Understanding your market
Understanding your market - both your customers and your competitors – is essential if you're going to build a successful business. Finding out what your customers really want will help you improve your products and services to meet their needs. And by discovering how your competitors work, you can find ways to improve on their service to give your business an advantage.
Many businesses don’t realise that digital market research activity can increase your annual turnover by over a quarter.1
Carrying out market research will:
- Give you the information you need to plan
- Reduce the risk of making the wrong decision
- Identify potential new openings
- Help improve your marketing, selling points and create effective advertising
- Give you ideas for product and service development
- Help you better understand the competition you face
- Inform your business plan.
Whatever your business, you’ll need to know:
- Is there a demand for your product or service?
- What would people be willing to pay for it?
- Can you make it for them or provide it to them at that price?
- Is your price competitive?
Levels of market research
You can carry out three levels of market research:
1. Market awareness
This involves online research, reading newspapers and other publications, speaking to friends and colleagues, talking with your competitors' customers/clients, analysing your competitors' business approach, analysing sales, and noting what's happening in your business, e.g. how many online and offline customers you have.2
2. Ongoing informal research
This includes surveys – for example asking customers and prospects for their feedback on a regular basis.
3. Formal research
This research would be carefully planned and carried out, probably by a professional, to support a big, new investment. The researcher would have a clear brief, budget and timescale.
Understanding your customers
To know what customers want, it's important to collect all the relevant information and insights you can. Carry out your research by phone, email or face-to-face meetings. There are data protection laws regarding making unsolicited calls, so make sure you are not breaking them, visit The Information Commissioner's Office for more information.
Understanding the market
You need to understand how business is done in your industry, the ways products are sold and delivered, and what discounts and credit arrangements are offered by other suppliers.
Understanding your competitors
To learn as much as you can about your competitors:
- Study trade websites, newspapers and the business sections of local papers
- Look at trade directories as soon as they're published, and note any changes
- Try out competitors services as a mystery shopper
- Have a talk with your competitors' customers2
- Chat with your competitors – although they're your rivals, they're also your industry colleagues 2
- Research your main competitors at Companies House.
Carry out ongoing informal research as your business develops to keep your business fresh.
Ask your customers for their views occasionally by post or email, or on your website if you are able to.
There are many free online surveys which are a great way to collect feedback. Collecting customers’ email addresses at the point of sale will also help you with your research. You can then ask your customers for their views occasionally by post or email. It's important to keep surveys short and anonymous.
Offering possible prizes can encourage people to take part. But this means your promotion becomes a prize draw which is then governed by Gambling Commission rules. And it's important to note that collecting information from participants may be subject to government rules on data protection. You can check by visiting GOV.UK for more information. If you are going to promote your survey, then you need to make sure you are following Advertising Standard Authority rules too.
Talk with your customers and prospects – whoever in your business deals with customers should use every opportunity to gently ask them for feedback. Also talk with retailers and distributors. You should set up a system for recording and capturing feedback – this could help you improve your services. Even if your business grows rapidly, always deal with a few customers yourself to keep your eye on the ball.
You can also keep a watchful eye on social media about your business and your competitors. There are social listening tools that allow you to track what is being said about your brand and the sentiment behind those conversations. Its aim is to look deeper than just the number of times you get mentioned.
If you are getting a lot of positive or negative engagement it is worth trying to delve into what is prompting that. Your customers will be sharing a lot of information about what they like or they don’t like and this can help deepen your understanding about your offering and help you adjust your strategy.
Be on the look-out for problems
Watch for even the smallest signs of dissatisfaction – people will often stop buying/using your service rather than complain.
Try asking customers what their ideal would be, e.g. ‘If you could change one thing about our product/service, what would it be?’ Then work towards delivering it.
Don’t forget internal sources can help you with this. Asking sales staff what objections are raised most frequently in the selling process or understanding what questions customer service employees get asked most often can give pointers. These can all provide useful insights and identify gaps or weaknesses for your business. Sometimes solving these issues can be as simple as adding a little more information on your website about a product or additional details about service, refunds or delivery and so on.
Complaints to the business are also a good source of understanding what has gone wrong.
Customers today expect to be able to share feedback about a business wherever and whenever they want to. It might be through social media, via review sites, or by adding comments to your own website, where that is possible. Some customers also use social media as a public forum for complaints, in the hope that their issue will be addressed promptly, rather than using the normal channels.
Many customers say they consult these types of reviews when making purchase decisions and most consumers say that a negative online review has caused them to avoid a business.
Turning a negative into a positive
While there’s no fun in reading criticism of your hard work, there are lots of ways you can turn negative comment into a positive.
You can use comments to improve your business, and to update your frequently asked questions (FAQs) section on your website.
Best of all, people who complain but have their comments handled satisfactorily often end up becoming extra-positive advocates of your business.
Monitor sales records
Structure your accounts so that you can compare year on year, month on month. Look for seasonal trends, or a product in long-term decline, and try to evaluate the reasons for them.
Look at your data
Review what you’ve learned from all your research at a fixed time each month. Discuss it with your key staff and see if you can draw conclusions and agree on what actions to take.
If you're writing a business plan or have an idea for a new product or service, consider doing some formal market research or employing a professional to carry it out for you.
This research should be carefully planned and carried out. This will usually be done by a professional, to support a big business idea. The researcher should have a clear idea of what you want to find out, together with the budget and timescale.
The British Library Business and IP Centre and its National Network may also be able to help. You can get access to:
Things you might want to think about in your research:
The economy: Economic research can help you allow for a recession or boom in the future. Focus on trends that affect your industry.
The population: You may find statistics on the population, spending power and consumption patterns helpful in identifying which areas of your market to target.
Other research relating to your market: Find facts and figures particular to your market – temperature statistics if you sell air conditioning, or statistics on industrial production if you sell industrial machinery.