It is imperative that you use market research to find customers. Blending consumer behavior and economic trends to confirm and improve your business idea increases your chances of success. It’s crucial to understand your consumer base from the outset. Market research lets you reduce risks even while your business is still just a gleam in your eye.
Gather demographic information to understand better opportunities and limitations for gaining customers. This could include population data on age, wealth, family, interests, or anything else that’s relevant to your business.
Then answer the following questions to get a good sense of your market:
Demand: Is there a desire for your product or service?
Market size: How many people would be interested in your offering?
Economic indicators: What are the income range and employment rate?
Location: Where do your customers live, and where can your business reach?
Market saturation: How many similar options are already available to consumers?
Pricing: What do potential customers pay for these alternatives?
You’ll also want to keep up with the latest small business trends. Understanding the specific market share that will impact your profits is important.
You can do market research using existing sources, or you can do the research yourself and go direct to consumers.
Existing sources can save you a lot of time and energy, but the information might not be as specific to your audience as you’d like. Use it to answer general and quantifiable questions, like industry trends, demographics, and household incomes. Check online or start with this list of market research resources.
Asking consumers can give you a nuanced understanding of your target audience. But, direct research can be time-consuming and expensive. Use it to answer questions about your specific business or customers, like reactions to your logo, improvements you could make to the buying experience, and where customers might go instead of your business.
Here are a few methods you can use to do direct research:
The U.S. Small Business Administration (SBA) provides counseling services through this resource partner network for guidance on deciding which methods are worthwhile for your small business.
Use competitive analysis to find a market advantage. Competitive analysis helps you learn from businesses competing for your potential customers. This is key to defining a competitive edge that creates sustainable revenue.
Your competitive analysis should identify your competition by product line or service and market segment. Assess the following characteristics of the competitive landscape:
Strengths and weaknesses
Your window of opportunity to enter the market
The importance of your target market to your competitors
Any barriers that may hinder you as you enter the market
Indirect or secondary competitors who may impact your success
Several industries might be competing to serve the same market you’re targeting. The Department of Justice provides Porter’s Five Forces diagram to differentiate your competitive analysis by industry. Important factors to consider include the level of competition, the threat of new competitors or services, and the effect of suppliers and customers on price.
Free small business data and trends
Many reliable sources provide customer and market information at no cost. Free statistics are readily available to help prospective small business owners.