This article is part of our Complete Guide to Small Business Marketing, which covers topics like market research, SEO, SEM, social media and content marketing.
Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it help new business owners figure out how to break into the market, it can also help seasoned entrepreneurs get better at activities like marketing, advertising, and releasing new products or services.
You should have your customers in mind with every business decision you make. Doing so will help you deliver a highly-customized experience that will truly satisfy your customers, which is a key factor in creating loyalty, driving repeat business, and ultimately referrals.
Knowing your customers also helps you optimize your marketing for a better return on investment. The more targeted your approach to marketing is, the more effective your results will be. It can also help boost your brand over the competition if your customers feel your company knows their needs better than the rest of the options out there.
In order to do effective market research, you need to understand two key things: 1) What kind of information about your customers will truly help you tailor your marketing and customer service activities; and 2) How you can best gather that information.
This guide will cover both of these key questions. The first part addresses what you should be trying to learn about your customers and why, while the second part covers specific resources and tips on how to conduct market research properly.
Part 1: Preparing for your market research project
In order to truly know your customers, you’ll need to understand both demographic information (who they are) and behavioural information (what they do). The more in-depth your understanding gets, the better you’ll be able to meet their needs and speak to them in a relevant way.
Here are the top questions you’ll want your market research to answer for you:
Who they are
If you’re selling directly to customers, you should start with the basics: gender, age, location and occupation. If you’re selling to other businesses (B2B), determine their industry, what they do, how big they are, and who in those companies makes the buying decisions. Knowing the basics about your customers allows you to get an initial gauge on what they’re looking for, and if there are patterns or commonalities, it provides you with the potential to find similar customers.
Why they buy
If you can figure out why your customers are buying a product or service like yours, you can try to adapt your offering to get closer to meeting their needs. You might find a gap in what your competitors offer that you can take advantage of.
Even more importantly, understanding how your customers want the product or service to improve their lives helps you customize the messaging in your marketing materials to speak directly to their needs and desires.
When they buy
If you’re communicating with a customer around the time they’re looking to purchase, it increases your chance of success. Similarly, knowing where they are in their purchasing cycle will allow you to customize your efforts. If you have a product that customers tend to buy habitually, familiarizing yourself with their purchasing schedule or habits will allow you to be proactive with your promotions or communications.
How they buy
If you know all your customers prefer to buy online, you won’t bother paying rent for a brick and mortar store. On the other hand, if your product is only offered online but most of your customers feel more confident purchasing from a sales agent they can speak to in person, you’ll have to amend your sales strategy. Understanding how to make the purchase as seamless as possible for your customers means increased sales, so this is a key piece of information to learn.
How much money they have
You want to sell your customers what you know they can afford. If most of your customers are on a limited budget, it probably doesn’t make sense to sell a luxury version of your product any time soon. Make it easier for them to buy what you’re selling; not harder. If your current client base doesn’t have the means to become regular customers, use the information you have to find a new customer base with deeper pockets.
What they want from you
If your customers want longer hours instead of more agents, wouldn’t that be helpful to know? You could provide better service and satisfy your customers better by creating shifts than hiring more people. Similarly, if your customers are willing to pay more for delivery to avoid getting products late, knowing that means you could start using a delivery service that you know costs a bit more, but is more dependable.
What they think about you…and your competitors
If you receive a complaint about a product or service, you want to resolve it quickly, efficiently and effectively. An unhappy customer will not only stop buying your product, they’ll prevent other people they know from buying your product as well by sharing their experience. If your customers enjoy dealing with you, they’re likely to buy more, so knowing what they like or dislike about you and your competition is information you can use to your advantage.
Part 2: How to conduct effective market research
Market research can encompass everything from customer surveys to interviews to industry reports. Some agencies will even sell you credit reports on competing companies (no, we don’t recommend you buy those). Because of the depth and potential impact of all this data, solid market research is expensive. Fortune 500 companies happily spend many thousands of dollars on a robust market research report.
As a small business owner, that kind of cost can be prohibitive. That being said, you can absolutely compile useful market data on a budget, but doing it for the first time can feel overwhelming. The key is to break it down into a focused plan with defined steps, so the whole process feels more manageable.
There are two kinds of market research: primary (talking to customers) and secondary (getting information on your customers from other sources). You’ll want to carry out both kinds of market research to fully get to know your customers. Secondary research will help you find assumptions about your customers to test, while talking directly to your customers will help you better understand your customers’ pain points and emotions.
The data you gather from your research should help you answer the key questions outlined in the first part of the article. You should aim to come away with the following:
- A clear picture of your target customer demographic (i.e. age, gender, ethnicity, geographic location, income level, education level, and lifestyle).
- The biggest problems your customers have and how your product or service can help solve them (i.e. a basis for your value proposition).
- A list of products or services your customers are currently buying to meet that need (i.e. your competitors).
- Any factors that might motivate customers to start buying from you instead of a competitor (i.e. your differentiators).
How to do your own market research
Putting your plan together
Before diving into actual research, you’ll need to set aside some time to create a plan. Depending on your goals, you might have a lot of different kinds of information you want to gather and can’t do it all in the first round of research. To help stretch your dollars further, spend some time honing your focus with these steps:
- Figure out what you truly need to know about your market right now. If you just want data on your ideal customer, great—hone in on collecting that information. But you can do an in-depth competitive analysis or analyze your industry as well (think trends, threats, revenue data, and potential growth). Prioritize the information that’s most valuable to your business, and focus your efforts on that.
- Gather resources for your research. Not every kind of primary or secondary research makes sense for every small business. Consider the different resources available to you and narrow down your scope to the ones that you feel will give you the most important insights. And don’t worry—we’ll share some low-cost resource options below.
- Set a budget. Once you know what resources you’ll use and have outlined the goal for your research, estimate how much it’ll cost. Be reasonable and realistic—you won’t be able to get through this process without spending a little something.
Once you have a clear plan you’re ready to get started with your market research. Here’s what you need to know about carrying out primary and secondary research.
Primary research is brand, spanking new information. It doesn’t currently exist anywhere else, and you get it straight from the source: your target customers. Primary research is meant to help you get direct answers to your burning questions, like defining customer product preferences, understanding their motivations, and getting a sense of their needs.
Primary market research examples:
- Online surveys: Using a tool like SurveyMonkey or Wufoo, create and distribute a survey to ideal customers in your target market. But before blasting out any emails, ensure that you’re compliant with anti-spam laws like CAN-SPAM (U.S.) and CASL (Canada).
- Customer interviews: Ask customers questions either in person or over the phone.
- Focus groups: Create a small sample of your ideal customers, gather them together, and have a mediator facilitate a discussion.
- Direct mail: Don’t discount the power of snail mail! Send a paper survey to a sampling of your ideal customers. While direct mail surveys can help curb researcher bias, the response rate is usually low and responses take a while to reach you. But direct mail is a great avenue if your customers belong to an older demographic or to help you get around spam email standards since you don’t yet have a relationship with these potential customers. Also, direct mail works: 42% of recipients read or scan direct mail pieces.
Digging into primary research might take you outside your comfort zone. You might shy away from asking customers lengthy questions to avoid annoying them. Or maybe you’ll fret overtaking too much of their time. But trust me: the long-term impact of a rigorous market research report is worth the discomfort.
When designing your survey questions, follow a few basic rules of thumb:
- Keep questions short and simple. The longer the question, the more likely it is to confuse your customers.
- Go from general questions to more specific ones.
- Make sure your survey is easy to read and has a clean design.
- Don’t use ambiguous words or leading questions.
- Offer different ways to respond based on the question. It could be true or false, multiple-choice, a response scale (like stars or numbers 1 to 5), or comment boxes to elaborate.
- Send your survey to friends/colleagues first. Fresh eyes can spot potential problems and errors.
While primary research offers a more detailed view of customer needs and competitor profiles, secondary research offers a bigger-picture analysis. As mentioned before, secondary research uses resources that already exist. That could mean digging through government demographic data, industry reports, or pricing guides for data that can guide your research.
Some resources you can use for secondary research include:
- Demographic data: Look up specific demographic data from government entities like Census.gov or Statistics Canada for valuable insights to inform ideal customer profiles.
- Industry/sector data: Get a sense of how your specific industry is performing using data from the U.S. Bureau of Labor Statistics, the U.S. Census Bureau, Statistics Canada, or Industry Canada. Also, check out information from your specific trade association and trade publications for specific industry info.
- Competitors: Don’t forget to check out competing companies! Look up other businesses that are relatively the same size, offering similar products/services, in your geographic area, and/or that are serving the same customers. What can you learn from them? Where do they succeed or fall short? Are there gaps in their offerings that you can fill with your products/services?
- Local library: It might sound old-fashioned, but your local library will likely have great reference materials on your market and industry.
- Sales data: If you’re an existing business, don’t neglect your own internal data. Examine invoices, sales receipts, revenue reports, and other relevant data to determine trends, popularity of certain goods/services, and the impact of specific advertising/marketing campaigns.
If you’re still digging for more information (or maybe just a helping hand), there are a variety of other resources to use to inform your research:
- PR Newswire: A repository of press releases for the general media. Search by industry to find current events, data, and research affecting your chosen market.
- U.S. Small Business Administration: Access resources to help you conduct your research, write a business plan, calculate your business costs, and more.
- Canada Business Network: Access free market research services, secondary research resources, sample business plans, a guide to designing your questionnaire, and more.
Moving forward with your own market research
No matter what kind of small business you’re running, it’s crucial to know everything you can about your customers. Knowing how your product or service meets a specific need—and then figuring out how to communicate that effectively—can make the difference between success and failure.
And now that you have a better grasp on the fundamentals of market research, you can start designing your own plan to better understand both your target customers and your competitors.
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.