Why Every Entrepreneur Should Conduct Primary Market Research
Every entrepreneur should conduct primary market research to assess the potential of their product in their target market or any market to be truthful. Market research involves acquiring information on the size of the market you are involved in, the needs of your prospective customers, and what your competitors are doing to meet these needs.
Primary market research is an essential precursor to any new business. Information is king, or so they say, although it is how you use that information that crowns it all. The more successful businesses carry out market research continuously.
This helps to keep them current with new developments, changes in consumer needs and preferences, and what their competitors are doing. Also, equally importantly, the effectiveness of their marketing programs. However, there are times when specific research has to be carried out, particularly when a firm is doing badly,
If you have a good understanding of your target market, who are currently the market leaders, and how well they meet the needs and expectations of their customers, then you will have a good platform from which to launch your products or services. Primary market research is an important factor in this. Here, we shall be using the term ‘product’ to include physical products, electronic products such as software, and also services.
What is Primary Market Research?
There are two types of information involved in market research – primary and secondary:
Primary Information: This term refers to the information you gather yourself. You can do this by yourself, by a team working for you, or by a third party that you pay to carry out the market research for you.
Secondary Information: Secondary market research involves searching the internet, using government databases, or using any other sources to find data that is already there. Secondary data has not been acquired by you but has already been published for you to view.
It is the primary information that we are discussing here. All of your competitors will have access to the secondary data, but you access and compile the primary data yourself. That in itself explains its importance! High-quality primary market research can get you one step ahead of your competition. Secondary information is unlikely to – unless your competitors have been negligent! You need to know your competitors to hold the position like IBM and Intel has maintained its position in IoT markets globally whether it be IoT or IoT security.
How to Conduct Primary Market Research
You should first establish how you will conduct your research and collect information. In other words, you need a plan. If you have employees, then every individual must be aware of the plan and how it is to be executed. One of the major issues is how to contact prospects of your potential customers. An important aspect of primary market research is to establish who your customers will be. Any entrepreneur who wants to be successful will have established their potential customer base right from the start!
Assuming that you have already done your homework and established not only a market for your product but also know and understand your competition, then here are some possible means of gathering information:
Written questionnaires: Generally by direct mail. You should always include a cover letter explaining why the recipient was sent the questionnaire and how the information they provide you with will be used. At best, such surveys are lucky if they get a 2% – 3% response.
Telephone Surveys: These can be irritating to many people and give them a bad opinion of your company.
Online questionnaires: These tend to get a better response.
Personal contact: By far the best of the four because:
You see your potential customers or product users face to face, and
You can answer any questions they have – and get the opportunity to impress them enough to consider your product.
Here is some of the information you will need from such surveys:
What issues do customers in your business niche have?
What are your potential customers/clients not getting from current products or services? Is there something they would like to have but that is not currently available? Does your product fill a gap?
If your current or prospective clients have customers of their own, what are these customers looking for?
What are their biggest gripes about the market they are involved in?
It can sometimes be beneficial to offer something in return for a response or completed questionnaire. You could offer a free newsletter about your products and new developments, or even a discount on their next purchase. Internet marketers are well aware of the benefits of such offers.
Using the Market Research Information Acquired
Sometimes you may find it possible to modify your product or service to fill a market gap. This type of primary market research often provides the information entrepreneurs need to get a good start with their new business. ‘Knowing’ is better than ‘hoping’ and a major aspect of primary market research is providing the knowledge without which even the most talented entrepreneur may fail during the crucial start-up months.
If your products are sold direct to the public, then you should be able to compile a questionnaire to establish what gaps, if any, there are in your market. Primary research is all about getting information unique to you by asking the right questions to the right people. These are the people who will use your product.
What is the objective? In the case of primary market research, it is the acquisition of information. You must be clear about:
The information you are seeking.
Who did you contact to acquire that information.?
How the initial contact will be made.
The questions that will be asked.
How the information received will be used.
How will the initial contact be made? There is nothing wrong with picking up a phone and calling a responsible person such as the acquisition or purchasing manager. Ask for an appointment, but be ready with the answers to some questions you may be asked.
For example, you may be asked:
What can you offer that my current supplier cannot?
Why should I change?
What benefits are there?
What is your pricing?
What quality guarantees do you give?
Any special deals going such as bulk discounts?
Who else do you supply?
Why have I not heard about you until now?
These are all common questions that are asked when a business or a buyer is asked to consider a new supplier. If you are researching to improve a product you must be honest. Never be afraid to ask “What’s wrong with our product?”, “What would you rather have?” or “How can we improve?” Your customers may respect you more by asking such questions. That’s what Lego did and it reinvigorated their product. More on that later.
Exploratory and Specific Primary Market Research
The information you receive can be of two different types. The first type enables you to identify certain problems. You are fundamentally exploring the market seeking gaps that you can fill or areas where your product could meet the needs of potential customers better than what are using now. This is known as ‘exploratory’ primary market research.
The second type, ‘specific primary research’ uses exploratory research to target the issues it has raised and come up with a solution. This is one major reason why every entrepreneur should conduct primary market research. It first identifies a problem, and then finds an acceptable and profitable solution to that problem.
Let’s look at an example of Primary Market Research: Lego
In 2004 Lego was losing $1 million per day when Jorgen Vig Knudstorp took over as CEO of the company. He used primary research to establish what customers expected of Lego. The results of this research revealed that Lego was getting it wrong. Not only was creative play important to parents, but also their children. The larger bricks and ease of construction were making kids lose their interest in what had become a ‘dumbed-down’ version of the original.
After carrying out primary research with parents, Lego found children wanted more challenges. At that time, Lego was reducing them, making it easier to build uninspiring structures. So they reintroduced old products such as fire engines that kids loved building.
Lego Friends – Getting Girls Interested: Primary research also showed that girls had little interest in Lego compared to boys. They had little interest in JCB diggers and various types of vehicles. The company was excluding itself from around 50% of the market due to its boy-centered product. So Lego introduced its Lego ‘Friends’ range, introducing the girl figure Mini-doll in nice pinks and other bright colors with which girls could identify. This took four years of primary market research to get right.
However, once launched, Lego Friends rapidly opened up a new female market for Lego! By 2014, Lego had surpassed most of its rivals in the toy market, including Mattel. The Lego House was another case where primary market research enabled the company to improve. The original Lego House had no bathroom. Girls wanted a bathroom, so one was included yet more potential sales! Click to read more about Lego’s research of the way Kid play.
McDonald’s Healthy Options: There are many other examples of how this type of market research helped turn around the fortunes of well-known businesses. McDonald’s is one of those: its surveys showed that people wanted healthier options. So more salad options were made available and the firm stopped using chicken containing human antibiotics. Healthier desserts were also introduced including apple pie. Now, who doesn’t like apple pie! The secret is the option: those who prefer the original can still get it.
Why Every Entrepreneur Should Conduct Primary Market Research: Conclusion
Every entrepreneur should conduct primary market research – not only those involved in new starts. Even established companies can benefit from seeking their data rather than using published statistics. Originality is often a quality that entrepreneurs possess, so why not apply that to your market research.
The examples above show that even established companies can reinvent themselves by using primary market research. Customer surveys, visiting clients, and even asking “How are we doing have you any issues?” This is also a form of primary market research and one that will give your customers more confidence in you and even respect you more.