So you have a new and exciting idea for a product or service – great! Like all entrepreneurs, your objective is to get people to buy from you. Now think: why is there a need for my product or service in my industry? What is the future of my industry? Who will buy my product or service? To answer these questions, you need to conduct market research. .
So why is market research so important to my business plan?
“Market research is critically important so that the entrepreneur – and potential investors – can make a decision whether or not to move forward with a business idea. Market research is proof that one’s idea can work in the market, cater to a need/want and make a profit,” says Cuauhtemoc Rodriguez, Business Consultant and Planner at Aztlan Business Consultants (ABC). “Primary and secondary market research are both important, especially if you’re just starting out. Your market research is what you will use to substantiate your financial projections – so it’s important to know the state of your target market.”
So what’s the difference between primary and secondary market research?
Simply put, primary research is original, first-hand research that your company obtains directly from potential customers within your target markets(s). Secondary research is research compiled from existing market research data.
So what does that mean?
“Your objective is to determine the market feasibility of your product or service,” says Rodriguez. “The better you define your market, the better you understand your potential customer base – and the better your potential investors understand who will buy your product or service, and why.”
Primary market research is a direct approach and usually the best way to accumulate target market data, especially if you’re a new company or you have a new idea and you are looking for funding. Examples of primary market research include surveys, focus groups and interviews with potential customers and industry leaders.
“The idea here is to get out there and ask, ‘What do you think of my idea?’ and see how much interest and information you generate from a targeted group of people, relevant to your industry,” says Rodriguez.
Secondary market research involves compiling existing market data by analyzing studies already conducted by professionals in your field. Examples of secondary market research include trade association data, government studies and industry projections and reports from universities. Market research firms exist to provide market research reports, but be aware the information often comes with a price tag.
“You want to be sure that you’re looking at timely data,” says Rodriguez. “It’s very important that you’re able to show how your product or service fits into your target market right now, not five years ago. Be careful when using search engines to find your data – the information you find on the Internet isn’t always correct and it’s not always current.”
So what does this have to do with branding?
Understanding your target market is important to your brand strategy. Because market research both reduces risk and uncovers opportunities, the characteristics and motivations of the individuals in your target market (the people who will buy your product or service) will eventually take shape through your research.
“Having a thorough understanding of your customer’s mentality through target market research will increase your ability to connect with them effectively through better designed marketing campaigns,” says Rodriguez. “This information will help you develop your logo, motto or slogan, business cards, signage, promotions, newsletters, social media, public relations – everything!”
When you discover the true identity of your target market, you discover the identity of your business – and that’s what branding is all about!