Definition: The process of gathering, analyzing and interpreting information
about a market, about a product or service to be offered for sale
in that market, and about the past, present and potential customers
for the product or service; research into the characteristics,
spending habits, location and needs of your business's target
market, the industry as a whole, and the particular competitors you
face
Accurate and thorough information is the foundation of all
successful business ventures because it provides a wealth of
information about prospective and existing customers, the
competition, and the industry in general. It allows business owners
to determine the feasibility of a business before committing
substantial resources to the venture.
Market research provides relevant data to help solve marketing
challenges that a business will most likely face--an integral part
of the business planning process. In fact, strategies such as
market segmentation (identifying specific groups within a market)
and product differentiation (creating an identity for a product or
service that separates it from those of the competitors) are
impossible to develop without market research.
Market research involves two types of data:
- Primary information. This is research you compile
yourself or hire someone to gather for you.
- Secondary information. This type of research is already
compiled and organized for you. Examples of secondary information
include reports and studies by government agencies, trade
associations or other businesses within your industry. Most of the
research you gather will most likely be secondary.
When conducting primary research, you can gather two basic types
of information: exploratory or specific. Exploratory research is
open-ended, helps you define a specific problem, and usually
involves detailed, unstructured interviews in which lengthy answers
are solicited from a small group of respondents. Specific research,
on the other hand, is precise in scope and is used to solve a
problem that exploratory research has identified. Interviews are
structured and formal in approach. Of the two, specific research is
the more expensive.
When conducting primary research using your own resources, first
decide how you'll question your targeted group: by direct mail,
telephone, or personal interviews.
If you choose a direct-mail questionnaire, the following
guidelines will increase your response rate:
- Questions that are short and to the point
- A questionnaire that is addressed to specific individuals and
is of interest to the respondent
- A questionnaire of no more than two pages
- A professionally-prepared cover letter that adequately explains
why you're doing this questionnaire
- A postage-paid, self-addressed envelope to return the
questionnaire in. Postage-paid envelopes are available from the
post office
- An incentive, such as "10 percent off your next purchase," to
complete the questionnaire
Even following these guidelines, mail response is typically low.
A return rate of 3 percent is typical; 5 percent is considered very
good. Phone surveys are generally the most cost-effective. Here are
some telephone survey guidelines:
- Have a script and memorize it--don't read it.
- Confirm the name of the respondent at the beginning of the
conversation.
- Avoid pauses because respondent interest can quickly drop.
- Ask if a follow-up call is possible in case you require
additional information.
In addition to being cost-effective, speed is another advantage
of telephone interviews. A rate of five or six interviews per hour
is typical, but experienced interviewers may be able to conduct
more. Phone interviews also can cover a wide geographic range
relatively inexpensively. Phone costs can be reduced by taking
advantage of less expensive rates during certain hours.
One of the most effective forms of marketing research is the
personal interview. They can be either of these types:
- A group survey. Used mostly by big
business, group interviews or focus groups are useful brainstorming
tools for getting information on product ideas, buying preferences,
and purchasing decisions among certain populations.
- The in-depth interview. These one-on-one
interviews are either focused or nondirective. Focused interviews
are based on questions selected ahead of time, while nondirective
interviews encourage respondents to address certain topics with
minimal questioning.
Secondary research uses outside information assembled by
government agencies, industry and trade associations, labor unions,
media sources, chambers of commerce, and so on. It's usually
published in pamphlets, newsletters, trade publications, magazines,
and newspapers. Secondary sources include the following:
- Public sources. These are usually free, often offer a
lot of good information, and include government departments,
business departments of public libraries, and so on.
- Commercial sources. These are valuable, but usually
involve cost factors such as subscription and association fees.
Commercial sources include research and trade associations, such as
Dun & Bradstreet and Robert Morris & Associates, banks and
other financial institutions, and publicly traded
corporations.
- Educational institutions. These are frequently
overlooked as valuable information sources even though more
research is conducted in colleges, universities, and technical
institutes than virtually any sector of the business
community.
Public Information
Sources
Government statistics are among the most plentiful and wide-ranging
public sources. Helpful government publications include the
following.
The State and Metropolitan Area Data Book provides a wide
variety of statistical information on states and metropolitan areas
in the United States. Published by the U.S. Census Bureau, it's
available online for $31 through the U.S. Government Printing
Office and at larger libraries.
The Statistical Abstract of the United States provides
tables and graphs of statistics on the social, political and
economic conditions in the United States. Published by the Census
Bureau, it's available online for $48 through the U.S. Government Printing
Office and at larger libraries.
U.S. Industry and Trade Outlook presents recent financial
performances of U.S. manufacturers and identifies emerging trends.
Published by the Commerce Department in cooperation with
McGraw-Hill, it's available online for $76 through the U.S. Government Printing
Office and at larger libraries.
The U.S. government online bookstore at the U.S. Government Printing
Office has an abundance wealth of publications on topics
ranging from agriculture, aviation, and electronics, to insurance,
telecommunications, forest management, and workers'
compensation.
The U.S.
Census Bureau website also contains valuable information
relevant to marketing. The Bureau's business publications cover
many topics and trades--such as sales volume at furniture stores
and payrolls for toy wholesalers--and are useful for small
businesses as well as large corporations in retail, wholesale
trade, and service industries. Also available are census maps,
reports on company statistics regarding different ethnic groups,
and reports on county business patterns.
One of the most important information resources you'll find is
the SBA.
The SBA was created by Congress in 1953 to help American
entrepreneurs start, run, and grow successful small enterprises.
Today there are SBA offices in every state, the District of
Columbia, the U.S. Virgin Islands, Puerto Rico, and Guam. Among the
services offered by the SBA are financial assistance, counseling
services through Small Business Development Centers (SBDCs), management
assistance through programs like SCORE, and low-cost publications. The
counselors at SCORE can provide you with free consultation on what
type of research you need to gather and where you can obtain that
information. They may also be able to suggest other means of
gathering the information from primary sources. SBDCs generally
have extensive business libraries with lots of secondary sources
for you to review.
One of the best public sources is the business section of
your public, or local college or university, library. The
services provided vary from library to library but usually include
a wide range of government publications with market statistics, a
large collection of directories with information on domestic and
foreign businesses, and a wide selection of magazines, newspapers
and newsletters.
Almost every county government publishes population density and
distribution figures in accessible census tracts. These show the
number of people living in specific areas, such as precincts, water
districts or even ten-block neighborhoods. Some counties publish
reports that show the population ten years ago, five years ago, and
currently, thus indicating population trends.
Other public information resources include local chambers of
commerce and their business development departments, which
encourage new businesses to locate in their communities. They will
supply you (usually for free) information on population trends,
community income characteristics, payrolls, industrial development
and so on.
Don't overlook your bank as a resource. Bankers have a wealth of
information at their fingertips and are eager to help their small
business customers get ahead. All you have to do is ask.
Commercial Information
Sources
Among the best commercial sources of information are research and
trade associations. Information gathered by trade associations is
usually limited to that particular industry and available only to
association members, who have typically paid a membership fee.
However, the research gathered by the larger associations is
usually thorough, accurate, and worth the cost of membership. Two
excellent resources to help you locate a trade association that
reports on the business you are researching include the
Encyclopedia of Associations (Gale Research), and the
Encyclopedia of Business Information Sources (Gale
Group).
Local newspapers, journals, magazines, and radio and TV stations
are some of the most useful commercial information outlets. Not
only do they maintain demographic profiles of their audiences
(their income, age, gender, amount of disposable income, and types
of products and services purchased, what they read, and so on), but
many also have information about economic trends in their local
areas that could be significant to your business. Contact the sales
departments of these businesses and ask them to send you their
media kit, since you're working on a marketing plan for a new
product and need information about advertising rates and audience
demographics. Not only will you learn more about your prospective
customers, you'll also learn more about possible advertising
outlets for your product or service.
Dun & Bradstreet is another commercial source of market
research that offers an abundance of information for making
marketing decisions. It operates the world's largest business
database and tracks more than 62 million companies around the
world, including 11 million in the United States. For more
information, visit the Dun & Bradstreet Small Business Solutions
website.
Finally, there are educational institutions that conduct
research in various ways, ranging from faculty-based projects often
published under professors' bylines, to student projects, theses,
and assignments. You may be able to enlist the aid of students
involved in business classes, especially if they're enrolled in an
entrepreneurship program. This can be an excellent way of
generating research at little or no cost, by engaging students who
welcome the professional experience either as interns or for
special credit. Contact the university administration and marketing
or management studies departments for further information.