How to conduct market research

Conducting market research doesn’t have to be costly or high-tech. It can be as simple as having a conversation. Whichever method you choose, it’s important to know exactly what you’re trying to find out. 

Here are some cost-effective ways to research your market.

By far the most common (and realistic) approach is to simply get out and talk to as many potential customers as possible about your idea. You might like to develop a simple questionnaire such as this:

• What do you like about my idea? 
• What do you think could be improved? 
• Would you buy this product or service? If not, why not? 
• What price range would you be prepared to pay?

Get advice from people with industry knowledge. Reach out to an experienced business owner within your industry – many owners are happy to share their knowledge, and support new businesses. Most industries will have an industry association that produces research or can offer you some information or insight.

It’s important to get honest answers, so be careful about asking family or friends. For one, they might not be your target customer – so their opinion may not be as relevant. You’re also likely to get one of two typical responses: 

• To show their support they may say nice things about your idea – rather than say how they really feel.
• For various reasons they may be negative and suggest you would be better off with the security of a regular wage or salary.

The best advice usually comes from people who’ve:

• Been in business and therefore understand the challenges and opportunities you face
• Previously bought the type of product or service you’re selling.

Statistics New Zealand has a wealth of information free of charge you can access by visiting their website.

You could also see if you can access information held by universities or polytechnics as a cheaper alternative to professional market research. 

Don’t be limited by what you see in front of you. Look at other parts of New Zealand and other countries – if similar products or services exist, chances are a demand has been developed. For instance, if you live in a town that doesn’t have a bakery, but you know a similar town does (and the bakery is really busy), a demand probably exists.

• The industry size, characteristics of major competitors, market segments, sales volumes, and various channels to market (include dollar figures wherever possible).
• Future industry trends and predictions. 
• Your ideal customer (age, life stage, and budget), including how many there are in the market, how many are your customers, and where and how they buy your product.
• The best way to advertise and promote, and the best channels by which to sell.
• Current prices and supplier costs.

Now is the time to research anything that may prevent you from being in business. It’s assumed that what you have in mind is legal, but are there other aspects you haven’t thought of such as:

• Local council restrictions
• Licences to operate or leases you may need to acquire
• Permission from any other stakeholders
• Industry qualifications or levels of expertise.

Health and safety requirements and the Resource Management Act could impact on the ability for you to run your business. There is a useful summary of these on the business.govt.nz website.

Bringing together your research on market demand and your competitive advantage is a bit like presenting evidence to a court – you’re trying to show ‘the jury’ that your business will work. For example: 

• There’s a similar business in another town or city that does a roaring trade 
• Everyone you ask says they will buy from you
• It’s very popular in other places or countries
• You have some statistics or research to back up your assumptions
• You have a customer already signed up
• You have a customer base that’s already loyal to you
• Research indicates demand for your product or service.

Market research is essential to starting a business – after all, how else will you know if people want to buy what you sell? Put in the effort, and you’ll arm yourself with the knowledge and confidence to set your start-up in motion.