overview of the market your product or service will compete in is called the industry analysis. A good sign that your idea will be a winner is if the industry is in a growth stage.
Example: The electric scooter market is young and growing, and there are opportunities for new companies to enter the market. While other markets, such as roller skates, are old and stagnate, with just a few companies dominating sales.
The number of businesses in a market is also a good indicator to look at. If there are many companies in the market, competition will likely be high and center around price.
To discover if an industry is attractive and in a growth stage, entrepreneurs will need to conduct primary and secondary research.
Primary research is original information collected by you through interviews, focus groups, observation, and surveys.
Some important questions might be:
- What are your considerations when buying a product or service?
- What is good about current products or services in the market?
- What would you like to see improved about the product you’re buying?
- What is the right price for the product or service?
Secondary research is collected from business reports, industry publications, trade journal articles, scholarly papers, and other information that’s available online.
For reports on retail sales, goods, manufacturing, and tons of other useful information, Economicindicators.gov provides public access to economic indicators from the Bureau of Economic Analysis and the U.S. Census Bureau.
After conducting both primary and secondary research you should have an understanding of the market, who is already in it, trends, and actual dollar figures indicating the overall market size.
Current Market Analysis
Entrepreneurs will also need to drill down into the industry analysis, narrowing their research into a particular market within the industry.
For example, reviewing the market within a particular city, state, or geographic area, or looking at a demographic group, such as women aged 18-25.
You should use the same primary and secondary sources to build the analysis. Use the research to determine customer needs, their preferences, how they make purchase decisions for certain products or services, and how much they can and will pay. This allows you to assess different market segments and market potential.
Primary research for competition analysis usually involves talking to supply vendors in the market and can be valuable intelligence. Ask them if they have exclusive agreements with your competition.
You can also talk directly to your competition to find out what their product or service costs, what their manufacturing capacity is, and how they deliver. Talk to customers in the market about what they like about the competition and if there are deficiencies.
The secondary research comes from public business reports available on their websites, industry reports, or newspaper stories. Constructing a competitive map will give you a better understanding of the field, the competition’s strengths, and weaknesses, and identify opportunities those weaknesses create for you.
Now start using the research
Now you can calculate what your anticipated future market potential is using your industry, market, and competition analyses.
The growth trend from industry analysis will indicate the overall future market need, which you can use to estimate your own potential for growth.
The market analysis will tell you who the customers are in the market and how many will be willing to purchase your product or service and at what price.
The competition analysis tells you who the key players are, what share of the market they have, and what they will do when you enter the market. This will help you understand and estimate how much of the market you can capture when you enter and what the future market potential is.
If you discover through conducting market research that your idea isn’t ready for prime time, that the industry is in decline, the market too competitive, or that there are not enough customers, you might need a different business idea.
Luckily, TechLink keeps a list of inventions that can be the starting point for your next business idea. These technologies were invented in military laboratories and research centers and are waiting to become products and services for any customer.
Start reviewing the list here. It’s pretty long, so you can filter it by industry area or use keyword searches to find what you’re looking for faster. If you see a new business idea, then get in touch. TechLink offers businesses no-cost assistance in evaluating and licensing technology from defense labs.