When it comes to launching a new business, there’s a huge to-do list, from thinking of a great name to registering with the Companies Office. There’s one item that needs to be high on your list, but may have fallen to the bottom. It’s not cheap, and small business owners sometimes forget how important it is. I’m talking about market research.
Market research lets you find out who will buy from you, what they want, and how much they’re willing to pay. Market research can be as broad or as detailed as you need to it to be, including:
- Who your customers will be.
- What your customers want.
- Whether or not your target market will buy what you are selling.
- What your competitors are offering.
- What will make your company stand out from similar businesses.
- How to price your product or service.
- Where there are gaps in the existing market that your company may be able to step into.
If this seems like an expensive exercise, remember that the cost of a failed business is high, and not just in dollar terms.
Market research can not only reduce your risk of failure, but it can improve your profitability. It does this by:
- Identifying your customer demographics, so you can accurately target your advertising.
- Preventing you from making costly mistakes, like taking on a market leader who has the resources to steamroll your fledgling venture.
- Showing you what your competitors are doing, so you can find a unique angle.
- Helping you to price your product accurately so you balance optimal sales with healthy margins.
- Showing you ways to grow your business as it expands.
While market research can be expensive, it doesn't have to be. There are many sources of free demographic and economic information, particularly at Statistics NZ, where you can find out household incomes and other details about whole cities or suburbs, or ethnic groups. If you're on a tight budget, you'll find there's a surprising amount of market research you can do yourself, if only to get you started before you talk to the professionals.
Market research can save you money, and it can make you money, too. If you take the time to get a grasp on your potential customer base you are more likely to reap the rewards later on. You wouldn't build a house without knowing the shape of the section, so don't start a business without knowing the shape of the market.
By Jaime Patel