Market Research, in a Nutshell

Very many small companies need market studies but do not get them. They think research is too difficult and two expensive, but it doesn’t have to be.

What is a Market Study? A market study is an effort to obtain information about an area or group of people to which you might try to sell products or services. This writer once did a study with phone calls to just two buyers. Their responses were enough to assure him that the product could be sold and to provide ideas about how to sell it.

Why Do a Market Study? Almost the only valid reason is to obtain information that is needed to solve a problem or answer a question. A common question, for example, is: “can I sell my product in the USA (or Colombia or France or Japan)?”

How to Get a Study? There are three ways to obtain a market study: (1) buy one that has already been prepared, (2) prepare one yourself or (3) hire a consultant to do it. It is very rare to find an existing study that fits a particular company’s needs. Doing it yourself is an option, but only if you have the required time and expertise. Hiring someone can work well, but you must say exactly what you want done and stay in contact with the person or company who is doing the work.

What is the First Step? The first step in market research is to prepare a study design. It should say: (1) what problem you have to solve or question you have to answer, (2) what information is needed to answer the question, (3) how and where the information can be obtained, (4) how it will be tabulated and analyzed and (5) how it will be used.

How Much Does Research Cost? The cost can vary from a few hundred to several thousand dollars. An important principle is that one should not spend more on research than the results will be worth.  A major tool manufacturer, for example, can spend much more than a small producer of marmalade.

How About an Example? Suppose you want to know if it is feasible to enter the U.S. market with a new brand of hearts-of-palm. To answer that question, you will need, at a minimum, information about production cost, transportation cost, interest among potential distributors, their volume and quality requirements, branding and packaging, the level of competition, and prevailing prices. Some data might be found on the Internet in studies done by export promotion agencies in countries that produce palm hearts, and some by telephone interviews with companies in the United States that distribute canned vegetables. Prepare an outline of the report in advance, so the data can be fitted into it. Then, review the report carefully and obtain any other information that is needed to arrive at a decision.