Assignments 4–6 are intended to help you to bring your customers, competitors and the marketplace more sharply into focus, and to identify areas you have yet to research. The research should be done before the business is started or a new strategy is pursued, so saving the time and cost incurred if expensive mistakes are made. Obviously, the amount of research undertaken has to be related to the sums at risk. If a venture calls for a start-up investment of £/$/€1,000, spending £/$/€5,000 on market research would be a bad investment. However, new and small businesses that do not want to join the catastrophically high first-year failure statistics would be prudent to carry out some elementary market research, whatever level their start-up capital is to be.
As a President of the Harvard Business School said: ‘If you think knowledge is expensive, try ignorance.’
The starting point in any market research has to be a definition of the scope of the market you are aiming for. A small general shop may only service the needs of a few dozen streets. A specialist restaurant may have to call on a much larger catchment area to be viable.
You may eventually decide to sell to different markets. For example, a retail business can serve a local area through the shop and a national area by mail order. A small manufacturing business could branch out into exporting.
People all too often flounder in their initial market research by describing their markets too broadly: for example, saying that they are in the motor industry when they really mean they sell second-hand cars in Perth; or saying they are in health foods, when they are selling wholemeal bread from a village shop. While it is important to be aware of trends in the wider market, this must not obscure the need to focus on the precise area that you have to serve.
The purpose of gathering the market research data is to help you decide on the right marketing strategy when it comes to such factors as setting your price, deciding on service and quality levels and choosing where and how much to advertise. Assignments 4 and 5 pose the main questions you need to answer concerning your customers and competitors, and Assignment 6 covers the principal ways in which basic market research can be conducted, and where such data can be found.