Marketing research is the process which defines customers' needs, collects data, analyzes data and applies it to the decisions needed for profitably marketing your product/service. It is not enough to say, "I just know people will buy my product/service."
Market research will answer such questions as:
Who are my potential customers?
What kind of people are they?
Where are they?
Why will they buy?
How much will they pay?
How often will they buy?
Where should I locate?
Market research should determine the size and location of the target market. Using anticipated prices and costs in financial projections, the profitability will be determined. The early research will determine whether the proposed business is feasible at all. The entire study and plan should proceed with an open mind that the numbers have to verify that this business should proceed.
Market research phases (personal as well as business users):
1. Identify profile of potential customers.
2. Research the retail trading area or the national business market.
3. Analyze competitors.
4. Develop a forecast.
Target Market
A target market is a group of almost homogeneous future customers or prospects. It is necessary to develop a profile of the people that will buy your product/service. Each target market will have a similar set of characteristics which will provide a basis for your research. Some variables include:
Age
Education
Family size
Household income
Leisure habits
Lifestyle
Nationality
Occupation
Personal income
Race
Religion
Social class
Sex
Characteristics of business-to-business targets:
Demographics: size or location
Type of business: manufacturing, retail or wholesale
Type of sale: cash, credit, one-time sale or repeat sale
Style of buyer: buy on low price, loyalty to supplier or other styles
Trading Area (Retail)
Research should reveal that there are enough buyers within your trading area to support your firm.
Research an area (usually a two- to eight-mile radius) from your proposed business location based on whether your product or service is purchased on impulse or during destination shopping. See Chapter 5 for more information on this subject.
Competition
How are the prospects' needs already being met by the competition? You are competing not only with those businesses that offer the same or similar product, but also with those which offer a product that could be substituted or used interchangeably with yours. In most new businesses, new sales are taken away from an existing competitor. Use a map to locate them. You will be successful only to the extent that you can create and maintain customers at a profit.
Know who your competitors are, where they are located and what their strengths and weaknesses are. Compare your product benefits, business location, pricing policies, quality and level of service against competitors.
Forecasting
Information is needed to develop a one or two-year forecast of your expected sales. This forecast is the key to the financial schedules discussed in Chapter 7. To forecast your sales, multiply the estimated number of units (product or service) you expect to sell monthly times the average price of each unit. When you develop the forecast, include all the assumptions you make, so that a reader can understand where the estimates come from.
Sources
Identify the sources of information that are available. The local libraries contain volumes of data in their reference sections. The librarians will help you locate the sources best suited to your needs. Tell them the type of business you are researching and which prospects you are trying to identify. Many libraries also have on-line computer data bases which identify other sources of books and periodical literature.
Population Data
Data is available on population distributions by national, state, and metropolitan areas. Your main interest will be the 1990 Census Tracts Vol. #1 and #2 for standard Metropolitan Statistical Area (MSA).
National, regional and local census data are available for review at the:
Census Bureau Service Library
1395 Brewery Park Boulevard
Detroit, Michigan, USA, 48207
313-259-0056
http://www.census.gov
Population data for Oakland County's 61 communities are available at the:
Oakland County Planning and Economic Development Services
1200 North Telegraph Road
Pontiac, Michigan, USA, 48341
Population and employment forecasts for these communities through 2010, maps showing population by square mile and much more data are also available, call 248-858-0731.
Special census collections are in the Oakland County Reference, Oakland University and Oakland Community College/Farmington Hills libraries.
Extensive demographic data reports are available for a reasonable fee from:
CACI Marketing Systems
1-800-292-CACI
Donnelly Marketing
1-312-495-1211
Business Prospects
The U.S. Department of Commerce classifies all businesses by a four-digit Standard Industrial Classification (SIC) code in terms of their product or service. Determine which SIC codes pertain to your product or service by using the Standard Industrial Classification Manual available at local libraries.
Most of the following publications and journals are in local or special libraries.
Business Periodical Index: Lists business periodicals. Most publish an annual Buyer's Guide which includes details about lists of companies and other data.
Wall Street Journal Index: List of articles run in the past arranged by subject.
U.S. Census of Manufacturers, U.S. Census of Retail Trade, U.S. Census of Wholesale Trade and Census of Selected Services: Provides information by location, industry, and subject.
U.S. Industrial Outlook: Projections for 350 manufacturing and service industries through 1994. Published by the U.S. Department of Commerce.
Michigan Manufacturers Directory and Harris' Manufacturers Directory: Most businesses are grouped by SIC code and location, identifying size by number of employees or sales volume.
Ameritech Industrial Guide: Composite listing of all Michigan companies who list in the Yellow Pages, provides names and addresses.
Wholesalers and Agents Directory: Wholesalers and manufacturers representatives listed by SIC, area, and size.
Sales and Marketing Management: Business and personal buying power for the national and local marketing area by Metropolitan Statistical Areas.
Dun and Bradstreet Million Dollar Directory: Comprehensive business information about 160,000 U.S. companies.
Dun and Bradstreet: Reference Book, Apparel Trades Book, and Metalworking Marketing Directory.
Standard and Poor's Industry Surveys: Provides updated statistics and analyses of industries.
Encyclopedia of Associations: Names of international, national, state and local groups concerned with one mutual interest in leisure, business, profession or other common activities.
Michigan Association Directory: As above, includes only Michigan organizations.
The value of looking for the various associations or federations which are aligned with your type of business is that they can give you statistical data not available elsewhere even if you are not a member, they may assist you.
Other Sources
U.S. Government publications (over 14,000 items) can be reviewed and purchased at:
U.S. Government Bookstore
160 Federal Building
477 Michigan Avenue
Detroit, Michigan, USA, 48226
313-226-7816
Local community offices and chambers of commerce may provide local information. See Appendix E for other marketing references.
Primary Data is collected specifically for the purpose of research at hand, and is unique to your product or service.
The basic methods of contacting potential customers are:
Mail and Phone Surveys. Do these yourself or employ a research agency. The key is structuring the questions and having sufficient responses to obtain valid data. It can be used for consumer or business prospects.
Personal Interview. Ask prospects brief, informal questions in places where people gather. Malls, theater lines or grocery store locations are suitable for asking, "Would you pay (unit price) for this (product or service)?"
Door-to-Door. Select a neighborhood which accurately represents your target market and where people will speak helpfully. Some communities require a permit for door-to-door solicitation.
Comparison Shopping. Visit business establishments that offer products or services similar to yours and observe prices and how those goods are sold.
The ultimate test of your research is whether or not the information you have gathered answers the question:
"Do I know (if and where) there are sufficient prospects, willing to pay the required price for my product or service, and that enough profits will be generated to warrant risking my life savings on this new business?"
