With a heightened awareness of opportunity, ideas can often be generated by market research. The National Women’s Business Center (NWBC) defines market research as “a systematic, objective collection and analysis of data about your target market, competition, and/or environment with the goal being increased understanding. Through the market research process, you can take data–a variety of related or non-related facts–and create useful information to guide your business decisions.
For example, in recent years data has indicated the shift of the U.S. to a service economy and away from manufacturing. Service industry growth is good news for prospective entrepreneurs. Service businesses are relatively easy to start, and economies of scale are not generally sufficient to give larger companies a significant competitive edge.
For an indication of the products and services that people will need in the near future, we can look at projections of those industries which are expected to produce the most new jobs in upcoming years. The U.S. Department of Labor projects that eating and drinking places will create the most new jobs at the change of millennium, followed by health care, construction, and personnel and supply services.
More specific ideas are often suggested in the business and entrepreneurship literature. Food and recreation opportunities could include family entertainment centers, tea salons, and brewpubs. Services you might offer could include children’s learning centers, unique travel experiences and specialized staffing agencies.
Other useful sources of ideas include the business section of the local newspaper and the local business weekly. Broad trends can be tracked merely by being a reasonably well-informed observer of the popular culture.
Are opportunity listings useful? Some believe that it is already too late to enter a business by the time it is publicly acknowledged to be an opportunity. Many suggest that it is better to wait for the “first movers” to clarify exactly what services consumers want, and then to enter with a more focused product.
We also have the choice of moving into “hot” new businesses, or developing better approaches to well-established industries. While leading edge ventures are generally more exciting, more fortunes have probably been made with well run versions of fairly common businesses.
Scan the current literature for opportunities that fit your strengths and interests. Describe a specific business that would take advantage of one of these opportunities. Identify how your strengths and expertise would contribute to the success of such a business. Visualize yourself as the owner/manager, and project how you would get the venture off the ground.
Our coffee shop idea fits within the fastest growing industry, eating and drinking places, though in competition with national franchises. Is it in competition only with other coffeehouses, or with other casual dining or snack-food places?
Many services are highly localized. Is national data useful to consideration of a neighborhood coffee shop? Can we acquire meaningful data on just our market area, the northeast corner of a metropolitan area, serving 18% of its population? This would almost certainly require gathering primary data, that is data that we gather or commission specifically for this purpose, rather than secondary, or published data.
The NWBC stresses that information gained through marketing research isn’t just “nice to know.” It is solid information that can guide your most important strategic business decisions.
Market research guides your communication with current and potential customers. With good research, you should be able to formulate more effective and targeted marketing campaigns. For example, some retail stores ask customers for their zip codes at the point of purchase. This information, which pinpoints where their customers live, will help the store’s managers plan suitable direct mail campaigns.
Market research helps you identify opportunities in the marketplace. For example, if you are planning to open a retail outlet in a particular geographic location and have discovered that no such retail outlet currently exists, you have identified an opportunity. The opportunity for success increases if the location is in a highly populated area with residents who match your target market characteristics.
Market research minimizes the risk of doing business. Instead of identifying opportunities, the results of some market research may indicate that you should not pursue a planned course of action. For example, marketing information may indicate that a marketplace is saturated with the type of service you plan to offer. This may cause you to alter your product offering or choose another location.
Market research uncovers and identifies potential problems. Suppose your new retail outlet is thriving at its location on the main road through town. Through research you learn that in two years, the city is planning a by-pass, or alternate route, to ease traffic congestion through town. You’ve identified a potential problem!
All businesses, big and small, old and new, need to do market research. Many small business owners feel that they don’t need to do market research since they already have a feel for their customer market, given their long experience. Experience, though useful, can lead to a false sense of security; information gathered randomly over the years may be out of date, vague, biased or, what the Albertan Rural Development agency calls “of a ‘folk tale’ nature.”
Business owners can’t afford to make errors in judgment. Their savings, their families’ future and their business reputations are at stake. Market research is a critical step.
Wishing you success,
John B. Vinturella, Ph.D.
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