Before you can begin any type of major investment, whether it is starting a new business or to expand an existing business, you will need to undertake market research, otherwise you run the risk of losing your investment through poor planning.
When conducting your market research, you will be gathering two types of information:
Primary Information, that you can compile yourself or employ someone else to gather for you.
Secondary Information, or information that is already compiled and organised. Reports and studies done by government agencies, trade associations or other businesses within your industry are examples of what will already be available.
There are basically two types of information that can be gathered through primary research:
Conducting exploratory & specific research
Exploratory research is open-ended, helps you define a specific problem, and usually involves detailed, unstructured interviews in which you acquire lengthy answers from a small group of respondents.
If you were about to introduce a new product to the market, you might ask a focus group of consumers for their opinions regarding the product’s usefulness, its design, its colour, etc.
The more answers you receive at this stage, the more time you can put into modifying the product to appeal to your customers.
Specific research concentrates on solving a problem once it has been defined. It usually involves more in-depth and structured questioning, with the objective being to decide on concrete courses of action to resolve a problem defined by exploratory research.
Specific research tends to be more expensive than exploratory research.
While many companies employ a marketing firm to acquire primary information for them, this is not always the case. When conducting primary research using your own resources, you must first decide how to question your target group.
Four methods commonly used are:
- Direct mail
- Telephone interviews
- Person to person interviews
- Focus groups.
Using direct mail
If you choose to use a direct mail questionnaire, you can increase your response rate by doing the following:
Enclose a professionally prepared cover letter, clearly explaining the nature of your survey and stressing the value of the recipients’ opinions.
Make sure your questions are short and to the point, and easy to answer.
Make sure questionnaires are addressed to specific individuals and that they are of interest to the respondents.
Limit the questionnaire’s length to two pages. Most people don’t like to be bothered with questionnaires, so if they are too long, your chances of receiving a good response will be decreased.
Enclose a reply postage-paid envelope. Information on how to apply for a postage-paid facility is available from your local post office.
Offer an added incentive (such as a prize draw) for the timely return of your questionnaire.
Send a reminder about two weeks after the initial mailing.
Unfortunately, even if you employ the above tactics, you will probably receive a response from a fraction of your market. Only certain types of customers will voluntarily respond to a direct mail questionnaire.
Make sure you take this into account when drawing conclusions from the responses received. Don’t be disappointed if you receive a response from less than five percent of those to whom you mailed your questionnaire.
As previously mentioned, offering a reward or special offer for respondents can dramatically increase your response rates.
Mailing lists fitting predetermined specifications and criteria can be rented from a Mailing List Broker, which can be found in the Yellow Pages under the heading of “Advertising – Direct Mail Services”. Mailing Lists are rented on a “per usage” basis – each time you want to use one you will need to pay for it. Don’t be tempted to use a list a second time without payment, as you will almost certainly be found out.
Conducting telephone interviews
Telephone surveys are generally the most cost-effective kind of survey to use, considering overall response rates.
The same principles of questioning are true of telephone interviews. Most people are inundated with telephone inquiries these days and have become wary of unfamiliar voices over the phone.
This, combined with the fact that you are invading their time makes you an unwelcome intruder. Many people however, will give you enough time to ask a few questions. Don’t take too much time, or the respondent may become negative.
Following are some phone survey guidelines:
At the beginning of the conversation, the interviewer should confirm the name of the respondent if calling a home, or give the appropriate name to the switchboard operator if calling a business.
Avoid pauses, as respondents can quickly lose interest.
Make sure that you (or your interviewer) can make a follow-up call if you require additional information.
Phone interviews can save both time and money. Some of the more experienced interviewers can get through up to 10 interviews an hour, but finishing five to six per hour is more typical.
Phone interviews also allow you to cover a wide geographical area relatively inexpensively.
You can reduce the costs of calling by taking advantage of cheaper rates during certain hours of the day.
There are two main types of person-to-person interviews.
The group interview – Used mostly by big businesses, group interviews can yield suggestions for new products or changes in existing products. They can also help you determine which factors consumers take into account when they make purchasing decisions.
The depth interview – The interviewer speaks with one person at a time and uses a small checklist and basic common sense to guide the conversation. Depth interviews are either focused or non-directive. Non-directive interviews encourage respondents to address certain topics, but use minimal questioning. The respondent, in essence, leads the interview. The focused interview, on the other hand, is based on an established, and comparatively detailed, checklist.
Whether you are interviewing people in a group or one-on-one, once you have their attention and they have agreed to take part in an interview, it is easy to sit down and ask questions which can take an hour or more to complete.
Interviews are usually conducted at a time that is convenient for the person (or people) being interviewed. Some interviewers offer a small gift as a token of their appreciation. It is important that your candidates are willing.
Using focus groups
Focus groups can be an excellent source of market research – if you know how to use them.
Here are some tips for getting the most out of focus groups.
Know what information you’re looking for. Do you want feedback that will help you develop a questionnaire for more detailed research? Are you looking for a reaction to a particular package design, ad campaign or other marketing effort? There are different reasons for using focus group research – structure the group based on the information you need.
Do not project results beyond the group. Focus group research seeks to develop insights and directions rather than precise or absolute measures, and conclusions cannot be accurately projected to a larger universe.
Conduct enough sessions to get valid information. Because focus group research is subjective and can be influenced by a variety of circumstances, you’ll probably need to conduct several sessions.
Invite the right people. Focus group participants must be representative of your market, which can be a challenge if your prospective customers are busy professionals. Screen carefully. The tighter you can control the people sitting around the table, the more valid your answers are going to be.
Use a professional moderator. Trained focus group moderators do more than ask questions; they plan the session based on the client’s needs, conduct the interviews, then analyse the results – which are not always what they seem to be. Untrained moderators tend to accept everything they hear, especially if they have preconceptions. A good moderator controls the session, then when the interviewing is done, the moderator spends hours or days listening to the session tapes and going over the notes. The moderator’s experience allows him (or her) to reach conclusions and make recommendations for action.
Conducting secondary research
Secondary research is not as complicated as primary research. It does not require any interviews to determine problems and develop courses of action.
It only requires a knowledge of where to find organisations that have already collected the information that you are looking for, saving you time and money.
Secondary sources fall into three main categories:
Public – Public sources are the most economical, as they’re usually free, and can offer a lot of good information. These sources are typically government agencies, business sections of public libraries, and so on.
Commercial – Commercial sources typically consist of research and trade associations, banks and other financial institutions, publicly traded corporations, etc. Commercial sources are valuable, but, as the term implies, you will have to pay for the information, which can sometimes be quite expensive. You would, however, spend much less money buying this data, which is already assembled, than you would in commissioning a research team to collect the data firsthand.
Educational – Businesspeople frequently overlook educational institutions but colleges, universities, and other educational establishments conduct more research than virtually any sector of the business community.
Where to start?
The following secondary research sources can save you time and money when you are compiling information.
- The Australian Bureau of Statistics
The Australian Bureau of Statistics publishes population density and distribution figures which will show you demographic information about your chosen area, including the number and ages of people living in specific suburbs.
Some reports show the population 10 years ago, 5 years ago and currently, thus indicating population trends. Extra information that can be obtained from the Bureau of Statistics includes education statistics and qualifications, individual family and household incomes, industry sectors, dwelling types and sizes, number of vehicles and more. This information is updated fairly regularly.
Declining, static or small populations in an area are not good indicators for new businesses. Increasing and expanding populations are good indicators.
- Councils & Business Organisations
Maps of zoned commercial trading areas in cities, towns and suburbs may be viewed at your local council offices.
Look at the road map of an area for information on accessibility. Access is an important consideration in determining market area limits.
An example of this is a small commercial area surrounded by a major arterial road system that does not allow easy access.
Council Offices can also provide you with information on the local population, home occupancy permits, health and business regulations and rate charges.
- Business Advisory Organisations
Most Australian capital cities have several advisory organisations that will be able to provide you with market research assistance. There are, amongst others:
- Chambers of Commerce
- Small Business Development Corporations
- Business Enterprise Centres
- Government Departments
These organisations will be able to supply you with information relating to population trends, community income characteristics, award rates and other statistical information.
Other sources of information
Your Local or State Reference Library will also be an invaluable source of information.
The services provided by libraries vary, but usually include access to a wide range of government and market statistics, industry profiles and benchmarks, a large collection of directories including information on domestic and foreign businesses, as well as a wide selection of magazines, newspapers and newsletters.
Internet access is also now available at most public libraries.
- · Trade And Research AssociationsTrade and research associations are some of the best commercial sources of information.
The information they gather is usually specific to the industries they serve, and is often available only to association members. Most associations charge a fee to become a member. The research gathered by the larger associations is usually thorough, accurate and worth the cost of membership.
Research associations are often independent of, but are sometimes affiliated with, trade associations.
They’re often limited to conducting and applying research in industrial development, but some have become full-service information sources with a wide range of supplementary publications such as directories. These directories can be valuable sources of accurate and up-to-date information about your industry.
- · Educational InstitutionsEducational institutions are prolific sources of research. Research projects conducted at such institutions range from faculty-based projects published under professors’ bylines, to student projects, theses and assignments.
Copies of student research projects may be available for free, if you obtain the permission of the faculty and the student.
You can also engage faculty members or students to undertake assignments as consultants, either for free or at a cost you negotiate with them. If you work with students, they might be eager to earn professional experience for academic credit.
Contact the marketing or management-studies department for further information. University libraries are additional sources of research.