Market Research

Accurate and thorough information is the foundation of allsuccessful business ventures because it provides a wealth ofinformation about prospective and existing customers, thecompetition, and the industry in general. It allows business ownersto determine the feasibility of a business before committingsubstantial resources to the venture.

Market research provides relevant data to help solve marketingchallenges that a business will most likely face–an integral partof the business planning process. In fact, strategies such asmarket segmentation (identifying specific groups within a market)and product differentiation (creating an identity for a product orservice that separates it from those of the competitors) areimpossible to develop without market research.

Market research involves two types of data:

• Primary information. This is research you compileyourself or hire someone to gather for you.
• Secondary information. This type of research is alreadycompiled and organized for you. Examples of secondary informationinclude reports and studies by government agencies, tradeassociations or other businesses within your industry. Most of theresearch you gather will most likely be secondary.

When conducting primary research, you can gather two basic typesof information: exploratory or specific. Exploratory research isopen-ended, helps you define a specific problem, and usuallyinvolves detailed, unstructured interviews in which lengthy answersare solicited from a small group of respondents. Specific research,on the other hand, is precise in scope and is used to solve aproblem that exploratory research has identified. Interviews arestructured and formal in approach. Of the two, specific research isthe more expensive.

When conducting primary research using your own resources, firstdecide how you’ll question your targeted group: by direct mail,telephone, or personal interviews.

If you choose a direct-mail questionnaire, the followingguidelines will increase your response rate:

• Questions that are short and to the point
• A questionnaire that is addressed to specific individuals andis of interest to the respondent
• A questionnaire of no more than two pages
• A professionally-prepared cover letter that adequately explainswhy you’re doing this questionnaire
• A postage-paid, self-addressed envelope to return thequestionnaire in. Postage-paid envelopes are available from thepost office
• An incentive, such as “10 percent off your next purchase,” tocomplete the questionnaire

Even following these guidelines, mail response is typically low.A return rate of 3 percent is typical; 5 percent is considered verygood. Phone surveys are generally the most cost-effective. Here aresome telephone survey guidelines:

• Have a script and memorize it–don’t read it.
• Confirm the name of the respondent at the beginning of theconversation.
• Avoid pauses because respondent interest can quickly drop.
• Ask if a follow-up call is possible in case you requireadditional information.

In addition to being cost-effective, speed is another advantageof telephone interviews. A rate of five or six interviews per houris typical, but experienced interviewers may be able to conductmore. Phone interviews also can cover a wide geographic rangerelatively inexpensively. Phone costs can be reduced by takingadvantage of less expensive rates during certain hours.

One of the most effective forms of marketing research is thepersonal interview. They can be either of these types:

• A group survey. Used mostly by bigbusiness, group interviews or focus groups are useful brainstormingtools for getting information on product ideas, buying preferences,and purchasing decisions among certain populations.
• The in-depth interview. These one-on-oneinterviews are either focused or nondirective. Focused interviewsare based on questions selected ahead of time, while nondirectiveinterviews encourage respondents to address certain topics withminimal questioning.

Secondary research uses outside information assembled bygovernment agencies, industry and trade associations, labor unions,media sources, chambers of commerce, and so on. It’s usuallypublished in pamphlets, newsletters, trade publications, magazines,and newspapers. Secondary sources include the following:

• Public sources. These are usually free, often offer alot of good information, and include government departments,business departments of public libraries, and so on.
• Commercial sources. These are valuable, but usuallyinvolve cost factors such as subscription and association fees.Commercial sources include research and trade associations, such asDun & Bradstreet and Robert Morris & Associates, banks andother financial institutions, and publicly tradedcorporations.
• Educational institutions. These are frequentlyoverlooked as valuable information sources even though moreresearch is conducted in colleges, universities, and technicalinstitutes than virtually any sector of the businesscommunity.

Public InformationSources
Government statistics are among the most plentiful and wide-rangingpublic sources. Helpful government publications include thefollowing.

The State and Metropolitan Area Data Book provides a widevariety of statistical information on states and metropolitan areasin the United States. Published by the U.S. Census Bureau, it’savailable online for $31 through the U.S. Government PrintingOffice and at larger libraries.

The Statistical Abstract of the United States providestables and graphs of statistics on the social, political andeconomic conditions in the United States. Published by the CensusBureau, it’s available online for $48 through the U.S. Government PrintingOffice and at larger libraries.

U.S. Industry and Trade Outlook presents recent financialperformances of U.S. manufacturers and identifies emerging trends.Published by the Commerce Department in cooperation withMcGraw-Hill, it’s available online for $76 through the U.S. Government PrintingOffice and at larger libraries.

The U.S. government online bookstore at the U.S. Government PrintingOffice has an abundance wealth of publications on topicsranging from agriculture, aviation, and electronics, to insurance,telecommunications, forest management, and workers’compensation.

The U.S.Census Bureau website also contains valuable informationrelevant to marketing. The Bureau’s business publications covermany topics and trades–such as sales volume at furniture storesand payrolls for toy wholesalers–and are useful for smallbusinesses as well as large corporations in retail, wholesaletrade, and service industries. Also available are census maps,reports on company statistics regarding different ethnic groups,and reports on county business patterns.

One of the most important information resources you’ll find isthe SBA.The SBA was created by Congress in 1953 to help Americanentrepreneurs start, run, and grow successful small enterprises.Today there are SBA offices in every state, the District ofColumbia, the U.S. Virgin Islands, Puerto Rico, and Guam. Among theservices offered by the SBA are financial assistance, counselingservices through Small Business Development Centers (SBDCs), managementassistance through programs like SCORE, and low-cost publications. Thecounselors at SCORE can provide you with free consultation on whattype of research you need to gather and where you can obtain thatinformation. They may also be able to suggest other means ofgathering the information from primary sources. SBDCs generallyhave extensive business libraries with lots of secondary sourcesfor you to review.

One of the best public sources is the business section ofyour public, or local college or university, library. Theservices provided vary from library to library but usually includea wide range of government publications with market statistics, alarge collection of directories with information on domestic andforeign businesses, and a wide selection of magazines, newspapersand newsletters.

Almost every county government publishes population density anddistribution figures in accessible census tracts. These show thenumber of people living in specific areas, such as precincts, waterdistricts or even ten-block neighborhoods. Some counties publishreports that show the population ten years ago, five years ago, andcurrently, thus indicating population trends.

Other public information resources include local chambers ofcommerce and their business development departments, whichencourage new businesses to locate in their communities. They willsupply you (usually for free) information on population trends,community income characteristics, payrolls, industrial developmentand so on.

Don’t overlook your bank as a resource. Bankers have a wealth ofinformation at their fingertips and are eager to help their smallbusiness customers get ahead. All you have to do is ask.

Commercial InformationSources
Among the best commercial sources of information are research andtrade associations. Information gathered by trade associations isusually limited to that particular industry and available only toassociation members, who have typically paid a membership fee.However, the research gathered by the larger associations isusually thorough, accurate, and worth the cost of membership. Twoexcellent resources to help you locate a trade association thatreports on the business you are researching include theEncyclopedia of Associations (Gale Research), and theEncyclopedia of Business Information Sources (GaleGroup).

Local newspapers, journals, magazines, and radio and TV stationsare some of the most useful commercial information outlets. Notonly do they maintain demographic profiles of their audiences(their income, age, gender, amount of disposable income, and typesof products and services purchased, what they read, and so on), butmany also have information about economic trends in their localareas that could be significant to your business. Contact the salesdepartments of these businesses and ask them to send you theirmedia kit, since you’re working on a marketing plan for a newproduct and need information about advertising rates and audiencedemographics. Not only will you learn more about your prospectivecustomers, you’ll also learn more about possible advertisingoutlets for your product or service.

Dun & Bradstreet is another commercial source of marketresearch that offers an abundance of information for makingmarketing decisions. It operates the world’s largest businessdatabase and tracks more than 62 million companies around theworld, including 11 million in the United States. For moreinformation, visit the Dun & Bradstreet Small Business Solutionswebsite.

Finally, there are educational institutions that conductresearch in various ways, ranging from faculty-based projects oftenpublished under professors’ bylines, to student projects, theses,and assignments. You may be able to enlist the aid of studentsinvolved in business classes, especially if they’re enrolled in anentrepreneurship program. This can be an excellent way ofgenerating research at little or no cost, by engaging students whowelcome the professional experience either as interns or forspecial credit. Contact the university administration and marketingor management studies departments for further information.