Do you have a great idea for a new business? Are you ready to open shop, draw up a business plan, and get marketing?
Great enthusiasm! But before you put in all that work and money, you first need to make sure your idea is a viable one. The way to do that is through market research. Market research will reveal who your target market is, and if they will actually pay for the service or product that you are offering. Chances are, they will pay for it if it solves a problem in a new and better way—and the only way to know that is by getting to know your potential customers and their needs.
Market research will help you fine-tune your idea into a viable and actionable business plan. Your research doesn’t have to be expensive, but it should be careful and thorough. Daymond John’s Success Formula offers this guide to conducting market research.
What Is Market Research?
Market research is collecting information about your target market and about the customers who would buy your product or use your service. The goal is to determine how your proposed business will contribute to the industry, and what differentiates it from what’s already out there. It involves defining exactly who your ideal customers are—including age, gender, hobbies, income, location, and other demographics—as well as taking a look at competing businesses.
How to Do Market Research
There’s a lot of work to do when it comes to understanding your market. Daymond John’s Success Formula recommends breaking it down into these steps:
1. Identify Your Customers
Your first task is to define your business’s customers. Don’t be tempted to say that everyone is a potential customer—if that’s the case, your business idea may be too broad. You need to narrow down the traits that describe your target customer. What stage of life are they in—are they new parents or retirees, or maybe college students? What are their demographic traits, including age, education, and gender? What do they do for fun? How many people fit into this category in your area? Make sure your market isn’t so narrow that it makes scaling difficult, and not so broad that there is too much competition and not enough niche appeal.
2. Write Out Your Questions
Once you’ve defined your target customer, decide what you would like to find out about them, especially as it relates to your business idea. Write out any and everything you’d like to know. Start with these questions:
- What do customers do now instead of buying your product or service, and why?
- What would encourage them to buy from you instead?
- What price ranges are they looking for?
- Does your business idea offer a workable solution to their problems?
3. Ask Your Questions
Armed with your list of questions, create an online survey, poll, or focus group to ask these questions. Depending on how in-depth you go, this can be an expensive step. But the more feedback you get from customers, the better your business will turn out.
4. Start Conversations
Get out from behind the screen and meet your customers face to face. Your goal is to make life easier or better for them in some way, so the more you see of them the better. A great way to get feedback and meet potential customers is to start a low-cost trial run of your business. Ask for feedback and input from customers along the way, and make adjustments accordingly.
5. Check Out the Competition
What competing businesses are out there, and what kind of solutions do they offer customers? Ask customers what businesses they choose now, and what they like or dislike about the experience. Brainstorm how to develop your business into a better or cheaper solution.
Daymond John Entrepreneur Training
Market research is the first step to putting together a great business plan. Once you’ve got some evidence that there’s a demand for your idea, you’re ready to get going and building. Want more tips for entrepreneurs? Register for a Daymond John’s Success Formula event today.