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How to Do Market Research Right for Your Small Business

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When it comes to marketing, it seems like big businesses have all the luck. They've got the budget to hire marketing and advertising firms dedicated to bringing them more customers. But this doesn’t mean that small businesses can’t make their own luck. After all, the foundation of a good marketing campaign is the same, whether the business is big or small: it all depends on thorough market research.

How to Do Market Research
Good market research methods can include questionnaires and surveys. (Image Source: Envato Elements)

Market research is just about gathering as much information as you can on your target market’s needs. This is something that small business owners can do on their own, even without the help of a large budget or a market research firm. Once you know everything you can about your target customers, you’ll know how to tailor your products, services, and marketing materials to their needs. 

But before you conduct any market research, make sure you've narrowed down your target market. Review the following guide to make sure that you’ve selected the right target audience for your business:

Now let's dive into our discussion on how to do market research right. 

Market Research Basics: What You Need to Know

As a small business owner, you can’t afford to spend time and resources learning every single detail about your target market when doing market research. That’s perfectly fine. You only need to know the few things that are relevant to winning customers over. 

Here are the only questions you need to answer:

1. What’s the Full Spectrum of Your Target Market’s Needs?

Since you already know who your target audience is, dig a bit deeper to find out what it is they need. They rarely ever need just one thing. Instead, they've got a full spectrum of needs. These needs could be positive, such as goals, desires, and preferences. They could also be negative, such as problems, frustrations, and other pain points.

Of course, you don’t need a full list of all their needs — just the ones that are relevant to your business. Here are some of the more detailed questions you can ask your audience:

  • What do you wish to accomplish in the near future? Specific examples: What do you want your front yard to look like in the next two weeks? (For a lawn care or gardening service.) How many new customers do you want to acquire via your website in the next six months? (For a web designer.)
  • What positive changes do you want to see? Specific examples: What do you want to accomplish with a new fitness program? (For a personal trainer.) What do you want prospective customers to think about this particular product? (For a product photographer.)
  • What is your most painful problem? Specific examples: What’s the most frustrating part of maintaining your yard? What feature of your garden do you dislike the most? (For a lawn care or gardening service.) Why are you unhappy with your current product photos? (For a product photographer.) Why do you think your current website isn’t meeting your goals? (For a web designer.)

Once you’ve listed two to three questions to ask, you’ll need to know where and how you’ll get answers. You can use one or a combination of the following techniques to get started:

  • Surveys. If you already have a list of people who belong to your target market, such as existing customers or people who've opted into your mailing list, you can conduct surveys to find out their needs. Here are some resources that can help you get started:

If you don’t have a list, you can use survey solutions that find respondents for you, ask them questions, and send you reports of the results. Some examples include AYTM, SurveyMonkey Audience, or GutCheck. These services can get respondents for you for a fee, and typically the fees increase the larger the group you want to survey. If you decide to take this route, just make sure that you pick respondents that fit into your target audience.

  • Online and offline groups. It’s possible that your chosen target market can have their own groups. These could be local groups that meet up regularly, or online groups in message boards or social media. You can join these groups, let them know what you’re working on, and ask permission if you can run a few questions by them.

If you’re looking at online groups, you can also search through existing discussions that might give you answers. For example, if you’re a personal trainer looking to target busy professionals in your city, you can check out the reddit group for fitness, search for the word “busy,” and look through the results. You’ll find that there are a lot of existing discussions about how busy people find time to work out. You can go through these discussions and take notes on any challenges, frustrations, or goals mentioned.

Example of searching online groups
The above discussions can give you an idea about the challenges busy people face when it comes to fitness.
  • Client questionnaires. There are some service-based businesses —  such as web development, copywriting, photography, consulting, or teaching —  that need to analyze their clients’ needs before the project starts. If this sounds like your business, odds are that you've got a client needs analysis questionnaire already or at least have some notes from preliminary client meetings. Look out for any words or phrases that are repeated by different clients. 

If you run a service-based business and you don't do any formal needs analysis, the following guides can help you get started:

2. How Much Are Customers Likely to Spend to Fulfill These Needs?

Apart from getting a deeper understanding of your target market’s needs, you also need to know how much they’re willing to spend to fulfill these needs. This knowledge can help you get an idea about how to price your products and services, what kinds of promotional offers to make, and which needs they’re willing to spend more on. Here’s where you can look up this information:

  • Competitors. A quick way to find out how much your customers spend on the needs that are relevant to your business is to look at how much your competitors charge. You’ll discover that they don’t charge the same amount for similar products and services. Some businesses will be charging on the lower end, while others will have higher markups.  Make sure that you look at as many competitors as possible, so that you’ll have an idea about the full pricing range. 
  • Industry websites and research. If your industry releases information on pricing, or has a cost database, these can provide helpful benchmarks. Some broad pricing databases such as Cost Helper lists the prices from a wide variety of industries, products, and services. For products only, you can look up prices on price comparison sites like Nextag (US) or Price Runner (UK).
  • Consumer surveys. If you’re selling to individual consumers rather than businesses, consumer survey results can also give you an idea about how people spend their money. These surveys are also helpful if you’re trying to spot or understand spending trends. For the United States, the Bureau of Labor Statistics regularly releases results for their Consumer Expenditure Survey. Their most recent results show that Americans typically spend the most on housing, followed by transportation. The United Kingdom’s Office for National Statistics also releases similar types of data.
Cost database example
A pricing database can help you find out how similar services or products are priced.

As you do your research, you’ll see that there’s a range of prices people are willing to pay depending on the type of solution they get. Going along with the personal trainer example, you’ll see that fitness books can cost $3 to $30, fitness equipment can cost up to a few hundred dollars, while hourly rates for trainers can go from $20 to $70 per hour. Be aware of these differences so that you can focus on finding the pricing of products or services that are closest to what you offer.

3. How Well Are Other Businesses Fulfilling Their Needs?

It’s also important to know the gaps in the market, the part where your target customers feel their needs aren’t being met. To find this gap, you need to look at your competitors and see where they’re falling short or where they could do better. Here’s how you can find out:

  • Review sites. Review sites like Yelp and the Better Business Bureau are a good resource. Sites like these help you easily find several competing businesses and their customer reviews in one place.
  • Competitors’ social media profiles. If you already know some of your competitors, visit their Facebook, Instagram, Twitter, and other social media accounts. What do customers say about them in the review section? Are there any negative comments on their posts? Look out for the most common negative or constructive feedback posted by customers.
  • Independent reviews. Blogs, newspapers, and magazines also run reviews of products and businesses. Through a simple Google search, you can probably find bloggers and professional reviewers who've tried products or services similar to yours.

Pay attention to reviews or comments that rate the business as average or lower. These imperfect reviews are a goldmine for understanding where other businesses go wrong, and for finding opportunities on what you can do right.

Let’s say you want to start a clothing alterations shop in your area. You can look at the less than stellar reviews of similar businesses on Yelp and find the most common complaints and suggestions. You’ll find that one of the most common complaints is that the alterations aren’t finished by the time the customer expects it. If you can alleviate that concern in your marketing materials and offer some kind of guarantee for getting the clothes done on time, then you would have a way to differentiate yourself from other shops.

Excerpts of reviews of clothing alterations store
Browsing through the negative reviews of clothing alterations shops, you'll see that meeting deadlines is a major customer concern.

If going through public feedback isn't enough for you and you want to learn more about your competition, the following tutorials may help:

4. What’s the Size of Your Target Market?

When doing market research don’t forget to find out if you've got a large enough target market to sustain your business. At this stage, you’ve surveyed groups and looked at reviews. The amount of activity you’ve encountered can give you an idea whether your target market is a bustling community or a small band. While you don’t need to have millions or hundreds of thousands of people in your target market as a small business, you do need enough to make a profit. Here's how you can estimate the size of your market:

  • Census data. Looking through sites like Census.gov and the Small Business Administration will give you a good idea about the size of the population that falls under your target market.
  • Social media tools. Facebook Audience Insights is good for estimating audience size — as long as your target audience is on Facebook (this guide includes a short tutorial on how to use it). If you’re targeting professionals, running a people search on LinkedIn and narrowing it down by job title and location will also give you a rough estimate. For example, accountants in the Houston, Texas area are around 31,000.
  • Your competitor’s audience. Again, your direct competitors can give you a firsthand look of what type of audience size to anticipate. Do they publicly cite customer numbers and sales figures? How many people follow their social media profiles? How many people sign up for their newsletters? The more you know about the size of their audience, the better you can estimate yours.

Note that you won’t be able to reach, much less sell to, your entire market. When you look at the total numbers for your market, make a very conservative estimate of the segment you can reach. Assume that you'll only be able to reach 3 to 10 percent of your estimated target market size.

5. Where Are Customers Likely To Be Reached?

Finally, you need to know where you’re supposed to send or post your marketing materials. For offline marketing, this could be specific spaces or venues where your target market is likely to be. These might include a community center, neighborhoods, parks, or even other unrelated businesses that attract a similar market. It could also be the radio stations they listen to or the magazines and newspapers they read. For online marketing, these are the channels, websites, and social media sites that your target market tends to use. These could be Instagram, an online marketplace, a niche blog, or their email inbox. 

With all these options, how do you know which ones to choose? Look into the following:

Social media demographics
If you want to reach a younger audience, go for Instagram and Snapchat.
  • Facebook Audience Insights. You can use this tool from Facebook to get an idea about your selected audience’s other interests. Once you fill in the audience criteria, you can look at the tabs for Page Likes and Location to find out possible places or channels where you can reach your audience. For example, let’s say your target market for your online store is people in California who are aged 18 to 24 and interested in martial arts. Facebook Insights can tell you the cities in California where such people are likely to be found (under the Location tab), as well as their other interests (under the Page Likes tab). You’ll know that most of them follow KTLA 5 News and the blog, Cholo Adventures.
Facebook Audience Insights Page Likes
Find out your target market's other interests and locations with Facebook Audience Insights.
  • Competitive research. It also helps to look into where your competitors advertise. Look through the local publications and see which types of businesses buy ad space repeatedly. If you see your competitors or businesses targeting the same demographic as you, then it’s likely they’re getting customers through those ads — and you will too.

If you want to find more options for offline marketing and the above resources aren't enough, check out this guide for marketing service-based businesses locally.

Market Research Is a Must for Small Businesses

Market research, despite sounding like something only big businesses do, is for businesses of all sizes. All businesses need to understand their customer as well as possible. When you customer feels understood, they're more likely to buy from you.

Now that you've finished this tutorial, you should have a good grasp of some marketing research basics. It's time to develop your own effective market research methods.

Once you’ve completed your own market research, you’ll have a better idea of what materials and tactics you’ll need to make more sales and find new customers.

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