If you have an idea for a business, you’ll have a much greater chance of success if you spend time researching your market first. Here are a few tips to get you started.
I HAVE AN IDEA FOR A BUSINESS. WHERE DO I START?
This is the starting point for most new entrepreneurs.
You’ll be surprised at the wealth of useful information you can gain through market research. Although you will already know something about your market, customers and competitors, it’s likely your information is incomplete, and that you don’t know how to apply it to setting up your business.
The key is to be systematic about your research, to have a market research plan, and to document your findings.
HOW DO I RESEARCH A MARKET?
When you conduct market research you are gathering information about your market and target customers in an organised way. It’s essential because it will enable you devise a sound business strategy to establish and grow your business within a competitive environment. You can start your market research plan by answering the questions below, noting that your answers will probably change as you explore further. You can keep on amending them until they reflect your business idea.
a. What are the problems I am solving?
b. Which people or organisations are most likely to suffer from these problems?
c. Which people are most likely to want or need my business’s products or services (ie my target market)?
It is also useful to explore external factors that influence your market (eg Covid 19, war in Ukraine, inflation etc), trends in the market (eg artificial intelligence technology or ‘brown is the new black’ in fashion, etc) and how competitive it is. You can do this by using secondary research, (a type of research that has already been compiled, gathered, organised and published by others), which you can find at your local library and online in news stories, industry publications, reports, whitepapers, government, local government, competitor and other business websites.
WHY CAN’T I TARGET EVERYONE?
The group of people most likely to want or need your product or service will probably be too broad for you to successfully sell to. As a startup your marketing budget won’t allow you to reach them all and you couldn’t possibly serve them all.
Let’s take an example. Say you want to buy and sell trainers (also called sneakers).
UK revenue in the sneakers segment amounts to £3.5bn[1] in 2022. The market is expected to grow annually by 5.24% (CAGR 2022-2027).[2]
So the sneaker market is growing, influenced by increased awareness of the health benefits of sport and fitness activities, technological advancements, and emerging fashion trends. But its growth is restricted by a decline in consumer demand for athletic footwear caused by the impact of Covid 19 on the economy and diminished consumer confidence.[3]
So who are these consumers?
MARKET SEGMENTATION
One website called Segmentation Study Guide, identifies five distinct consumer groups[4]:
Sporty: actively involved in fitness or sports on a regular basis
Elite sports: highly committed to a particular sport, and probably train more than 10 hours per week.
Everyday wearers: a wide variety of people who are looking to purchase sports shoes to wear on a day-to-day lifestyle basis.
Fashion sports: an emerging segment of consumers looking for sporty looking fashion shoes. It also includes a lively resale market which has experienced huge growth and profitability.
Budget conscious: very budget conscious or will buy cheaper shoes on occasions.
Each of these segments can be divided into smaller groups, for example by age, sex, geographical location, disposable income, etc. And each target segment will require its own marketing strategy. So, if your target market segment is fashion sports, you will need to break this segment down even further.
For example, a woman who buys fashion trainers to wear with her dresses[5] is completely different from a sneaker enthusiast, defined as “a 33-year-old male with plenty of disposable income. He’s well educated, having completed some form of post-secondary education, works in a professional career and lives in a major metropolitan area.”[6]
You need to clearly understand who you are targeting with your marketing activities so that target customers can relate to your communications, take an interest in what you are offering and eventually buy from you. If you can segment your market and identify the most attractive segment (s) for your business, this will enable to you focus your research so you can learn and understand more about the people you aim to sell to and who are most likely to buy from you.
FURTHER MARKET RESEARCH
You can continue using secondary research to gain valuable insights into the people you want to communicate with and market your products and services to. It will also be important to use primary research – ie information that comes directly from your potential customers, by interviewing them, conducting focus groups or surveys, to learn more about them, test out your ideas and get direct feedback.
You will also need to identify and research your competitors – but that’s for another post. You can also read more on that topic here.
To summarise
1 Answer the questions below (and document your answers, knowing things will change)
What are the problems I am solving?
Which people or organisations are most likely to suffer from these problems?
Which people are most likely to want or need my business’s products or services (ie my target market)?
2 Explore (and document) external factors that influence your market, trends in the market, and how competitive it is.
3 Segment your market and identify the most attractive segment(s) for your business
4 Use primary research to find out more about the people in your target segments, for example, interview some target customers.
5 Research your competitors (but read about it here first).
Don’t forget to write everything down!
Any questions? Just ask 🙂
Best wishes
Viv
[1] US$4.29bn
[2] https://www.statista.com/outlook/cmo/footwear/sneakers/united-kingdom
[3] https://www.reportlinker.com/p06251021/Athletic-Footwear-Market-Size-Share-Trends-Analysis-Report-By-Type-By-End-User-By-Region-And-Segment-Forecasts.html?utm_source=GNW
[4] https://www.segmentationstudyguide.com/understanding-market-segmentation/market-segmentation-examples/market-segmentation-example-sports-shoes/
[5] https://www.stylist.co.uk/fashion/best-trainers-to-wear-with-dresses/411285
[6] https://huddleup.substack.com/p/the-state-of-sneakers-in-2022