Market research is a fundamental part of preparing to launch a business, and assessing the importance of external factors – that is, those outside your office or workshop. Researching the market you’re intending to enter is paramount to making sure your business is heading in the right direction, and should be used to answer questions such as:
• Will anyone be willing to buy my product or service?
• How many people out there would buy it, and does this equate to an attractive market?
• Who are these potential customers?
• What are they currently using, and how much are they willing to pay?
• Do they really like my product, and do they have to buy it?
Without the answers to questions like these you might find that you have worked tirelessly for six months and been doing completely the wrong thing. As such, it is important to get it right from the beginning to ensure your business grows at its maximum capacity and achieves its full potential.
Market research is a broad term and there are a number of different techniques you can use. However, generally speaking, market research falls under one of two categories: quantitative and qualitative.
Here’s a closer look at what each involves:
Quantitative market research
Quantitative research is simply defined as research that involves statistical analysis and mathematics. As such, quantitative research should be used whenever you need to identify a numerical output.
An example of when it is more appropriate to use quantitative data is when calculating market sizes for your potential product. For example, you might ask 1,000 professionals if they would need your product.
From these 1,000 responses, you might receive 780 positive responses (or 78% of the total), indicating that professionals would need your product. You know that there are 10,000 of these professionals in the UK. Therefore your potential market size is 7,800 professionals.
If you know that the value of your product/service is £5, then this indicates that the total market value for your product/service in the UK is 7,800 multiplied by £5, which equals £39,000.
It is when looking for this specific figure, value or percentage result that quantitative research is at its most powerful.
Qualitative market research
Qualitative market research differs from quantitative market research in that it is not numerically-based, but opinion-based. Qualitative research can be used to explain or understand quantitative research, as well as offering insight to help you improve your proposition, by uncovering how people feel and what they think about your product, and identifying trends within the written or spoken work.
For example, one common type of qualitative research a focus group, where a company gets a number of their target customers (perhaps six to eight people) together and presents them with a new product – say, a new yoghurt.
One member might come out and say, “eugh, this product is far too fruity” and another might say, “I find the texture of this yoghurt far too runny”. It is these nuggets of feedback, and the quotes, that will be reported back to the client – especially if the majority of the group expresses the same point of view and they identify a consistent theme throughout.
Which is best?
There are strengths and weaknesses to each option. Quantitative analysis will give you a hard, cold answer as to the attractiveness of the market, the probability of success or the final outcome of your business opportunity.
Qualitative analysis, on the other hand, will help you to add colour to your insight and build a bigger picture of the scenario you are looking at, which will be more useful when creating your marketing materials and developing your idea, working out your position in the market, your pricing – and crucially, what sets you apart from the competition.
Ideally, you need a mixture of both quantitative and qualitative research to gain a reliable picture of the market and to define and hone your proposition.
Daniel Callaghan is the founder of MBA & Company, an online marketplace which enables companies to hire MBA-level talent on a freelance basis. We have partnered with MBA & Company to offer Startups readers a 15% discount on your first project. For more information, visit the MBA & Company website.