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:
The main purpose of the market research is to help a business find a position in a part of the market where it charge 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:
Trekking in Nepal
Beach holiday in Ibitha
Porsche 911 Turbo
Cadbury's Dairy Milk
Snowboard UK magazine
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.
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