Market research involves gathering of information about the potential buyers, sellers and competitors. It is one of the critical steps before anyone should start a new business.
Successful entrepreneurs does not decide the possible profitability of a business venture based on their feeling or guess work alone. They perform some market research to allow them assume potential difficulties and possible solutions to problems.
For reason of time and fear of cost, many entrepreneurs have bypassed market research. However, it can be very dangerous to just assume that you already know about your intended market. You need to do some market research to make sure you’re on the right track. For example Google recently changed (2015) its search engine to favour mobile responsive websites. This has affect the entire online industry. It means in this age, it will be disastrous to develop a new website that is not mobile responsive.
Components of Market Research:
Market consist of customers whereas industry consist of sellers and you meet the competitors in both the market and industry. Therefore the research report generally focus on the market and industry factors.
Customers – people who will buy your product or service.
- Who are your customers?
- What are your customers buying decision ?
- Targeted geography, demographic etc.
- Any customer expectation that is still unmet?
- What are the potential demand in the target market? Potential demand is the estimated number of customers x frequency of purchase x price.
- What are the various market segments?
- Trends in target market – growth trends, trends in consumer preferences, and trends in product development and delivery.
- What are the potential barriers to entry in this market and of course how do you intend to overcome them.
- You need to really establish that there is a market for you. Remember customer is the real boss.
Suppliers – Where to get your input products and services to enable you serve the customers.
- Who will supply you the good or service?
- Possible logistic arrangement to get the goods
Competitors – any business that sells a similar product and service or substitute to your own product.
- Who are the other suppliers in the market ?
- What are their strengths & weaknesses e.g. service delivery, pricing etc?
Economy – An idea about some economic indicators can help. For example
- Inflation rate and trend
- Rates – interest and currency
- Unemployment etc.
These indicators impact business operations, for example importation becomes more expensive when exchange rates move up against the local currency.
- business climates etc
Technology – All industries uses technology, but it is a must have investment in some sectors such as financial services. What are the impacts of technology on your business? How do you intend to use technology to acquire or serve your customers?
How do you obtain Market Research information?
Primary source of information means gathering your own data. For example, you want to know the number of passengers from Banjul to Brikama. You could do your passenger count at the various bus stations. Primary sources also includes surveys or focus-group interviews to learn about consumer preferences. This method is sometimes time consuming and costly.
Secondary research means using an existing published information such as
- Local chamber of commerce, e.g Gambia Chamber of Commerce and Industry reports
- Associations e.g Construction association, Small business association etc.
- Industry reports,
- Government agencies such as GEIPA, Gambia Bureau of Statistic, Central Bank etc. Government agencies are an invaluable source of market research, most of it free
- You can also talk to others who are already in the industry. Lots of people are willing share but only if you asked them.
Whatever method you use, it is important to note that secondary sources are cheaper and easier, however they may be out of date.
Is it important? Yes
- It help you create stronger business plan. There is not business plan without information about market
- Market research help you understand the competition
- You can easily predict the future by looking at industry trends and analysis.
Is this too much?
There is no doubt that gathering these market research information is hard to do. If you do not invest the resources to understand your customers and industry, how do you win in the face of competition?
However, the level of information gathering depends on the type of business and capital investment you plan to do. If you want to start a financial institution, you will do nothing less what we have outlined above. For a small trading business in Serrekunda, one page information could suffice.
Conducting market research is an investment in your future. If you make the necessary adjustments to your product or service now, you’ll save money in the long run.
In conclusion, your understanding of market and industry will be the basis of your sales projection. You should therefore be as specific as possible; give statistics, numbers, and sources.