Market Research for Small Business

There are two types of research – primary and secondary research. Primary research includes quantitative research which involves surveying a large sample of people, and qualitative research which involves more in depth exploration through a smaller sample, usually through depth interviews and focus groups. Both types ultimately provide insights into your target audience and their attitudes.

Secondary research – also called “desktop research” – includes using third-party sources such as government statistics, research reports and news sources that already exist.

Both types of research can play an important role at various stages of the business life cycle and can help you plan strategy and make decisions. These can be used for analysing your industry, competitors and current and prospective customers.

If you are considering starting a business, understanding the industry is a good place to begin. Things to consider include the size and growth potential of your industry which can be achieved by using secondary sources such as the Australian Bureau of Statistics and industry reports.

For example, if you were considering starting a residential construction firm, the Australian Bureau of Statistics has a range of reports on Building and Construction, including Building Approvals and Building Activity. IBISWorld has a regularly-updated report on House Construction in Australia that covers industry performance and outlook, products and markets, the competitive landscape, key success factors and operating conditions. While the ABS reports are free, the IBISWorld industry reports are not but can be accessed through some public libraries, such as the State Library of Victoria.

Keyword search term data can also give you insights. One helpful tool is Google Trends which shows you the popularity of Google searches over time. When you’re considering entering a market or expanding your offerings, you can gauge their popularity by how many people are searching for related terms.

In addition to the ‘big picture’ view of the industry, you can investigate your competitors in a number of ways, including:

• Observing websites and other advertising
• Visiting locations if it’s a consumer business with public access, such as retail or hospitality. Being a ‘mystery shopper’ is a great way to find out how a business serves its customers.
• Analysing social media to determine how competitors are viewed by their customers and the market in general.

Conducting market research for small business can begin by looking at data already at your fingertips or can be easily obtained. These include:

• Point of sales systems and sales records
• Customer relationship management (CRM) data
• Email marketing data
• Customer complaints, feedback and suggestions
• Website traffic statistics
• Inventory management systems.

All of these can provide valuable insights into your existing and potential customers with little or no added cost. You can learn how, why and when people buy your products or services and how they can be improved. For example, sales records and inventory management systems can reveal much about customer buying habits. Website traffic statistics can show you what potential customers are interested in when visiting your site.

Secondary research has its limitations if you want a deeper understanding of the perceptions of your customers and prospects. Primary research can help you fill this gap and provide in-depth information. Two main types of primary market research methods for small business are quantitative and qualitative. Quantitative surveys can allow you to measure the strength of opinion, or size up the attitudes of a group of people, while qualitative research allows you to explore attitudes in detail including how people think. The questions that you wish to answer will ultimately determine which approach to take in market research for small business. 

If you decide to conduct a survey, you’ll want to dedicate some thinking time when creating it to get the most out of it. These include:

Demographic questions – including age, gender, highest level of education attained, location and income. Some of these can be touchy subjects. So in order to make people feel more comfortable, create income and age ranges, instead of asking questions such as “How old are you?” and “How much do you earn?” If you are surveying businesses, you will want information about each business, such as the number of employees and annual turnover.

Products or services – these are specific questions about your products or services, including how satisfied customers are with them and what they think could be improved.

Brand – these questions look at the overall brand image of a business, such as how people perceive the brand. For non-customers, questions can uncover the level of brand awareness in the market.

Competitors and the industry – questions in this area can determine how customers and potential customers see your competitors. For example, “When you think of (your industry), which companies come to mind?” You can ask scale questions about competitors such as, “On a scale of 1 to 10, how likely are you to purchase from (name of company)?

Depending on your needs, programs such as Google Forms and Survey Monkey can help you create, send and analyze surveys cost effectively. Conducting surveys by phone is also an option but requires more time and resources.

This approach is an effective way for small businesses to understand existing customers and target markets in detail. A focus group might involve 6 to 8 participants, while a depth interview generally involves a one-to-one discussion.

The first step is determining the type of group you want information from. It could be with current customers to learn more about their experience and perceptions of your organisation, or it could be with potential customers or those who are using competing products or services. Avoid using family and friends, as they are less likely to offer unbiased feedback. Companies often pay a small fee to focus group participants. If you have a tight budget, you can offer a voucher for discounted or free products or services.

Once you have identified the group or groups of people you will be meeting with, you can begin formulating questions. Used open-ended questions to get more information. For example, instead of asking, “Do you like this product?”, ask “Why would you buy this product?” or “Why wouldn’t you buy this product?”

If you have a product prototype, questions to ask could include “How could you see yourself using this product?” to get a detailed response to help you understand its appeal.

With qualitative research, you want to focus on the quality of the answers, not the quantity. Since you want in-depth answers from the group (or individual), you will need to balance the topics you discuss with the time available. You will also want to use follow-up questions based on responses to delve deeper into how participants feel about the topic. Also, getting a video or audio recording of the session (with the permission of participants) will make it easier to analyse responses instead of frantically taking notes during the session.

Create a focus group environment where all participants feel comfortable sharing their opinions, not just the participants who are more outspoken.

While it might seem like a big task, you can easily start conducting market research for small business. You can begin with secondary research to leverage data that you already have. The next step can be conducting a survey of existing or potential customers to create a quantitative picture of people in your market. Finally, a focus group will help you delve deeper to gain insights that go beyond the survey format.

One SME that leveraged market research is Scratch, a game-changing dog food company based in Melbourne. The business was interested in finding out how people felt about the dog food available on the market whether the amount spent on dog food differed by the age of owner. The business owners originally thought that Millenials would spend more on dog food than older generations. However, they found that the age of dog owners isn’t a factor in how much is spent on dog food. Scratch’s Great Australian Dog Survey was featured in the media, including an article in B&T Magazine.

Learn more about this innovative company in Scratch: A business for pup and planet.