When setting up a business, you must conduct market research and prepare yourself to discover opportunities, understand challenges, and learn how to overcome them.
As an entrepreneur, market research gives you a clear picture of where to launch your venture, which businesses are in demand, available market opportunities, and many other factors that will help you achieve your goals both in the short term and in the long run.
Tools for Conducting Market Research
Market research is generally a four-stage process:
- Defining the Question or Opportunity
During the first stage, a question or opportunity is identified regarding the product or service the entrepreneur wishes to introduce.
Example: Can the local market support a new ice cream parlor? - Selecting Research Tools
In the second stage, the entrepreneur decides which tools or methods will be used to gather the required information, such as surveys, demographic studies, income analysis, and interviews. - Collecting Information
The third stage involves gathering relevant data and information from selected sources. - Analyzing the Information
In the final stage, all collected information is carefully analyzed to help make informed business decisions.
Types of Data Collection Tools
There are two main types of data collection used in market research:
Primary Data
Primary data refers to information collected firsthand, directly from the source, for a specific purpose.
Methods of primary data collection include:
- Questionnaires
- Personal interviews
- Focus group discussions
- Mail surveys
- Telephone surveys
Secondary Data
Secondary data refers to information that has already been collected, often for another purpose.
Examples include:
- Demographic studies
- Surveys
- University and college research projects
- Books and magazines
- Government publications
- Internet research
Secondary information can also be obtained from:
- Libraries
- Small Business Administration (SBA) offices
- Service Corps of Retired Executives (SCORE)
- Small Business Development Centers (SBDC)
- Chambers of Commerce
- Community banks
Careful internet research can also provide valuable information.
Sources of Secondary Data Collection
Secondary data is often the easiest place to begin because it is already available, making it cheaper and faster to obtain.
Books
Examples include:
- The Business Periodical Index — lists business articles published in major business magazines.
- The Encyclopedia of Associations — describes organizations and associations across the United States.
- Standard & Poor’s Industry Surveys — provides statistics and industry analysis.
Commercial Information Sources
These are usually subscription-based services. Examples include:
- The A.C. Nielsen Company — provides information on market share, retail prices, sales, television audiences, and household purchases.
- Information Resources, Inc. — collects supermarket scanner data, grocery product movement information, and customer behavior trends.
- NFO Research — provides information for mail-order businesses, product testing, customer attitudes, and market segmentation.
- Simmons Market Research Group (MRB Group) — publishes annual reports on lifestyles and regional demographics related to age, income, gender, and brand preferences.
Government Publications
Examples include:
- The Annual Survey of Manufacturers
- Business Statistics
- The Census of Manufacturers
- The Census of Population
- The Census of Retail Trade
- Industrial Outlook
- The Monthly Labor Review
- The Survey of Current Business
- The Vital Statistics Report
International Data Sources
Examples include:
- The Asian Economic Handbook
- Country Studies
- The Demographic Yearbook (published by the United Nations)
- The Economic Survey of Europe
- The Europa Yearbook
- The Statistical Yearbook (UN)
- International Financial Statistics
- International Marketing Data and Statistics
- The International Trade Statistics Yearbook
Periodicals and Journals
Examples include:
- Advertising Age
- The Journal of Marketing
- Campaign
- The Journal of Marketing Research
- Chain Store Age
- The Progressive Grocer
- International Journal of Research in Marketing
- Marketing Week
- The Journal of Consumer Research
- Sales and Marketing Management
Sources of Primary Data Collection
Primary data collection requires time, courage, effort, and proper planning. Questions must be prepared carefully, the right participants must be selected, and responses should be analyzed objectively. Seeking assistance from experienced individuals can greatly improve the accuracy and reliability of the research.
Examples of primary data collection methods include:
Observing Customer Behavior
This method involves studying how customers behave in real situations. Examples include:
- Acting as a customer to observe competitors’ operations
- Counting the number of customers entering a similar business
- Showing sample advertisements or products to customers to measure their reactions
- Investigating traffic flow patterns and competitor locations
Telephone Interviews
Telephone interviews allow entrepreneurs to quickly reach many people. Phone directories and membership lists can provide useful contacts because people with similar income levels often live in the same neighborhoods.
However, challenges include:
- Many people use answering machines or caller screening
- Some people dislike unsolicited calls
- Mobile phone numbers are often difficult to obtain
Group Interviews (Focus Groups)
Focus groups involve gathering several people together to discuss opinions, ideas, and experiences. These sessions can also serve as brainstorming opportunities, where group discussions generate valuable insights.
Disadvantages include:
- Groups may not accurately represent the wider community
- Some individuals may dominate discussions
- Some participants may expect payment for their time
Questionnaires
A questionnaire is a written set of questions designed to collect specific information from participants.
There are two main types of questions:
Closed-Ended Questions
These provide predefined answer choices for respondents to select from. They are quick and easy to answer but may limit responses and overlook unexpected opinions.
Open-Ended Questions
These allow respondents to provide detailed answers in their own words. They can reveal deeper insights but may discourage participants if questions are too personal or require lengthy responses.
Final Thoughts
Conducting proper market research is one of the most important steps in building a successful business. It helps entrepreneurs understand customer needs, identify market opportunities, analyze competitors, and reduce the risk of failure.
Through market research, entrepreneurs gain valuable knowledge about the best location for their business, the level of demand for products or services, pricing strategies, and customer behavior. It also helps business owners prepare for challenges and develop effective solutions before investing significant time and money.
Both primary and secondary data collection methods play an important role in gathering accurate and useful information. Whether through surveys, interviews, observation, books, government publications, or online research, the information collected helps entrepreneurs make informed decisions and improve their chances of long-term success.
Ultimately, a business built on strong research and careful planning is more likely to survive, grow, and remain competitive in the market.