Your Small Business Guide to Market Research

The best way to create brand loyalty is to lead with creativity, examine the data, and double down on what works. 

But how do you find those ride-or-die fans who are going to recommend your products to everyone they know?

You have to conduct in-depth market research. 

Without knowing who’s in the market you plan to enter and having a plan to beat the competition, you’ll be flying blind. 

Well-done market research can offer you a roadmap that will make everything easier. Trying to build a business without it is like trying to drive from LA to NYC using only a compass. You might make it, but it’s going to be a much more difficult journey. 

We understand that this idea can be overwhelming for a small business owner. You’ve got a million things to do! That’s why we’ve put together an in-depth guide to market research that you can start using today! 

Understanding the Basics of Market Research

Market research is simply the process of uncovering who’s in your target market, discovering why they want to buy your product, and then making a plan to tell them why they should buy from you instead of your competitors. You can accomplish this through primary or secondary market research. 

Primary vs. Secondary Market Research

Primary and secondary market research can be thought of as direct and indirect engagement with your customers. 

Primary market research uses surveys and interviews to directly engage your target audience and capture feedback in real time. Secondary market research uses industry reports, academic journals, and statistics to paint a larger picture of your market. 

Let’s start with primary research.

Primary Market Research

Let’s say, for example, that you sell hacky sacks. Now, you’re a social person. You got into the hacky sack market because you believe they have the power to bring people together. In college, you spent hours playing on the quad with friends, just passing the time and decompressing from the stress of studying. 

Now that you’ve created the most awesome hacky sack ever made and fixed every problem you saw in the hundreds you’ve owned, you’re ready to start marketing. Like most budding entrepreneurs, you target all of your advertising towards people like you—the groups of friends who want to hang out and kick a hacky sack around together. 

Unbeknownst to you, however, there’s a massive market of introverted people who just want to put in headphones and get as great at hacky-sacking as they possibly can by themselves. They might even be entering competitions, and they need a world-class hacky sack to win that prize money! 

This new market could be very lucrative for you because instead of buying one or two hacky sacks and taking them to their hangout sessions, these people might buy 5-10 for themselves and test them out until they find one they like best. 

If all of your marketing is tailored towards social sackers (as I’m sure they call themselves), you’ll completely miss out on the business of the solo sackers (that must be how they refer to themselves). 

Identifying Your Research Goals

There are a few big-picture questions you need to answer before starting to plan primary market research:

• Who do we want to speak to, and why? 

• Will we talk to them one-on-one or en masse? 

• How will we find them? 

• How will we make sure this time is well spent? 

• What will we give them in return for their time? 

• How much are we willing to spend? 

• What’s our plan for using the data afterward? (It seems silly that I have to add this, but I’ve seen many companies conduct market research and never use the data they spent thousands of dollars collecting.) 

Let’s break these down further: 

Who Do We Want To Speak To, and Why?

Do you already have ride-or-die fans? Do you have any idea why they love your product? Some business owners think that people love their products for the same reasons they do (like in the hacky sack example). If you never ask them, you’ll miss out on some key insights! 

You may just be gathering information about a potential product that you want to create. If that’s the case, you’ll want to ask people who have already bought from you if they like the new idea.

Maybe you’re just starting out and don’t have any fans or previous customers. You don’t have an easy way to contact people who might like what you make, so you’re going to have to find some people to talk to out of thin air! 

Will We Talk to Them One-On-One or En Masse? 

Both of these approaches have their strengths and weaknesses. When you talk to one person, you’re only getting one perspective, but you’re able to go in-depth. When you talk to a lot of people, you can get a lot of opinions, but they tend to be very surface-level.

One-on-One

Pros:

• It’s much more intimate.

• It’s easier to get deeper insights from someone who loves your product.

• You can lock someone in for a specific time slot so they won’t rush through the interaction (like they would with a survey). 

Cons:

• You’re taking a lot more of someone’s time than it would take for them to fill out a short survey, and they may expect an incentive.

• Interviewees may not be as willing to give harsher feedback in a one-on-one interview.

• It’s harder to pin one person down for a specific time slot.

En Masse (includes surveys, focus groups, etc.)

Pros: 

• It’s easier to collect a lot of data. 

• People can more easily work a survey into their schedules (surveys only). 

Cons: 

• People may rush through, checking boxes randomly to complete the survey for the incentive (surveys only).  

• People may all end up agreeing with one person who hijacks the group (focus groups only). 

• Your data may not be accurate if you don’t reach the right people who actually use your product.

• You risk creating “survey fatigue” by always asking your loyal customers for their feedback. 

How Will We Find Them? 

Finding and contacting your most engaged customers is easiest if you have a newsletter. 

Not sure how to find people to talk to? Don’t panic; there are a million creative ways to accomplish this goal. If you have a decently sized budget, you can leverage great tools like: 

• User Interviews

• Respondent

• Dscout

If you’re really strapped for cash (I’ve been there), here’s a creative way to find market research participants: 

1. Create a free SurveyMonkey survey or Google Form. 

2. Find Facebook Groups, Reddit threads, and competitor forums where people talk about products in your market. Hacky sacks, outdoor gear, canoes, etc. – there’s a forum for everything!

3. To gauge interest, post in these threads about how the products you make/plan to make are better than the ones your competitors make. 

4. Ask people who respond if they’d be willing to take a survey, so you can make the best version of the product possible. 

5. Collect the list of people who took the survey. 

6. Re-target the people who provided their contact info in the survey. Ask them if they’d be willing to talk to you for half an hour about why they love the product in exchange for a gift card or a free product sample. 

How will we make sure this time is well-spent?

There’s a great quote from David Ogilvy (widely considered the GOAT of advertising) that every marketer should keep in mind when setting up market research campaigns:

People don’t always know the real reason that they love or hate a product, and they might not always be honest. Someone you’re interviewing might hate your new website for a reason you need to know, but are afraid to tell you for fear of disappointing you! 

So how do you mitigate that risk? By norming the conversation and asking the right questions! 

Start every one-on-one interview or survey by explaining that you want honest feedback, however harsh it may be. 

Tell the interviewee: “We’re trying to get the best possible data here, so please don’t worry about offending us. If you strongly dislike something that you see, tell us why. Harsh feedback helps us as much or more than positive feedback!” 

What will we give them in return for their time? 

If you want someone to give you useful feedback, you’d better offer them an incentive! This is why you see large companies saying, “Complete our survey for a chance to win x prize,” all the time. Those incentives work!

The best part is that incentives can be whatever you want. Gift cards work well for tax purposes, and you can easily incentivize people through Venmo or Paypal. I’ve heard of brands offering to donate a certain amount to charity for everyone who takes the survey. You could even offer consulting or volunteer time as an incentive if you’re strapped for cash!

However, there are some drawbacks to using incentives. 

Incentive Pros:

• People are more likely to sit for interviews (by as much as 30%). 

• Who doesn’t like winning prizes? 

Incentive Cons: 

• Some people will just rush through to get the incentive and skew your whole data set (surveys only). 

• You might attract people from outside your target market who only want the prize and don’t actually care about your product. 

You can absolutely conduct market research without incentives as well. Just understand that in that case, you’re asking for a favor. People might be inclined to help out their favorite hacky-sack brand once or twice, but no one wants to see their favorite brands begging for help every other week. 

How much are we willing to spend? 

This one’s pretty straightforward. What’s your budget for collecting feedback? Make sure that you budget your time and your employees’ time spent drafting survey questions, collecting feedback, and then turning it into usable data. 

What’s our plan for using the data afterward?

If you don’t know why you’re collecting data and what you’re going to do with it, you’ll waste a lot of money and time! Don’t ever do anything because you should.

If you always ask for feedback and then never act on it, your customers will become frustrated with you over time. People want to see that their favorite brands care about them. If you actually get someone to sit down with you and offer their time and opinions, respect them by implementing what they asked for! 

Designing Your Market Research Survey

A well-designed survey is going to bring you great data. A repetitive survey that isn’t clear on what it’s asking for is going to bring you nothing! 

So how can you ensure that you’re going to get high-quality responses? 

Crafting Effective Survey Questions

You love your business and your customers, and you want to know everything about them! We get it. But when you’re crafting survey questions, you’ll have to be brief and clever if you want to get anything useful back! 

Here are some survey best practices: 

• Don’t overwhelm your respondents with questions.
  If your survey takes longer than 15 minutes to complete, most of your participants will abandon it halfway through.

• Be merciless with your editing. 
  Every question needs to fight for its life. If there’s any doubt that a question will return useful information, cut it!

• Cut repetitive questions. 
  People who are taking surveys will be frustrated with them if they’re repetitive, and you’ll have wasted valuable time and space.

• Vary your question types.
  No one wants to answer 50 one-answer, multiple-choice questions. We’re not in high school anymore! Likewise, no one wants to spend their evening typing in the answers to 20 open-ended questions, either. Add some variety!

• Double-scan for bias before publishing.
  You probably want your customers to answer in a certain way because part of you has an idea of the best way to do things. Make sure that the questions you ask aren’t biased towards any one solution.

• Ask closed-ended questions. 
  Open-ended questions are great for one-on-one interviews but should be used very carefully in surveys. Make sure that every question you ask has clear answers, or you’ll confuse your audience and yourself.

• Randomize question order for different respondents.
  There’s a psychological phenomenon called anchoring that happens when an early piece of information in a survey influences all of a respondent's answers throughout the survey. To avoid this, simply randomize the order of your questions for each person! 

Examples of Effective Survey Questions

There are two broader types of questions you can ask in customer surveys: open- and close-ended questions. Both have their place and are useful in different scenarios! 

Close-Ended: 

Close-ended questions are good for gathering precise numbers from answers like ratings, rankings, or choices. They have a set list of responses for people to choose from. Since the answers are already defined, it's easier to collect and analyze the data from these questions.

1. Multiple Choice: These are perfect for getting to know your customers, how they use what you're selling, and what they think is essential.

   Multiple-choice questions let people select from a list of answers, often with an "other" choice if they don't agree with anything on the list. They're easy to fill out, and the answers are straightforward to tally and analyze. There are two types of multiple-choice questions:

• Single-Answer: You can only pick one option from a list.

• Multiple-Answer: You can check off as many answers as you need to.

2. Dichotomous (true/false, yes/no): Dichotomous questions are best for quick and clear answers. They’re simple: just two choices. They're quick to answer and easy to figure out, but they only tell you a little.

3. Ranking: Ranking questions are good for understanding what's most important to your customers. People drag and drop to arrange their answers according to what's most important to them. Rankings let you see your customers' priorities but don't explain why they chose the order they did.

4. Likert Scale: Great for seeing how much your customers agree or disagree with something, Likert scales use a scale to determine how much someone agrees or disagrees with a statement. It helps you measure how strongly someone feels about something.

5. Rating Scale: Ideal for checking how people feel about your product or service, rating scales ask people to give a score, usually from 1 to 10, to show how satisfied or happy they are. If you ask the same questions regularly, they can help you track how opinions change over time.

6. Semantic Differential: Excellent for detailed feedback on how people see your product or service, this method uses scales, too; but instead of agree/disagree, it uses pairs of opposite words (like poor and excellent) to measure feelings about something. It helps you understand your customer's gut reactions.

Open-Ended: 

Open-ended questions are the best choice for deep, personal responses. Think of these as temperature-takers. 

Open-ended questions allow people to write whatever they think in their own words. They can offer more profound insights but are much more challenging to interpret at scale than multiple-choice or scale questions. 

Open-ended questions are great for one-on-one interviews, where you’re going to receive much more depth of information from a conversation that you’d ever get in a survey. 

Mixing open-ended questions with other types, such as close-ended questions, helps you get both specific details and general trends within your customer base. 

Secondary Market Research

Secondary market research involves leveraging existing data and public records to form conclusions about market trends and consumer behaviors that help you allocate your limited budget. It's an invaluable tool for expanding your understanding once you've done primary research. 

Secondary Research Sources

You can pull essential data from any one of these sources: 

• Public Sources: These are readily accessible and often free to use! They include government-released statistics, such as those from the U.S. Census Bureau. You can use these for demographic insights and broader market trends.

• Commercial Sources: These are pay-to-play reports sold by research agencies like Pew and Forrester. Accessing these usually requires a subscription or purchase. They'll deliver deep industry insights, consumer behavior patterns, and detailed competitive analyses.

• Internal Sources: This includes data your organization has already collected, such as sales data, average revenue per sale, and customer retention rates. This data helps you understand historical product performance, predict future customer needs, and adjust business strategies.

Utilizing Commercial and Public Data

By incorporating data from both commercial and public sources, you can gain a comprehensive view of your industry. Just like with primary market research data, secondary market research data is only as good as what you do with it. 

Some uses for secondary market research data: 

• Product Development: Use industry insights to tailor your products to the needs of different consumer segments, like solo sackers who need competition-grade hacky sacks.

• Marketing Strategies: Adjust your marketing campaigns based on the competitive analysis you've conducted by looking at public data. Suppose a commercial report indicates growth in competition hacky sacking. In that case, you might sponsor the world's greatest sacker and speak directly to people competing on the sack circuit. 

Analyzing Market Research Data

Here's a step-by-step guide to help you effectively analyze and use your data, with actions to take and tool recommendations for each step:

Step 1: Clean and Organize the Data.

Objective: Ensure that the data you've collected is high-quality and usable.

• Action: Remove duplicates, correct errors, and format the data consistently.

• Tool: Excel and Google Sheets for sorting and cleaning data

Step 2: Analyze the Data.

Objective: Extract meaningful patterns and insights.

• Action: Perform quantitative analysis, like trend analysis, and qualitative analysis, like sentiment analysis (more on these below). 

• Tool: Tableau for exploring data visually

Step 3: Interpret the Findings.

Objective: Understand what the data suggests about your customers and business.

• Action: Identify key trends and potential areas for action.

• Tool: beehiiv dashboard for seeing how campaigns are performing

Step 4: Develop Actionable Strategies.

Objective: Translate your data into concrete business actions.

• Action: Gather stakeholders over beverages and donuts and make a plan based on your collected data. 

• Tool: MindMeister for brainstorming and strategy mapping; Smartsheet for planning and executing strategies

Step 5: Implement and Monitor.

Objective: Put the strategies into practice and track their effectiveness.

• Action: Implement the strategies and continuously monitor the outcomes using KPIs and metrics.

• Tool: beehiiv's 3D analytics for tracking the success of your campaigns

Step 6: Refine Based on Feedback.

Objective: Make adjustments based on your strategy's performance.

• Action: Use feedback and continuously gather new data to refine and optimize strategies.

• Tool: beehiiv polls for collecting and analyzing customer feedback 

Avoiding Common Pitfalls in Data Interpretation

It's really easy to misunderstand and misuse data. There are a few common issues that any business needs to be aware of when interpreting data:

1. Confirmation Bias: This occurs when decision-makers interpret data in a way that confirms what they already believe. To counteract this, involve diverse perspectives in the data analysis process! Ensure that a few people see your data set and that healthy debate about it is fostered.

2. Overgeneralization: Making broad assumptions based on data from limited samples can lead to big problems. Businesses should ensure that their data represents the entire target population or market segment. Consider increasing your sample sizes or contacting different groups to capture a more comprehensive data set.

3. Misinterpreting Correlation for Causation: Just because two trends co-occur does not mean one causes the other.

4. Ignoring Contextual Factors: Data does not exist in a vacuum. Economic conditions and cultural trends can influence the relevance of historical data. Regularly updating data sets is crucial! 

Quantitative vs. Qualitative Analysis

Both have a place, but they need each other to balance each other out. If you only learn the percentage of people who like one hacky sack over another, you’ll never learn why. If you only learn why people like one hacky sack over another, you’ll be blind to what’s happening in the larger picture! 

Quantitative Analysis 

Quantitative analysis involves numerical data and objective measurement. You can use it for statistical analysis and for generating numeric results. It's best for measuring sales numbers, market size, or demographic statistics. 

Use quantitative analysis when you need to confirm hypotheses or measure variables precisely, like determining the percentage of customers who prefer one product over another. 

For quantitative data, enter it into a spreadsheet and analyze it using statistical tests. Tools like Excel can help perform correlations, regressions, and other statistical calculations. 

Qualitative Analysis 

Qualitative analysis deals with descriptive data and provides insights into the reasons behind a particular trend. It is ideal for exploring behaviors, opinions, and experiences in more depth.

Use qualitative analysis to develop theories or understand underlying reasons and motivations, like why customers prefer one product over another.

To gather qualitative data, transcribe interviews or focus groups with tools like Otter.ai for qualitative data. Then, paste transcripts into an AI tool like ChatGPT to break down the main points and themes from all of your conversations. 

Leveraging Findings for Competitive Advantage

Armed with well-conducted market research, small businesses have a significant advantage over large corporations that can't implement and pivot quickly. Here's how small businesses can use their findings to move faster than companies ten times their size: 

• Identify Opportunities: Use your market research to discover gaps in the market. For instance, if your customers like collecting older, out-of-date lines of hacky sacks you've put out, consider a limited edition 3-pack!

• Tailor Offerings: Adapt your products or services to address the customer needs that your competitors are ignoring. Think about wild new product features, new service levels, or personalized options.

• Align With Customer Values: If eco-friendliness is a common trend among your target audience, consider putting out an organic hemp hacky sack!

• Benchmark Continuously: Use data as a baseline to measure growth and change. Monitor market trends and competitors' responses. Then, double down on what makes your brand unique!

• Stay Agile: Update your strategies regularly based on fresh market data. Experiment to find out what works. Then, throw resources at it until it stops working! 

Conclusion

By continuously gathering and integrating new market research insights into your business strategies, you’ll stay adaptive, responsive, and ahead of the curve. 

Creativity up front, data on the back end – that’s the most important thing we, as entrepreneurs, marketers, and brand builders, need to remember. 

Marketing that’s only driven by creativity often falls flat in the long term because no one is checking to see what’s working and what’s not. But if marketing is only driven by data, it feels heartless and un-original. You end up pandering to your audience and following trends without trying to create them yourself. 

Don't worry that you're not doing it perfectly. Data analysis is complicated, and collecting and effectively responding to data is a long game. Don't stress yourself out too much! 

When you're ready to start a newsletter so that your ride-or-die followers are easier to contact, consider starting your free trial of beehiiv!