Do you want to do market research on a product idea but don’t know how? If YES, here’s how to do market research for a business plan before starting a business.
Turning a new business idea into reality requires financial investment. You have to invest some funds before your business idea can start making you money. However, you cannot be too sure that your business idea is viable enough to bring returns on your investment except you carry out market research.
Why Conduct Market Research Before Starting a Business?
A market research helps you test your business idea, especially how the market would respond to your products/services. It also helps you understand the strengths, weaknesses, opportunities and threats of your business and business industry so that you can take advantage of the strengths and opportunities and prepare adequately for any threats and weaknesses.
You don’t need to waste too much money conducting market research for your business idea; here are some cheap ways to do it:
How to Do Market Research on an idea Before Starting a Business
1. Outline the Goals of the Market Research
The first thing you need to do is to write down the goals of the research. What are those things you need to know about the business idea.
You’ll probably want to know if there is a willing and waiting customer base for your business, what the best prices are for your products/services, any government policies or rules that may negatively impact or improve the success of the business, and any market or industry trends that may be of benefit to the business or affect it negatively. Write all your goals down so that you can know how to plan your research to achieve these goals.
2. Plan your Market Research
Now that you have set your goals, the next thing is to know how to achieve them. First, you have to set a budget- how much are you willing to spend on this research? It is only when you have a budget that you are able to move on to the next stage of planning- research methodology.
If you have a lot of money to spend, you can simply hire a market research organization to conduct the research for you. These are trained professionals who have all the tools and knowledge to help you conduct an in-depth research into your market and help decide if your business idea is viable or otherwise.
3. Carry Out Independent Research
If you don’t have the funds or you want to avoid spending too much on the research, you can use any of these resources to gather basic information about your business and industry.
- Use Government Resources:
The government often gathers data from the public to use in planning and formulating policies. You can check government sources like the:
- Bureau of Labor Statistics
- US Small Business Administration
- Security and Exchange Commission Filings
- Federal Business Opportunities
- Wage Determinations
- Internal Revenue Services
- Bureau of Economic Analysis
- Economic Report of the President
- Agency for International Development [USAID]
- US Censor Bureau
- Occupational Outlook Handbook
All of these are free government resources that you can use to gather accurate information about your business industry.
- Get Data from Trade Associations:
There are many trade associations formed to protect the collective interests of businesses operating within a specific area or industry. These trade associations often carry out research aimed at promoting their businesses. You can find out if such trade associations exist within your industry, and gather helpful research data from them.
- Gather Data from Industry Publications:
Some independent organizations also carry out research to benefit the members of a specific industry. They would often publish such research reports in magazines, journals and publications so that people can either buy them or get them for free. If any such publications exist within your industry, you can also gather useful market research information from them.
- Create a Product Prototype:
If you don’t want to rely on facts and figures on paper, you can create a few samples of your product and test market response by offering these sample products for sale. This method is especially good for determining market demand and supply rate. You can also use it to figure the best pricing strategy to adopt for your business.
- Conduct Customer Surveys:
Talking to potential customers and asking them questions can help you understand their needs, wants and any current dissatisfactions with your competitor’s products/services. With this knowledge, you can tweak your own products/services to meet your client’s needs.
- Use Dummy Sales Tests:
If you don’t want to spend money on creating product samples but still need to know how your potential clients would respond to your products/services, you can use this method. You simply need to set up an online advert for your product and create a “buy now” button so that people who are interested in ordering your products can click on the button to place orders. This method is very effective for testing demand and pricing without spending too much funds on creating product samples.
4. Gather and Analyze Your Data
When you have gathered enough data, you should start analyzing the information according to the goals of the research. When you were creating your goals for the research, you would have analyzed some important questions that you want your market research to answer. Now you just need to begin answering the questions using the information you were able to gather from your research.
5. Draw Up Conclusion
At this stage, you should be able to use your data analysis to determine whether the business idea is a viable one or not. The most important thing you are looking for here is whether the business idea is able to bring you enough returns to pay for your physical efforts and financial investments in the nearest future. After analyzing your research data, you will be able to draw an informed conclusion which is better than guessing and taking risks.
7 Questions You Must Ask When Conducting Market Research for a Product idea
Before you bring out a product to the marketplace, you need to be sure of your target audience. This is because it can be very demoralizing to put all your resources – time and money – into putting together a product only to find that no one is interested in buying the product. This is why conducting market research before starting any business or developing any product is necessary.
Even though many entrepreneurs might balk at the idea of conducting market research, it shouldn’t be so because a market research isn’t as complicated as most people think. All you need to do is ask yourself certain vital questions concerning the business and then make sure you find answers to the questions. Below are some of the questions that you need to ask when conducting market research for a product idea.
a. What are my potential customer demographics?
Knowing the market that your product will work for is a great way of conducting market research for your product. Surveying the demographics of your potential customer can allow you understand what they are thinking, their habits and how they are likely to use your product.
If you have no understanding of who your target market is, your market research is likely not going to yield any meaningful data. It is therefore critical to know your idea customers so that whatever marketing decisions you make will be done based on their preferences.
b. How does my potential target market handle a similar product?
Even though your product is likely the first of its kind, there will be another product closely similar to it – through features or usage – and so your best bet is to find out if your potential target customers had ever used something of that nature and if they did, what problems they had with it as finding out the problems they had with a similar product will enable you build on that by ensuring that they do not have to encounter such a problem with your own new product.
c. What do my potential customers really want?
It is really important that you know what your customers really want as that is what they are likely going to purchase as a solution to their problems. This is an important question as the answers will save you a lot of heartache as no customer will want something that is not in existence. In order to get the right answers for this sort of question, ensure that you give the respondents samples of product offerings and combinations.
d. What sets your perceived product apart from that of your competitors?
If you are looking to increase profitability for your product and build your business to become a successful brand, then this is a critical question. It is also important that you word this question carefully so that it gives you the right specific answer instead of a general one. Getting the correct answers to this question will enable you have a competitive advantage over existing competitors when your product becomes a reality.
e. What emotional benefits are attached to the product?
Most of the products that are purchased in the market are based on emotion and so it is important that you identify the emotions that your potential customer has when buying a similar product to yours. Knowing what emotional level your customers are on should also allow you connect with them on that level so that you could provide that benefit through your product.
f. What do my potential customers dislike about my product idea?
Even though there might be lots of reasons why your potential target market are likely to enjoy your products, you should keep in mind that there are also a lot of things that they might dislike about the product and so gathering the information on what your customers are likely to dislike about your product based on a similar product in the market is likely to help you make the right decisions concerning your business.
g. What ideas do customers have that are likely to help improve on my product idea?
As long as there is a similar product to yours in the market that has been in existence, customers will always have ideas on how the product can be better improved upon. Allowing potential customers to proffer ideas for improving on a product will ensure that you gain valuable insight into the product and also make your target market feel more involved in creating the product.
In conclusion, the above questions, aside from allowing you start your business on a better footing, they might help you stumble on a creative and more innovative way to start your new business. You should however note that while some of the questions might help you understand your new business better, others might bring up additional questions, so it is imperative that you also handle these additional questions so as to conduct a better market research.