Market Research

Market research does not necessarily have to be highly sophisticated, expensive or complicated. It can be very much a do-it-yourself thing. The important thing is to make sure it gives you reliable information that you can use in building your business. Market analysis results in information about the market potential, which provides the basis for
accurate sales forecasting and your marketing strategy. Its basic components include:
  • an estimate of the size or the market for the product/service;
  • projected market share;
  • information about your market; and
  • analysis of the competition.
Market research involves activities designed to obtain data about the market and falls into two main categories.
  • Primary research collects new data through market surveys and other field research -- specific studies that are conducted on behalf of your company.
  • Secondary research gathers pre-existing information that is useful to your purposes from published sources.
In addition to conducting research, it is quite valid to rely to some extent on your own opinions and observations, especially if they have to do with your local community. “Outsiders” will not know a community like the people who’ve spent their lives there. However, it is important to back up your opinions with data and research. Don’t rely solely on your intuitive feelings; they’re probably not enough to go to the bank with. Resist the temptation to only look for data that confirms your opinions.

Information you gather goes into estimating the sales your company will achieve during its first few years of operation. The feasibility study and business plan you are putting together are built upon these estimates. Because research is one of the principle tools for determining whether the business will work, it is worth making an investment.

You need to be as specific as possible about the dimensions (size, trends) of the opportunities your business faces. Since a new business doesn’t have a track record, your research must be thorough enough to enable you to make realistic sales estimates.

How do you figure out whether adequate demand exists for your product?

Primary Research
Primary research is information you gather first-hand. Common examples of primary research information-gathering techniques include personal interviews, surveys and focus groups.

Methodologies are ways in which you contact sources for your information. They might include:
  • in person
  • telephone
  • fax
  • Internet mail
  • U.S. mail
Observation
Observation is also a common technique. You record what your customers do naturally. Through observation, market researchers determine how consumers behave as they buy and use a product, or how they are influenced by some marketing strategy being used by the business. This method works very well in a retail environment. It is a useful technique to learn how and then, perhaps, why customers purchase a product that is in direct competition with your product. If your product is already being sold, you might watch how your customers act while purchasing your product.

A pitfall of the observation technique is that the presence and/or bias of the observer can influence the behavior of the subject. As you observe customer behavior in stores, markets, etc., try to be inconspicuous in your presence.

When businesses gather primary data, they often are gathering qualitative data. Qualitative data is data that cannot be counted. It reveals the quality of a subject’s experience or beliefs. Qualitative research is gathered by allowing customers to answer questions in an open-ended, unstructured manner. Customer preferences might be examples of qualitative data.

Focus groups, one-on-one discussions or interviews can provide qualitative data.

Quantitative data describes things that can be measured and analyzed with statistical analysis. These are expressed in numbers and reveal such things as the quantity of customers with a particular characteristic. How much do your customers earn each month? How old are they? How much do they spend each month on groceries?

Both qualitative and quantitative information can be important to you as you do your market research. There is a problem with using only quantitative data gathered from a small number of individuals. It may not be a large enough number of people, with a large enough product sampling to be reliable for decision making. Would you make the decision to completely change your product based on the thoughts of a handful of customers? When you combine quantitative and qualitative data, however, you can expand what you learn by combining or showing connections between observations, preferences and the quantitative data you have developed. You can develop a good base of information, for example, about the characteristics of your typical customer.

The following tips will be useful as you design the research tools you will use in conducting your primary research.
Creating a Survey
  • Keep questions short, simple and to the point.
  • Make it very easy for the respondent to complete.
  • Use questions that involve a ranging scale of 1-5 (1= strongly disagree, 5=strongly agree).
  • Surveys should take no longer than 5-10 minutes to complete.
  • Be careful not to bias the answers with your question construction.
  • Offer respondents some reward for completing the survey (money, discounts, prizes, etc.).
  • Say, “Thank you.”
Hints for a Good Focus Group
  • Assemble 6-10 people who you think would buy your product.
  • Gather in an informal, relaxed setting.
  • Use someone who is an excellent interviewer/moderator with good listening skills.
  • Initiate open-ended questions.
  • Listen as participants share ideas, respond to one another and stimulate one another’s thinking.
  • Gently guide the discussion for no more than one hour.
  • Take notes during the session and also audio tape it for accuracy.
Old, New Tricks
  • Enclose pre-stamped envelopes with mail surveys.
  • Tap into the knowledge of the reference librarian at the library.
  • Talk with other business people in the area. Benefit from their experiences.
  • Get on-line and use browsers.
  • Read advertising and marketing industry periodicals.
Conducting Primary Research
Two important questions to be answered by your primary research include:
  1. Who is your customer?
  2. Who is your competition?
The place to start your primary research is with your customer. You may ask, “What information should I find out about my customer?” The answer is “everything.” The better you know and understand your customer’s wants, needs and desires, the better able you are to meet those needs with a product that sells. The goal of gathering and analyzing this information is to prepare a customer profile. This customer you expect to market your product or services to is called your target customer and represents an average or typical customer. It may be one profile of one customer group or several profiles covering several customer groups.

Demographic vs. Psychographic Customer Data
Businesses gather demographic and pyschographic data in order to discover more about their customers. Demographic data describes specific characteristics of an individual such as age, level of education, occupation, income, marital status and address. Psychographic (lifestyle) data describes an individual’s activities, interests, opinions and beliefs. This data give marketers insight into such things as how potential customers live, make buying decisions or plan for the future.

To illustrate the magnitude of demographic and pyschographic trends, consider the following psychographic trends that have directly impacted marketing strategies today.

Shifts in Age Make-up of the American Market

In the U.S., 77 million baby boomers make up one-third of the population and represent one-fourth of the economy’s purchasing power. As baby boomers reach their peak income earning years, their income is expected to double. The size of the youth market (people ages 12-19) is expected to continue decreasing, but its spending is increasing. The mature market (individuals 50 years old and over) commands half of the discretionary income in the U.S. and holds 77 percent of its assets. Within 30 years, one-third of all Americans will fit into this group.

Changes in Family Composition
Increases in the divorce rate and the percentage of working women and a decrease in the birthrate after 1960 have all caused major changes in the make-up of the typical American family.

Increasing Proportion of Working Women
In 1990, 58 percent of women worked, as compared to 33 percent of women in 1950. Women are entering the work force at younger ages and changing the face of American business in nearly every industry. The time crunch that many working women feel has helped to fuel the boom in catalog and telephone shopping and other timesaving services.

Increase in Ethnic Backgrounds
Cities have traditionally held people from many different ethnic backgrounds, but rural areas have tended to be more homogenous. The strong economic conditions in the U.S. have spurred the need for more workers in rural areas. Rural America now is home to people of many different colors, nationalities and religions. This ethnic diversity provides numerous opportunities to develop new specialty and ethnic markets for meat products.

Shifting Male-Female Purchasing Roles
Because more women are working in addition to having a family, men are playing a larger role in child care and household duties than ever before. Although 80 percent of the grocery shopping is still done by women, marketers are beginning to see a shift in who makes the purchasing decisions. Because women are earning more money and achieving more professional independence, they are spending more money on travel, dining out, entertainment and luxury products.

Those are only a few of the major trends you can observe, research or read about that could affect the products you wish to take to the market place.

Identifying Your Competitive Advantage
After you have identified your target customer(s) and developed a good understanding of your competition, you are able to identify your competitive advantage. A competitive advantage comes from offering more value to your customers than your competitors. Value can come from, among other things, a higher quality product, lower prices, better service or more convenient distribution.

If you are able to provide a high quality product, you may have a competitive advantage over your larger competitors. You would only want to position yourself in this way if your customers value quality. What is it your customers value?

A competitive advantage has two key criteria:
  • It must be something your customers value.
  • It must be something you do better than your competitors.

Some examples of a competitive advantage are:

  • Developing a new technology.
  • Serving a specialized customer niche.
  • Establishing unique distribution channels.
  • Obtaining production cost advantage due to better sourcing (locating and purchasing the inputs needed for your production).
  • Building a unique brand identity.

Secondary Research
You can obtain much of the information you need through secondary research. It is available to the public from government statistics, computerized databases and directories. Much of it can be gleaned from the Internet.

Some good resources for industry-specific information are:

U.S. Industry Outlook 
A book that provides an economic and market overview of hundreds of industries.

Dun and Bradstreet
Phone: (800) 552-3867 
www.dnbcorp.com

Moody’s Manual of Investments

Standard and Poor’s
Phone: (800) 437-3528

ValueLine
Phone: (800) 654-0508
Figures can be obtained for average sales in many industries or similar industries from Robert Morris and Associates, which publishes an annual survey of major industries, organized by Standard Industry Classification (SIC) number.

Robert Morris Annual Statement Studies
Robert Morris Annual Statement Studies, One Liberty Place, Philadelphia, PA 19109
There is a national or regional association for almost every industry under the sun. Find the appropriate one for your business. Call to find out what type of resources are available.

Attending a trade show can be a good way to learn about other businesses, such as discovering competitors’ pricing structures and gaining ideas on type of products to develop. Some major food trade shows include:

Natural Products Expo East and West
Natural Products Expo East and West, Baltimore MD, (303) 939-8440                                        RegistrationDepartment,exporeg@newhope.com 
Marketing Manager, expomarketing@newhope.com

Fancy Food Show
Rossbach International Trading Corp., 47 Portland Pl., Staten Island, NY 10301-2806
Phone: (718) 816-0423                                                             
FancyFoods.com

Institute of Food Technologies
221 N. LaSalle St., Ste. 300, Chicago, IL 60601-1291                
Phone: (312) 782-8424                                                      
info@ift.org

Food Marketing Institute
655 15th St. NW, Washington, DC 20005                                   
Phone: (202) 452-8444                                                        
fmi@fmi.org

Subscribing to food-trade publications and business magazines enables you to learn about product trends. Some industry trade journals include:

Chef Delicious! 
New Hope Communications Inc., 1301 Spruce Street, Boulder, CO 80302
Phone: (303) 939-8440
www.newhope.com/cgi-bin/feedback_form.dgi 

Food and Beverage Marketing
ABM Adams Trade Press, Daniel J. Corcoran, Vice President/Internet Development,
6001 Cochran Rd., Ste. 300, Solon, OH 44139
Phone: (440) 248-1125
dcorcoran@adamsbusinessmedia.com

Food Management
Food Management, Inc., 2448 76th Avenue SouthEast, Suite 203, Mercer Island, WA
98040-2781
Phone: (206) 232-9771
talktous@cfm-inc.com.

Gourmet News
P.O. Box 3047, Langhorne, PA 19047-3047
Phone: (215) 788-7112

Gourmet Retailer
Gourmet Retailer, 6201 Howard St., Niles, IL 60714
Phone: (847) 647-9787
eloeb@gourmetretailer.com

Meat and Seafood Merchandising
Vance Publishing Company, 10901 W. 84th Terrace, Lenexa, KS 66214
Phone: (913) 438-8700
www.producemerchandising.com

Natural Foods Merchandiser
New Hope Natural Media, Inc., 1301 Spruce Street, Boulder, CO 80302
(303) 939-8440
Mary Scott, Business Editor, at msscott@newhope.com

Organic Food Business News
Hotline Printing and Publishing, P.O. Box 161132, Altamonte Springs, FL 32716
Phone: (407) 628-1377

Nationals Restaurant News
Nationals Restaurant News, 425 Park Ave., 6th Floor, New York, NY 10022
Phone: (212) 756-5188
http://www.nrn.com

Restaurant Hospitality
Penton Media, 1100 Superior Ave., Cleveland, OH 44114-2543
Phone: (800) 659-5251
corpcomm@penton.com

After gathering your primary and secondary research information, you are ready to analyze your market potential. You should be ready to answer these questions.

  • Who is your target customer?
  • What are the defining characteristics of your target customer?
  • Who is your competition?
  • What are your competitor(s)’ product(s)?
  • What is your current trade area?
  • What is your market size?
  • What are your market trends?
  • What is your market potential?
  • What is your true production potential?