Every small business owner-manager must ask the following questions to devise effective marketing strategies:

• Who are my customers and potential customers?
• What kind of people are they?
• Where do they live?
• Can and will they buy?
• Am I offering the kinds of goods or services they want at the best place, at the best time, and in the right amounts?
• Are my prices consistent with what buyers view as the product's value?
• Are my promotional programs working?
• What do customers think of my business?
• How does my business compare with my competitors?

Marketing research is not a perfect science. It deals with people and their constantly changing feelings and behaviors, which are influenced by countless subjective factors. To conduct marketing research you must gather facts and opinions in an orderly, objective way to find out what people want to buy, not just what you want to sell them.

Why do it?

It is impossible to sell products or services that customers do not want. Learning what customers want and how to present it attractively drives the need for marketing research. Small business has an edge over larger concerns in this regard. Large businesses must hire experts to study the mass market, while small-scale entrepreneurs are close to their customers and can learn much more quickly about their buying habits. Small business owners have a sense their customers' needs from years of experience, but this informal information may not be timely or relevant to the current market.

Marketing research focuses and organizes marketing information. It ensures that such information is timely and permits entrepreneurs to:

• Reduce business risks
• Spot current and upcoming problems in the current market
• Identify sales opportunities
• Develop plans of action 

How to do it 

Without being aware of it, most business owners do market research every day. Analyzing returned items, asking former customers why they've switched, and looking at competitor's prices are all examples of such research. Formal marketing research simply makes this familiar process orderly. It provides a framework to organize market information. 

Market Research - The Process

Market research, like other components of marketing such as advertising, can be quite simple or very complex. You might conduct simple market research such as including a questionnaire in your customer bills to gather demographic information about your customers. On the more complex side, you might engage a professional market research firm to conduct primary research to aid you in developing a marketing strategy to launch a new product.

Regardless of the simplicity or complexity of your marketing research project, you'll benefit by reviewing the following seven steps in the market research process.

Step One: Define Marketing Problems and Opportunities

The market research process begins with identifying and defining the problems and opportunities that exist for your business, such as:

• Launching a new product or service
• Low awareness of your company and its products or services
• Low utilization of your company's products or services (the market is familiar with your company, but still is not doing business with you)
• A poor company image and reputation
• Problems with distribution - your goods and services are not reaching the buying public in a timely manner

Step Two: Set Objectives, Budget, and Timetables

Objective: With a marketing problem or opportunity defined, the next step is to set objectives for your market research operations. Your objective might be to explore the nature of a problem so you may further define it, or perhaps it is to determine how many people will buy your product packaged in a certain way and offered at a certain price. Your objective might even be to test possible cause and effect relationships. For example, if you lower your price by 10 percent, what increased sales volume should you expect? What impact will this strategy have on your profit?

Budget: How much money are you willing to invest in your market research? How much can you afford? Your market research budget is a portion of your overall marketing budget. A method popular with small business owners to establish a marketing budget is to allocate a small percentage of gross sales for the most recent year. This usually amounts to about two percent for an existing business. However, if you are planning on launching a new product or business, you may want to increase your budget figure to as much as 10 percent of your expected gross sales. Other methods used by small businesses include analyzing and estimating the competition's budget and calculating your cost of marketing per sale.

Timetables: Prepare a detailed, realistic time frame to complete all steps of the market research process. If your business operates in cycles, establish target dates that will allow the best accessibility to your market. For example, a holiday greeting card business may want to conduct research before or around the holiday season buying period, when their customers are most likely to be thinking about their purchases.

Step Three: Select Research Types, Methods, and Techniques

There are two types of research: primary research or original information gathered for a specific purpose and secondary research or information that already exists somewhere. Both types of research have a number of activities and methods of conducting associated with them. Secondary research is usually faster and less expensive to obtain that primary research. Gathering secondary research may be as simple as making a trip to your local library or business information center or browsing the Internet.

Step Four: Design Research Instruments

The most common research instrument is the questionnaire. Keep these tips in mind when designing your market research questionnaire.

• Keep it simple.
  Include instructions for answering all questions included on the survey.
• Begin the survey with general questions and move towards more specific questions.
  Keep each question brief.
• If the questionnaire is completed by the respondent and not by an interviewer or survey staff member, remember to design a questionnaire that is graphically pleasing and easy to read.
• Remember to pre-test the questionnaire. Before taking the survey to the printer, ask a few people such as regular customers, colleagues, friends, or employees to complete the survey. Ask them for feedback on the survey's style, simplicity and their perception of its purpose.
• Mix the form of the questions. Use scales, rankings, open-ended questions, and closed-ended questions for different sections of the questionnaire. The form or way a question is asked may influence the answer given. Basically, there are two question forms: closed-end questions and open-end questions.

Close-end questions - Respondents choose from possible answers included on the questionnaire. Types of close-end questions include:

• Multiple choice questions which offer respondents the ability to answer "yes" or "no" or choose from a list of several answer choices.
• Scales refer to questions that ask respondents to rank their answers or measure their answer at a particular point on a scale. For example, a respondent may have the choice to rank their feelings towards a particular statement. The scale may range from "Strongly Disagree," "Disagree," and "Indifferent" to "Agree" and "Strongly Agree."

Open-end questions - Respondents answer questions in their own words. Completely unstructured questions allow respondents to answer any way they choose. Types of open-end questions include:

• Word association questions ask respondents to state the first word that comes to mind when a particular word is mentioned.
• Sentence, story or picture completion questions ask respondents to complete partial sentences, stories, or pictures in their own words. For example, a question for commuters might read: "My daily commute between home and office is _____ miles and takes me an average of ______ minutes. I use the following mode of transportation: _______." 

Step Five: Collect Data

To help you obtain clear, unbiased and reliable results, collect the data under the direction of experienced researchers. Before beginning the collection of data, it is important to train, educate, and supervise your research staff. An untrained staff person conducting primary research will lead to interviewer bias.

Stick to the objectives and rules associated with the methods and techniques you have set in Step Two and Step Three. Try to be as scientific as possible in gathering your information. 

Step Six: Organize and Analyze the Data

Once your data has been collected, it needs to be cleaned. Cleaning research data involves editing, coding, and tabulating results. To make this step easier, start with a simply designed research instrument or questionnaire.

Some helpful tips for organizing and analyzing your data are listed below.

• Look for relevant data that focuses on your immediate market needs.
• Rely on subjective information only as support for more general findings of objective research.
• Analyze for consistency; compare the results of different methods of your data collection. For example, are the market demographics provided to you from the local media outlet consistent with your survey results?
• Quantify your results; look for common opinions that may be counted together.
• Read between the lines. For example, combine U.S. Census Bureau statistics on median income levels for a given location and the number of homeowners vs. renters in the area. 

Step Seven: Present and Use Market Research Findings

Once marketing information about your target market, competition and environment is collected and analyzed, present it in an organized manner to the decision makers of the business. For example, you may want to report your findings in the market analysis section of your business plan. Also, you may want to familiarize your sales and marketing departments with the data or conduct a company-wide informational training seminar using the information. In summary, the resulting data was created to help guide your business decisions, so it needs to be readily accessible to the decision makers.

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