Conducting market research is vital to organisations who want to avoid costing mistakes and it's an important component of any business plan. Market research aims to understand the reasons customers will buy your product. It studies such things as consumer behaviour, including how cultural and personal factors influence that behaviour.
Market research is split into two varieties: primary and secondary.
Primary research studies customers directly, whereas secondary research studies information that others have gathered about customers. Primary research might be conducted in a street or telephone interviews or online polls with randomly selected members of the target group. You can also study your own sales records and customers to gather primary research.
Secondary research might come from information found online such as reports found on the websites of other organisations or blogs written about the industry. For your business plan, you can use either type of research or a combination of both.
The basic questions you will try to answer with your market research include:
Who are your customers? Describe them in terms of age, sex, occupation, income, lifestyle, education, etc.
What do they buy now? Discover and describe their buying habits relating to your product or service, including how much they buy, their preferred suppliers (or brands), the most popular features and the predominant price points.
Why do they buy? This is the tricky question to answer as it attempts to delve into consumers’ heads. Answers will depend on the product and its uses. Cookware buyers may buy the products that offer the most effective non-stick surfaces, or those that give the most pans in a package for a given amount of money, or those that come in the most decorative colours.
What will make them buy from you? Although some of these questions may seem difficult, you’d be surprised at the amount of information that's available about markets, sales figures and consumer buying motivations. Tapping into information sources to provide the answers to as many questions as you can. Add to your plan and the odds of success will be higher
The evidence is clear: Having a formal business plan increases the chance of start-up success by 10-15%, controlling for other factors. That isn’t because the plan is correct, but rather because planning helps the business understand their market (through this market research), aligns goals and makes founders think about the future.
If you would like to discuss your business plan needs and why market research is an important part of any business plan please contact me here. A ProfitPlus PlanningCLUB combines creating a business plan, business coaching, advice, interactive software and business tools to help you through your business planning process simply and effectively. The interactive two-day workshop will result in an outstanding 5 year business plan to help you develop and plan your business for success, giving you higher profits, greater cash flow and increased value.