10/27/2012 7:00 AM
By Bernadette Logozar Extension Economic Development Specialist
Now you might be asking yourself, why do you need to do market research?
First, in order to develop a successful marketing strategy you must understand your market, your competition and customer trends.
Second, potential profitability of the new enterprise can only be calculated from projected potential sales volume and prices.
There are two general types of market research — primary and secondary. Primary market research involves gathering information by observing people, taking surveys, performing interviews or other direct actions. Secondary research involves studying data that has already been collected and published.
In order to understand your market well, you will probably need to use both primary and secondary research.
Where can you find secondary research data? Using existing data (secondary research) is the easiest and least expensive way to obtain market research. You can get secondary research from libraries, government offices, chambers of commerce, trade magazines and computer databases.
For example, demographic data provides you with characteristics of a group of people including size, growth or family structures. You can get population information, such as the number of families within a 50-mile radius of your business, from the Census Bureau.
Census QuickFacts will provide an overview of data for your county or region that describes income, age distribution and other basic characteristics.
Consumption: Information about consumption, such as how many pounds of apples are consumed per person since 2002, isn’t readily available for all commodities.
Consumption data can be most likely found on commodities that have been marketed for a long time, such as apples, eggs, beef, potatoes and sweet corn; commodities that generate many dollars or involve many acres or farmers, such as beef, wheat or hay; and commodities that fall under federal programs, such as chicken, eggs or milk.
Whatever data you are using, be sure you analyze the data correctly. Data for new products, such as yogurt and pumpkin seeds, may be out of date even if it’s only a few years old. Also, remember that consumption data describes national trends and may be less useful for your local market.
Future market trends: Predictions of future market conditions may include production and consumption levels, prices, packaging and processing trends.
The Agricultural Marketing Resource Center (www.agmrc.org/markets__industries/understanding-markets/) has a tremendous amount of information that can assist you with understanding market trends for different commodities.
The U.S. Food Market Estimator (www.ctre.iastate.edu/marketsize/about.html) helps you determine the potential demand by U.S. county of more than 200 different food items. It should be noted that this tool does not give you actual consumption, but for the purposes of your market research it will provide you with the changes in consumption and market shares for food commodities relative to your business venture.
The other form of market research is primary research. Often, people don’t get all the answers they need from secondary research. Finding the answers to some of your questions might require you doing some primary research yourself.
Primary research is especially important when considering an innovative enterprise, a new market or a local market for which there is little published data.
Good primary research can be simple and inexpensive. Having a small budget isn’t a legitimate excuse for not doing your market research homework.
Be creative when developing the most cost-effective method for collecting the information you need. Some common methods used to conduct primary research include observations, surveys, personal interviews and test marketing.
Observations: This involves counting the numbers of products, people or events in a way that relates to your business. You may do this yourself or hire people to do the task for you. If you are hiring out the task, it’s best to do a few observation sessions yourself, so that you can understand the task and train your workers.
You will need a pencil, form or checklist with the observations you wish to make and a hand-held mechanical counter. You need to do many observations to be sure the counting is representative of the situation.
It is also good to note environmental elements (what the weather was like, time of day, other things happening in the area or region) which may influence the number of people in a given location. For example, during fair week in rural communities there tends to be a lot more traffic on Main Street than say four weeks after the county fair.
An example of observation might be traffic counts in front of a proposed farm stand site to observe the number, time of day and direction of potential customers.
It would be important to know the designated speed limit, as well as the general speed of the traffic on that roadway as well. This would influence signage placement for the business to ensure drivers would have sufficient time to slow down and turn into a driveway.
Surveys: Surveys can be a mechanism for you to gather more detailed information about potential customers. With a survey you can drill down into your potential market’s likes or dislikes, preferences and buying habits.
Surveys can be distributed in a number of different ways; each has pros and cons. You can do written (mail out), over the phone and email surveys. Regardless of the method of delivery, there are some basic design features you should keep in mind when creating your survey. The key elements of good survey design are length, wording and structure of the questions asked.
Keep it short! Two sides of a single sheet of paper is plenty. For email surveys, keep it to 10 questions or less, if possible. The longer the survey, the fewer people will complete it.
Ask questions where people need to give quantifiable answers. For example, how much more per pound would you pay for organic vegetables (select one)? $0, $10, $20, $30, >$30.
Use checklists and multiple-choice questions. Constructed questions give you answers you can analyze more accurately. Limit the number of open-ended questions on your survey.
Don’t be afraid to ask for demographic information, but handle these carefully. Most people are reluctant to share personal information freely. Ask for the information, but don’t demand it. Share how the information will be used and place these questions at the end of the survey.
Provide categories for age and income, rather than asking them to write it out. Provide the option to continue communication with your business by allowing them to provide you with their full contact information. If this is a written survey, you collect this on a separate card rather than having that as part of the overall survey.
With telephone surveys, create a script for yourself to ensure consistency between calls. Develop a checklist so you can note questions quickly and keep the calls brief as possible.
Finally, the last step in designing a survey is to test it on a small number of volunteers. This will help you find any questions that might be misunderstood and need to be reconstructed. A simple test of 5-10 people can greatly improve your survey and get results you can use to improve, expand or develop your business.
In summary, market research is everything you do to understand and predict the market for your enterprise. By working through the process, you will gain a clearer understanding of the market for your new enterprise or venture and develop skills that can be used again and again as your business grows.
Bernadette Logozar is a rural and ag economic development specialist with Cornell Cooperative Extension of Franklin County.