Whether you’re taking a first look at business opportunities or thinking about how to develop your franchise, you should never underestimate the importance of market research. Knowing how potential customers are likely to welcome and interact with your product will help you pave the way for long-term success.
Before we dive into the questions you should ask when doing market research, here’s a quick overview of what the term actually means.
What is market research?
Market research gives you a view of your prospective customers: who they are, how many there are and how they might behave in relation to your business. Your fact-finding mission should also help you find out about your competitors and how your organisation stacks up against them.
If you’re conducting market research for a new business venture, you may discover your local area is oversaturated when it comes to the sector you’re hoping to join. The best franchise opportunities may well be with a less recognisable brand in an emerging market. Turning away from famous companies could give you an advantage in your chosen sector, but because there’s slightly less certainty with this option, market research is even more critical.
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How to conduct market research
Before you start doing market research, you should consider what exactly you’d like to find out. The process can be time-consuming and sometimes tedious, so it’s worth making sure you don’t waste minutes or hours pursuing pointless lines of enquiry.
Start your investigation with a clear motive in mind; what’s your end goal? Once you know the answer, you can create a thorough plan. Here are the questions you should ask yourself when doing market research.
1. What does my target market look like?
Although you might be tempted to try to appeal to everyone, you risk developing a bland business with no appeal at all. And by trying to address lots of people with the same message at the same time, you’re effectively pitting yourself against the largest possible number of competitors.
By refining your target market criteria, you can focus solely on making sure you attract your intended demographic, avoiding the ‘one size fits all’ approach. You’ll be able to deliver a specific, attention-grabbing message in places your particular audience is likely to see it.
2. How will I appeal to my target market?
Once you’ve narrowed down your target audience, it’s time to get to know them a bit better, so you can find the best way to appeal to them. Using a technique called ‘market segmentation’, you can divide up your target market into separate groups, based on factors such as location, age and socio-economic background.
Understanding your potential customers' lifestyles, beliefs and behaviours allows you to develop a targeted message and deliver it at the right time. This approach will ultimately result in higher response rates, which translate into more sales.
3. How large is my target market?
If you’re starting a new venture, you’ll use the answer to this question to create your financial forecast in your business plan, so it’s important you’re realistic. You need to measure the size of your market and consider the number of prospective customers it offers.
Understanding the market size helps you differentiate between two groups:
- The addressable market - the total opportunity for your product or service
- The available market - the share of the addressable market for which you can realistically compete
By defining the difference between the two groups, you can adapt your message to make sure you appeal to both camps.
4. Are there opportunities for growth in my target market?
This question is a key part of market research prep, and it’s particularly important for existing business owners trying to drive growth. Almost every business and franchise opportunity is affected by changing demand - either positively or negatively.
Ask yourself whether the number of people in your chosen market is likely to increase? To help you answer this, think about changes in people’s buying behaviour. Are people set to spend more, or less, in your market over time? Are any external factors, such as legislation or environmental changes, expected to impact your customer base?
5. Who are my competitors?
It’s not just your customer base you should be analysing; it’s your competitors too. Make a list of your main business rivals and then consider their strengths and weaknesses. The more you can find out about them, the better. You might want to research:
- Where they're based
- What they sell
- How much they charge
- Their marketing messages
- Their reputations
Understanding your competition can improve your business, as you’ll have the chance to turn their weaknesses into your strengths. You may even be able to develop a unique selling point your competitors can’t top.
How to conduct market research
There’s lots of information out there to help you when you’re learning about customers and competitors. Here are just some of the resources you can use for market research:
- Official statistics - The Office for National Statistics (ONS) is a government-run database with consumer and demographic information on specific market sectors.
- Local authorities - If your business or franchise unit needs to appeal to a specific geographical market, try approaching your local authority. It could be a great source of information about the people who live in your area.
- Trade directories – These resources have plenty of details about various industries and you can find them online or in your local library.
- Market reports – It can be quite expensive to get your hands on published data, but it might be worthwhile if it provides the insight you need to make sure you’re informed.
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Alice Tuffery, Point Franchise ©