I hear statistics all the time such as…”80% of all small businesses fail in their first year.” Does this mean that small business success is largely the victim of bad luck? On the contrary, I believe most business failures result from charging into the marketplace with untested assumptions.
The answer lies in performing sufficient market research, which can be as easy as picking up the phone.
Market research removes the risk and guesswork of developing your business, products and services, which I explain in my book, Get Slightly Famous:
Once you have a working idea of the market you’d like to serve, you need to dig deeper to test your assumptions. The process starts with market research: analyze your best potential customers, your competitors, your market’s predisposition toward your products and services, and your ability to serve these people so well as to make you their vendor of choice.
Market research can provide relevant information for establishing a solid foundation under any business. Even if you have been in business for years, it’s a good idea to stay up-to-date with market research that might help you understand where your market niche is going.
Market research can, among other things, help you understand your potential customers, the likelihood that they’ll buy your products and services, why they’ll buy them, and how much they’ll pay. Market research can also help you evaluate your competitors’ strengths and weaknesses, thereby providing one of the keys to dominating your niche.
I’ve always held that market research is the most underutilized secret weapons for small business success. This became especially relevant when, several years ago, I helped the owner of a start-up software wholesale business prepare for launch.
During our first meeting, it didn’t take long to see that his entire business model was based on untested assumptions about his target market. I instructed him to postpone launch and call several potential customers to ask them what they thought of his positioning and marketing strategy.
The results were profound. Not only did my client see how easy (and eye opening) simple market research can be for testing assumptions about your target market, it also enabled him to reposition his business and redesign his marketing strategy.
Here’s a summary, in my client’s own words, of his experience and results:
I’ve finally learned that the secret to positioning and growing any company for success is conducting as much market research as possible.
Prior to conducting market research for my company, I developed services and marketing strategies that were based on my assumptions about what customer’s wanted from my company. I was about to launch based on these assumptions when you strongly suggested that I take time to do market research.
Following your advice, I created a list of the top 10-12 companies in my geographic area with the most potential of needing our services. I took several days and called each one, asking them a series of questions and took copious notes.
I asked each company how much they paid for services like ours, what their profit margins were, how much software they purchased per month, and what the top 3-4 most important aspects they expected their software vendors to have. I also asked what trade journals they read, what websites they visited, who there top vendors were, etc.
These simple conversations enabled me to visit the competitors’ websites and thereby create my product prices, return policies, shipping policies, etc., based on what these vendors where doing.
When I talked with each prospect, I explained my company’s business model and asked them if they thought it was appealing, or if they saw any flaws in my model.
To my surprise, I found out a few surprising things. First of all, my original marketing strategy was going to be solely based on how cheap our prices are, because I thought that price was the most important buying factor for our potential clients.
As it turns out, almost everyone I talked to told me that fast and reliable shipping was the most important thing to them, followed by an extremely efficient customer service department as the second most important thing. Price actually came third.
Based on this information, I completely changed my marketing to focus on our fast FedEx shipping services and 24-hour customer support response time. I also discovered that I could increase my profit margins by 15% without hurting sales and dramatically increase our profits every month.
I never would have known this was possible had I not taken the time to conduct this research!
Another great advantage to talking directly with prospects and customer’s is that they will tell you exactly how to sell them on your services. They will stress what is most important to them, and if you record the conversations, you can copy exactly what they say word for word in your marketing campaigns. It’s extremely powerful.
Needless to say, I am very happy with my market research results. It has helped me establish a company that is tailored to provide exactly what potential prospects are looking for, and it has given me invaluable information that I can use for marketing, profit projections, and word of mouth marketing.
The market research that I conducted has given me a complete idea of who my customers are, what they want, and how to sell them. It’s made all the difference in the world.
As you refine your market niche, you need to develop an insider’s understanding of your prospects. This means personally experiencing the world your clients and customers live and work in, so that you really understand their daily concerns.
Like my former client, actively explore how your customers live, work, and spend their time. Get to know the key players within your niche, and understand the structure and dynamics of of your market.
By challenging your initial assumptions and getting personally involved enough to see through the eyes of your prospects, you can avoid the “80 percent” failure trap and build your business on a fact-based foundation.