Market Research For a Small Business or Start-Up - What, How, and Why?

As the owner of a small business, or an entrepreneur setting out on a start-up venture, it can be tempting to run head first into your project. However, doing so could prove detrimental to your business. You first need a clear understanding of the demand for, uses of, and preferences regarding your products or services from your customer base, so that you can make the most effective choices.

How can market research benefit a small business owner?

Market research can help you to understand the essential elements of your business:

• Who your customers are and how they behave
• The size and condition of your market
• What opportunities you have for growth and expansion

Understanding these areas can help you to stand out from your competitors, and fulfil the needs and desires of your customers.

If you conduct regular market research you will identify areas of interest and customer behaviours that your competitors are missing, providing you with a competitive edge and the tools to create a more compelling, targeted, and informed marketing strategy.

You can also benefit from a greater understanding of your customers and competitors in terms of identifying customer types you would not have initially thought to be interested in your product/service, allowing you to tap into a different area of the marketplace. You may discover areas where your customers have been dissatisfied with similar products in the past, allowing you to focus your efforts on improving these areas.

Finding out what customers expect from your offering, how much they expect to spend on it, as well as what they do not want to see and what they wish was offered, can provide you with a serious competitive advantage.

What are the advantages of market research for start-ups?

Gathering data before going to market can prevent you from stumbling blindly into a marketplace you are unfamiliar with, and falling before you have a chance to stand. Making sure there is a market for your product/service, and that there is reasonable demand for your business in the marketplace, is a vital first step before you invest too heavily in your idea.

Understanding your market

Once you are confident that you have seen evidence of a gap in the market for your business, research can help you gain a deeper understanding of your potential market and position within it. Identifying trends in the market (is it growing or shrinking? Are there economic or social trends that could impact your market?), along with a general idea of where it is headed over the coming years, can help you to anticipate the ways the market will change, and future-proof your product or service as much as possible.

Understanding your customers

Researching your customers' characteristics may reveal unexpected results. It's crucial that you know the sort of person you can expect to be a customer of your business, including their age, gender, and buying habits, so you can tailor your marketing and services towards specific customer segments. In researching your customers you should be asking yourself a range of questions, including why your customers choose to buy from you, how much they are prepared to pay for your product/service, how they would want to pay (cash, card, order online, etc.), and how frequently they might buy from you.

Understanding your competitors

Investigating your competitors' activity can help you get an idea of customer expectations for your product or service. Researching the views of your customers in relation to competitor brands can guide you to make effective choices in your marketing strategies, customer service, and beyond. Exploring brand sentiment can also assist in building a thorough picture of your competitors strengths and weaknesses. Recognising whether competition is strengthening or weakening for your product/service, how long your current competitors have been trading, and who their target audiences are, can inform decisions about how you approach and enter the market.

Market research can also help you to identify the smaller details that customers look for in your product/service, particularly those that your competitors may not be capitalising on. Identifying your unique selling point (USP) and the position you can take in the marketplace will help ensure that you are able to make a name for yourself and attract the right customers.

What research methods might benefit me the most as a small business or start-up?

As the owner of a small business, you are likely to be both mindful of your expenditure, and limited on free time. If this is the case, a great place to start with market research is to implement a Net Promoter Score (NPS) survey. If your business is based on ecommerce, you can very easily implement a basic NPS survey into your post-sale emails to customers, or directly into your website. If your business is brick-and-mortar, you could hand out a business card with a web address to your NPS survey, or give over a leaflet for your customers to return when completed. Find out more information on what an NPS Survey is and how it can be used.

If you are looking for research findings that can help steer you towards a clear objective, then customer satisfaction/perception surveys, or brand sentiment analyses, might help you gain a clearer insight than an NPS survey can, but you can expect to spend more time and resources to gain that valuable insight.

Small businesses can also benefit from customer and audience segmentation, which aims to discover the various customer types who are interested in your product, and their unique interests, preferences, and requirements, to help you tailor your branding to the full range of people interested in your product or service.

Although start-ups may also benefit from some of the research mentioned above, customer surveys are out of the question when you don't have an audience to survey! However, there are plenty of research methods you can be undertaking in the meantime to give you a head start. Getting the rundown of your potential competitors is possible using either brand sentiment analyses or competitor activity monitoring, while you can gain an understanding of your future customers' needs by conducting a user needs analysis. Customer and audience segmentation can also be used by start-ups to identify the customers you will need to target with your marketing strategy.

Whether you own a small business or a start-up, one place you can start your research journey is sitting right in front of you - social media.

How can a small business use social media for market research?

Utilising social media for your market research can prove much more cost-efficient than performing full primary research. Data from social media can tell you how customers use your product or service, what customers like or dislike about your competitors' products or services, what customers expect to see from brands in the future, and so much more. As you have probably experienced first-hand, people are much more likely to be critical online than in person, so reading reviews and social media posts can help you get a clear picture of how your customers truly perceive your products/services.

Understanding how to use social media to benefit your business is a little more complicated. There are several tools available online that you could use to conduct a brand sentiment analysis, or you could browse the social media profiles of your competitors to see first-hand how their customers interact with them. Interpreting what you find there through an accurate and unbiased lens is key to producing useful results from your research.

How much should a start-up spend on market research?

The cost of research varies depending on the size of your company, the type of research you wish to conduct, and the information you would like to gather. If you are not sure where to start, and you'd like some guidance on what information could most benefit your own business and what research you should conduct, get in contact with us.