Every successful business starts with a business plan. A large portion of a business plan is reflecting inward on your business: your product or service, team, finances, visions, and goals. But an important part of a business plan is also looking outward at your customers and competitors.
The market research and analysis of a business plan often stumps those writing it, but it is arguably the most important section. You need to understand your target market—your types of customers, what their needs are, and how to reach them—if you want your business to succeed.
What exactly is market research?
Market research is the process of gathering information on the people and businesses around you to find out if your product or service is needed and how it will perform. Successful businesses often perform extensive research on their customers and competitors to find out how they stack up. Formalizing the process of market research can bring out a wealth of data about the marketplace and help you make important business decisions. Market research is usually broken up into two categories: primary and secondary research.
Primary Market Research
Primary market research is carried out through your own efforts to answer a set of preliminary questions. This research is conducted by you and is typically gathered through observation, surveys, and experimentation. The following questions are addressed through primary market research:
- What products or services do buyers need or want?
- Who are my customers? How can I reach them? (online, storefront, etc.)
- What influences the buying decisions of my customers? (price, branding, customer service, etc.)
- Who are my competitors? What are their strengths and weaknesses?
By asking the questions above, you get to know the marketplace around you more personally. Here are some ways to carry out market research:
- Create personas of potential or ideal customers
- Send out informal surveys or questionnaires to friends, family, and coworkers
- Interview potential customers
- Carry out a focus group
- Observe the behaviour of buyers in person
- Check out competitor’s online and in person
- Hire a professional market research firm
Secondary Market Research
While primary market research is more personal and involves you collecting raw data for your specific objectives, secondary research involves collecting data that already exists and was originally collected by someone else.
Secondary research is less targeted than primary research and addresses questions that you are less likely to ask customers directly. The following questions can be addressed through secondary market research:
- What are the demographics of your customers? (age, income bracket, education, etc.)
- Are there international markets for your product or service?
- What is the labour market like? Can you find people to employ? Do they have the skills you require?
- What are the current economic conditions that your business is going to operate in? Are the conditions stable or changing?
- What trends may influence the industry your business will operate in? (social media, AI, VR, etc.)
Depending on how deep you dive into secondary research, it can become costly and time-consuming. Here are some places to gather your secondary research:
- Government departments like the Government of Canada website
Writing a business plan is daunting enough, and conducting research on a whole market is a whole other feat. Just remember that primary research is personal and is conducted by you, while secondary research is public and requires looking at what has already been researched. Take things step by step, day by day. You’re not going to finish all of your research all in one sitting, and that’s okay!
If you’re a Canadian business, you can find more information on market research here. Good luck!