What Is Small Business Market Research?
There is a lot involved when starting a small business from creating a business plan to developing a product or service to making sure you're compliant with legal and regulatory requirements. Another equally important aspect for small businesses is market research. Most small business owners focus on location, advertising, employees, inventory etc. but fail to determine whether or not their product or service is even warranted. Market research involves looking outside of the business itself and evaluating competitors, growth and how the product and its price fit into the overall business climate.
Market Opportunity
First and foremost, is what you're offering even considered valuable to the going public? Many small business owners create a business or service because it's something they love to do. While this is the most reliable way to select a small business idea that doesn't necessarily mean the idea will work as a going concern.
Competitive Analysis
Using a competitor analysis is one guaranteed way to determine if your small business is necessary. If competitors already exists in a given category then that means there is money to be made. If no competitors exist then it is probable others tried similar ideas and found no financial success. If too many competitors exist then the market may be saturated making obtaining new customers difficult and expensive.
Target Market Scope
Small businesses operating online aren't necessarily tied to a geographic location or target market limitation. Identifying a target market is crucial to small business success because it will dictate how advertising dollars are spent and whether or not your business offering is relevant to the target group. Your business may also be able to target other segments to increase sales and further expansion.
Market Expansion
Depending on your small business, market expansion may or may not be relevant or necessary. A small specialty restaurant may be fine profitably operating in the same spot for decades. This is more of a personal ambition but should opportunities arise, determine whether or not your current business model grows comfortably without creating too much debt or turning away customers.
Customer Acquisition
Many small businesses fail because they find a location, they get everything established then no customers walk through the door. It is incredibly important to determine how your customers will find out about your small business and what it costs to obtain new sales. Repeat customers are fine but are unlikely to lead to a long-term sustainable revenue stream.
Product Features
Many businesses, when introducing a product, will offer free samples or conduct panels to get customer feedback. What additional features may increase customer satisfaction and generate more revenue? How will additional features impact usability and pricing? A simple product is great but it can lead to stagnant sales if offered for too long. Modifications are often necessary to increase sales or to reach new target markets.
Maximum Pricing
Product pricing can be the most difficult aspect of launching a small business. Many companies have introduced products at too high a price point creating significantly reduced sales. No small business wants to leave money on the table but they also don't want a loose hundreds or thousands of sales because the price immediately turns customers away. A great way to establish pricing is to look at what competitors are currently charging and incorporate that into your costs of goods sold and profit margin expectations.
Customer Satisfaction
Small businesses need to proactively and continually seek customer feedback regarding their product or service as a part of normal business operations. Customer satisfaction cards might seem quaint but they can provide valuable insights into what customers are thinking. While a few clients may just be complaining others will hopefully highlight significant deficiencies such as poor customer service, not enough value or limited store hours.
