Briefing Paper 3
Market Research for Community Enterprise

Market research is an organised process to collect information about the business environment before your business starts. It includes talking with customers about their occupations, interests and buying habits as well as listening to customer requests for products and services. Customers are the foundation of any successful community business. Effective market research results in the delivery of good quality service that stands the test of time. Use your market research to develop marketing plans and create an accurate base for making assumptions and help develop critical short and mid-term goals.

Market research:

What is Market Research?
Market research is an effective way to learn about potential customers, their opinions, habits, trends and future plans. It determines the geographic area of a business and demographic characteristics of customers (age, gender, income and educational level) and may make the difference between the right and wrong decisions that affect your community business. It could also reveal unfilled needs, suggest marketing strategies or identify the competition's strengths and weaknesses.

Market research involves asking questions, recording information and taking time to learn from the information. Market research develops an information base to estimate needs, sales, develop market strategy and decide how to enter the market. One approach to market research is to compare customer needs and wants to competitors' weaknesses as well as to customer demographics.

Identify a Customer Profile
Who buys the product or service? Where do they live? What income levels are in the market? What is the age pattern in the market? Answers to these questions help identify target markets, specific products or services and advertising efforts. Use demographic characteristics to identify customers. Demographics include age, gender, income, ethnicity, marital status, education, occupation, home ownership, number in the household and age of the home.

Customer profiles help determine if a market segment is large enough to be profitable. Ask these questions to identify important customer characteristics:

Who buys the product and service?

What are the similarities and differences between my products and customers and my competitors' products and customers?

All the answers may not be available. Part of the picture gives a base on which to build a marketing program and target an advertising plan. A sample customer profile for a particular product or service is shown on the next page. Once the customer profile is developed, collect information from current customers by personal interviews, telephone surveys and mail surveys. To collect information from potential customers:

Identify the Competition
Now that customer needs and wants have been identified, look at business competitors. Compare what customers need and want to what competitors offer. Develop a checklist of factors important to customers, such as the one shown below.

Where to Go for Help
You can obtain market research information from a variety of sources, such as direct contact with customers, the competition, the local library reference materials, magazines, a directory of associations, sales and marketing figures. Try a local college library or business school, vocational or technical institute, chamber of commerce, wholesale or manufacturers sales representatives, trade associations, media representatives such as advertising space salespersons, or competitors. Additional sources of market information include: regional planning organisations; banks; real estate agents, economic development agencies. Customer phone numbers, addresses and past business records indicate geographic market areas.

Business Potential Summary
Results of market research serve as a blueprint to guide your future decisions. Market research defines your community business in terms of customer needs and wants, identifies the available market, how well advertising is reaching the target market, changes competitors have made, what new products should be offered and changes occurring in the market place. To be successful, you must know the market. Market research is a simply structured, objective way of learning about people - the people who will buy the product or service.

Simple and Practical Market Research
What's the first thing, the most essential element, you need in business? No, not a plan: you need customers. First look at whether or not your community business has (or will have) enough customers to keep it healthy. For the next step, you need to go further into a market analysis. It doesn't have to be academic and it doesn't have to be a huge project. What you want, ultimately, is to know your customers. Some of the best market research is simple, practical, and even obvious. You don't get it from reference sections in libraries, or even from the Internet. Get it from real people, particularly customers or potential customers. Here are some practical examples.

Study Similar Businesses
The Internet has made information gathering simple and easy, but sometimes the best information is found much closer to home, with real people. Always take a look at other businesses similar to your own, as a very good first step. If you're looking at starting a new venture, you may well be starting one similar to one you already know. If you're doing a plan for an existing business, you are even more likely to know the business well. Even so, you can still learn a lot by looking at other similar businesses.

Look at existing, similar businesses
If you are planning a community cafe, for example, spend some time looking at existing community cafes and commercial ones too. How long do customers spend in the café? How much do they buy at breakfast, at lunch, at dinner?

Find a similar business in another place
you are planning a local business, find a similar business far enough identify shoe stores in similar towns in other states. Call the owner, explain your purpose truthfully, and ask about the business.

Always shop the competition
If you're in the restaurant business, visit your competition once a month, rotating through different restaurants. If you own a shoe store, shop your competition once a month, and visit different stores.

Talk to Customers
If you're considering starting a new business, talk to potential customers coming out similar businesses. Talk to your neighbours, friends, relatives. Ask them how often they buy or use products/services, what type, where, at what price etc. If you're starting a cafe, sustainable landscape architecture business, community bakery or whatever, talk to customers.

At most business schools, when they teach business planning, students have to do a market survey as part of the plan. The plan isn't complete unless they go out and ask a credible number of people what they want, why, where they get it, how much they pay, and so forth. Although you may not go through the formality of a customer survey for your business, this information is vital.

One of the sites does no selling, but provides free information, including free downloadable sample plans, outlines, and discussions, including answers to several hundred specific questions about details of developing a business plan. We sometimes ask people stopping by our Web sites to answer a few quick questions that concern us. The invitation promises just a few questions, and promises also that we won't ask their names or e-mail addresses, and we won't follow up with sales information. When we do, we get about 300 responses a month, which provides us with valuable information about the concerns people have as they consider writing a business plan.

If you have an ongoing business, the process of developing a plan should include talking to customers. Take a step away from the routine, dial up some of your customers, and ask them about your business. How are you doing? Why do they buy? How do they feel about your competitors? It is a good idea to take a customer to lunch once a month, just to keep yourself in touch.

Count Potential Customers
As an essential first step, you should have a good idea of how many potential customers there are. Most business plans contain an analysis of potential customers. As an essential first step, you should have a good idea of how many potential customers there are. The way you find that out depends on your type of business. For example, a retail shoe store needs to know about individuals living in a local area, a graphic design firm needs to know about local businesses, and a national catalogue needs to know about households and companies in an entire nation.

Good sources depend on what you need. Government and commercial statistics are usually more than enough, but for some plans you may end up purchasing information from professional publishers or contract researchers.

For general demographic data about a local area, if you have no easier source, ask the reference desk at a local library. A local university library is even better, particularly a business library. Chambers of Commerce usually have general information about a local market. Nowadays the quickest route to the census bureau is via the internet.

The official statistics are good for business information as well. You should be able to find a count of local businesses with some measure of size, such as sales or employees. You can also find free information at the Chamber of Commerce and probably at your local library.

Magazines provide another good source of demographics.

Use of a Particular Product or Service.

I am a: ____ light user ____ medium user ____ heavy user ____ non-user

I use your product/service: ____ daily ____ once a week ____ once a month ____ once a year

I have used your product for: ____ a short time ____ many years

I have tried similar products. The names are: ________________________________________________________

________________________________________________________

I use your product in combination with: ____ other products ____ different seasons ____ etc.

I buy your product at a: ____ supermarket ____ drugstore ____ department store ____ discount store ____ hardware store ____ other store

The quantity I buy at one time is: ____ a single package ____ several packages ____ many packages

Trade with a Particular Store.

I shop in your store: ____ more than once a week ____ at least once a week ____ every two weeks ____ once a month ____ once a year

The distance from my home to your store is: ____ less than five blocks ____ one mile away ____ two or three miles ____ five miles ____ more than ten miles

I usually buy these types of products at your store:

The part of my shopping I do with your store is: ____ All ____ Most

My favorite stores that are similar to yours (and including it) are: First choice___________________
Second choice_________________
Third choice__________________

Each year I spend this amount in your store: £_______

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Further Reading

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