The Facts About Understanding Your Market

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Market evaluation is the most critical element of successful business planning. It provides the basic data that will determine if and where you can successfully sell your product or service and how much to charge.

While it may sound deceptively simple figuring out if a market exists for your product or service, it's probably one of the most challenging requirements of business. The process involves scrutinizing your competition and your customer base, and interviewing potential suppliers.

The information collected can help you, if necessary adapt your product or service to better meet customer needs. In some rare cases, it might lead to a totally new, but financially rewarding venture.

MARKET RESEARCH

There are any number of benefits to conducting market research. It can help you:

Create primary and alternative sales approaches to a given market,
Make profit projections from a more accurate base,
Organize marketing activities,
Develop critical short/mid-term sales goals and
Establish the market's profit boundaries.

So, how should you go about conducting your research? Two of the most important first steps are defining your goals and organizing the collection/analysis process. Maintain a set of well-documented and easily accessible files so you can store and retrieve data as needed.

QUESTIONS TO ASK

Your research should ask these basic questions:

 

 

Who are your customers?
Where are the located?
What their needs and resources?
Is the service or product essential in their operations or activities?
Can the customer afford the service or product?
Where can you create a demand for the service or product?
Can you compete effectively in price, quality and delivery?
Can you price the product or service to assure a profit?
How many competitors provide the same service or product?
What is the general economy of your service or product area?
What areas within your market are declining or growing?

MARKET DATA

Knowing your market not only requires an understanding of your product, but also an understanding of your customers' socioeconomic characteristics. In conducting your research, you can access relevant market information from these sources:

 

 

SBA ONLINE, the agency's computer-based electronic bulletin board. Accessed by modem, it provides immediate, round-the-clock information on the SBA's services, publications and programs. Users can access a national calendar of events, such as training programs, small business seminars and international trade fairs. Most information is available at no cost; some interactive services involve a connection fee.
SBA's Business Information Centers offer the latest in high-technology hardware, software and telecommunications. Each BIC offers electronic bulletin boards, computer databases, on-line information exchange, periodicals and brochures, counseling, video tapes, reference materials, texts, start up guides, application software, computer tutorials and interactive media. BIC's are located around the country. One on one counseling with seasoned business veterans also is available through the Service Corps of Retired Executives, better known as SCORE.

Other sources include:

 

 

Trade association studies and journal articles.
Regional planning organization studies on growth trends.
Banks, realtors and insurance companies.
Customer surveys in your market area, which you can conduct on your own or search out existing material.

Finally, research on competitors is extremely important. Visit industry trade shows to find out what your competitors are selling and how they are marketing their products. Similarly, stay current on information in industry magazines and publications.

Once you have obtained and analyzed this information, it should become the foundation of your business plan. Research data also will help you develop the basic assumptions in your financial projections, which will tell you whether or not to go into business. You should not view market research, however, as a one-time activity. Once you establish your business, you continually should be in touch with your customers. You may also have to adapt your product/service and/or marketing strategy to keep up with your customers' changing needs.

EXPORT MARKETS

In general, you should be well-established in the US market before committing resources and taking on additional risk to explore export markets. Some products, such as used equipment that is obsolete in the United States but new to other countries, may be particularly well suited for exporting right from the start. Whatever your product or service, it is never too early to explore its export potential.

Researching international markets involves many of the same steps as domestic market evaluation. The first step is to identify the countries with the largest and fastest growing markets for your product. The SBA's Automated Trade Locator Assistance System (SBAtlas) can help. This market research tool provides two types of reports. The product markets for a particular good. The country report identifies the top 20 products most frequently traded in a target market. The National Trade Data Bank, maintained by the US Department of Commerce, also contains valuable market information.

From your list of possible markets, you will want to determine which of these offer the best prospects. You should examine the markets in greater detail, looking at how your product quality and price compares with that of goods already available. You also should determine who your major customers are.

With this information, you can pick one or two export markets to explore initially. You can add more markets later, as your export skills develop. Now you are ready to conduct more in depth market research on this target market(s), just as you did before establishing your business.

SUMMARY

A small business owner, manager or employee must know and understand the market. Market research is simply an orderly, objective way of learning about people - the people who will buy from you and sustain your business venture.