Market study

In the following section we are going to focus on one of the most important marketing strategies, which many people make the mistake of not doing: market research. Some fail to do it because they fear the word research, as if it reminds them of school and they have to do an assignment with a deadline. A small business can easily spend all its capital on advertising if the market niche has not been properly defined. Many companies spend huge sums of money on this aspect, but forget to study their target market and this costs them a lot more money, since, if the ad does not reach the ideal target, it would be too late to patch it up.

You have to ask yourself: who is my product aimed at? what do they do? how do they spend their free time? As all of this is extremely relevant to their value as a consumer. You must learn step by step the psychology of marketing to focus your marketing strategies more efficiently, so that you know your target market better.

So let's talk about market research before launching your business, no matter which one. In fact, even before you start your business plan you must first do your research and be able to prove without a doubt, both to yourself and to anyone else that your business is going to succeed.

This is called market research and it is a very important step to test the initial forecast of your target market, your competitors and your field in general. You should keep in mind that market research does not have to be complicated or expensive, in fact, you could do it on a limited budget. As a first piece of advice, try to do the research yourself because by being involved in the process, you will discover new business ideas, such as mistakes in the initial business idea or new aspects that you can improve that you would not have noticed otherwise.

Some new entrepreneurs have realized after their research that their market was practically non-existent and have discarded their initial idea and started another one. This is undoubtedly one of the examples of the vital importance of market research, because, although it does not usually happen, it will save the entrepreneur a lot of time and money. Here is a small example for you to observe more practically the usefulness of market research: Julia wanted to start a vegan cupcake store, considering that vegan cupcakes are very popular and had gained a lot of popularity in her area.

She thought her idea was easy and very profitable, particularly because there was only one other store like it, but quite far from where Julia wanted to locate hers, which made her believe that she would have a good market, with almost no competition for her. But during her market research she discovered that the profit margin on cupcakes was very small, extremely small. She found several articles on the subject that showed the profit margin of the cupcakes in several stores in the country and by conducting surveys to potential customers.

Thanks to this she decided to change her concept, shifting to a higher profit margin bakery, still making cupcakes, but introducing more items such as cakes and pastries that would increase her margin and make the business more prosperous. Julia also learned in her research that many of her potential customers were very interested in healthy foods and living a healthy lifestyle, and although they were not as interested in veganism they were open to eating healthy foods that tasted good.

With this in mind she created some options in her menu of ketogenic diet and some vegan options and only using animal products without having to kill them such as milk, honey, etc.

Here you can see how the market research changed the initial idea by expanding it, keeping the initial product she wanted to market, however, changing the main focus from a single product to a variety of related products will be more appealing to many more customers and will lead to a higher profit margin.

Types of Market Research

Many market research experts recommend that when conducting your own research you do it in two phases or waves.

Primary research involves conducting surveys and consultations with potential customers to find out how they feel about the product or services offered by your competitors, answering questions about their buying habits, specific preferences and particular tastes.

Secondary research includes the knowledge that others have gained about your industry and your services. This usually consists of reading publications about your industry or reports on the subject.

So to understand the difference between the two phases look at it this way, the first is about getting information directly from your target audience and the second is about getting information about your target audience.

• Secondary Research: That's why I recommend starting with the second phase first, even though some experts call it secondary. Doing this first will give you many advantages, not to say that it is easier to read trade magazines, business publications, newspapers, blogs, listen to podcasts in your field and any other publication that can help you get more information about your market. I would also pay close attention to comments on blogs and podcasts as you can get very insightful information from these. Keep in mind also that most industries have their own specific trade publications that you can consult, even in your area or similar areas that you can use as a frame of reference to evaluate what works and what doesn't in businesses similar to yours.
• Primary Research: After all this initial research, it's time to talk to people, meet your peers. If the initial idea for your business is still intact, it's time for primary research. Many entrepreneurs prefer only secondary research as it is much easier to conduct and find primary research a bit intimidating. However, keep in mind that this is very important too, even more important as there is no better source of information than your own potential customers.

Stages for Market Research

The methods used for market research unfold in the following three stages or steps, which you can perform in whatever order is easiest for you, as long as you don't skip any of them.

Target Market Research

The first step in market research is to figure out what types of questions you want answered, in other words, what specifically you want to find out about your market. Here is a list of general questions to ask your potential customers, plus the list of methods you can use to get your questions answered. There are three groups of questions that can have stand-alone or combined methods to get the answers.

The first set of questions is directed at customers to answer research questions, keeping in mind that these will not be the same questions you will ask your potential customers. These are the questions that you as a business owner need answered and based on these you will formulate the questions for your customers, so first you need to answer these:

• Who are my target customers?

• What services or products do they need?

• What are they buying?

• What are the market trends?

• How much do customers typically pay for my type of products or services?

Here are the methods you can use to get answers to these questions.

Surveys and Questionnaires: First you can use surveys and questionnaires that you can create yourself or get from other entrepreneurs and tailor them to your specific needs. Here's a practical example. A trainer wants to open his own gym and one of his challenges is in which location to open it. Initially he plans to open it in location A because he thinks that this is where his target audience resides, which he defined as people between 20 and 45 years old, working and with children. However, he is concerned about the limited parking space in the area, which may alienate potential customers.

He conducts initial research by visiting several gyms similar to the one he wants to start. In other words, he is researching the competition, visiting them, looking at their websites, their locations, even signing up with them to see what they have to offer.

The following is a short questionnaire created specifically for this business that you can use as a template for your own Is Neighborhood A a good place for a gym? (Your main question). Of course this is not the question she asks people directly, this is the question she has answered. To help answer it we use these examples:

• Do you currently go to any gyms and how often?

• Where are they located?

• What do you like and dislike about these gyms?

• What is the ideal time for you to go to the gym?

• Do you consider parking in neighborhood A a problem?

• What type of gym do you think is lacking in your neighborhood?

• What would be the ideal neighborhood for a gym?

These are the questions used in this example, but you can use other questions or expand on them, depending on the question you want answered.

You can use whatever method is easiest for you to ask them, either via e-mail, social media, WhatsApp or even in person. Or even better use a free online polling service like SurveyMonkey where you can create your own professional questionnaire, write your prospects and invite them by e-mail to participate, the service will tabulate the results in a very useful way.

The survey results in this example showed that there are high expectations for a gym in the neighborhood, and almost no concerns about parking, given their initial concerns.

Customers' main concerns about the existing gyms were that their hours did not accommodate working people and that they did not offer childcare. The survey result then solidified the trainer's decision to locate the gym in Neighborhood A and expand the hours to accommodate their target audience.

The survey also resulted in engaging another person with childcare experience and a desire to open their own daycare, which allowed them to start a shared win-win business. All of this clearly delineates the power that well used surveys can have.

I hope that by looking at this example you can understand how powerful market research can be and how easy it can be for your start-up business.

Interviews and Consultations: Another method you can use is to interview or consult with contacts you trust or even strangers, this could be just a lunch with an acquaintance or business mentor who has experience in your field.

Or you can conduct a more formal interview with people you trust. For example, if you want to start a healthy diet and exercise business you could consult with acquaintances who are in the restaurant or candy store business and gauge their opinions. Or you could ask customers of those same businesses and find out their opinions about potential new products.

Depending on your line of business, target your queries to people you know in the same field to assess whether or not they have similar ways of thinking.

If you are trying to become a life coach or business coach you could talk to a human resources representative or a therapist, always keeping in mind that they relate to your venture or way of thinking.

Cold calling: You can also make cold calls, for example: a gym is closing in your area, use this opportunity to find out the numbers of other gyms in surrounding areas and start calling them and ask them the questions in your questionnaire.

Attend events related to your business: Another way to discover new prospects is to attend business events related to your area of entrepreneurship such as business seminars, small business meetings, festivals and others that may be useful to you.

Quick interviews in high traffic areas: You can go to an area in your locality with a lot of traffic and ask them if they have a few minutes to answer a few questions. How many of us have not stopped for a few minutes to answer some probing questions at a bus stop or subway station? In this case the priority is to have a few short questions that the pedestrian can answer quickly and concisely rather than questions with the heading how, what or why that may require more time to answer, bearing in mind that most people do not want to be bothered for so long.

Focus group: So far we've talked about questionnaires, interviews and so on both online and in person, but there are more methods to get your answers.

One alternative is to use focus groups which is nothing more than a small group or seminar organized by you in which you make a small presentation of your products or services to potential customers and ask them for feedback, usually using a pre-made questionnaire.

An example of a group would be, using Julia's example seen above, where she organizes a party to test her menu and asks the participants to judge her sweets by texture and taste, even comparing it to competitors' sweets.

Another example would be to offer a free fitness class in a new format you are testing, so that the group that attends can give you feedback at the end of the class, evaluating how they felt and whether they would like to attend the class again.

Keep in mind that market research is not something you do at the beginning of your business venture, it is something you must redo every time you want to introduce new features or products to your business.

Competitor Research

In the previous step we answered questions to our target customers aimed at getting to know our specific market better. To make our study easier it is better to divide it into segments, in the following we will study our competitors and the industry separately.

The second step is to answer the questions using different methods, to learn our competitors. Again below is a list of questions and methods that you can use, as they are, or as a template adding or modifying some aspects:

• What do they offer?

• How much do they charge for their products or services?

• How do they provide these products or services?

• Who are your customers?

• What is their competitive advantage?

• How do they promote themselves?

Search their websites or visit them in person: To answer these questions you will want to do more in-depth research on the competition and how they work. You can start by visiting the competitor's website or visiting them in person if possible, and while you are there observe what you like and dislike, what you would do differently differentiating yourself from their operation, always trying to be as objective as possible to better evaluate what seems to work or not work about their business.

If they have any commercial materials such as menus, brochures or product listings, take them with you to analyze their commercial strategies. Also pay attention to how they present themselves, whether in person, at their place of business or some other meeting they participate in. The more you observe and the more you learn about how your competitors act, the better strategies you will be able to devise for your own business.

I want to make it clear that all this research should be conducted in an ethical manner, respecting established professional boundaries, it is not uncommon for competitors to spy on each other, but try not to take it too far.

Don't cross the lines of legality and ethics in order to obtain more information. Check out their services on their online platforms or participate in seminars or meetings they offer to the public, that's fine. Anything beyond that may cross lines that won't go back. Always ask yourself beforehand if you would like them to do something unethical to you or your business, also consider that someday you might partner with those businesses or need their help, so also look at your competitors as potential partners at some point where you can learn and grow together.

Make recommendations: It's always a good practice if you have a client who asks for a service you don't offer and you know a competitor who does offer it, to recommend them. Professional recommendations are a great tool to connect with other entrepreneurs and can be instrumental in the growth of your business. There are some businesses that get 80-90% of their business from referrals from outside business associates they met through their network.

Based on all the details and information you have gathered you will start evaluating competitors always starting with the closest and most direct ones. In other words,