There is a lot of uncertainty in business. We don’t know if our new product will succeed. We don’t know if an investment in new equipment will pay off. We don’t know if that important deal will go through. We don’t know what government regulation or industry disruption will hit us next. We don’t even know if our business will exist in five years!
But that’s the way life is, because God planned that He alone knows the future. That’s not to say we can’t make good business decisions. We can! Deuteronomy 29:29 says “The secret things belong unto the Lord our God: but those things which are revealed belong unto us and to our children forever, that we may do all the words of this law.” The future is one of the secret things that God alone knows. Did you notice the implied promise? God has revealed to us what we need to know to be successful in obedience to Him.
Business researchers Jim Collins and Morten T. Hansen address this unpredictability in their book Great by Choice, which has this intriguing subtitle: “Uncertainty, Chaos, and Luck—Why Some Thrive Despite Them All.”
Great by Choice looks at principles for having a successful business in these “unpredictable, tumultuous, and fast-moving times.” One of the things the book discusses is the concept of venturing cautiously into new territory rather than charging full steam into uncharted waters.
The authors emphasize that instead of a big, risky bet on something new, businesses should test their plans in a small way first. If the experiment is a success, then the business can invest or proceed with confidence.
This is similar to how a farmer wanting to grow a new crop might plant a small field the first year to find out how well the crop will do. If he gets a good yield, he could then plant a larger acreage the next year and implement the lessons he learned during the first year.
Great by Choice tells how Pacific Southwest Airlines jumped into the hotel and rental car business. Rather than doing a small pilot project (no pun intended), the airline confidently took out 25-year leases on hotels and boldly bought an entire rental car company.
But the initiative never worked, and the company lost money on it every year. There will always be uncertainty surrounding new ventures, but this story illustrates one of the perils of doing business without relying on good market research.
What is market research?
Whether you are starting a new business, prototyping a new product, or improving your existing marketing, research is one way you can minimize your risk and find a measure of certainty as you plan for the future.
Online encyclopedia Investopedia defines market research this way: “Market research is the process of assessing the viability of a new good or service through research conducted directly with the consumer.”
Hubspot, a sales and marketing software company, says it this way: “Market research is the process of examining an industry's buyers, the product these buyers want, and where they're currently getting it. By engaging the right people and data, a business can use this research to position itself in the market and predict where the market will go in the future.”
Market research is learning about customers or prospective customers. It also includes studying the competition, understanding past and current market trends, and collecting information from industry experts. Doing small “field tests” is market research, too.
Is market research worth it?
Maybe market research sounds like too much trouble: you already know what you need to know, and besides, who has time to do all that work? If that is the case, ask yourself this question: Am I making decisions based on facts and market realities, or am I making assumptions based on my personal frame of reference?
- Have you accurately identified your ideal customer, or are you making assumptions?
- Have you accurately identified what your customers really want, or are you making assumptions?
- Have you accurately identified what marketing messages have the most appeal, or are you making assumptions?
Market research is an opportunity to see how your assumptions align with reality. In The Personal MBA, Josh Kauffman writes: “Every business or offering has a set of critical assumptions that will make or break its continued existence. The more accurately you can identify these assumptions in advance and actually test whether or not they’re true, the less risk you’ll be taking and the more confidence you’ll have in the wisdom of your decisions.”
A few more ways you can benefit by doing market research:
- You’ll avoid investing in resources your customers won’t value.
- You’ll learn how to make something good even better.
- You’ll discover ways you can add a lot of value for little cost.
When is the best time for market research?
An obvious time to do research is when you are working on something new—a new marketing campaign, a new sales strategy, a new product, or a new business. Entrepreneur Steve Blank wrote: “’Build it and they will come’ is not a strategy; it’s a prayer.”
For example, if you have a brilliant idea for a bicycle bell, one of the first things you need to know is whether people will want to buy it. How do you find out? One way is to ask them. But don’t ask just your family and friends—they want you to succeed, so their feedback will be biased.
Determine what kind of person you think would be the most likely to purchase your revolutionary bicycle bell, and test your idea with them. If they are perfectly happy with the bicycle bell they already have, you’ll be grateful you discovered that fact before sinking a lot of money into your new venture.
Here are some other times to keep your ears to the ground, listening to the market:
- When sales are low
- When sales are high
- During industry disruption
- All the time!
How can I do market research?
First, relax. Market research is not as complicated as you might think. In fact, you are probably already doing some market research without realizing it. You can pick up a few more ideas here to help you glean that extra information that will give you an edge. Follow these steps:
1. Define the decision you need to make and/or the specific information you want to gather. Maybe you need to know which features to add to your next model, or you want to add an entire new line of products.
2. Write scripts or survey questions. Who is going to gather the information? Explain your goals and reasons for the research to that person, and give them a set of questions to ask. Tailor your questions for three groups:
- Existing customers,
- Prospects considering a purchase
- Former customers or prospects who have decided against becoming your customer.
Why bother talking to former customers? Well, it’s like Bill Gates said: “Your most unhappy customers are your greatest source of learning.”
3. Plan how you will record and organize the information. You will get the most out of the feedback if you have a system for collecting in a format where you review and distribute it to others. Write it down!
4. Ask customers questions. Three examples of implementing a system for consistently asking questions:
- Your store clerks ask the same question to every customer as they check out.
- Your salesman asks every prospect the same three questions.
- Your serviceman asks each customer each time he arrives (or departs).
A more informal approach can work too. For example, perhaps you simply ask your employees to make note anytime they sense that a customer is frustrated about your company or your level of service. Hold a meeting once a month to share what they have found and to talk about ideas. Customers often have suggestions, so make sure those suggestions are discussed.
If you have a retail store, make it a habit to take a little time to stroll around and strike up conversations with customers. Ask them about their purchases and their experience in your store, and listen for patterns that pop up.
You may decide to take an official survey, either oral or written. Oral surveys are done face-to-face or over the phone. An oral survey offers you the opportunity to ask questions to clarify the customer’s responses, but on the downside, it takes a lot of time. Personal interaction like this builds your credibility as long as you show respect and genuine interest in their lives.
A written survey where the recipient fills out a form on paper online is much more efficient, but it can be difficult to gain deep insights this way. Written surveys work well when you want to discover simple preferences or are asking yes/no questions. Be prepared for a low response rate—people may not be motivated to bother to respond unless you offer an incentive. One survey offered a $50 Amazon gift card to three respondents chosen by random.
5. Glean insights from industry experts. You probably already attend industry events. These gatherings are good places to learn from others and stay up-to-date on market trends. Subscribe to (and then take time to read!) trade journals, business newspapers, or online blogs. Even if you can’t get personal access to top industry experts you can read their writings.
Government agencies, trade associations, and research universities sometimes publish reports or studies that contain useful information. And don’t overlook these two resources: knowledgeable salesmen in the industry and your very own competitors!
There is usually not a single “right answer” or “silver bullet” that will guarantee success in the uncertainty and questions that face your business.
However, market research is a compass that can keep you pointed in the right direction, because it gives you a solid basis for making decisions. Like this quote attributed to economist John Maynard Keynes, “It is better to be roughly right than precisely wrong.”