The internet is filled with articles and guides on how to write a business plan. Market research is often mentioned, but usually only briefly, with little or no guidance as to how it should be included and what it should show. So in this article I will outline the key elements that your market research can demonstrate in your business plan (whether it is free market research, or any other market data that you have got hold of). You shouldn’t necessarily feel that you need to do all of what I am about to summarise, but using market research to demonstrate that you have thought about as much of the below as possible can only help strengthen your business plan.
Define your customer: An obvious one, but the more detail you can get the better. This might just be a case of age, gender or other basic demographics, but it might also include more generic lifestyle information (whether they have a family, where they like to shop, the brands of car they like to drive, how busy they are, etc.).
Define your competition: Is there anything that is already on the market that you will be attempting to steal sales from? If so, can you get research data to show what people are paying for your competition, where they are getting it from, how often they buy, and why they buy it. If there isn’t anything similar already on the market, then you need your data to show how your product fills a need that people hadn’t realised existed.
Define your advantage: What are the key factors that will lead people to preferring your product over another? Are you cheaper or better (or both!)? Do people even want a cheaper or better alternative? Or is your advantage more to do with marketing: maybe your home-made kitchen knives are no better than the dozens of others available, but if you’re expecting people to buy into your ‘family-made’ brand, then you should show data that demonstrates this.
Define the minimum percentages you want to see at a key question: It’s likely that there will be one or two questions in your survey that will make or break your business case. Before you start the research, you should get an idea in your mind as to what sort of percentages you would like to see at these questions. Is 1% wanting to buy your product enough, or do you need more like 50%? But if you’re shocked by a lower than expected result, it’s not necessarily the end of the world: it might just indicate that you need to position your product or service more carefully when marketing.
One final point: if you need to discuss the market research in your business plan with anyone, you should be prepared to answer questions about the validity of your data – where you got it from, how much you trust it. On this latter point, you should feel absolutely comfortable in questioning your own data, acknowledging any weaknesses it may have. This will show that you’re not using the data in the blind faith that it is completely accurate, and have analysed it appropriately.
For example, perhaps you intend to specialise in selling movie-themed baking accessories online, but have carried out market research that only shows how many people like to bake at home. Just because there are a large number of home bakers, it does not necessarily mean that they will want movie-themed decorations or tools, or that they would even want to buy these accessories online. In this sort of situation you should recognise the limits of what the research data is showing, but it does not mean that your research is wasted. You can still use the research data to illustrate that a good proportion of people are baking at home, and that all of these are potential customers if your products are good enough. If you do find any weakness in your research, being able to turn these weaknesses into strengths will demonstrate that you know your market and that you’re not being overly optimistic in your business plan.
Our first three blogs were guides on how to use market research data in different scenarios. But what about putting these lessons it into practice? Next time I’ll be carrying out a case study of real-life example where a company has used data to talk about – and promote – their services.