Survey Says. Surveys and focus groups are like a target-market x-ray. Here's a primer on using these revealing research tools.

By Mie- Yun Lee

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Extensively researching your target market has long been viewedas a luxury--a perk available only to the corporate giants withdeep pockets. But the past decade's surge of small businesseshave made understanding and accurately targeting your customers amake-or-break means of survival.

Market research comes in all shapes and sizes, and some formscertainly have high price tags attached. Of course, not everybusiness has thousands of dollars to dish out on analyst reportsand services from big-name market research firms.

Luckily, there are quite a few effective options available thatwon't take a nasty toll on your budget.

What Is Market Research?
Researching your market helps you understand your customers, yourcompetitors, and the industry in which you operate. It's anongoing process that involves using data to drive decisions relatedto running your business.

Conducting market research involves collecting data to beanalyzed. Data can be collected through various processes, and themethod you choose depends on what you are hoping to discover orbetter understand about your market.

Once your data is collected, it takes careful analysis to cometo any conclusions or understanding. But if done right, the resultswill make all your business decisions smart ones.

Why Use It?
Market research has definite value. It gives you the informationyou need to make smart decisions about your business, so yourrevenue increases.

In fact, your ROI on market research often exceeds the cost ofconducting 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 aredoing right
  • identify your customers' specific needs
  • uncover problems with your business that may not have surfacedotherwise
  • evaluate your success with measurable data

Secondary Research
Even though its name may imply otherwise, secondary research iswhere market research usually begins.

Secondary research is conducted by consulting published reportsfrom 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 availablethan you may think.

Secondary research can be internal, like sales reports orinternal market analyses. But most of it will be external,including:

  • web-based directories and resources
  • nonprofit agencies
  • government agencies (try for access to 70 governmentsites 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 makesense to use the knowledge gained through secondary research toguide your decisions regarding primary research or even to hire anoutside consultant to do the analyzing for you.

Primary Research
You can think of primary research as getting down to thenitty-gritty.

Primary research is conducted to get really intimate with yourmarket, to answer specific questions you might have or addressspecific areas of focus. It costs more and often takes longer toconduct than secondary research, but it gives conclusiveresults.

Primary research can be broken down into two subcategories:

  • Qualitative research includes studies done on smallergroups of people, like one-on-one consumer interviews or focusgroups. It's meant to give you direction, to get an answer to aparticular concern or question--not to make predictions.
  • Quantitative research includes studies done that resultin a large amount of data-like surveys. This type of research isstatistically valid and can be used to make predictions.

About Surveys
Surveys are a type of quantitative primary research that aim tocollect specific data from a sample audience.

Surveys can be administered via email, snail mail, or phone, andusually target customers or potential customers.

There are four steps to attacking a survey: identifying youraudience, writing the survey, conducting the survey, and analyzingthe data collected.

When you write the survey, keep the questions simple, but bevery specific. Also, including a "reward" for completingthe survey--a promotional product or coupon of some sort--is a goodway 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 dataanalyzing to a research firm that conducts surveys as part of theirbusiness.

About Focus Groups
Are you developing a new product? Embarking on an advertisingcampaign? Interested in assessing your customers' needs beyondsimple questions and answers? Here's where focus groups--a typeof qualitative primary research--can help.

Focus groups are typically composed of about 10 pre-screenedpeople that meet criteria you specify. They are assembled in oneroom--either on your site or offsite--to discuss and react to aspecific topic relevant to your business.

Meeting offsite has its advantages; facilities designed forfocus groups usually have access to cameras to tape the session.Some also have one-way mirrors to the participants can beobserved.

The discussion is guided by a moderator. You can either hire anoutside moderator or assign the role to someone in yourorganization--but keep in mind that he or she can't participatebeyond moderating.

Focus groups are helpful because the participants can be probedfor the reasoning behind their opinions, and conversations can begenerated around a particular topic--giving you what's known as"rich data" as opposed to, for example, the finiteanswers you get from survey questions.

It's best to hold at least two sessions in order to arriveat any sound conclusions.

Survey Costs
Survey prices will range depending a number of factors, includingwhether you purchase a mailing list, who designs the questions forthe 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 ofsurveys that need to be sent (or calls that need to be made) inorder to get a response. For example, if you send 100 surveys and10 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 decreaseaccording to the success of responses. The fewer the responses, thehigher the price. For example, if only 50 percent of the listresponds, you'll pay a little more than $40 per interview.

  • Mail. Surveys via snail mail will run close to the priceof phone interviews, usually about $5,000 to $7,000 for 200responses.
  • E-mail. E-mail surveys are becoming more popular becausetheir costs are lower--about $3,000-$5,000.
  • Costs are lower for two reasons. First, postage isn't aconcern. Also, email has a higher incidence rate, since the optionto answer questions on participants' own time makes them muchmore likely to respond.

    However, a word of caution: Using email for surveys limits yourpopulation to those with e-mail access (currently about 40percent).

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 ofregistered users on your website), you can avoid the cost ofpurchasing a mailing list (usually five to fifteen cents a name,which can get pricey).

And certainly consider email as opposed to snail mail. Youdon't have to pay for printing or postage, and the responserate seems to be better.

Focus Group Costs
Prices for focus groups can range from $4,000 to $6,000 per sessionif you outsource to a company that runs focus groups. Sinceit's recommended that you hold at least two sessions, thatprice can be a little hefty.

But there are ways to save. You don't have to outsourceevery aspect of a focus group (facility, moderator, recruiting, andscript). If you come up with the script of questions for discussionyourself, don't hire a professional moderator, and use aconference 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 tocut corners. The time spent recruiting eligible participants can bemore than you want someone in your office to spend, especially ifyour guidelines are strict. For example, finding cell phone ownersmay not take much time, but if you want to find cell phone ownersthat have dogs, that will take a bit longer.

Participants also need to be compensated for their time, eitherwith cash or a reward of equivalent value (stock options, a giftcertificate). For a two-hour session, you can expect to pay $35 to$50 each for consumers, $50-100 each for professional levelindividuals, and $100 to $150 each for executives.

Secondary Source Costs
Many published reports and resources can be found at your libraryand online for free. Just make sure that the information you'reusing isn't outdated.

Some analyst reports run as low as $250, but most of thewell-known research firms charge at least $1,000 for theirreports.

Mie-Yun Lee is the founder of, theleading online marketplace for business purchasing. The sitefeatures extensive buying advice and a free Request for Quotesservice for more than 100 common business purchases ranging fromphone systems to forklifts.

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