How to do Market Research for Your Business – A Comprehensive Guide

No one wishes to see their business sinking after investing effort, time, and capital. Fortunately, there are many ways to prevent this from happening to your business. Some of the critical tips to building a successful business are proper planning and researching. So, to stay afloat in the industry, you need to know how to […]

No one wishes to see their business sinking after investing effort, time, and capital. Fortunately, there are many ways to prevent this from happening to your business. Some of the critical tips to building a successful business are proper planning and researching. So, to stay afloat in the industry, you need to know how to do market research for a small business.

What is Market Research?

Many important life decisions require planning. If you want to travel, you probably won’t just pack your bags and leave. It would help if you planned things, like choosing a location and determining how long you will spend there. Also, you may need to go further by finding out details about where you are travelling. What kind of activities can you do there? How much does it cost to travel there? 

This logic also applies to your business. Starting a business, no matter how small, should involve some planning and research. That is why it is crucial to know how to conduct market research for a new business.  You need to know what you are getting into. Do you have competitors? Who will be your customers? How large is your target market? These are just a few questions your market research should provide answers to. 

By definition, Market Research is an in-depth assessment of your desired industry in the marketplace. It involves gathering relevant information about your industry, consumers, competitors, and products. Knowing how to conduct a market analysis for your small business is a great way to thrive in your industry. 

Why is Market Research Important for a Small Business?   

Whether you are seeking a loan or trying to increase cash flow, conducting a market analysis is a good idea. A good market analysis helps business owners understand their industry and develop strategies to grow their businesses. At the end of a good market analysis, you will be able to uncover where you stand in the industry and how best to serve your customers.

In a nutshell, knowing how to conduct market research for a new business will help you make better business decisions. A proper market analysis will help you: 

  • Determine the Strengths, Weaknesses, Opportunities, and Threats in your industry 
  • Outperform your competitors 
  • Understand your target audience and the best way to serve them
  • Develop relevant products or services for your customers 
  • Set accurate pricing

How To Do Market Research For a Small Business: Step By Step Guide

Market research involves a complete analysis and understanding of the market you want to enter. 

How do you understand your market? 

You do so by conducting a thorough assessment of different aspects of your market. This includes analysing your target customers, competitors, and market share. Meanwhile, you should know that assessing your market takes time and strategic effort. It’s not something you do in a day or even a week. 

To guide you on  how to do a market analysis for a small business, we highlighted six crucial steps below:

1. Define Your Objectives 

Business owners conduct market analysis for different reasons, including seeking a loan, writing a business plan, or understanding customers. Your market analysis should have an objective that describes the reason you are conducting industry research in the first place.

Typically, there are internal and external purposes for conducting a market analysis. Internal purposes include improving sales, outperforming your competitors, testing a new product, etc. External purposes, on the hand, may include things like seeking a loan or investors. Your analysis can also be for both external and internal purposes, depending on your needs.

2. Research Your Industry 

Another significant step you need to know on how to do market research for a startup is industry research. To conduct good market research, you should start by getting to know your industry. What is the global market share? What are the current trends in the marketplace? What is the projected growth rate? A good industry research will provide answers to help you understand the current state of your market. 

Some of the significant metrics to get a detailed understanding of your current industry include;

  • Trends
  • Projected growth
  • Size 
  • Market segments

For example, if you are thinking of selling sports gear, you should try to understand: 

  • Value of the sports gear industry (is the demand growing or reducing?)
  • Trends in the sports gear industry (maybe people now swim more, so you need to cater more for swimming?)
  • Factors that affect sports activities (such as season, pandemic?)

Say you are learning how to conduct a market analysis for your small business because you seek investors. The industry research step will show the prospective investors whether your market is viable and worth their money.

3. Identify Your Target Audience

Customers are a critical part of every successful company. For this reason, a significant step in market analysis is identifying your customers. Not everyone will be your customer, so you need to identify those likely to buy from you.

Also, you should know that trying to get everyone to buy your product is impossible. An excellent practice to develop an accurate target audience is to streamline as much as possible. From women, you can streamline to young women, then young unmarried women, then young unmarried women who own a business. 

You also need to understand your target audience by analysing their behaviour and characteristics. Common market research examples you can use to collect information for customer analysis are surveys, interviews, and observation.

Some of the things you want to know about your target audience include: 

  • Demographics

Demographics is an overview of what your ideal customer will look like. It describes characteristics such as age, income level, gender, marital status, educational level, etc. Are they male college students who love sports or working mums in the tech industry? Your customer analysis should tell. 

  • Location

Another essential information you need during customer analysis is your customer’s location. Where do they live? Where are they from? Do you plan to cater to customers in all locations or a specific location?

  • Market Size

Another important reason to know how to do a market analysis for a small business is to know your customers’ size. Your market size describes the number of potential customers in your industry. Are they up to millions or thousands? 

  • Psychographics

Psychographics include characteristics like their likes and dislikes, personality, and behaviour. For example, some business owners pose their product as something for the one percent of the one percent. Usually, in this case, the target audiences are wealthy people, famous people, or those who love luxury. 

  • Customer Behavior

You need to understand your customer’s behaviour, especially their buying habits. Do they prefer to shop online or offline? Do they prefer to shop for your type of products in the rainy or dry season? 

Note: Your target audience person may expand or change as the company grows. For this reason, you may need to review your target audience periodically.

4.  Analyse Your Competitors

Another essential step to know when learning how to do market research for a startup is competitor analysis. Your competitors are an essential part of your industry, and understanding their market situation can help improve yours. It becomes easy to develop strategies to stay ahead if you understand your competitors properly. 

Competitor analysis involves researching the top competitors in your industry and what they are doing. Look at things like their location, target audience, pricing, and branding strategies. Does it work for them or not? 

To conduct a proper competitor analysis, start by compiling a list of your top competitors. Next, conduct a SWOT analysis on each competitor. Ask questions like, does this competitor pose a threat to my business? What is the quality of their products? Why would a customer pick them over someone else? You can use market research tools like Sprout Social and Ahrefs to spy on your competitors.

How are you different?

Analysing your competitors helps you build a strategy to do things differently from them. You want to differentiate your business from your competitors even if you offer similar products. Your differentiation can be the pricing, the location, or even the target audience. Once you’ve understood your competitors’ strengths and weaknesses, rank them according to their threat to your business. Now, you can figure out what you can do differently to stay ahead of the rank. 

Tip: For a small business, it is best to choose your immediate competitors and not the big corporation. For example, if you run a beverage company, Coca-Cola does not have to be your competitor. You can, however, go for other small businesses that run a beverage company.  

5. Analyse The Pricing

Another essential step in market analysis is figuring out your pricing. You want to ensure that your price is more than the production costs. At the same time, you don’t want to offer a too high price.  

How do you ensure you are balanced?

First, check your competitor’s prices and seek inspiration from different pricing methods used by other brands. A popular pricing strategy involves lowering your price to compete with those who offer higher prices for the same products.

6. Analyse Your Findings

The first steps of market analysis involve gathering information, but this step requires analysing those data. Summarise the findings from your market research, bring out relevant points, and interpret them accurately. There are also free tools available to summarise and analyse your market research. 

7. Take Action

The whole point of learning how to do a market analysis for a small business is to make better decisions. Therefore, you should take strategic actions based on the findings from your market analysis. For example, if your analysis showed that your proposed price is too high compared to what your audience can afford. In this case, you may consider reducing the price. An excellent market analysis should influence your business decisions for the better.

Market Research For Small Business Examples 

A great way to conduct excellent market research is by leveraging valuable tools and examples used by other business owners. Here are five techniques for conducting detailed industry analysis, competitor analysis, and customer analysis. 

  • Google Trends

Google trends is a market research tool that offers snapshot data on trends from all over the internet. You can streamline the information from this platform based on your location and industry. If you want to get the latest news and information in your industry or understand your customer search behaviours, then Google trends it is. 

  • Market Research Surveys and Interviews

Surveys are some of the most common market research for small business examples. This form of market research technique involves asking questions directly from potential customers. Asking questions can be something as simple as creating a Twitter or Instagram poll. You can also consider creating questionnaires, survey forms, or conducting interviews. 

  • Online Observation

Unlike surveys and interviews, observation does not involve asking people questions directly. Instead, it involves assessing and observing conversations and trends, usually online. You can observe your competitors, customers, and industry by keeping track of their activities online.

The more you stay abreast of what’s happening in your industry online, the more information you have for your market analysis. You can observe different market research examples used by other business owners to gather relevant tips. For example, Body Shop tracked conversations online to get tips on how to serve their customers better. The company found out that customers would love a refill through social media observation, so they launched a refill program. 

Social media platforms like Facebook, Twitter, Quora, Reddit, and even reviews are great ways to observe your market research.

  • Market Analysis Tools 

Another method of conducting a successful market analysis is leveraging market research tools. Some popular tools used for market research include:

  • Questback
  • Answer the Public
  • Think With Google
  • SurveyMonkey
  • Statistica
  • Ahrefs
  • Typeform 

These tools and others help business owners get detailed information for market research. Questback, for example, provides detailed information about your target market. SurveyMonkey helps solicit customer feedback and Answer The Public offers insights into millions of Google searches. 

Knowing how to do market research for a small business is vital for every new business owner. Without research, it’s impossible to understand your customers, competitors, and the overall industry. And if you do not understand these things, you may find it challenging to stay afloat in the industry.

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