Conducting Market Research for a Business Plan
Market research relates to the information that you gather on your clients and prospective clients, about their likes and dislikes, what they want and need, demographics, market prices, your competitor, and related points of interest. Your public or local state university library is a good place to pull information that is published such as governmental reports and statistics. You may also choose to speak with vendors who sell their products to your competitors or to similar businesses in a "foreign" market; that is a market that is outside of your primary area. For example: If you live in Texas, you may choose to speak with the owners of businesses in Florida, New York, Illinoi, or California and find out what their costs and prices are for their markets. It is more likely that folks who would be your competitors if they lived in your town or your state will talk with you about business details IF they know you are not a threat to their market share. This type of research is what professional marketers call secondary research. It is information you are getting from an indirect source or a published report or statistic. This information is important and useful in your business decisions, but it cannot be your only market research.
Bankers and investors are interested in your primary market research, that is, the research that you have conducted face to face with members of your immediate target market. Your current clients and their response to you about their needs and wants is also considered primary market research since they are real and tangible clients already adding to your company's bottom line.
Another approach to primary market research is to conduct your own prospective client surveys. Asking folks what they want and how they want it before they become your client is a safe, non-threatening way to get accurate input for your marketing efforts. The most expensive way to gather primary market research is, of course, to hire a professional market research firm. Some of these market research firms do such things as hire random folks to "test" products, give opinions, and fill out customer surveys. This type of market research will be necessary for certain types of businesses and will prove to be a waste of money for other types of businesses. Know in which category your business falls.
Target market and market research are closely linked together in preparing your marketing plan for your business plan and marketing information segments. A quick start for extracting information from your target market, or for creating primary market research statistics, is to utilize an email list if you have one. Online marketing companies such as Sales Genie offer help and provide 100 free leads for your upstart sales pitch. Other companies, such as Constant Contact, help you to manage and exploit the marketing advantages of a healthy email mailing list. With these systems you can contact your target market and directly offer them discounts or conduct surveys to find out more about them and their needs and wants.
If you have an online business, then you also have related tools to help you with your target market and your market research. For example, you can utilize one of those pop-up chat screens on your website, such as ZaZa Chat,where the people interested enough in your product or services can click to your site. Then they are prompted to chat with one of your company representatives about their needs and why they visited your site. Chat boxes are terrific for gathering primary market research information as well as getting you directly in touch with your target market. Programs, such as those at ZaZa, start at less than $25 per month and that includes the programming and the online operators.
What you learn from your target market will affect everything in your marketing plan, your business plan, your public presentation to others when seeking finance, and virtually every part of your business and its interactions with the public. When speaking to people from your target market, be sure to pay close attention to everything they tell you as well as the things they don't tell you (out of politeness). In other words, don't just take their word about your inquiry, but also pay attention to what their tone of voice and body language tell you. Although those elements will be intangible, they will help to guide you and hopefully support your expectations and ideas.
Your marketing plan will reflect much of the information that you gather in your market research and from your target market. Additionally, you will want to include certain facts about your company's industry or business. You will want to paint a picture, so to speak, of your company's total market share, to total size of the market, the current and growing demand for your services, and the general market trends of the industry.
You will want to include such information as:
- What keeps competitors from flooding your local market or running you out of town or out of business?
- How would changes in the law or in federal regulations impact your company?
- What happens to your industry if the economy bottoms out?
- How does outsourcing or other industry changes affect your company?
- Who are your competitors? [Name, address, company name].
- Are your biggest competitors local or national?
- Include target market demographics such as the largest group according to age, gender, socio-economic class, and education.
It was the great William Shakespeare who penned, "To Thine Own Self Be True." with complete and total conviction. In a similar way, you must think about your company and its competition in the marketplace and you must always be true to your own company's objectives. Since the primary objective of a well written business plan is to obtain growth capital from any number of banker or investment sources, your primary "own self" must be to write your business plan in such a way as to win your objective.
To successfully write your Marketing Summary, and the marketing segment of your business plan, you must finish up with information about your competition. This will include a Competitive Analysis, in which you exhibit your knowledge of your company's competitors and what they are up to in their business. You must have an accurate picture of what they offer and a personal knowledge of how their offerings impact your business efforts.
If you skirt any of the issues of competition within the context of your business plan, then you can expect bankers and investors to haunt you with the obvious questions that you did not answer. It is far more uncomfortable and awkward to answer questions concerning your competition at the time and place of your funding petition than it is to simply, accurately, and clearly address those questions in the plan's content.
YOUR COMPANY'S COMPETITION
In this segment of your business plan, you will identify your competition to the reader. What types of businesses compete for any segment of your market share or client base? Who are the owners and what do they have going for them that could help them to infringe on or take a part of your market? You will want to name names for the Competitive Analysis, but you must first personally identify them. It is also important to identify what sets them apart from you and determine if those differences have a greater benefit to you or to your competitor in terms of providing more of what the client seeks.
Whether you include it as part of your analysis report or chart, you should identify how the presence of your competition in your local marketplace helps to sharpen you or how it helps to keep your company's standards high. The reason to identify the positive side of your competition is because at some point in the course of conversation with your banker or investor, it may become helpful to make a smart reference to a competitive idea that you have the ability and desire to provide to the marketplace at a better pricing scale. If you mention such a topic, be sure that you can either adequately convince your banker that your company is better prepared to handle such a challenge, or that it is not in your company's overall interests to pursue the product.
An accurate Competitive Analysis will require you to get your hands dirty and get involved in face to face information gathering. You will want to go to your competitor and "shop" them to see how they handle their customers. An encounter with your competitor as one of their customers will reveal to you both their strengths and their weaknesses.
Here is a small list of what you will need to gather from your Competitive Analysis:
- How do they meet the public? Are they clean, friendly, and helpful?
For presentation purposes, it will be best to create either a table in your document or a spreadsheet chart with bolded titles over each of the categories above. This will help the reader to quickly see how your competition breaks down, what their strong points are, and where you have them beat in the marketplace. This is information that will burden the reader if it is not placed in an easy to read format, such as a chart.
PRESENTATION OF YOUR COMPETITION OR COMPETITIVE ANALYSIS
You may choose to survey all of your local, state, or national competitors. You may decide that only the locals are worth the effort since less than 2% of your business is from outside your town. In any event, gather your information together and make it comparable. Create it or place the information into a competitive format, a direct comparison, or contrast chart. This will help your reader to visualize the competency of your rival, assuming there is some. For an idea of what a well prepared Competitive Analysis will ultimately look like, you may want to check out the Word or PDF file available on SCORE's page. Alternatively, you may choose to prepare the Competitive Analysis in a spreadsheet format such as Excel.
Do not leave this page out of your business plan. Ideally, it should be condensed down to a single page that contains all of the pertinent information on it. It should be well laid out in a table inside your document [such as a table insert in Word], or as a spreadsheet as discussed above.