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Conducting Start-up Market Research

Entrepreneurs and those looking carefully at the business plan will need to evidence that there is likely to be a demand for the product / service before they are likely to invest. The problem is, it can be very costly performing market research and the funds for starting the business are generally tight. There are some techniques that are possible to afford as a business start-up.

Primary and Secondary Research

  • Primary Research – Collecting first hand data that is tailormade to the firms own products, customers or markets.
  • Secondary Research – Information collectedfrom a second hand source, such as reference books, government statistics ormarket intelligence reports. Generally not as expensive to gather as primarydata.

Primary Research

To gain detailed precise information about the market,it might be necessary to collect this specifically for the business.Entrepreneurs may not be able to afford to pay someone to do this and so islikely to perform this function themselves. They have a number of decisions to make to ensure theycollect the correct data.

Disadvantages of Primary Research

  • Often costly to carry out
  • Difficult to carry out accurately
  • Can be inaccurate leading to incorrect business decisions
  • Entrepreneurs often lack the skills and time to carry out research.

Secondary Research

An existing business may well have lots of existing data internally that can answer the questions required. This can be in the form of sales figures, stock records, geographical analysis of sales, financial records, reports from sales staff and even customer complaints. Entrepreneurs can gain secondary information from a number of sources.

  • Listings in the phone book – The most obvious way to find out about competitors in your area, the Internet has taken over here.
  • Trade Associations – Most industries have an organisation that exists to advise the businesses within it.
  • The Charter Institute of Marketing – Has a marketing library
  • Chambers of Commerce – Generally exist in most towns and cities to advise and help businesses in the local area.
  • Enterprise Agencies
  • Business Link – A government organisation offering help, support and advice
  • The Trade Press - Most industries have their own magazine or newspaper. These have articles on the trends in the markets, useful contacts and supplier information.
  • Competitors – Will issue brochures, price lists, special offers, product details. All of this is valuable information.
  • Office for National Statistics – Population statistics and research publications
  • Research Companies – There are companies that specialise in conducting research and although expensive will do the job for you should there be problems with time constraints.
  • Quantitative Data - Numerical data about the market, i.e. population size, sales figures etc.
  • Qualitative Data - Written feedback from surveys. Can be information about attitudes, feelings and opinions. This information is often more revealing but costs more to collect.

Sampling

Sampling Methods:

  • Who is the information going to be collected from? - In order to reduce the costs of asking everyone, a representative sample is taken of the public in order to answer the questions you want answers for. The smaller the sample the less confident an entrepreneur can be about its accuracy.
  • Random Sample - Each potential member of a group has an equal chance of being in the sample. If your chosen demographic was 18-25 year old females in Liverpool, to get a truly random sample you would have to ensure that each of them was identified and had an equal chance of being chosen. By completing a questionnaire on the street, some would be omitted because they stayed home that day, or spend the day at work.
  • Quota Sample - The characteristics of the market are mirrored in the sample. For example, the market in Salisbury has a population of 43,000 people, 20,000 are male, 23,000 are female. You might ask the first 20 males and the first 23 females.
  • Stratified Sample - A selection of people is randomly chosen from with a sub group or demographic. For instance a business might want to know the views of females 17 – 24 and select randomly from people within that group.

What affects the choice of sampling?

  • Available finance
  • The nature of the product – is it something that has been done before or a brand new product / service? New ideas are less likely to have data available already.
  • The level of risk – The newer the product the greater the risk and the more need for some research
  • The target market – A clearly defined market is much easier to sample.

How to collect information

  • Observation – Sometimes the most useful information can be gained by watching
  • IT – More detailed and accurate information through EPOS systems, loyalty cards and websites.
  • Written Questionnaire – Most used but often badly designed. Must avoid leading questions and ask closed and open questions when appropriate.
  • Face to Face Questionnaire – Difficult and time consuming but have the benefit of being able to follow up on questions
  • Telephone Surveys – Cheap and quick, have similar benefits to face to face questionnaires.
  • Focus Groups – People discussing a product can reveal information that might not be gained from individual interviews. Can be used to gain the psychological motivations for product purchase.
  • Test Marketing – Selling the product in a small segment of the market generates useful data to improve products and practices. The small scale of business start-ups tends to rule this out

Business


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