Market Research 101 for Small Businesses
“Do your market research” is standard advice to people thinking about starting a business. But what does that really mean, and can you afford it?
The good news is, there’s a lot of useful free market data—although you may have to get reacquainted with your local library to access some of it. In this post, we’ll go over the basics of market research, helpful resources, and DIY tools to help you gather the business intel you need.
What is market research?
Market research is the homework you do before you start your business to learn as much as you can about your prospective customers, the geographic market where you’ll operate, and your industry. The great thing about market research today is that, thanks to massive amounts of consumer data collected by government agencies and research firms, you can get as detailed a picture of your customers, market, and industry as your time and budget allow.
At a minimum you’ll need to know:
- Who is the target market for your product?
- Do they need and/or want what you’re planning to offer?
- Do they have money to spend with you?
- Do enough of these customers exist to support your business now and in the future?
- How’s the overall health of your industry?
- Who’s your competition?
- What sets you apart from the competition?
To find the answers, you’ll need to do two types of market research.
Primary market research is research you do.
Secondary market research is all the demographic and industry data that’s out there for businesses to use.
The names don’t mean that you should do primary market research first and secondary market research second. To be efficient at planning your business, you need a good understanding of the industry, geographic market, general customer characteristics, and projected trends before you invest time and money in conducting surveys and focus groups with primary sources.
How do you do primary market research?
You’ll need to identify people who fit the profile of your ideal customers – people who are interested in what you want to sell, have the money to buy it, and will continue to have money to spend with you over time.
The way to do this, usually, is with online and maybe phone surveys, based on demographic data you’ve gathered from secondary sources, in-person connections you’ve made with your target market, trade and professional groups, and more.
The Small Business Administration has a handy 7-page Market Research Worksheet that not only guides you through the basics of setting up a primary research questionnaire but also helps you avoid some newbie mistakes as you go.
For online surveys, SurveyMonkey is the most popular option. Not only does the service offer free tools you can use to collect data, there’s also a resource library where you can learn how to design your survey, how to finesse tricky topics, how to structure numerical rating scales, and tips on market research.
If you’ve already started building your business email list, you can share your surveys with your subscribers to start collecting info. You can also embed SurveyMonkey surveys on your Facebook pages. You can use both SurveyMonkey Audience and Facebook Ads to share your surveys with audiences that match your target customers.
How do you do secondary market research?
There’s a lot of good data online, but for some of the most valuable secondary market data, you’ll need to either buy access or find a library with access to those databases.
Free online resources to get you started include:
- SizeUp from the Small Business Administration, which lets you research local competitors, benchmark your business against them, and find advertising outlets.
- American FactFinder from the US Census Bureau can help you determine the size of your target audience, get general demographic data, and gather industry information by state, county, or city. The Census Bureau site has other resources you can explore, too.
- The Bureau of Economic Analysis has a trove of national and regional data, including personal spending, income, and savings data displayed by quarter. Wonder whether spending on shoes is rising? Find out here.
At the library, look for these resources:
- The State and Metropolitan Area Data Book – The more recent, the better. This covers general demographic data like population, employment, education, and more.
- The Statistical Abstract of the United States – Again, the most up to date edition you can find. This includes data on everything from sexual orientation, healthcare usage, veterans, and lots more to help you refine your research.
- Databases – Each library system has access to a variety of databases that cost too much for individuals to tap into on their own. Cardholders may be able to use some of these databases online at home, but others may require you to make a trip to a branch.
These are just a few secondary sources, and there will be a learning curve as you explore, but that’s true for just about every aspect of starting a business. Stick with it, ask your library’s information specialists for help, and remember that learning to do identify worthwhile market research sources is a skill that will help you as your business grows.
How long do you have to do market research?
After you launch, you always should keep tabs on market trends that affect your industry, your competitors, your geographic market, and your target customers. This can help you when you want to introduce new products or expand into new areas, and it can help you serve your customers better as their needs and income levels change.
Casey Kelly-Barton is an Austin-based freelancer who enjoys writing about business development and marketing, e-commerce payments and fraud prevention, and travel.