1. Market Research Methods
AOF Entrepreneurship
Unit 2, Lesson 4
Market Research Methods
Developing a great idea is only the first step toward entrepreneurial success. Before sinking time and money into a product or service, entrepreneurs have to make sure there are people who will buy it. Furthermore, entrepreneurs must know as much about their potential buyers as possible in order to communicate to them the product’s benefits. The way entrepreneurs get to know their market—the people who likely have a need for the product in question—is through market research.
This presentation introduces methods for primary data collection for the purposes of market research, including observation, networking, interviews, surveys and questionnaires, and focus groups.

2. Entrepreneurs can choose from several methods for learning about potential customers
Observing customer behavior
Networking and talking with customers and competitors
Holding focus groups or panel discussions
Interviewing customers and conducting surveys
Conducting experiments
Market researchers and entrepreneurs can conduct primary research in many different ways. Some methods are informal and involve casual discussions, while other methods require careful preparation and analysis.
The important goal of research is to understand the local market, relevant trends, and customers’ desires and needs. Businesses are most likely to be successful when they have a clear understanding of their local market, including both their competitors and their customers.
Which methods do you think are formal and which are informal ways of doing research?

3. Observing customers is the simplest, cheapest way to learn about people’s buying behavior
One of the simplest ways to research customer groups and their buying behavior is just to watch them shop or use products and take note of their behavior. By watching how they interact with products, and what they actually purchase, entrepreneurs can learn what customers like and what they dislike.
Through observation, entrepreneurs can also identify any problems people have interacting with existing products or services. One example might be customers shopping for electronics such as phones, which sometimes have confusing buttons. If a customer has trouble figuring out how to use a product in the way it was intended, it may be designed poorly. An observant entrepreneur can exploit the opportunity that a competitor’s poorly designed product provides: the entrepreneur can identify a need in the market—a phone that’s easy to use—and get an idea of how to design a phone that’s intuitive—simply by watching consumers interact with a phone they’re considering buying.
Observation can also reveal the conditions in which people are likely to shop and buy. When entrepreneurs observe what customers do in the real world, such as at a shopping mall, they gain authentic information that sometimes is more valuable than just talking to people. Sometimes what people say they will do and what they actually do are different. For example, a customer might say he is interested in something but then not actually purchase the item, so watching how customers behave is important to making decisions about what really works.
How might an entrepreneur take advantage of a competitor’s poor product design?

4. Networking with customers can help an entrepreneur understand the local market better
By taking time to be social with colleagues, customers, and competitors, business leaders can gain critical insight into their industry.
Social skills are highly important to successful business. By talking with people and forming connections and friendships, entrepreneurs learn about how people in their industry think and behave. Many entrepreneurs credit their success to their friends, colleagues, and even competitors who provided insight, advice, or critical information. This information can help businesses make good decisions about what direction to take with new products and services.
Professional networking is the process of talking with people and developing a network of contacts. These people can provide support, information, and guidance. Building trust with colleagues, competitors, and customers will make them want to work with you and buy from your business.
Networking is an informal way of performing market research, but it can be inexpensive and highly valuable. Sometimes it may be easier to collect information by talking with people casually, because they may be more likely to open up to someone that they trust—or they may be more likely to speak candidly in a casual chat than in a formal setting where they may not be as comfortable.
Why else are social skills critical to success in business?

5. Survey research and interviews are popular methods that reveal in-depth information about customers
Survey research includes questionnaires, surveys, and interviews.
If you want to know what potential customers are thinking, just ask!
Market surveys are often the most popular ways of conducting research because they can be used to poll potential customers about many different topics, including their habits and what they’d like in a specific product. Surveys and interviews can be done by phone, by mail, in person, or online. Each method has its benefits and drawbacks. For example, some methods are easier and cheaper to do than others, and people may answer differently depending on the method.
In fact, a drawback of survey research is that people may say they like a product or exhibit interest, but when the product is actually offered, they may be less interested. This isn’t because people are dishonest, but they sometimes don’t know how they will feel ahead of time, or their thoughts may change given different circumstances. What people say they are going to do does not always reflect their behavior. This is why many entrepreneurs want to use other methods of research, like observation and networking, as well as formal survey research.
When surveys are complete, the information collected can be reviewed and analyzed in qualitative ways by looking at what people say and feel. They can also be analyzed quantitatively, that is, by identifying what are the most common concerns and priorities of customers. This helps give an entrepreneur a more detailed, targeted view of the customer’s thoughts about the products.
Is a customer more likely to be completely honest in an in-person interview or in an anonymous questionnaire?

6. A focus group is an informal discussion with a group of potential customers about their preferences
What happens when you gather a group of potential customers in a room and ask their opinion?
Focus groups encourage customers to discuss what they want and expect from a product or a service.
Focus groups gather between 8 and 12 potential customers into a small room, often a conference room. An experienced researcher leads the discussion and asks questions that address the information researchers want. They listen to how customers discuss a product or a service and learn how their thought process works. By listening to customers talk about a product, the researcher learns what customers already know about the product and gets to hear what they want in a potential product or service.
Since focus groups involve an informal discussion with customers, they should be conducted by someone other than the entrepreneur. This is because an entrepreneur may not be able to objectively interact with customers about his “big idea” or really listen to what they say. Entrepreneurs usually feel strongly about what they want or expect, so it’s useful to have someone objective and experienced lead a panel or focus-group discussion.
Focus groups can be an expensive way to conduct research, because they require identifying and inviting customers, securing space for the discussion, and paying impartial researchers to lead the talks. Often, they will also compensate the customers for their time and insight. Despite the costs and difficulty, they can be highly valuable for companies to get in-depth insight into the customer’s perspective.

7. By experimenting with product features, price, and delivery methods, entrepreneurs learn what works
Once entrepreneurs understand their market, they can test the waters by trying out a new product.
Experimentation will show them what works and what sells—and what doesn’t.
When a market researcher has finished talking with potential customers and learning their concerns, the next step is to try out different products or services. By introducing products and services, the businessperson can see how customers react to them and what they will actually buy.
For complicated products, an entrepreneur might first make a prototype of a product. A prototype is a first version, like a model or a demonstration of the final project. This can be used to show potential customers and investors what the entrepreneurs intend to produce. By asking customers what they think of the prototype, entrepreneurs can also gain valuable information, and make changes to the product before it is mass produced. Then the final product will be improved before it’s sold to customers.
The next stage of the product can be offered for sale, and entrepreneurs can track how successful they are. By adjusting product offerings over time, an entrepreneur will find out which are most successful.

8. No method is the “best” or “worst.”
Entrepreneurs choose the type of market research that helps them find out what they need to know
The different forms of market research each have advantages and disadvantages.
No method is the “best” or “worst.”
Entrepreneurs can mix and match market research methods to get different perspectives on the market.
Choosing which method to use can depend on factors such as:
Time available for research
Budget for research
Goals of research
Observing customers and networking can be done informally at low cost.
A survey is the most popular method for doing formal, targeted research, but it’s also more expensive to conduct.
Focus groups allow customers to talk about a service and bounce ideas off of each other, but that means that some customers may be influenced by others and their buying patterns may differ from what they say in the group discussion.
Eventually, when an entrepreneur has gotten solid information from other methods, she will have to begin experimenting by developing a real product or service and trying to sell it.
Over time, with careful research and adjusting the products and services to match the customer’s needs and buying patterns, the entrepreneur can work toward success.