1. Zaman Khan
2/6/2016
The Importance of Market Researchfor Small Businesses
Small businesses andstartupshave certainadvantagesanddisadvantagesassociatedwiththeir
size.Theycan be nimble andversatile,orlackthe expertiseandfunding thatlargercompaniesenjoy.In
exploringthe importance of marketresearchfora small business,thispaperwillfocusonthe
disadvantagesof beingsmall andhowtomitigate those weaknesses.Small businessestendtohave less
cash on hand,lessexpertise,andfewerproducts/servicesinthe marketplace thanlargercompanies,
whichare importantbuffersthatprotectacompanyfrom error andeconomicdownturns.These buffers
can meanthe difference betweenaslightlossinprofitsforalarge company to catastrophicloss for a
small one.
As anybusinessexpandsoperations,itmustconductresearchtomitigate some of the
uncertaintyinherentindoingbusiness.Withlimitedresourcesandexpertise,asmall businessmust
resortto more affordable sourcesof data(usuallylowerquality),andbe more adaptive andenterprising
inattemptsto gaininformationaboutthe marketplace (askingfriendsordoingresearch themselves).
Understandingthe importance of marketresearchandhow toeffectivelyconductitistherefore an
invaluable skillforsmall businessowners.
There are a fewessentialcomponentsof the marketthata small companymustknow in order
to bringgoodsto consumerswitha level of certaintyandconfidence.Amongthe manycategories
associatedwith marketresearch,the following fourare critical anddeserve adeeperlook:
1. Whois the Target Audience
Anycompanymust knowto whomtheyare selling theirgoodsorservices. While thismayseem
straightforwardatfirst,newventuresdonotalwaysgoas planned. Forinstance,acar manufacturer
may planfora specificmodel itproducedtobe usedbya wide audience,suchasmiddleclassfamilies,
but findlaterthata muchsmallersegmentof the marketis interestedintheirvehicle. Whereasalarge
companyhas a robustnesstohandle such a marketingmistake without sufferingadebilitatingloss,a
small company mightincurirreparable financial lossesfromsuchamiscalculation. Byallocating
resourcestoacquire vital informationontheirtargetdemographic,small businessescanbeginto
navigate the marketplace withbettercertainty.Aninexpensive waytodothisis to studyan existing
brand’sgoods and theirsuccesswith a particularaudience.If the competitionisenjoyingsuccessselling
to a particularsegment,thenthe small businesscancompete forthe same audience withasimilar
product. In case there are no relevantproducts orbrandsto study, a small businesscanconducta focus
group,administersurveysorquestionnaires,andstudyinternallyavailable datafromprevious
customers’complaintsorsuggestions.Thesemethodsof gatheringinformationcanshedlightonhow
differentmarketsegmentsfeel aboutaproductor service.
2. Where isthe Target Audience Located
Knowingwhere the customerislocatedisanimportant piece of the recipe tosell tothem.The
locationof customerscan offeracompany preciousinsightssuchasthe customers’average income,
whichdistributorsandpartners tocoordinate saleseffortswith,and evenwheretospendadvertising
dollars. The locationof customerscan alsomean logistical challenges, suchasadditional transportation
costs,how longertransportationtimesaffectthe product’sshelf life,orevenreveal aweakdistribution
and retail infrastructure.Besidesthe challenges,knowingthe targetdemographics’locationcanprovide
advantagesif theyare underservedorlocatedona robustdistributionchannel.Ascertainingwhere
customersare locatedcan be done throughtraditional orelectronicsurveysorquestionnaires,oreven
offeringspecialrewardsforinformation.
3. Where to Place Advertising

2. Knowinghowtoattract the intendedaudienceisextremelyimportant forany business,butitis
up to the small businesstobe innovative,costeffective,andaccurate while doingso. Since different
groupsof customerscan be reachedthroughdifferentmediums (traditional orelectronic) andhave
varyingdisposableincomes,knowingthe age,race/culture,gender,income bracket,ormarital statusof
the target demographiccanensure maximumbangforadvertisingbuck. These little detailscanhave a
massive impactonthe mediaemployedtoadvertise,oronthe actual message itself. Anolderaudience
mightbe reachedintraditional media(radio,TV,print),whereasayoungeraudience ismore likelytobe
foundonelectronicmedia(phones,internet,social-media),andyetthisissubjecttoeducationand
income.Similarly, certainmarketsegmentscanbe foundinparticular typesof storesor engagingin
niche groupactivities.Failingtoattractthe intendedaudience’sattention canbe a costly disasterfora
small company.
4. How to Price the Product
The correct price for a product isan importantpart of maintainingthe balance of supplyand
demand.A small companycan suffergreatlyfromeitheroverpricing orunderpricinganitem.Itis
importantto knowthe breakevendollartoprice anitem to start with,butthe amount thatcustomers
are willingtopayfor a product or service isoftenthe drivingforce behind anentire industry. There are
differentmethodsandformulastocalculate the balance betweenprice andsupply/demand.The
companywantsto meetthe consumerat the pointof most profitabilitywithoutcompromisingthe
demand.Pricedtoohigh,the company will lose salesvolumebutgainahighermarginper piece.Priced
too low,the companywill lose profitperpiece andpotentiallyencounterlogistical oroperations
problemswhiledealingwithexcessive production. Unlessacompany’sbusinessmodelsaimto succeed
on high-volume/low-profitproduction,the sweetspotbetweensupplyanddemand iswhatshouldbe
sought.
There are a fewdifferentwaysforasmall businesstolearnaboutthe rightprice for their
product. A focusgroup isan excellentmethodtoresearch whatconsumersthinkabout the price of a
product/service.Askagroup comprisedof the ideal customeraboutthe perceivedvalue of aproductor
service andhowmuch theywouldbe willingtoforkovertoavail it.A small businesscan alsoexperiment
by fluctuatingpricesindifferentsalesareas tosee how customersrespond,tofindwhereaprice
increase reducessales volume beyondthe additionalprofitperpiece cancompensate.Thisiseasierfor
a businesswith establishedsalesindifferent areas,but,nearlyidentical customersinthatarea.Lastly,a
cheapand fast source of informationonaproduct’sprice can come fromstudyingthe competitionfor
similarproducts,features,prices,andsuccess.
In conclusion,asmall businessneedsto use all the resourcesavailabletoitto make sure that it
knowswhoto reach,where theyare,how to catch theireye, andat what price.There are otherfactors
that can spell disasterforasmall businessthatcannotbe calculated,suchasMother Nature or strong
competition, butsuchisthe nature of businessanditsappeal.Where largercompanieshave more
wealthandexperience tothrowbehindanendeavorthansmallerones,small businessesmustbe agile,
efficient,andeffectivetoavoidcripplingmiscalculations.Armedwiththe anentrepreneurial spirit,
innovativeness,versatility,andthe fourstepstoconduct effective marketresearch,asmall businesscan
enjoyrelative comfort,evenconfidence,while embarkingonnew ventures inthe uncertaintythatisthe
marketplace.Happyhunting!