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CHAPTER SIX

Researching Your Business and Market

Introduction - One of the most important parts of starting a new business is the research that is done prior to going to market. This is to ensure that you have correctly evaluated the opportunity and have a good sense of both the current business environment you will enter, and what are the keys to success. It is not uncommon for clients to come to SCORE believing they have done research on their project by asking friends or relatives what they think of their idea. As a result of this “research” in most situations they have received glowing responses. This is probably the worst type of “research” that one can do, as friends and family are normally not qualified to evaluate a business idea considering all the important elements, and importantly are unlikely to give an objective response for fear of offending the creator of the new business in the event they feel negative about the idea. One analogy that is very relevant here is to ask you if you ever went to see a new baby and told the parents it was ugly. It is just not something we would do, and the same dynamic operates when asking friends and family for their opinion about a new business idea.

Research as Business Insurance - The role of research in the process of developing and implementing a new business idea should be considered a form of insurance. The more research you do, the better the chance you have of succeeding. The more you know about your product, your market and your competition, the stronger your own introductory marketing plan will be, and the more prepared you will be to enter the market place. Like insurance, you can have too much research, but there clearly is a basic amount of work that needs to be done before you are ready to move forward with your program.

The purpose of this chapter is to (a) discuss the market research options available to a small business relative to the marketplace and the product or service being introduced, and (b) to identify a selection of different research techniques that can be employed to fulfill the

objectives of the market research program.

Categories of Research - There are essentially three types of research that are necessary during introducing a new product or service.

* Market Research - This is research intended to understand the environment in which you are competing by addressing at least the following issues:

-The size and growth trends of the market in which you will be operating. It is important to put this into perspective for a small business. Many, if not most, small entities and start-up companies have a very local focus, anticipating that their business will be generated from a relatively small area from where they are operating. In these situations, the national size and growth of a product or service category is not relevant. For example, if you are opening a dry-cleaning business, you might be concerned with the overall trends in the business on a national level, but the size of the category is important.

-The market dynamics, in terms of how the category operates in terms of how the business is promoted, advertised, etc.

-The keys to success in this product or service business. This is a vital part of the research process, as the identification of the keys to being successful in the organization can dramatically help improve the chances of success.

-The key competitors in the business and how they are marketing themselves to achieve the share of market they have obtained to date. It is vital to fully understand your competition, particularly from the perspective of what they advertise and promote to be their key strengths that they are seeking to communicate to their target audience.

-The key copy points that represent the market position of each of the competitors (we will discuss Positioning in a later chapter). This refers to what the business is trying to communicate to the marketplace in advertising, promotion, packaging, and social media.

-The customer dynamics of the business in terms of the various market segments to which you might consider appealing. This includes such things as buying cycles, key distribution outlets, who is the decision maker for the purchase, etc.

-The unmet needs of the target customers. This might be the most important output of research, as it could direct how you plan to advertise your product to the marketplace. If you can determine what your target customers want, and are not receiving, the chances of a successful introduction are dramatically increased. This, of course, assumes that your product or service can effectively meet that need.

* Product Research - This is a category of research intended to evaluate your idea and to determine whether it is likely to be successful in the market. At a minimum, this class of research should attempt to learn the following:

-General reactions of the target customers toward your product or service.

-Perceived strengths and limitations of your concept. This is vital as you must find a way to correct any perceived problems with your product or service before entering the marketplace.

-Understanding of your USP (unique selling proposition), in terms of its value to the target customer.

-Positioning of your product or service in your market. Specifically, is there a gap that you are successfully filling that represents an identified customer need?

-Reactions to specific elements of your program, such as a product size, packaging, or pricing or a service delivery approach.

-Learning as to how target consumers talk about products in your category, so you can be sure to use the correct language in all your external communications.

* Post-Introductory Research - This is a group of research that is intended to help you determine how your product or service was received by the marketplace following introduction. Obviously, revenues or sales are generally an excellent indicator of success, but there are many stories of brands that started off with excellent sales figures, but eventually failed due to the lack of repeat purchase by the consumer. The objective of this type of research is to delve into the reactions to your new product or service to determine whether it might have a future. Some of the questions addressed by this type of research are:

-How do buyers of the product or service feel about it once they have had actual in-the-market experience? Importantly would they make a second or third purchase; would they recommend it to others, etc.?

-What is the level of awareness of your offering among the target audience? If the people you are trying to sell to are unaware of your offering, it will be impossible to be successful.

-What message are they getting from your communications/advertising? Is this the intended positioning?

-How did the buyers feel about the price-value relationship of your offering?

-What are the repeat purchase patterns? For a product with a short purchase cycle (i.e., consumer goods, retail outlets, drug products, etc.) it is vital to understand the repeat purchase patterns to get a full picture of the response to the introduction.

Research Tools Available to Address the Questions in each Category - This section will identify the types of research that a small business entrepreneur could use to research the market, the product, and to conduct post introductory research on your product. Most of this research can be done free or with a very small investment.

* The Internet - This is the most common ways “research is conducted” today due to the ease of getting information at no cost. The most comprehensive tool for researching on the internet consists of using search engines such as Google to learn as much as possible about the market you are considering. Most people are amazed at the amount of information they can get by spending considerable time with Google to research their marketplace.

In addition to Google searching for articles and other published data about your marketplace, it is essential to visit and analyze the websites of all organizations that represent even remote competition. From the websites, you can learn a great deal about the competitors in terms of such things as:

-Their pricing

-Their key copy points seeking to deliver a USP

-Their intended positioning in the market

-Their method of sales and distribution

-Their promotional programs

* Social Media Platforms - In the current environment you can learn a great deal by simply posting a question on platforms such as LinkedIn, Facebook or Instagram. They all have very extensive audiences which can provide you with excellent answers to questions you are seeking about a marketplace.

* Consumer or Trade Publications - There are many publications, whether in print or on-line that can provide extremely valuable information about a market you may be considering entering. One example is the magazine Consumer Reports, which exists to provide comparative information about many different product and service categories. However, there are dozens of other printed and on-line resources that will evaluate products and services.

* Personal Visitations of Target Customers or Competitors - One obvious research source that is overlooked by many small business entrepreneurs is the opportunity to visit and talk with either the competition or the prospective customers. This cannot be easily accomplished in all product or service categories, but it is very relevant and extremely helpful in many. For example:

-If you are planning to open a retail store of any type, you should spend considerable time visiting other stores in your area that would be competition. It is also very useful to visit stores outside your market area (i.e., non-competitors) to understand how they do business. Some of the types of information you should be able to learn from these visitations are:

--How the store is organized

--How they promote and advertise their store

--Inventory carried & depth of inventory

--Pricing strategies

--Staffing of the outlet

--Square footage of the store

--Types of locations that appear to be most successful

--Most important vendors for them (i.e., who is supplying them with their product)

-Perhaps you have invented a product that will be sold to a retail store. In this case, it is essential to visit the prospective customers to understand what else they carry that is similar and where your entry would be positioned in the inventory. You should also learn about the pricing and distribution channels into the store. In some cases, you would be able to show the prospect a prototype of your product and therefore get some very valuable inputs about the attitudes toward what you are considering. One example of this is a client we had that was planning to sell a product to toy stores at $79. After considerable market research, it was determined that the only way for them to be successful was to sell it for $49, which required a major change in the entire production and marketing strategy of the organization.

-Often it can be productive to visit a company in your business who operates in a geographic area that is not competitive with you. For example, a consulting business that only operates in a limited geographic area, or a retail operation that has no intention of expanding to your area. Generally, these people will talk to you about the business and provide valuable tips that will be helpful to you in the planning process.

* E-Commerce Research - Whether or not your new business is in the e-commerce space, it can be very useful to study the websites of various e-commerce organizations that would be competitive with you. You can learn about the products they are featuring, their pricing, product selections etc.

* Free on-line Survey Tools - There are many different on-line survey tools that are available to conduct quantitative research among your audience. The objective of these is to obtain attitudes and behavioral information that will enable you to make more effective decisions relative to your own marketing plans. The most popular of these is Survey Monkey (www.surveymonkey.com). This is a research tool you can use to implement quantitative market research on-line via questionnaires that you would develop. The big drawback to this and the other on-line tools is that you need to have a data base of e-mail customers who have opted-in to your website to survey them. It is not legal to purchase lists of emails and use vehicles such as Survey Monkey to conduct research among them. Also, using the free vehicle you have limitations regarding the number of surveys you can distribute. However, we have found Survey Monkey to be a very cost-efficient vehicle for larger studies. Further, Survey Monkey is free for up to 100 questionnaires, but beyond that there is a fee.

* On Line Research Libraries - Another resource that should not be overlooked is the wide array of on-line resources that are available, some free and others for a cost. Two examples we recommend considering are:

-CompaniesAndMarkets.com – This is an organization with thousands of reports on a wide variety of topics that could be very relevant to your analysis of the marketplace. They claim to have over 500,000 different reports.

-Freeonlineresearchpapers.com - This is a website run by the online University of Phoenix. They also have thousands of different reports about a wide variety of topics. They are free.

* Trade Associations & Industry Publications - Another very important category of information that is readily available to most people considering entering a new business category are the trade associations serving the category and the various publications that are produced in print or on-line about the topic. In the years before the Internet offered products such as Google and Yahoo to do searches, the trade associations were among the most important resources for gathering research information. Most trade associations will talk to prospective members and provide them with useful information about the marketplace and the competitive factors in the business. Further, they will normally be helpful in directing you to other resources that will answer questions that they are unable or unwilling to address.

A great source of information about a product or service category is the industry publications in the field. Almost every product category has a magazine or newsletter, which you can obtain to learn about the business category. In addition to general articles about the dynamics of the business, it is very common for trade magazines to conduct surveys of their members that can prove to be invaluable to a new person seeking entry into the area.

* Your Local Business Reference Librarian - When planning an entry into a new business it is very advisable to develop a close relationship with the research librarian in the major library facility in their area. They can be extremely helpful and can save significant amounts of time. The types of information you are likely to get from a local library with the help of an experienced reference librarian are:

-Market size and growth trends

-Detailed information about competitive brands or companies

-Demographic information of potential customers

-Sources of industry experts to contact or follow via the Internet

Some of the major libraries have very extensive business reference sections where they collect information specifically aimed at the small business entrepreneur. One example is the Science and Industry Business Library in New York City. This is a branch of the New York Public Library located at 34th Street and Madison Avenue. In addition to having very experienced librarians, they have a collection of hundreds of business plans that can be researched to give you help with your planning. It is likely that you would find a business plan for an organization that is like that which you are creating, thus giving you valuable information to use in your planning efforts.

A related resource that also should be explored is University Libraries. Some university libraries will permit the public to use their resources for research, particularly if you might be an alumnus of that school. It certainly is a research option that must be evaluated during the planning stages of a business.

* Communication with University or College Professionals – One possible invaluable source of information can be teachers at local universities that teach business courses. They offer two important potential resources: