Market research is an important part of any home business venture. Anne Wenzel has a gift for making this complex topic understandable and fun to read about!
Business planning isn’t easy, isn’t fun for most and can take precious time away from jumping in to serve your customers. But you’ve got to figure out just what your customers need, want and will pay for before you jump in.
Why Do Market Research?
Failing to Plan in the First Place is the number one never ever do according to AllBusiness.com’s Top Ten Business-Planning Never-Evers. Conducting market research is essential if you are going to write a good business plan. Your marketing plan and sales goals will be based on your market analysis.
Realistic sales goals result when you know your market size, growth and the prices customers will pay. Advertising and marketing dollars will be well spent if you know whom you’re trying to reach, why they want to buy from you and where you can find them.
Before you can conduct market research and write your market analysis, you must first document exactly what your company is offering, your pricing strategy and your competitive advantage.
Your market research results may lead you to go back and adjust your product or service offerings, and the prices you charge, in order to align your business more with market needs. But you must clarify your business ideas in order to begin the research and get to know your customers and industry.
Once you clearly define your business, you’re ready to take time to really understand your potential customers. What are their needs, wants and desires, and does your product offering meet those needs?
Andy Gibbs, inventor and founder of Patent Café, says, "A new product [or service] will only succeed if it satisfies a customer’s needs, wants or desires, can be economically produced and sold at the right price, is delivered to market through appropriate distribution channels within the window of market opportunity, satisfies applicable safety or performance criteria, and delivers lasting value."
Know Your Industry
You also need to familiarize yourself with the industry as well as customers. Understand buying and distribution patterns. Andy Gibbs explains, You simply must know how a product [or service] enters the sales channel - and how yours can enter a similar channel. This might be through distributors, retailers, direct sales, or others. Don’t simply ASSUME that your idea will sell unless you understand the channel limitations.
Why will people shop with you instead of another supplier? You need to keep track of your competitors. Underestimating your competition is another of AllBusiness.com’s business planning Never-Evers: If you want to stay ahead of the pack, you have to know what the rest of the pack is up to.
You must be able to produce your goods or services at the lowest cost possible, and deliver them quickly and conveniently to customers, so that you can compete with businesses all over the country, indeed sometimes all over the world.
Today’s Internet economy is truly competitive. For example, United States artists are now competing with artists from Latin America, Morocco, West Africa, Thailand and Zimbabwe via Novica.com. Novica.com is not only satisfying American’s growing desire for affordable ethnic art, but does so with a money back guarantee.
An American artist or art dealer who hasn’t done market research might become frustrated with his or her sales efforts, wondering why they’re not grabbing a piece of the rapidly growing art and home decoration market.
In short, your market research should prove that your product or service will be a big seller before you spend a lot of time and money on office furniture, equipment, supplies, bookkeeping and marketing.
It’s true that passion for your work is critically important for the long-term survival of your business. But most of us can tweak our passions just a bit and still meet the needs of the marketplace. It’s much more rewarding, and profitable, when you’ve got plenty of customers happy to do business with you.
But you must clarify your business ideas in order to begin the research and get to know your customers and industry.
Getting your ideas down on paper is the first benefit to planning: inconsistencies between your ideas and your ability to actually deliver the product or service, or over ambitious plans, become obvious.
Sometimes there aren't enough hours in the day or we don't have enough energy or staff to deliver all that we'd like. According to AllBusiness.com, a business plan 'makes you a better manager and makes your company, no matter how large or small it is, more competitive and more likely to succeed over the long haul.'
Once you clearly define your business, you're ready to take time to really understand your potential customers.
Anne Ramstetter Wenzel is owner of Econosystems, an economics and market research firm in Menlo Park, CA. Visit www.Econosystems.com for weekly articles on market research, marketing and applied economics. You can also subscribe to Econosystems’ Small and Home Business Market Monthly, an e-zine that includes a brief of a new or hot market and a Marketing from the Trenches column in each issue.