When you watch investment interest shows like Shark Tank or Dragon’s Den, the high-profile venture capitalist investors are commonly perturbed by one thing from the many budding entrepreneurs who attend their studios, and that’s a lack of proper market research.
There’s nothing that gets a serious investor’s hackles up more than people in business who base their market analysis on either their own assumptions, or their family and friends telling them that they “loved” the product. Proper market research for consumer brands will determine whether or not any new product or service has any chance at all of succeeding.
Here are some of the biggest and best reasons that market research matters more than ever in this challenging business world that we live in today:
1. It Verifies the Presence of a Viable Market
First and foremost, proper market research will tell you if you even have a market or not for what you’re offering. You might find that you’re in the wrong place in the country to sell a particular service, or that there aren’t enough potential customers to buy your product from your proposed local store.
This is a fundamentally important thing to understand before one invests in setting up shop to supply an area with whatever product or service one is offering. To ignore market research is to simply invite getting egg on one’s face.
2. Helps You Spot Other Business Opportunities
Let’s imagine that you’re preparing to launch a new clothing brand in your home city. The limited market research you’ve done shows that there’s huge demand for menswear, so that’s what you’re going to push. The problem? Menswear is a pretty broad category, isn’t it? More detailed market research might show that what the market is really missing is formal menswear, or that perhaps people really want to see more stores dedicated to boys’ clothing.
In these ways, market research opens up potentially whole new avenues of business for you. Your “menswear” store could now specialise in what there’s more demand for, and you might find an opportunity to sell items you understand well but didn’t realise that people wanted.
3. Lowers the Risk
When is a business venture “high risk”? The short answer is when there are too many unknowns to be confident of any success. Market research has an express purpose to lower that risk and create better chances of success. While risk can never be fully eliminated, it can be mitigated to the point where investor confidence increases and one can secure more resources to further help ensure a successful business or product launch.
As we mentioned in the introduction, it is often a pet peeve of venture capitalists and investors when pitching entrepreneurs appear to have failed to do their homework on market research. That pet peeve is well-founded, as well, because it means these same entrepreneurs are asking investors to risk their money based entirely on hearsay and gut feeling.
4. Helps You Target Marketing Materials
Well done market research means you know not just the general picture of the market, but also that of each critical segment that makes up the market. When you’re marketing to that whole, you can create different marketing materials to more effectively reach each different segment of the market and ensure your message reaches a wider audience.
5. It Better Informs Decision Making
An informed decision is always the best kind to make, and market research is what will inform you best in business decisions. If you’re going to decide on strategies to best your competitors, for instance, then you need details of the market that reveal where your existing competition might be going wrong. For instance, if your research turns up that none of your competitors offer money back guarantees, or they overcharge for delivery, then you have ways you can use to make your own business more attractive. Those decisions will make all the difference.