The benefits of a market study
You know what they say, “Forewarned is forearmed”.
And yet many people do without a market study, saying: “I already know the market”, “a research firm asks me 10,000 euros, I can’t afford that”, “I don’t even have the time to do it anyway”, …
Creating a business without conducting a market research inevitably increases the risk of failure!
To prove this, let’s take an unfortunately frequent example:
Pierre V. is passionate about computer science. He noticed that some IT service providers were thriving in his area. He thinks that the market is dynamic and decides to create a company before taking the time for a market study.
After a few weeks and despite countless advertisements distributed in the mailboxes of the inhabitants of his city, the company is struggling to start.
Pierre V. decides to ask a consultant who quickly diagnoses a completely saturated market. Moreover, the company’s service offerings are identical to those of its competitors, and the prices are similar.
With a little hindsight, some research and a market study, Pierre V. would have accumulated the necessary information to get off to a good start!
Summary
- The general approach
- Our Advice
1- The general approach
For your market study to be good, a few conditions have to be met:
– You should be curious,
– You should set goals and limits for your study,
– You should take the necessary step back to avoid false conclusions,
– And finally, you should always be surrounded by advice. Preferably, this advice should not be given by your relatives who will find it harder to contradict you.
Throughout this article, you will come to realize that most of your market study can be done without wasting your time and money.
This study should be seen more as an investment in the future.
Decide knowingly
First of all, do not make a market study for no other reason than to work with a financial or commercial partner who requires it. It is imperative to realize that such a study is mandatory to understand the state of the market, to highlight the points of attack to be developed and to know what decisions should be taken.
Then, it is important to spend time analyzing the results of one’s study before making decisions. They may be of significant importance, and it’s always better to take your time rather than to have to bounce back from a desperate situation that could have been avoided.
Another thing to keep in mind is that even if you go to a specialized market research firm or a business creation advisor, you should still actively take part in this study. Controlling the information is indeed one of the major tasks of an entrepreneur. Especially so for the information that concerns the evolution of the commercial environment, which is the very environment the company will draw its revenue from!
Be careful not to carry out a purely macroeconomic study, only analyzing national statistics, major trends, etc. This information makes it possible to acquire a “general culture” of the environment in which one is invested, but they do not bring direct answers to generate revenue in the short term.
Be careful not to limit your concerns to potential customers only. It is necessary to know as much as possible on the evolution of the environment (competitors, sectoral/local regulation, technological evolutions, etc.) on which the company depends and which can modify the conditions of its development in the long term.
It makes you able to anticipate the market
If conducting a market study is necessary at the time of preparation of the creation of the company, updating the knowledge of the functioning of this market should be one of your concerns at all time.
If you know how to control information, where to find it and how, as well as what to do with said information, you will be better at managing your business.
What you learn by making this business study will be invaluable for the entire lifespan of the company. Even if you sometimes feel like it is a complete waste of time to do research with organizations, companies or people who aren’t always among the most cooperative, this period of learning and discovery is an investment whose value will only become more apparent as time goes on.
By persevering, you will be a true visionary in your field.
You should always check the reliability of the information collected
If you are the one performing your market study in its entirety, or even only partly, It is important to remain as objective as possible.
Some difficulties may force us to extrapolate and interpret. In these cases, it is important to be prudent, and not to hesitate to ask for the opinion of experts.
It is therefore important to always check the date the information was collected. Some pieces of data have not been updated for several years, and it can be dangerous to overly rely on it alone.
Some information is not always available to an entrepreneur, such as studies done on behalf of large companies. Other information that would be useful for some markets simply doesn’t exist yet because no one organization has been concerned so far. This is the case, for example, with macroeconomic information on the audiovisual and communication markets.
Some information is available, but on a very large scale in relation to the size of the company, or concern categories that are way too broad for your activity. It’s the case, for example, for the statistics of the ceramic industry for a potter.
To confirm the validity of the information you can collect, try to find several sources on the same subject. No information can be 100% reliable, but crossings between different sources on the same subject will allow you to be as certain as possible about how reliable your information is. This is the case, for example, for files of competing companies or customers, market prices, population statistics, consumption figures, etc.
Thus, the making a market study can be summarized in an important search of information. When it’s done, all that’s left is to carefully analyze the results to make appropriate decisions for your company.
2- Our advice:
Stay close to the field and customers
A simple search for information on the Internet or in a documentation center doesn’t really “immerse” one in the market. Therefore, it is important to:
- to go on the field itself
- to visit the points of sale of the competitors (price, reception, positioning, etc.),
- to talk with the sellers,
- to meet your suppliers (for example in trade shows),
- and above all, to ask questions to your future customers yourself.
Actively participating in the administration of a questionnaire to your customer target, for example, allows one to receive as much information as possible about the purchasing habits (places, regularities of purchase, needs, criteria, etc.) and to identify the less obvious.
An investigator who is not part of the project will not necessarily write down all this information.
Monitor your competitors
Today, it is necessary to “fight” to recover market shares, because competition is omnipresent!
It is therefore important not only to identify direct or indirect competitors, but also to scrupulously analyze their method of operation and their development: this is referred to as “competitive intelligence”.
These observations should be done not only before of the company has been created, but also throughout its life: the disappearance of a competitor announced in the local newspaper, the announcement of the creation of a commercial complex, the publication of a revolutionary new product in your industry, … All of these are information that may change the company’s strategy and cause changes in the way it operates.
Take risks, but not too many
When you start a business, you naturally take risks. But you should refrain from relying on nothing but luck, and you should therefore only take more “measured” risks.
In terms of market research, limiting risks means sorting and reworking information to match the reality of the market studied and, most importantly, not always taking it at face value.
For example, the results of a national study should always be compared with the information collected during the field survey, from the actual target of the project leader.
Similarly, when obtaining regional or local studies, it must be kept in mind that the client interviewed will not necessarily have the same consumption requirements in Paris, Brest or any other municipality (urban or rural).
Finally, a commercial concept that has already proven itself abroad or in some French cities won’t always receive the same success back home.
