If you're new here, you'll want to be sure to get your free report and subscribe to the monthly e-zine and, perhaps, subscribe to the RSS feed, as well. Thanks for visiting!

Market Research: Doing Your Homework

I. IDENTIFY YOUR TARGET MARKET

Begin your market research by learning who your customers are. Identify them by:

Demographics. What is their age, gender, occupation, income and education level, residence?

Lifestyles. What habits or behavior patterns do they share? Where do they shop, what kind of music do they listen to, what do they watch on TV, what types of books and magazines do they read? How do they currently learn about your business — TV or radio ads, Yellow Pages, word of mouth, direct mail, website?

Perceived Benefits. What qualities or benefits do your customers expect to get from your product or service–what do they value most: selection, availability, affordability, convenience, reliability? What do they dislike about it, and can that be modified to better meet their needs?

Once you know who your customers are, you can take the next step to find out who else they buy from and why.

II. IDENTIFY YOUR COMPETITORS

Advantages of analyzing your competition

Understanding who your competitors are and how they do business will help you in a number of ways:

You’ll discover your company’s competitive advantage — the reason customers do business with you instead of your competition. Then you can emphasize this advantage in your promotional pieces to “win over” your potential customers.

You can uncover current issues or deficiencies in the marketplace that your competitors aren’t addressing, or that can be improved on. For example, you might find some groups of customers whose needs are not being met. What if there was a new neighborhood under development in your town that catered to young couples with children, but there were no nearby convenience stores or daycare centers? This would be an untapped market! By satisfying unmet needs, you can develop a market niche.

By observing your competitors’ actions, you can learn more about your market. For example, does a successful competitor offer reduced prices during a particular season? If so, what might that tell you about your market’s spending habits? If you find that your market is already filled with capable competitors, you can avoid the costly mistake of starting a business without adequate demand. You can then redirect your efforts toward something that will pay off instead.

What to look for when researching your competition

You probably already know who some of the businesses are that you’ll be competing with. It helps if you keep a file on the top four or five. Start by gathering information that includes:

Name of competitor. This may seem obvious if you’re selling a specialty product, like gourmet coffee or aromatherapy candles, but your competitors might also be businesses that don’t specialize but do carry similar products, like gift shops or the big box stores.

Summary of each competitor’s products or services. This summary should include their location, quality, advertising, staff, distribution methods, promotional strategies, customer service, etc.

Competitors’ strengths and weaknesses. You need to see your competitors’ strengths and weaknesses from your customer’s viewpoint, not yours. List their strengths and weaknesses, and write down how you will capitalize on their weaknesses and meet the challenges presented by their strengths.

Competitors’ strategies and objectives. You can probably get this information from their annual report, but it could be tricky trying to obtain a copy. You’ll more likely have to get your information from a variety of sources (see the next section).

Strength of the market. Is the market for your product growing steadily enough that there are enough customers for you and your competition? If the market’s already stretched thin and you’re selling primarily to your competitors’ customers, you’ll need to have a very strong competitive advantage.

How to research your competition

Knowledge is power, so use any or all of the sources below to find out as much as you can about your competitors.

Internet. Use this powerful research tool to discover who your competitors are and to see if they have a website. If they do, see how much information it provides and if you can create a better one to give you a market advantage.

Personal visits. If possible, visit your competitors’ locations and see what their business looks like. How are their products displayed and priced? How do their employees interact with customers? Do they have adequate parking facilities and visible security?

Talk to customers. Learn what your customers and prospects are saying about your competitors — and about you, too!

Competitors’ ads. Analyze competitors’ ads to gain information about their target audience, market position, product features and benefits, prices, etc.

Speeches, workshops, presentations, trade shows. Attend events where your competitors are giving speeches or presentations, and attend trade shows where they have a display. View their display from a potential customer’s point of view. What does it say about the company? Even observing which trade shows or industry events competitors attend provides information on their marketing strategy and target market.

Written sources.
- General business publications
- Marketing and advertising publications
- Local newspapers and business journals
- Industry and trade association publications
- Industry research and surveys
- Computer databases (available at many public libraries)
- Annual reports
- Yellow Pages

III. IDENTIFY YOUR OWN STRENGTHS AND WEAKNESSES

This step of the research process is called “Issues Analysis” and it will help you identify both obstacles and opportunities you’ll encounter in your business life.

Obstacles and opportunities (from outside)

Identify, and rank by order of importance, any obstacles or opportunities your business may face from outside influences. Obstacles and opportunities come from a variety of sources including:

The economic outlook of your market’s economy. Are you starting your business in a healthy economy? If not, can your product still thrive?

Product innovations. How will changes made to competitors’ products affect you? What’s happening with products that are complementary to yours? For instance, if you write computer software programs that run on Windows, PCs made by Dell, Hewlett Packard, Gateway, etc., would be complementary products to yours.

Technological advancements. What changes in technology will impact you?

Environmental issues. Is your product earth-friendly?

Government regulations. What impact does complying with government regulations have on your business? Is there any pending legislation that might affect you?

Barriers to market entry. Are there high or low barriers to market entry in your field? What would it take for a competitor to start a business in your field? Could a competitor start up overnight (low barrier) or does your business require special knowledge, expensive machinery, etc. (high barrier)?

Strengths and weaknesses (inside your company)

Identify internal strengths and weaknesses of your company. For example, your education, experience, and reputation in your area of expertise are most likely strengths. If you’re the inventor of a product or process, that gives you an extreme advantage over your competitors.

On the other hand, if you don’t have any supervisory experience and you need to hire employees, this is a weakness that can, and should be, overcome.

Taking The Next Step

Now that you’ve got a firm handle on who your customers are, what your competitors are doing, and how you’re going to deal with the challenges facing your business, it’s time to begin strategizing your promotional plans and budget needs.

Let’s move on to Marketing Objectives and Strategies.