Inexpensive Market Research Methods
Would you shell out $200 for a pair of shoes without trying them on? Plunge into a steaming bath without dipping a toe in first? Of course not-but people do the business equivalent every day. Many an entrepreneur has found out too late that nobody wants to buy hand-quilted Christmas stockings at $24.99 a pop, or that moneyed customers won't trudge to the unfashionable part of downtown for luxury stationery.
The paradox: Conventional market research is expensive (corporations regularly budget tens or hundreds of thousands of dollars for it), but no one needs it more than a startup entrepreneur. A couple of marketing blunders won't put a giant manufacturer out of business, but just one can sink an entrepreneur with shocking ease.
This article walks you through the basic steps of do-it-yourself market research. We'll skip the tried-and-true but unaffordable techniques-like focus groups, professional surveys and direct-mail questionnaires-and fast forward to ideas for those of us with more creativity than cash. The focus is on startup research, but many of the same techniques can also be used to refine your marketing plan for an existing business or to figure out why it's not flourishing the way you think it should.
You'll start by roughly defining your typical customers, determine if enough of them exist, and, finally, try to decipher their buying habits, preferences and prejudices.
Step 1: Define Your Target Customers
Your "target customers" are those who are most likely to buy from you. Resist the temptation to be too general in the hopes of getting a larger slice of the market. That's like firing 10 bullets in random directions instead of aiming just one dead center of the mark-expensive and dangerous.
Try to describe them with as much detail as you can, based on your knowledge of your product or service. Rope family and friends into visualization exercises ("Describe the typical person who'll hire me to paint the kitchen floor to look like marble . . .") to get different perspectives-the more, the better.
Here are some questions to get you started:
- Are your target customers male or female?
- How old are they?
- Where do they live? Is geography a limiting factor for any reason?
- What do they do for a living?
- How much money do they make? This is most significant if you're selling relatively expensive or luxury items. Most people can afford a carob bar. You can't say the same of custom murals.
- What other aspects of their lives matter? If you're launching a roof-tiling service, your target customers probably own their homes.
Get specific. For example, if you're selling collectible comics through a Web site but aren't willing to brave international export regulations, your customer location can stay in the United States. Or if you're planning to open a custom-tailoring shop and need busy executives to come for three fittings, you may need to limit it to your local area.
Step 2: Decide if You Have a Market
Before you commit hours to researching what customers want from you, it makes sense to find out whether you have a viable target market.
The cheapest and simplest way to do this is through "secondary data," or information someone else has already gathered for you. Usually, this takes the form of various statistics and can only answer closed-ended questions: How many? When? Where? Your own questions will depend on your customer profile and become more tightly targeted based on what you find out as you go.
You can find answers in a number of ways:
1. Reference librarians: Most are delighted to help you research. Often, they'll practically do it for you. These days, they can look up a lot of what you need on computer databases, and you have a decent chance of walking away with all your answers. Printouts may cost several cents per page.
2. The local field office of the Department of Commerce: It should supply you with free or nearly free information on population, demographics, housing, the economy, market trends, surveys of current businesses, and more.
3. The business libraries of local universities: These often have more specific information on business trends than a public library. Ask the librarian for help.
4. Your local SBA branch or Small Business Development Center: It has a multitude of publications and business literature full of advice and market forecasts.
Once you've got all the answers, it's time for a judgment call: Do you have a working market?
Only you can decide if 14 competitors are too many for 19,000 target customers, or if you want to gamble on the fact that your target customer spent 30 percent more last year than three years ago. If you don't like the numbers, at least you've just saved yourself a potential financial disaster. Now you're armed with a much better grasp of market conditions to revamp your business idea or marketing direction and return to Step 1.
This is a preliminary customer profile for an entrepreneur's actual business idea. He wanted to offer faux paint effects, but wasn't sure if there was enough of a market in his area for him to do this for a living. Going only on his own knowledge, this is the customer profile we came up with (comments, qualifiers and all):
- Gender: Both, since many clients will be couples
- Age: Late 20s to 40s-let's say 29 to 45. Very young people usually can't afford this, and the older generation might be too conservative.
- Location: The Denver area. Since projects usually require at least a few days to complete, it's not practical to drive long distances every day.
- Income: $60,000 upwards for the household combined. Since the cost per job ranges between $500 and up, people who make less than that aren't likely to be able to afford this.
- Occupation: Probably white-collar
- Other factors:Owns a home-many landlords won't let renters paint, especially when it comes to daring effects like this. Married-because couples have a greater pooled income and are more likely to be homeowners. No young children-because parents aren't as likely to invest in fancy paint effects and might also be worried about the safety of kids around chemicals during the process.
When creating a customer profile, you'll want to use secondary research to answer questions like the following:
- How many people in the Denver area are between 29 and 45 years old?
- How many of these are married?
- How many couples have young children (under age 10)?
- How many have a combined household income of $60,000 or more?
- What percentage of them own their own homes?
- Are the numbers of homeowners and relatively high-income families in my area increasing or decreasing?
- How many decorative painters and faux finishers work in my area? Who are they?
- How many were there five years ago, three years ago and last year? Are there more of them now than before?
- How many clients hired them last year?
- How much did they make on average?
- Where are they located? Are there more of them in certain areas than others?
Step 3: Get to Know Your Marketing
Once you decide you have a viable market, it's time to find out more about it.
Secondary research helps you refine your customer profile and gives you broad guidelines for your marketing efforts. But because it's all derived from information that focused on others, it's only so much sophisticated guesswork that applies to everybody in your position. Market research that's done specifically for your business, or "primary research," is where you'll get intimate with your own unique market.
Keep your mind open to any information, but also keep a list of primary research questions handy, such as:
- Who influences your customers and how? Spouses, neighbors, peer groups, professional colleagues, children and the media can all affect buying decisions. Look for hints that one or more of these are a factor for you.
- Why do they buy? Distinguish between the features and the benefits your product or service offers. Features describe what it is; benefits are what your customers get out of it. The latter is why your customers pay you. Are they looking for a status symbol, a savings in time or energy, a personal treat or something else?
- Why should customers choose you and not your competition? What can you offer that the competition doesn't?
- How do your customers prefer to buy? Many businesses benefit from the broader market provided by the Internet and mail order, while others do better with a physical presence. Don't assume you fall into one category or the other; customers may surprise you.
Keep those questions in mind as you take the following research steps:
1. Read, read, read. Articles, interviews and survey results published in trade periodicals reflect specialist knowledge of your market. Publications that focus on your business type are invaluable for forecasting upcoming trends and identifying customers' needs. But ads, letters to the editor, and other "extras" can be even more revealing. Study the ads (full- and half-page ones as well as the classifieds) of businesses similar to yours; watch for features your competitors most want to emphasize or de-emphasize. To get an overview of recent changes, order back issues, or find them in the library. Are there more or fewer ads now than last year or three years ago? Do those that have lasted have anything in common?
Readers' letters often contain information on what your customers like or dislike about certain products or companies. Editorial pieces frequently highlight hot trends, which should have a bearing on your marketing plan. Say you're starting a creative sewing pattern company. If three sewing magazine editors in as many months mention the plus-size market, and you see half a dozen letters complaining about the lack of choices in larger sizes, you've just received a hint in neon.
2. Tap the Internet. Newsgroups and discussion lists on the Internet debate every imaginable topic. Chances are, some of them partially match your customer profile. They may be talking about the type of product or service you offer-or can be encouraged to do so. Best of all, everything they've ever said has been archived. It's like having a ready-made, if somewhat chaotic, focus-group transcript at your disposal.
You can glean information just by finding archived threads relevant to your business and paying attention to comments made by those who fall into your target demographic. As a shortcut, type the names of your competitors (you found these during your secondary research) in the search boxes.
You can also take it one step further and start your own thread to initiate a more tightly focused discussion. A caveat: Some lists and groups don't welcome commercial postings. Always observe their rules, and phrase your questions discreetly. You can ask any number of questions that don't violate their posting etiquette and still supply you with a wealth of feedback ("What should I look for in a good pet-sitter?" "What's everybody's favorite brand of low-carb chocolate?" "How much is too much for a handmade harp?" "Where's the best place to buy organic baby products?"). You can follow up the answers with further questions until you have the level of detail you want.
3. Check out the competition. You can learn about what to do and not to do by studying your competitors. Visit their Web sites, and look at their prices, guarantees, testimonials and special offers. If they offer newsletters, get on their mailing lists. You'll get free information on improvements, new product lines, trends and even customer responses.
Spend some time analyzing their advertising and sales literature. What do they emphasize most? What are they not mentioning? Do you see aspects you could improve?
Try calling or e-mailing them to ask about their rates and services. If they have stores, visit and browse them. Write down your impressions as soon as you've hung up or left the building. Keep a record of each one, and ask yourself what all or most of them have in common, why you think that is, and how you can set yourself apart.
4. Get students involved. Call or visit the Web sites of local business colleges as well as the faculty of business departments at universities and colleges in your area. Find out who teaches classes on marketing, preferably small-business marketing. Try to persuade them that your business would make a great real-life market research project.
They may agree, especially if you're willing to provide samples and demonstrations on request. You'll have a better chance at certain times of the year, so if you've caught them at the wrong time, ask when might be better and whether they can refer you to anyone who runs on a different schedule.
If it pans out, you'll have to work with the professor's teaching plan and timetable, but you'll end up with 100 percent relevant, thorough, customized research results put together by people who intend to make a career out of this.
is a marketing consultant specializing in startup business planning and copywriting.