Market research is usually associated with big brands, often spending millions researching market need, market size, and competition. While this is true, many startups, entrepreneurs, and small businesses manage to undertake market research on a shoestring budget.
Before we go into more detail, why is market research important? It can help you learn about the market, pricing, a product, service, customer, competitor, promotion, distribution, and so on. In fact “No market need” is the main reason why most businesses fail, and in our opinion, most of these businesses probably failed to take “market research” seriously. With that in mind, how should you plan and execute market research on a budget?
Identify the Problem or Opportunity
What is the problem or opportunity you are trying to address? If you are thinking about starting a business, you probably have an idea in mind, and before you start thinking about market research, you need to put your thoughts on paper.
Different Market Research Types
Since you are working with a limited budget, your initial research should focus on one or two market research types.
- Product – investigates what you are selling, and how it compares to similar products on the market
- Customer – examines your customers, segmentation, target niches, and what is required to make a customer switch to your brand.
- Pricing – investigates pricing, discounts, and pricing strategies your competitors are using.
- Promotion – investigates promotional efforts by your competitors. How do they advertise? How often do they promote? What products do they promote the most? How do they compare to your promotional efforts?
- Distribution – investigates how you will get your product/service on the market. Are there any intermediaries? Will you use direct or indirect channels? How will your distribution differ from your competition?
Primary Research vs. Secondary Research
In most cases, primary research is expensive, because it will be tailored to your specific needs. For example, conducting interviews, focus groups, and product testing ensures your data is first hand and up to date. On the other hand, secondary research is less expensive because it relies on data already collected by a third party — for example, public records, trade associations, libraries and so on.
That being said, primary research can be conducted on a budget, if you have friends and family that are willing to help. Just a word of caution, if you don’t have experience conducting interviews or focus groups, you will likely ask leading questions, and leading questions should automatically disqualify the answers. Also, your friends and family are naturally biased, so they can help you conduct market research, but should not be included in it.
Setting Minimum Parameters
When you have a limited budget, you have to compromise. Ask yourself, what is the minimum amount of data we need to reach a conclusion? What should that sample size be? For example, do you need to interview 50 people or 500 people? How many public records or trade associations do you need to research? Obviously, more is better, but if you don’t set realistic parameters your market research budget will quickly spiral out of control.
Some ideas for collecting data
- Face-to-face and Telephone Interviews
- Informal Focus Groups
- Mystery shopping
- Online Polls
- Product tests
- Chambers of commerce
- Business libraries
- Trade directories
- Publicly available marketing research findings/data
- Census data
- Public records
- Omnibus surveys
Market research is extremely important in determining if there is a need for your product or service. Therefore, 99.99% of businesses should conduct market research. The other 0.01% should be reserved for visionaries like Steve Jobs, Elon Musk and disruptive companies like Uber – releasing products/services ahead of their time. However, chances are your product or services is not revolutionary, so give your business the best chance of succeeding and conduct market research. At the end of the day, we live in the information age, so most information is affordable and only a few clicks away.