Business Research - 3 things you absolutely must do to analyze your market effectively

Take it from a market research professional...

As a market research professional, I can tell you with confidence you will learn more from listening to your (potential) customers than you will listening to yourself. And when it comes to undertaking business research, there are three essential things you must do:

1. Research your potential market completely and research it well

You need to know who exactly who your target market is:

• How old are they?
• Where do they live?
• What do they do for a living?
• How much do they earn?
• How much - and how often - do they spend on certain products or services?
• When do they buy - in the winter, summer, fall, spring - or year-round?
• What brands do they currently buy (in other words, who are your competitors)?
• What motivates them to buy or stick with one brand, and what would motivate them to switch?

Almost every successful business you know started in a niche market before delving into the larger market. Think of companies like...

• Starbucks - young, high income professionals willing to pay more for a cup of coffee in a stylish social environment
• Dell - businesses and PC enthusiasts looking for customizability
• Subway - fast food "junkies" looking for a healthier alternative
• Rolex - wealthy individuals to whom status is important
• RIM/Blackberry - professionals who want or need to communicate without any restrictions

You simply can not satisfy the entire market, so why bother? Here's an example...

Let's say you want to start up a tour agency, and your potential market is everyone in your city who either has or intends to travel. Could your business, especially if new, possibly offer quality tour packages to anywhere in the world? Even if you confined yourself to one continent - let's say Asia - it would still be a severely uphill struggle to capture and satisfy every potential buyer.

You could, however, focus on Southeast Asia, for example, and target travelers looking for tour packages within or around Southeast Asia. It would allow you to become an expert in your niche, learn more specifically what travelers to Southeast Asia look for and experience, and tailor your product to this group to closely match their demands.

You could go even nichier - focusing on budget travelers - satisfying their ultimate goal - to travel and enjoy Southeast Asia without breaking the bank.

Here are some very effective places to learn more about your market:

• Your local library - it should have a business section, and some time explaining your business research objectives to the librarian should help you get started on your path.
• Small Business Administration - contains a wide range of information on starting a new business, government programs and much more.
• The US Census Bureau - offers free census data by demographic as well as by industry sector.
• Bizminer.com - provides literally thousands of completed market and business research, ranging from industry analysis to financial profiles for 17,000 industries.
• Hoovers.com - is another place you can find business research by industry on a per fee basis.

In a nutshell, the more time you take to identify and refine who your target market is, the better prepared you will be to ...

2. Target your market

The better you know your target market, the more tightly you can align your product or service to their specific needs. The additional effort you put into learning more about your market will help you fine-tune and deliver solutions to their problems. As a result, you will gain more credibility with potential investors and other funding sources, who value thorough and objective business research.

One business research possibility is to commission a research company to study your customers and competitors. However, being a market research professional myself, I would advise against that if you're a small business startup - the costs would likely be too inhibitive. This option is suitable for large or established companies who can afford the cost of research.

You can conduct a fairly complete analysis of your market by conducting business research online. Take note that online resources often lack validity or credibility, but here are two low-cost ways you can make an informative analysis:

1. Set up an online survey using Google Adwords. It's fairly inexpensive to set up and get started. If you're not tech savvy, you will need to hire someone to set up a website with an online survey. Study the keywords potential customers would use to search for similar products or services, and then position your survey using a Google Ad to show up on the search results. Google Adwords is a pay-per-click program, so be aware of how much you can afford to pay for the study, and design your ad to target those who closely match your potential customer profile and are serious - not just browsing around. You can get fairly important information if you set it up well.
2. Search through or open a thread for your product or service in Google Groups. Google Groups works just like Google's search engine on the surface. The difference is in the results - when you enter a keyword phrase, you will see a listing of relevant threads. This is cumbersome and time consuming, but that is the case with any kind of business research, and it could prove well worth your time if you are able to get answers or insight from your potential market through it. It's free and worth trying.

Once you have enough answers and information about what your potential customers demand, you can design your product or service to meet their needs. The more accurately you can satisfy their needs, the more likely you will succeed in your new endeavor.

But is conducting business research enough? Not really. Getting responses from your target market will help you gain a better understanding of their demands, but you won't really know how well your business addresses their demands until you...

3. Test your product/service.

Conduct some pilot tests. Run a mini sales campaign - contact potential customers asking them to buy. Or run an online sales campaign using Google Adwords. If you have a tangible product, you can also test it out at Ebay.com.

Business research is all about being objective and demonstrating credibility. Whether you are conducting research for writing a business plan to present to investors, or researching an existing market to improve market penetration, a thorough and relevant analysis of your industry and target market will enable you to attract and convince people such as potential investors, lenders or shareholders.