How To Perform Market Research For Your Franchise
So, you’ve decided to invest in a franchise. Now, the next job is to select the best franchise opportunities for you. The problem is that there are thousands to choose from covering a wide range of markets, making it challenging to shortlist franchises to buy.
When you’ve managed to narrow your choices, not only should you make sure that you have all the necessary franchise information, but that you also complete thorough market research about the sector. This can be a lengthy and difficult task, but one that will ensure you invest in the right franchise, in the right market.
What is market research?
Market research gives you a view of your prospective customers: who they are, how many of them exist and the potential for growth. It also allows you to find out about what competition is out there and if there’s room for another business in the area.
When you’re considering franchises to buy that have been established within their chosen market for a long time, your market research may discover that your area has been oversaturated. The best franchise opportunities may well be with a less recognisable brand in an emerging market. Taking this alternative approach can give you an advantage in your chosen sector, but because there is less certainty for this option, market research is even more critical.
Either way, the secret to successful market research is to know what questions you’re trying to answer. As a franchisee, your market research should answer these essential questions:
1. Who is your target market?
Although it can be tempting to try to appeal to everyone when you’re just starting out, the truth is that this approach usually ends up not appealing to anyone. By refining your target market criteria, you can focus solely on your intended demographic, avoiding the ‘one size fits all’ method.
Attempting to please a large target audience can result in weak, watered down and generic messages being used in promotional activity. Not only will this simplified approach fail to appeal to many, it will also prove to be costly. By trying to address lots of people at the same time, with the same message, you’re effectively competing with lots of other businesses who are going after the same audience.
It’s far more sensible, and cost-effective, to narrow the scope of your audience. This allows you to deliver a specific, attention-grabbing message in places where your refined audience is likely to see it.
2. How will you appeal to your target market?
Now that you have narrowed your target audience, it’s time to get to know them a bit better so that you can determine the best way to appeal to them. Market segmentation enables you to split your audience into pots of opportunity based on a geographic, demographic and socio-economic perspective.
Understanding your potential customers' lifestyles, beliefs and behaviours allows you to develop a targeted message that is delivered at the right time. This will ultimately result in higher response rates which equal more sales.
3. How large is your target market?
The answer to this question will inform the financial forecast element of your business plan, so it’s important that you’re realistic. You need to measure the size of your market and consider the number of prospective customers from each segment.
Understanding market size helps you differentiate between two groups: the addressable market, which is the total opportunity for your product or service; and the available market, which is the share of the addressable market for which you can realistically compete. By defining the difference between the two groups, you can identify what your message needs to be to appeal to both camps.
4. Are there opportunities for growth in your target market?
You must also give some thought to the possibility of market growth. Simply put, are the number of people in your chosen market segments likely to increase? To help you answer this, reflect on changes in people’s buying behaviour. Are people spending more, or less, in your market? Are there any external factors such as legislation or environmental changes that may impact your customer base?
As with any business, even the best franchise opportunities are affected by demand changing over time. And this doesn't always mean that your franchise will be impacted negatively. Ensure that you continue to perform market research even after you've started your venture, and you'll always be one step ahead of the market; and the competition.
5. Who are your competitors?
When performing your market analysis, don’t forget to include getting to know your competitors.
Make a list of your main competitors and then considering their strengths and weaknesses. The more you can find out about them, the better. Know where they're based, what they sell, how much they charge, their marketing messages, and their reputations.
Understanding what your competition offers can improve your business. Turn their weaknesses into your strengths. This can help you to develop a unique selling point that your competitors may be missing. Don’t forget to give some thought to your own limitations too.
6. Where should you go for franchise information?
There is lots of franchise information around to help you to conduct your market research. Here are just some of the resources available:
Official statistics - the Office for National Statistics (ONS) is a government-run database that can give you consumer and demographic information on specific market sectors.
- Local authorities - if your franchise is looking to appeal to a localised market, then your local authority can be a good source of information about the people who live in the area.
- Trade directories – there are many trade directories with details on many industries that can either be found online or in your local library.
- Market reports – market data and research can be sourced, at quite a high cost; but may be worthwhile if they provide the insight you need to make sure you’re informed about the best franchises to buy.
The Editorial Team, Point Franchise ©
Impress Prospective Franchisees with a Discovery Day to RememberArticle published on 19/08/2018 17:00
Five Ways That Franchisees Can Get Over the Fear of FailureArticle published on 19/08/2018 08:00
Discover the Recipe for Success with a Cook Stars FranchiseArticle published on 18/08/2018 17:00
A Guide to Choosing the Perfect Location for Your FranchiseArticle published on 18/08/2018 08:00
Top Five Franchises for Car LoversArticle published on 17/08/2018 17:00