For years, larger firms have found market research to be an invaluable tool for increasing their earning potential. But even without a big-dollar investment in market research, small businesses can benefit, too.
Market research consists of gathering, recording, analyzing and interpreting marketing information on goods and services. Large firms have conducted market research for years, resulting in major market-share increases.The potential for small businesses to benefit from market research may be greater than that of larger firms since their owner/-managers are closer to customers and can learn more quickly about consumers' likes and dislikes. Therefore small businesses can implement marketing research plans relatively easily, gaining quick results.
The information that can be gathered by the small-business entrepreneur is vast. Even before launching a business, market research can be used to determine whether the location and surrounding population are right for the company's proposed product. Afterward, it aids in determining whether to develop new or different products, expand at the original location or open additional outlets. Information can be gathered that will help find ways to increase store traffic and frequency of purchase. In addition, market research can indicate when and where to change emphasis on activities such as advertising, promotion strategy and channels of distribution.
Researchers know that new markets and new products are key to the maintenance and expansion of market share. Increasingly, what they are also discovering is that this type of information can help them to uncover hidden opportunities with their market potential that would otherwise never have been detected.
In big business, firms usually employ market research companies to obtain their market information. Commonly, these research firms gather data from such places as the Universal Product Code or "scanner" data gleaned from grocery stores sales. They also conduct test markets around the country and even conduct experiments in laboratories with potential clients or customers. All of this sounds very involved, but for a small business entrepreneur, market research is just as valuable and can be conducted without the aid of multimillion-dollar assistance. A little time and patience are all that's required.
There are two types of data that can be obtained: primary and secondary. Primary data is initiated by the organization that needs the information. For a small business owner/manager, primary research can range from simply asking customers or suppliers how they feel about your business to more complex studies such as direct-mail questionnaires, telephone surveys and test marketing.
Primary data are very specific to the company's needs and are highly useful for target marketing and new product development, but the methods employed are costly and sometimes difficult to initiate.
For example, in test marketing, the researcher simulates the conditions under which a product will eventually be sold. This would include selecting specific areas considered reasonably typical of the total market and introducing the product with a marketing campaign in that area.
On a smaller scale, primary research is feasible. Some techniques include license-plate analysis, which indicates what city or county customers come from. Telephone number and zip code analysis, coded coupons and "tell-them Joe sent you" media ads, not to mention just plain people-watching, are very useful methods of primary data collection.
Secondary data are initiated by other organizations, usually for other purposes, but may also be useful for small-business objectives.
Searching for this information usually starts at the public library in the government documents section. Examination could include Bureau of the Census data on subjects such as population, business, housing and agriculture. In addition, the Department of Commerce publishes an especially useful book, "Measuring Markets: A Guide to the Use of Federal and State Statistical Data." Your district office of the Department of Commerce have well-stocked libraries of census data and usually employ helpful staff members for assistance.
Computer data bases are also worthwhile sources for information. Some public libraries, for a fee, access computer data bases such as "Standard & Poor's Daily News" and "Cumulative News." Both offer news about company sales, earnings, dividends, management changes and mergers/-acquisitions.
In addition to these governmental offices, trade publications university research projects, congressional representatives and research divisions of chambers of commerce are excellent secondary data sources.
Even though entrepreneurs may have limited time and funds, market research is an invaluable tool for learning more about your product, customers and market. A little investment will yield much in success and growth of small business.