While investing in market research can be extremely expensive – especially for small businesses – it could represent the best investment they can make. Understanding the market, and the consumer wants and needs, before investing in marketing and product development can save small businesses hundreds of thousands of dollars over the long haul. For more on this, continue reading the following article from The Street.
Too many organizations market without a plan, wandering around trying to find customers. It’s ineffective, inefficient and expensive. The more time it takes to find your customer and hone your product, service or technology, the longer you have your money tied up.
That’s why one of the most important investments a business can make is market research. Without it you are investing your resources on what you believe versus what you know, risking your business and livelihood.
Getting to know your customer before your product is fully designed and launched is less expensive than creating a product (and a lot of it), putting it in the market place and ultimately finding out that the customer is not interested, willing to pay the price or in need of the product at all. Perhaps even worse is to put your product on the market and find that the product:
Market research versus "we believe"
Recently I was discussing the purchase of secondary market research reports (industry analysis conducted by research firms for sale) for products under development by different clients. The clients felt the research was "too expensive" for the "tight budget" each claimed. But there is no expenditure more expensive than continuing to invest in product design, prototyping and development without an understanding of your customer and the industry!
A four- or five-figure investment in market research can save you tens of thousands, even hundreds of thousands of dollars in product development expense. It’s a likely 10% of your budget for product development and understanding what the customer wants and needs — and understanding why the industry hasn’t delivered — versus spending 100% of your budget on a product that misses the mark and fails to capture the customer. Which is more expensive?
If this is your first product, you should value market and customer information even more highly than businesses with established products and existing customers.
Another point to make: While social media, Internet searches and all the other online "free" resources can provide windows into issues, they are anecdotal evidence or opinions, not facts. It will not provide you with the broad insights and support that come from fact-based market research. (And don’t expect investors to give you money because you saw a single YouTube clip on the issue.)
What you need from market research:
- Facts and evidence about the industry, customer, competition and more.
- Understanding of the players, potential and potential profits.
- Key benefits the customer wants.
- Identification of opportunities by market segments and niches, to know where to introduce your product.
- Trends: product, industry and market.
- Issues and problems with existing products, companies and industry
- Financial information on price, cost, revenues, volumes, discounts, setup costs and so on.
When it comes to designing and launching products, what you don’t know can cost you.
This article was republished with permission from The Street.