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The Importance of Market Research

The Importance of Market Research

Your sales aren’t as strong as you wanted, you’re toying with new product ideas, or you’re starting a new business from scratch. These situations all require market research—the study of specific markets, environments or products—to give you a better idea of what you’re getting into.

Unfortunately, research isn’t every entrepreneur’s strong suit. In fact, many skip it altogether and go into the market with all the wrong ideas. If you’re not sure how to go about it, read on for a quick step-by-step guide.

1. Find your customers.

Start by defining your target audience. Who is most likely to be interested, and what would make them want to buy? Where can you find them? Can they be groomed into long-term partners? These questions let you know who you’re selling to and help you refine your product before putting it on the shelves.

2. Define your product.

Get a good idea of what you’re selling, and where it fits into the marketplace. Are there other products like it? If there are, what makes yours different? Will it need any special packaging or positioning to stand out? This is also where you define your product’s life cycle, or how long you expect it to stay in the market before being phased out or upgraded.

3. Know your competition.

Think of competition both in the short and long term. Your major competitors today may not be the same as next year, as your business grows and adapts to your market’s interests. How would they react to a new player in the field? Can your product easily bring down the competition, or is it more practical to tough it out with them?

4. Choose your distribution channels.

How you get your products to the consumer depends on a lot of factors. If you’re selling to an international market, you need to plan for shipping and customs. If you’re limited to local buyers, you may find direct retail more practical. If you’re offering services, online methods may cost you less. Find out how similar businesses are handling it and take your cue from them.

5. Set your price.

Your goal is naturally to earn as much profit as you can while keeping your rates competitive. Again, long-term thinking is important: will you need to raise your prices in the future to make up for increased costs? Besides that, you have to consider what your market is willing to pay. If they can’t support the price you need to cover costs, you’ll need to find ways to lower them, or find a new product altogether.

6. Make your marketing plan.

How will you get word around about your product? Your target market again plays a big role in this step. Find out where your customers turn to for information, and position yourself in the same place. If your market tends to hang around coffee shops, look into partnering with local cafés. If you’re selling to kids, channel your marketing to children’s books, toy stores, or schools. Find out how much each marketing approach costs and whether the returns can justify it.

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