Business Tools Update 7.12.17
The Importance of Market Research and Competitor Analysis When Starting A Business
Source: Start Ups, December 2016
If you are considering starting your own business it’s likely there are 101 things you are thinking about.
Before you get lost in all the detail, it might be worth focusing on three key things:
- Is there really a market for my product or service?
- What are my key customers likely to look like?
- Who is my competition and what can I learn from them?
The power of market research
Valuable market research can form the solid foundations of your business, giving you vital feedback and information before you start committing time and money into your business idea.
Fundamentally, it will help you identify whether your product or service is something the market actually wants.
We have seen some people who have invested significant amounts of time and money to create a product without actually knowing if anyone wants it.
So here are some key things you could consider.
- Think customer first – Who is it that you think is likely to want to buy your product? Where are they, what age are they, are they male or female (or both?) what do they read, how do they buy, where do they hang out (physically and on the internet). Start to build up a picture of your target customer.
- It doesn’t need to cost a fortune – You don’t need to spend thousands on market research companies to start harvesting information that will help you shape your business idea. You can do a lot of it yourself whether that’s online research or face to face.
- It’s good to talk – If you have thought about who your customers might be, identify some near you and start to speak to them. Could friends and family introduce you to people that match your possible customer profile? Once you’re in front of them, tell them what you are planning to do and ask them if it would be of interest and what would they be willing to pay for it? Perhaps they may be able to provide thoughts and ideas that could improve what you are planning to do?
- Trap the findings – If you are going to the trouble of asking questions, make sure you trap the feedback. This way you can start to trap common responses or themes that can help you develop your product or service further. It can be as simple as writing it down on paper if you are speaking to them, creating a questionnaire that they can fill out or creating an online feedback or survey form if you are using social media or other platforms.
- Beware friends and family – On the surface friends and family could be good sources of market research. But the reality is they are highly likely to tell you what you want to hear. They will not have an impartial view so their feedback is likely to be skewed.
Learn from your competition
Competitors are often viewed as your enemies, only there to fight it out for your customers’ money. But ignore your competitors at your peril.
Competitor analysis, despite its academic sounding name, is a fantastic learning opportunity, which gives you insights into your own business as well as those operating in your market.
Getting to grips with it in the early days of your business really helps you understand and define what makes you special. It is this ‘special-ness’ that’s the key to customers choosing your product or service over your competitors – simply, they need to understand what makes you different.
So along with understanding your customer’s needs, you need to develop an understanding of your competitors. The research you undertake should help you understand three key things:
- Why my competitors are successful – this gives you an insight into the aspects you can ‘borrow’ and improve upon.
- Why my competitors are unsuccessful – this highlights the pitfalls you can avoid and shows you opportunities you can capitalise on.
- Look at what your chosen competitors say about themselves – online, adverts, promotional material. But also look at what others say about them – review websites are a goldmine of information.
Ultimately, you are trying to understand whether there is a space in the market for your product or service, whether there are customers willing to buy it and what you need to do to create something that will be chosen over your competitors.