Doing market research will help you to identify the needs of potential clients and make the right business decisions. Market research is easy and cheap, and can often mean the difference between the success or failure of a business.
If you want to be successful, you need to be fully informed about your market’s needs, purchasing power and buying patterns. The more you know about your target market and the more you understand their needs, the better you’ll be able to satisfy them. So, do regular market research
What’s market research
In a nutshell, doing market research should help you to answer certain questions and determine the following:
- Where should you establish your business? Carefully consider the location, as the needs of people in poorer areas are vastly different from the needs of people in more affluent areas.
- What goods and services should you provide?
- Do people in the relevant area need your product or service?
- What price should you charge?
- Is the need large enough for you to make a profit?
- What is the best way to advertise your goods or service?
- Does your market read newspapers, listen to the radio or surf the Internet?
- Are there any businesses already operating in the area that offer a similar product or service?
- How will your business operate in terms of the conditions of sale (such as cash only or also on
credit), the type of packaging, delivery of goods, the amount of trading stock to be kept on hand, the number and competency of your staff members, etc.?
- What will your sales volumes be?
A business won’t succeed if there’s no market for it. Although it’s always a good idea to run a business that’s closely related to your personal interests, people must also need your products or service.
Easy step by step guide
1. Define your market
Your market simply refers to the people, or other businesses, who will buy your goods or use your service. The type of business you run will determine who your end-users are, i.e. other businesses or consumers.
Your market could consist of people or businesses who already support you, as well as those who could be convinced, within reason, to start using your product or service.
2. Analyze your market
- What is the purchasing power of your clients? In other words, what is the personal, disposable income of your market, or how much do other businesses spend on your products or service
- What is the social standing of your clients? That is, what type of homes do they live in, what food do they enjoy, what brand of clothes do they wear?
- Then, establish the socio-economic standing of your target market by determining the following aspects:
Income group: Are they in a low, middle or high income group?
Age: What is the average age of your target market?
Gender: Is your product or service suitable for both men and women, or for only one gender?
Educational qualifications: Is the intellectual ability of your clients important, or do their educational qualifications make no difference?
Cultural background: What is the opinion of your potential clients regarding their beliefs, trends?
Career: Are the careers of your clients relevant to the appeal of your products or service?
Product use: Does your product have different uses?
Alternative products: How will you convince consumers to switch from other products to your products?
3. The size of your market
After analyzing the needs of your market at random, you can establish the size of your total market. For instance, you could calculate the average income per household, according to your target market’s qualifications and type of work.
You can now calculate the total purchasing power of the suburb by multiplying the average income by the number of households.
Then, calculate how many people could possibly buy your product, and how much they will buy over 12 months. Divide the number of clients by the number of competitors to determine the average number of clients for each competitor. You can use this information to easily calculate what your business’s market penetration should be, and how profitable your business will eventually be.
4. Your competitors
Competitors in the area will have an influence on your business. Your business won’t be successful if your prices are much more expensive, or if your service or the quality of your products is much lower than that of your competitors.
You need to determine whether or not the market is large enough for both you and your competitors to make a profit. Then, study your competitors and offer a slightly more innovative product, a cheaper price or even position your business better to win over a share of the market.
Your business’s success is closely linked to the satisfaction of your target market’s needs. If you want to enjoy sustained profits, you should do regular market research and apply the information you obtain.