Market Research 101
Ready to get your invention in the hands of customers? Before you start producing it, learn everything you need to know about researching your target market.
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.
Market Research 101
Once you've gained your "big picture" information through secondary research--and nothing you've found has told you to abandon the project--it's time to narrow your focus and zero in on the consumer.
Primary research is information you'll generate yourself through interviews and other methods, specifically about your product or business. This info will help you fill in the gaps that your secondary research didn't produce. The totality of this combined set of data will provide you with two avenues to take. It'll either strengthen your case and conviction to move forward, or it can help you determine that your market opportunity is limited (even if your product idea is clever). Either way, you'll be in a better position to decide if this idea is worth investing the time, energy and money necessary.
There are several ways to gather this type of more personalized data. The method you choose will depend on the specific information you're seeking and the size of your budget. Examples of primary research include focus groups (formal and informal), intercepts (stopping people in their environment), bulletin boards (internet), e-mails to friends and family, direct-mail surveys, and phone interviews. Some methods require a financial commitment; however, most of the information can be gathered on a shoestring budget.
Before you begin your primary research, be sure to map out exactly what you'd like to learn. Ask yourself the following questions: What business decisions do you want to make from this research? Who do you think you should talk to? If you could only get an answer to one question, what would it be?
Then decide which of the following methods will most efficiently and cost-effectively get the results you're seeking. Here's a quick summary of what each entails:
- Informal focus groups. Get a group of people together who will share their feedback in an environment where answers can be clarified and shades of thinking and opinion can be dissected. This can be as simple as inviting five dog owners to your home to answer your questions and provide feedback on your product.
- Person-on-the-street interviews. This method involves going to public areas where there's a high proportion of your target market (i.e., a dog run at a local park). Ask each person the same list of questions and keep it short to respect their time.
- Online bulletin boards. There are countless websites with message/bulletin boards, where very diverse groups can be found with whom you can open a dialogue. On the bulletin board, create a new topic, tell people exactly what you're doing (developing a new product that does "X"), and let them know you value their advice and feedback.
- E-mail blast. Send a mass e-mail to your network of family, friends and business associates explaining what you're doing. Include your relevant questions, and ask that your recipients forward the e-mail to anyone else who might participate (i.e., any dog owners they know).
- Direct-mail survey. Purchase a list of target customers, developing a mailer with questions to send to them, and include a postage-paid return envelope for their responses.
- Telephone survey. Hire a research organization with a call center. This method is ideal for close-ended questions (e.g., Yes/No answers, multiple choice, etc.) and should be limited to less than 20 minutes to collect true insights. Market research firms all over the country can script, field and process the results of a phone survey. Phone surveys are ideal for making final decisions on a product such as pricing or choosing a name.
One good resource to augment your own work is a feasibility assessment by the Wisconsin Innovation Service Center run by the University of Wisconsin in Madison.
Your findings from market research are critical because they'll help you make good business decisions. Not only will your research help determine whether or not there's a viable market for your product, it'll also help you hone and tweak your product to fit consumers' individual needs. Though your research may not fill all the gaps--especially under the constraints of a tight budget--you'll nevertheless dramatically improve your ability to make decisions, which can mean the difference between profit and failure. This information is extremely important to have before you take your next step: manufacturing.
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