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| Nov 25, 2003 6:13 am |
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re: Market Research |
Mark Anthony McCray
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Here is a general guide for market research that has worked well for me. Hope it helps!
DID YOU FORGET SOMETHING?
THE IMPORTANCE OF MARKET RESEARCH IN BUILDING AN EMERGING BUSINESS
By Mark Anthony McCray
I have been working with entrepreneurs and reading, writing, and reviewing business plans for a while now. I have come to realize that there is one major difference between a well-prepared business plan and a pretender. Financial projections are important. However, they are mostly predictive and many investors won't give them as much importance as market information that you gathered yourself. The missing ingredient is often a marketing strategy based on thorough research.
What I hope to accomplish through this brief article is to help you plan your business and your projects more effectively. I'm going to do this by explaining to you the three components of effective market research. I'll finish each section by giving you an idea about how you can go about completing a key area of your research.
THE THREE COMPONENTS OF MARKET RESEARCH
Gathering reliable market data upon which to base your marketing strategies does not have to be difficult nor expensive. In fact, it can be fun and enlightening. Most important, it can be the difference between getting the funding and/or strategic edge that you need to make your start-up business an emerging business. Market research will make you a smarter and, therefore, a better business owner.
There are three main components to conducting thorough market research. First is your analysis of the overall direction of the industry that you are entering. Second is your analysis of the direct (and indirect) competition that your are facing within your targeted marketplace. The third part involves learning what your prospective customers actually want.
Here is a brief description of each component and how to go about conducting each phase with a minimum of expense and maximum effectiveness. To help me illustrate these concepts more clearly, let's pretend that you are planning a new house painting business. Obviously, you know that you have a lot of competitors in the market and you want to succeed, so you decide to write a marketing plan. The first challenge of your marketing plan is doing some research. Here's how you get started building your new business, "Brush with Greatness."
#1: YOUR INDUSTRY
You think that you have an opportunity to make your house painting skills into a major successful business. But you also know that business is risky and you want every competitive edge that you can find. Since you want to work with home exteriors, the first thing that you decide to do is find out what's happening with home building in your city and region. You visit a web site sponsored by your local chamber of commerce that includes some population projections. You discover that, while housing sales and new home starts have been slumping, a population boom is expected over the next ten years. Several new manufacturers have begun to move to your city and more are on the way. Local economists expect them to create a lot of demand for new and pre-owned homes.
Also, a report in the local newspaper stated that several regional aluminum siding manufacturers are having trouble finding workers. They have to pay the highest wages ever heard of in the siding business. You figure that this will force prices sky high and discourage many people from choosing siding…at least for the next few months.
Given all this information, you decide that you'll have a strong market for at least the next decade without many down periods in the economy. Further, you think that your timing couldn't be better as far as telling people about the benefits of house-painting and about your skills in particular. You're convinced that you should do a little looking into your competition.
#2: YOUR COMPETITORS
Gathering competitor information can be the most challenging of the three parts of good research. How much information should you gather? Where do you start? What is a competitor to your company? What questions should you ask? Why are you even studying your competitors?
I'll address the last question first. One of the main reasons to research your competition is to find strong and weak points in their approaches to doing business. Ideally, you want to find ways to avoid challenging a huge company where you're likely to lose while simultaneously exploiting a market segment or service area in which they are most vulnerable.
Here's how you decide to get started. You take out a telephone book and begin to list all the companies that offer services that are like yours. Then you list all the reasonable substitutes to your service. You realize that painters are not your only competition. Those companies that sell siding and the hardware stores that promote "doing-it-yourself" are your competitors, too. If everyone does their painting for themselves, where does that leave your business? Finally, for good measure, you ask your friends and family about people that they have used. When you've finished this step, you have a good list of companies with whom others could spend their money.
Now, you've got a good list. What do you do with it? You decide that you'd like to perform a SWOT Test that will help you determine the Strengths, Weaknesses, Opportunities, and Threats that each competitor poses to you. You list down the left side of a sheet of paper the name of each competitor. Across the top of the page, in a grid pattern, you place the letters "S", "W", "O", and "T."
Now you're going. You study and write comments on each area for each company on your page. From your analysis, you discover that none of your competitors provide free estimates. Furthermore, only one of them has bothered to join any neighborhood associations. You figure that you might have spotted a way that you can make your company stand out in the crowd. You plan to join most of the really active neighborhood associations to give you a good referral base. You also figure that offering the public free estimates on painting jobs within two hours would be a good way to develop a good reputation very quickly. You know that you have to act fast because others will offer free estimates once they see you having success.
You think that you are almost ready to run with "Brush with Greatness", but you want to gain even more of an edge. It's time for you to talk to some prospective customers.
#3: YOUR CUSTOMERS
Many entrepreneurs diminish the importance of gathering first-hand data from their potential and current customers. You are not going to make that mistake. You realize that you might miss an opportunity to discover exactly how you might serve your customers FOR REAL. Plus, you don't have a lot of money for wasteful marketing programs so you need to learn how to best reach your target market with your marketing programs.
You could do surveys, one-on-one interviews, or hold a focus group meeting or two. You figure that it's important that you get feedback from as many people as possible, so you will use a questionnaire.
You ask your new friends in the neighborhood association to answer brief questions about their experiences with and any plan's to use house painters. You ask them who they have been using and for some comments about the service that they received. You ask the respondents what qualities are most important in a house painter. You ask them what it would take for you to win their business. You learn a lot about good and bad experiences that people have had with many of the competitors that are already studying. You think that you know some things that you can use to succeed in this business and write the rest of your business plan. At the very least, you are surprised at how much you learned in the process and you're glad that you did all the work. You're smarter and much better prepared than you were just a week or two ago…and you're more confident that you can meet your customers' needs.
GET RESEARCHING
You now understand your market, your competitors, and your customers like you never did before. "Brush with Greatness" has a better chance of living up to its name.
You know the statistics concerning the high failure rate of new business start-ups. You don't need to have them repeated to you. However, I would like to add that nearly all of these failed businesses had one thing in common. They did not understand what their customers needs were, nor how they could best serve them. The enterprises that win do so because they are able to deliver consistently what people want. And the best way to find out what people want is to ask them. Remembering that truism can take you a long way.
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Mark Anthony McCray is an entrepreneur and Founder of the Emerging Leaders Network, ShopPearlandNow.com and Vice President of First Capital Investments of Houston, Texas. Please visit http://www.leadernetwork.net/ for more info.
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