Marketing: Introduction to Market Research (GCSE)

The entrepreneur has come up with what he/she believes is a good business idea. But, how does the entrepreneur check that the business idea actually meets customer needs and has the potential to become a viable business? The answer is to do some market research.

Market research for a start-up or small business needs to focus on the fundamental issues, such as:

• How big the market is (measured by sales, volume etc.)
• How fast the market is growing ) & the market growth potential
• Who the existing competitors are and their share of the market
• How the market is divided up into segments ("segments" are the different parts of a larger market – e.g. low price or high quality)
• What kind of customers there are in the market. It is important to known what their preferences are in terms of when and where they buy, and the prices they pay

The main purpose of the market research is to help a business find a position in a part of the marketwhere itcharge a reasonable price and to earn reasonable profits. Often this happens when a business targets aniche market.

A niche market is a smaller part of a large market where customers have quite specific needs and wants.

By comparison, many of the goods and services you buy are offered in a mass market – where customer needs and wants are not too specific.

Here are some examples of how niche and mass markets compare:

Why should start-ups and small businesses aim for a market niche? Because surviving in high volume or mass-market segments is almost impossible. Mass markets are dominated by well-established businesses that enjoy lower costs and can charge lower prices than a smaller business. In other words, a start-up or small business will face stiff competition if it tries to compete in a mass market.

A business needs to be satisfied that there is likely to be a demand for the product. However, funds are often in short-supply which restricts how much market research can be carried out.

However, don't worry. Effective market research is not about getting hold of lots of statistics or detailed reports. It is about getting the right information to make good decisions.

Remember that a small business can learn much about the market by simply trading, talking to customers and suppliers on a day-to-day basis and reading the trade newspapers and magazines.