When I speak to most entrepreneurs about business plans, many of them believe that the process ends after it’s written. But I’m here to tell you that your job is just beginning. Now comes the part where you should do a “proof of concept”. What does this mean, you ask? Well, quite simply it’s testing your market assumptions. The data you gather from the testing will either validate your assumptions or invalidate them which will cause you to do some major revisions to your initial business plan.
There’s 2 forms of market research: Primary and Secondary. Primary research means you are directly obtaining feedback or data from your target market. Some methods of conducting primary research is through surveys, questionnaires, focus groups, or in-person interviews. Secondary research is where you obtain your information through indirect sources. This involves collecting information through newspapers, magazines, census data, or trade publications. Most start-ups I talk to typically only rely on secondary research, but in order to obtain the most relevant feedback on whether your target market is interested in the products or services you’re offering, primary research is absolutely necessary.
Below are some essential factors to consider when conducting primary market research:
1. Determine if you are concerned with quantitative or qualitative data. Deciding between these two types of data will determine the format of the questions you would like to ask. Quantitative data involves cold hard numbers and statistics. For example, understanding how much income your potential customers earn, how old are they, how big is the typical household, how many years of post-secondary education do they have, or even how many times they go to the movies. Anything that would involve a numerical answer is quantitative. Qualitative data is more personal, value, opinion, or belief based. Some examples of qualitative data is the gender of your market, the type of religion they have, their race, their occupation, or even their political association. The best type of market research will use a combination of both.
2. Calculate your sample size. Oh my, how this topic often frustrates me with new entrepreneurs! So many new business owners believe that all they need to do is pick an X number of people (lets say 100) to ask their marketing questions to and that represents a good sample size. THAT IS NOT GOOD RESEARCH! Picking numbers out of thin air will do nothing but give you a false sense of accuracy. Determining your sample size requires at least some elementary knowledge of statistics. It involves knowing how big your total population is and what do you want your confidence level to be. Luckily, for those that are mathematically adverse, there are a few resources online that can help calculate the correct size for you. One calculator I particularly like is from Creative Research Systems http://www.surveysystem.com/sscalc.htm
3. Getting to your audience. Great, you’ve determined the correct number of samples to have, now you decide to hand your surveys to any John Doe on the street! Well, that is the worst method to get to your audience. First, you should understand who your target market is. This should have been previously defined in your business plan, but if you haven’t then consider who are your ideal customers, where are they located, and how will you find them. Then decide on the best way to obtain feedback from your target audience. Will they be most accessible through email/phone/in-person, at a certain time, or even at a specified location.