Before McDonald's introduces a new sandwich, before Clinique launches a new perfume, and before Fisher Price offers a new toy, all these companies do some serious homework. It's called market research. And although they may believe wholeheartedly that their newly developed product simply won't miss in the marketplace, they also realize that consumers are fickle--and that to avoid financial disaster they'd better get the facts first.
First, these companies determine their product or service's demographics and analyze industry trends in order to fully understand the scope and makeup of their potential market. Then they research how consumers react to their product to ensure it's a welcome addition to the marketplace. All of this research occurs before a company even considers launching its new product in stores, catalogs or online.
As an inventor and/or entrepreneur, it's doubtful you have the market research budget of a McDonald's or Fisher Price. Fortunately, you've still got plenty of options. And because you're a smaller company working on a smaller scale (and with a smaller initial investment), you can get plenty accomplished with limited resources.
So where should your market research begin? After all, you don't have the well-oiled machine of a corporate conglomerate to back you up. What's a sole proprietor to do when it comes to market research? And why, exactly, do you need it?
First the "Whys." Developing a bank of knowledge reduces the risks (and stress) of making business decisions, validates your work, and allows you to continue bounding down your creative path. It offers guidance and shows you if and when you need to take a detour. Not only will it help you make important business decisions as you continue developing your product, research will also provide substantive market data that you can use later when you actually begin selling your product.
You definitely want to gather this information well before you mass-produce. Not only will it help you launch the best-designed product possible, it will also help prevent you from being stuck with thousands of units sitting in your garage because your potential market is less enthusiastic or robust than you'd imagined.
Painting the Big Picture
Now the "Hows." There are two types of research you'll want to collect. Data from secondary research will help you analyze your big-picture market opportunity. It consists of previously collected data like census information, industry trends and demographic information. Next, your primary research --information that you generate yourself--will round out the picture, giving you specific data about your product and how your potential market reacts to it.
Although it sounds counter-intuitive, you'll want to begin by collecting secondary research. This information will paint an overall picture of your potential consumers (the number of people in the country who might purchase this product; information on your specific industry; and the amount of money these people spend on the type of product you're developing). The information you discover will help you build the best possible profile of your market and the industry. For instance, if you're developing a product for dog owners, you'd want to find out the number of U.S. dog owners broken down by gender, age, geography and, perhaps, level of education (you can never have too much information). Then you'll want to research how much this market spends on pet products, if their collective spending has grown or shrunk in the past 10 years, and industry projections.
Fortunately, you'll find much of the information you need--no matter what your product or industry--from the comfort of your own desk. Here are some valuable (and low-cost) resources where you can gather secondary research:
- Census data
- Internet (key-word search using search engines such as www.google.com )
- Articles (business publications such as Entrepreneur Magazine, Business Week, Fortune Small Business, Business 2.0, and newspapers such as The Wall Street Journal and The New York Times)
- Trade associations
- Trade-specific publications (Pet Age and Pet Business are examples from the pet market)
- Gender or ethnic-specific publications (examples include Making Bread Magazine, Minority Business Entrepreneur Magazine)
- Financial data on key or relevant public companies (check out www.sec.gov )
You may also encounter sites and organizations that offer research reports with relevant data for a fee. While it's your choice to purchase such data, beware of buying reports without fully knowing if the data you'll receive is of value to you, specifically. I recommend exhausting your search for data in the public domain before taking this route.
Tamara Monosoff is the author of Your Million Dollar Dream: Regain Control & Be Your Own Boss and The Mom Inventors Handbook, Secrets of Millionaire Moms, and co-author of The One Page Business Plan for Women in Business. She is also the and CEO of www.MomInvented.com. Connect on Twitter: @mominventors and on Facebook: facebook.com/MomInvented.