Market Research: The Basics
Basic market research techniques can help you obtain information essential to your business’s success
This guide will show you how to:
- understand the purpose of market research
- understand levels of market research
- increase your market awareness
- carry out ongoing market research
- carry out formal research
Understanding the purpose of market research
The main reasons for carrying out market research are to:
- provide you with data for planning
- give you help with marketing and selling
- use as a basis for product development
- provide your financial supporters with evidence that your business plan is based on a thorough knowledge of your market
Your market research sources will be different depending on whether you have been in business for some time, or whether you are just starting out. However, in both cases you need to know:
- is there a market for your planned or existing products?
- how much would people be prepared to pay for what you are going to provide?
- can you afford to produce/provide it for them at that price?
Levels of market research
There are three basic levels of market research:
- Market awareness: this includes internet research, reading papers and journals, talking to friends and colleagues, talking to your competitors’ clients, analysing how competitors do things, simple analysis of sales, and observations – for example, counting how many people enter your premises*.
- Ongoing research: this includes feedback from customers, surveys and a culture of staff building relationships and seeking responses from customers and prospects.
- Formal research for special projects: this is carefully planned research, probably carried out by a professional, with a clear brief and timescale, to support a significant new investment.
Increase your market awareness
Your customers: To understand what customers want, you need to find out everything you can about them that is relevant. You can do this by telephone, email or face-to-face canvassing. You must, however, ensure that you are not contravening any data protection laws by making unsolicited calls. See the MRS standards and guidelines for more information.
Your market: To know how business is done in your industry, how products are usually sold and delivered and what discounts and credit arrangements other suppliers offer.
Your competitors – to find out what you can about your competitors:
- read trade websites, papers and the business pages of local papers
- look at trade directories as they come out, noting any changes
- try out competitors’ services as a mystery shopper
- talk to competitors’ customers, who may also be or become yours*
- talk to your competitors – while they may be your rivals, they are also your industry colleagues*
- research key competitors using Companies House – www.companieshouse.gov.uk – look at competitor websites, press releases and internet searches
Ongoing informal research
Get feedback. Talk with your customers and prospective customers. Everyone who deals with customers should gently seek feedback from them. Also talk to retailers and distributors. You also need to put in place a system for recording and capturing feedback – then make a decision on whether to act on that feedback. No matter how big your business becomes, always handle a few customers personally to keep your finger on the pulse.
Be alert for problems. Notice the slightest hint of dissatisfaction. People do not like to complain, so the first you know of a dissatisfied customer may be when they become an ex-customer.
Ask customers what they would like in an ideal world. For example: “If there were one thing you could change about the product/service, what would it be?” Then see if you can move towards providing it.
Carry out surveys. Survey your customers from time to time using email or postal questionnaires. Offering the chance to win a prize and making surveys anonymous may help improve response rates.
Use complaints. Complaints are pointers to opportunities for improvement.
Study your sales records. Put in place a structure of management accounts that keep you informed of what is happening within your company. Compare year on year, month on month. Are there other seasonal trends? Are these short term or long term? Or is a product in long-term decline? Consider reasons why they are the way they are.
Review data regularly. Set a fixed time every month to review what you have learned – from talking to staff and customers, from your books and your sales figures. Talk about it with your key staff. What conclusions can you draw? Are there trends? Document all actions and make sure the points agreed are carried out.
If you’re putting together a business plan, you may want to carry out some formal market research or employ a professional to do so.
Economic research: You may want to put economic research in a business plan to show that you have accounted for the possibility of a recession or boom over the next few years. Concentrate particularly on those trends that apply to your own industry.
Population research: You can get statistics on the population, their spending power and consumption patterns. This is important when it comes to identifying target segments of the market.
Other research relevant to your market: Look for facts and figures that apply to your own particular market. If you sell air conditioning, use statistics that show temperatures. If you sell industrial machinery, get statistics on industrial production.
Look at The Market Research Society website for useful information on standards and guidelines for conducting market research effectively and legally.
This Market Research: The Basics business advice article published in association with Lloyds TSB.
Whether you are looking to start-up a business account or want to move your existing business account Lloyds TSB can offer you all the Business Banking support you need
While all reasonable care has been taken to ensure that the information in this website is accurate, no liability is accepted by Lloyds TSB for any loss or damage caused to any person relying on any statement or omission in the content of this website. The content of this website is provided for information only and should not be relied on as offering advice for any set of circumstances and specific advice should always be sought in each instance