Cheap ways to get market research

Q: : I have a great idea for a business. But how can I find out if potential customers find it as compelling as me? I don't have a bundle of money to spend on fancy market research.

— Whitney

A: We hear you, Whitney. Understanding your target market is vital to starting a business that really sells. Making assumptions about what those potential customers want is a dangerous game, so it’s important to do some digging and hear feedback straight from the source. And happily, you can do a lot of this research with little or no expense, other than your time.

When planning your market research, include these keys to learning about your target customers:

• Their demographics – age, gender, occupation, household income, geographic location.
• How big the market is right now – your competitors’ annual revenues or, if you’re introducing a new product, how many potential customers you project.
• How big the market is projected to be in five to 10 years.
• If you plan special marketing to specific groups (“segments”) within your target market, what and how big are they?

Now, where do you find this information?

Start by asking your local librarian for help. Then turn to the feds and their massive databanks and information centers. The U.S. Small Business Administration Web site is definitely a great place to start.

After publicly available research, the best tools for gathering invaluable, specific information about your target audience are surveys and focus groups. You can do both for a lot less than you think.

Professional help with market research surveys can cost big, but Internet sites such as SurveyMonkey.com allow you to set up a small (100 or fewer respondents) online survey for free, or you can plunk down the $20 monthly fee for bigger projects.

You have to decide exactly what you’re trying to find out, so start by clearly defining your business mission. Is there market interest in your kind of product? Are people dissatisfied with current solutions to a specific problem? Also think carefully about your question format. How you ask can shape how you’re answered.

For example, open-ended questions get subjective and anecdotal answers. You won't get real statistical data, but you can gather a wide variety of customer opinions. On the other hand, scaled and multiple-choice questions produce specific and, in most cases, measurable results.

Each type is worthwhile; you just have to decide which meet your goals. Here are some tips for creating your survey:

• Write clear, precise, short questions. You’ll bore your survey group with wordy, unfocused questions that take a lot of reading, and risk biasing their answers or at the very least confusing them.
• Focus each question to ask for just one piece of information.
• Beware of bias! By bias, we mean that the wording of your question shows preference for a certain answer. Survey respondents invariably want to please you, and will be more than happy to follow your lead – and destroy the value of your results. So carefully edit bias out of your questions.
• Vary the kinds of questions. A string of similar question types will almost always lead to a string of similar answers.
• Be sure that people can complete your survey in just 10 minutes. Longer and your respondents lose patience and give any answer to finish.
• Look online for people interested in and passionate about your target market. It’s OK to post a request for survey participants on listservs, discussion boards and other online communities where your target market congregates. Offer a small giveaway, and you’ll almost guarantee a lot of response.

This is a great way to learn how well your product or concept plays live to your target audience – and it can also be done on the cheap. Pull in your friends and family, if they’re a diverse enough mix. Remember that a focus group can be as small as five or 10 people, as long as it represents your target market.

Clearly map out your questions, and how you plan to gather their answers. Then invite your group for appetizers or lunch – a small price to pay for valuable feedback.

Once you have their attention, clearly present your product or concept, and ask such things as:

• Is the price right?
• Do you love/hate/not care about the product or service?
• Why do you love/hate/not care about it?
• What improvements do you suggest?

For an example of putting this tactic to work, read how Amy Weaver used focus groups in the strategic marketing plan for her online retail startup.

To succeed, you have to know and understand your potential customers inside and out, upside and down. Surveys and focus groups are terrific market-research tools, and cheap, especially using online resources. Be focused, think creatively, and you’ll equip yourself with top-notch data to start up on the good foot.

Jeff and Rich Sloan are America’s premier startup advisors, creators and hosts of StartupNation.com and StartupNation Radio, and authors of StartupNation: Open for Business. Lifelong entrepreneurs, the Sloan brothers have a passion for helping others learn to run their own businesses. Do you have a question for Rich and Jeff? Send them an e-mail.