Extensively researching your target market has long been viewed as a luxury--a perk available only to the corporate giants with deep pockets. But the past decade's surge of small businesses have made understanding and accurately targeting your customers a make-or-break means of survival.
Market research comes in all shapes and sizes, and some forms certainly have high price tags attached. Of course, not every business has thousands of dollars to dish out on analyst reports and services from big-name market research firms.
Luckily, there are quite a few effective options available that won't take a nasty toll on your budget.
What Is Market Research?
Researching your market helps you understand your customers, your competitors, and the industry in which you operate. It's an ongoing process that involves using data to drive decisions related to running your business.
Conducting market research involves collecting data to be analyzed. Data can be collected through various processes, and the method you choose depends on what you are hoping to discover or better understand about your market.
Once your data is collected, it takes careful analysis to come to any conclusions or understanding. But if done right, the results will make all your business decisions smart ones.
Why Use It?
Market research has definite value. It gives you the information you need to make smart decisions about your business, so your revenue increases.
In fact, your ROI on market research often exceeds the cost of conducting the research.
Proper market research helps you:
- determine how to correctly target your marketing campaigns
- identify opportunities in the marketplace
- determine what you are doing wrong as well as what you are doing right
- identify your customers' specific needs
- uncover problems with your business that may not have surfaced otherwise
- evaluate your success with measurable data
Even though its name may imply otherwise, secondary research is where market research usually begins.
Secondary research is conducted by consulting published reports from trusted sources in order to find out:
- who makes up your target market
- what the needs of your market are
- the size of the potential market
Secondary research is less expensive than primary research. It's often free, in fact. It's also more readily available than you may think.
Secondary research can be internal, like sales reports or internal market analyses. But most of it will be external, including:
- web-based directories and resources
- nonprofit agencies
- government agencies (try www.fedstats.com for access to 70 government sites with valid stats and information)
- back issues of magazines and newspapers at the library
However, analyzing secondary data can sometimes be overwhelming, and your results can end up inaccurate or inconclusive. It may make sense to use the knowledge gained through secondary research to guide your decisions regarding primary research or even to hire an outside consultant to do the analyzing for you.
You can think of primary research as getting down to the nitty-gritty.
Primary research is conducted to get really intimate with your market, to answer specific questions you might have or address specific areas of focus. It costs more and often takes longer to conduct than secondary research, but it gives conclusive results.
Primary research can be broken down into two subcategories:
- Qualitative research includes studies done on smaller groups of people, like one-on-one consumer interviews or focus groups. It's meant to give you direction, to get an answer to a particular concern or question--not to make predictions.
- Quantitative research includes studies done that result in a large amount of data-like surveys. This type of research is statistically valid and can be used to make predictions.
Surveys are a type of quantitative primary research that aim to collect specific data from a sample audience.
Surveys can be administered via email, snail mail, or phone, and usually target customers or potential customers.
There are four steps to attacking a survey: identifying your audience, writing the survey, conducting the survey, and analyzing the data collected.
When you write the survey, keep the questions simple, but be very specific. Also, including a "reward" for completing the survey--a promotional product or coupon of some sort--is a good way to increase participation.
Although it is possible to conduct a survey completely in-house, your best bet would be to outsource the survey conducting and data analyzing to a research firm that conducts surveys as part of their business.
About Focus Groups
Are you developing a new product? Embarking on an advertising campaign? Interested in assessing your customers' needs beyond simple questions and answers? Here's where focus groups--a type of qualitative primary research--can help.
Focus groups are typically composed of about 10 pre-screened people that meet criteria you specify. They are assembled in one room--either on your site or offsite--to discuss and react to a specific topic relevant to your business.
Meeting offsite has its advantages; facilities designed for focus groups usually have access to cameras to tape the session. Some also have one-way mirrors to the participants can be observed.
The discussion is guided by a moderator. You can either hire an outside moderator or assign the role to someone in your organization--but keep in mind that he or she can't participate beyond moderating.
Focus groups are helpful because the participants can be probed for the reasoning behind their opinions, and conversations can be generated around a particular topic--giving you what's known as "rich data" as opposed to, for example, the finite answers you get from survey questions.
It's best to hold at least two sessions in order to arrive at any sound conclusions.
Survey prices will range depending a number of factors, including whether you purchase a mailing list, who designs the questions for the survey, what communication channel you use to send the survey, and how you want the results analyzed.
Costs are also dependent on the incidence rate, or the number of surveys that need to be sent (or calls that need to be made) in order to get a response. For example, if you send 100 surveys and 10 people respond, your incidence rate is 10 percent.
- Phone. Phone surveys can cost anywhere from $5,000-$15,000. They typically cost an average of $40 per interview (or person surveyed).
However, this per-interview price can increase or decrease according to the success of responses. The fewer the responses, the higher the price. For example, if only 50 percent of the list responds, you'll pay a little more than $40 per interview.
- Mail. Surveys via snail mail will run close to the price of phone interviews, usually about $5,000 to $7,000 for 200 responses.
- E-mail. E-mail surveys are becoming more popular because their costs are lower--about $3,000-$5,000.
Costs are lower for two reasons. First, postage isn't a concern. Also, email has a higher incidence rate, since the option to answer questions on participants' own time makes them much more likely to respond.
However, a word of caution: Using email for surveys limits your population to those with e-mail access (currently about 40 percent).
Options for Cutting Survey Costs
To save some cash, design the questions for your survey in-house. Also, if you have a ready-made list of recipients (say a list of registered users on your website), you can avoid the cost of purchasing a mailing list (usually five to fifteen cents a name, which can get pricey).
And certainly consider email as opposed to snail mail. You don't have to pay for printing or postage, and the response rate seems to be better.
Focus Group Costs
Prices for focus groups can range from $4,000 to $6,000 per session if you outsource to a company that runs focus groups. Since it's recommended that you hold at least two sessions, that price can be a little hefty.
But there are ways to save. You don't have to outsource every aspect of a focus group (facility, moderator, recruiting, and script). If you come up with the script of questions for discussion yourself, don't hire a professional moderator, and use a conference room in your office as opposed to an outside facility, you can cut costs almost in half.
However, recruiting is the one area where you don't want to cut corners. The time spent recruiting eligible participants can be more than you want someone in your office to spend, especially if your guidelines are strict. For example, finding cell phone owners may not take much time, but if you want to find cell phone owners that have dogs, that will take a bit longer.
Participants also need to be compensated for their time, either with cash or a reward of equivalent value (stock options, a gift certificate). For a two-hour session, you can expect to pay $35 to $50 each for consumers, $50-100 each for professional level individuals, and $100 to $150 each for executives.
Secondary Source Costs
Many published reports and resources can be found at your library and online for free. Just make sure that the information you're using isn't outdated.
Some analyst reports run as low as $250, but most of the well-known research firms charge at least $1,000 for their reports.
Mie-Yun Lee is the founder of BuyerZone.com, the leading online marketplace for business purchasing. The site features extensive buying advice and a free Request for Quotes service for more than 100 common business purchases ranging from phone systems to forklifts.