How to Do Market Research for Your Small Business: A Complete Guide

Market research for small businesses is made easy with this in-depth guide to show you everything you need to know, along with helpful market research resources and tools.

Picture this: you have a crazy idea of a product or service that will disrupt the market and become the next big thing. You invest thousands of dollars and hours into your new business and… it flops. People just don’t buy your product, and you have no idea why. 

One potential reason is an overreliance on personal opinions of what customers liked rather than relying on grounded market research. 

The above scenario can sound imaginary (it is), but there have been many real cases of new products or businesses failing due to failing to do their due diligence with their market research. According to CBInsights, lack of market need is the second-most prominent cause of failure in startups. 

But, how can you know what the market needs without first researching it?

This article will show you everything you need to conduct an effective market research campaign, especially for small businesses and startups. You will also gain pro tips, helpful tools, and resources for efficient and cost-effective market research.

Table of Contents

What is market research in business?

Market research refers to the systematic process of collecting and analyzing data to determine the market viability of your product or service. It is the lifeblood of any organization; Fortune 500 companies, SMEs, and NGOs all require constant and well-designed market research. 

Common reasons for market research include gaining insight into purchasing patterns, market segmentation, and assessing the attractiveness of markets. 

Large businesses may employ dedicated and extensive market research teams that usually work hand-in-hand with their marketing departments. On the other hand, market research for small businesses or startups involves utilizing cost-effective methodologies to collect data from a sufficient sample size, although not on the same scale as big companies.  

The market research process

There are four main steps in the market research process: defining problems and research goals, designing the research plan, collecting data, and finally, interpreting and analyzing the collected data.

This article will guide you through every step of the market research process in conducting market research for small businesses and startups. 

Difference between market research and marketing research

While both terms are used interchangeably, there is a slight perspective difference between market research and marketing research. 

Market research focuses on studying the market viability of a potential product or service in a target market. Examples of market research include confirming consumer interest in an experimental product, finding out consumer demographics, and the market pains of a market segment. 

On the other hand, marketing research involves researching anything related to marketing and business problems, such as advertising, distribution, and sales. In other words, market research is a subset of marketing research, though realistically, small businesses would combine both market and marketing research. 

1. Determine the business problems and research goals

The first step in market research is identifying the problems your business faces and the research’s objectives. This step is the most time-consuming and often the most challenging part of market research. However, it is worth taking the time to carefully lay out your objectives to prevent obtaining redundant or irrelevant data, returning to the drafting stage, and restarting the process again. 

Focus on describing the issue rather than diagnosing its causes to avoid misleading the entire research. An example of a problem could be “I don’t know the right target segment for my product.” From there, identify what data you need and determine how to obtain them. 

But, what if you don’t even know what information you need? In that case, you can start with exploratory research — attaining preliminary information to discover ideas, define problems, and suggest hypotheses as a groundwork for further investigation. 

Once you have some data to work with, you can move forward with descriptive research (research aiming to describe attributes and define relevant variables) and causal research (testing hypotheses of cause-and-effect relationships). 

Descriptive research Causal research
Explores ideas and directions as the groundwork for further research
Describes the characteristics of a sample
Explores the cause-effect relationship between variables
Usually, the first research to take place
Typically measures quantitative data
Involves clearly defined variables
Involves surveys, focus groups, and other qualitative research methods
Involves surveys, observations, and cross-sectional research
Involves experimentations and observations
E.g., “How do you feel about smartwatches and mechanical watches?”
E.g., “How much do you spend on watches annually?”
E.g., “How does a price change affect sales?”

Here’s an example of what all three types of research may look like:

Levi is an aspiring entrepreneur with the idea of selling low-cost yet fashionable smartwatches but doesn’t know where to begin. He begins with exploratory research to find out the PESTLE and competitive forces of the smartwatch industry. 

Then, he conducts descriptive research to define the demographics and psychographics of a target segment. Finally, he conducts causal research to determine the profitability of his smartwatches in the target segment. 

Pro tip: Ensure that your research objectives are SMART (specific, measurable, achievable, realistic, and timely) to minimize costs and maximize efficiency. 

2. Design the research plan and methodologies

Once you have defined the problems and research objectives, it’s time to develop the research plan, determine the required information, and decide how to collect these data. 

The easiest way would be to buy ready-made industry reports from market research companies. However, these reports cost thousands of dollars. If you own a small business or startup, it would be more practical to conduct the market research yourself. 

This calls for deciding between using primary research or secondary research

For small businesses and startups, we recommend using a mixture of primary and secondary data collection for a holistic understanding of the target market. 

Secondary research
You do the market research
Market research already conducted by others
An effective way to obtain specific and relevant qualitative data
More affordable and less time taken
Smaller data set collected
Data may be irrelevant and outdated

Primary research

Primary research is collecting first-hand information specifically for your market research project. Examples of primary research approaches include:

  • Focus groups
  • Interviews
  • Surveys
  • Observation

Advantages of primary research

Specific and customizable questions: Primary research gives you 100% ownership of the data’s nature, relevance, and amount. This ownership also prevents researcher’s bias and ensures that the data set is collected specifically for your business objective.

Up-to-date and accurate data: Since you’re the one conducting primary research, the data collected is up-to-date and reflects current consumer trends. 

Familiarize yourself with the market: You can gain first-hand experience and insight into the research environment by conducting the research yourself. Moreover, primary research can also expand your skills and enhance your business acumen. 

However, primary research does have its drawbacks. Notably, primary research is more expensive and time-consuming than secondary research. As a result, the sampling size involved is usually smaller (30-50 people) due to the amount of time required per person.

Secondary research

Secondary research is procuring data that other researchers have already collected. Some useful sources of secondary research data include:

  • Government publications
  • Statistical reports
  • Free industry reports
  • Journals

Advantages of secondary research

Lower costs involved: Since other people have already done the bulk of the work, you don’t have to develop the research plan and collect the data from scratch. 

Less time required: Secondary data is usually already published and available for anyone to use, many times for free. As a result, it takes less time to collect secondary data than it would to collect primary data. 

A wealth of data readily available: Depending on the source, you can find secondary research data with large sample sizes and extensive amounts of both quantitative and qualitative data. 

As with primary research, there are limitations to secondary research, especially in its relevance and credibility. 

For example, secondary data may be outdated and not representative of current market trends. Moreover, secondary data may be incomplete or irrelevant to your research objectives. Finally, not all secondary data is credible or collected by trustworthy sources. 

Qualitative and quantitative data

Depending on your research objectives, you may collect either qualitative data, quantitative data, or both. 

Qualitative data is data collected through qualitative research and measures attributes, feelings, and perceptions of people. An example of a qualitative research question is “why did you buy/not buy product XYZ?”. Situations where qualitative research is more suitable include:

  • Developing hypotheses during exploratory research
  • Exploring new ideas for further research
  • Identifying customers’ needs as part of a new product development
  • Finding competitor flaws
  • Exploring consumers perception of brands and their services

 

On the other hand, quantitative data is collected through quantitative research and measures hard values such as time, sales, and statistics. An example of a quantitative research question is “how often did you shop in XYZ a month?”. Situations where quantitative research is more suitable include:

  • Measuring something or testing a hypothesis
  • Determining the market size and potential
  • Collecting large amounts of data about customer demographics quickly
  • Selecting the right price for a new product or service
  • Deciding the right inventory size

What’s a good market research sampling size?

A good enough sample size for qualitative market research would be 30 to 50 because of the higher costs involved. However, for quantitative market research, you should strive to have a sample size of at least 50.

3. Collect the required data

Now that you’ve formulated the research plan and methodologies, it’s time to get your hands dirty and start collecting the required data. When doing market research for small businesses or startups, you should use cost-effective data collection approaches without compromising effectiveness. 

Here are six effective ways to conduct market research for small businesses and startups without compromising quality. 

Amazon & other e-commerce sites

Amazon suggests relevant keywords that are hints for potential niches.

E-commerce sites such as Amazon are a great starting place for market research, especially for small businesses or new products. Amazon is the largest e-commerce site globally and sells more than 353 million products from thousands of brands. 

Aside from the availability of products, Amazon also possesses a wealth of valuable data that you can utilize. 

Firstly, you can find out about trending topics and potential niches via Amazon’s search bar. Amazon’s algorithms provide these suggested terms based on what customers are searching and buying. In other words, Amazon is suggesting specific niches that have demand and may be underserved. 

Another place where you can get valuable insights is in the review section. By analyzing what customers like or dislike, you can identify market pains, competitors’ strengths, and features of a successful product. These product reviews are (mostly) genuine and reflect the customers’ needs and want — vital information for any marketing strategy. 

Reddit & other online communities

A simple search on Reddit shows that customers use smartwatches for healthy living and finding directions.

Online communities such as Meta (previously Facebook) groups and especially Reddit are among the best sources for market research. For example, Reddit has subgroups (called subreddits) for every hobby, interest, or product where members actively share their struggles, successes and ask related questions.

Since Reddit’s posts are made by genuine people, they are a reliable way to find out consumer demographics, psychographics, pain points, and even potential niches. Then, you can position your new business with a compelling USP that serves the markets’ needs and differentiate yourself from the competition.

Google trends

Google Trends is a tool to see the popularity of search terms by volume, region, and interest over time. While Google Trends can be complicated at first, it is a powerful tool for market researchers and digital marketers and can provide valuable insights when fully utilized. 

For example, you can identify seasonal patterns of a search term as shown above, where there is a spike in interest for smartwatches every November (coincidentally near Christmas). You can even customize the time range to identify daily, weekly, or even bi-annual patterns. 

Google Trends also has an ‘Interest by Region’ section to show which countries the search terms are most popular in. From there, you can plan out target segments and differentiated marketing strategies to reach those customer bases. 

Internal database

If you already have a small business or a website, you can mine internal sources of customer data such as customer relationship management software (CRM) or Google Analytics. Not only is it a cost-effective way to gather quantitative data, but it also directly tells you who your current customers are. 

From there, internal data sources will show you your customer’s demographics and purchasing patterns. A good CRM will have all this data stored in a centralized database and accessible for anyone in your organization. 

You could also arrange interviews and focus groups with your customers to collect qualitative data: why they buy from you, how your services solved their problems, and more. 

Pro tip: Apply the 80/20 rule by looking out for the prominent 20% customers and their unique characteristics. Then, focus your resources on them with loyalty programs, special marketing communications, and other sales techniques. 

Government publications

Most, if not, every government dedicates a portion of their resources to helping SMEs and startups. Some even provide free training, advice, and financial aid for small businesses

Examples of helpful government resources include:

 

Other helpful organizations that provide valuable market research data include:

Primary research

Whether through face-to-face or online means, having conversations with people is still the most effective way to collect qualitative and quantitative data.

Common primary research methods include interviews, focus groups, online surveys, observations, and experiments. 

When doing primary research, try to find out the consumers’ demographics, pain points, hopes and motivations, and obstacles faced throughout the purchasing journey. This information will assist you in coming up with solutions for their needs and, hopefully, result in loyal customers.

4. Interpret and analyze the collected data

In this step, researchers must collaborate with marketing managers to interpret the collected data and convert it into actionable insights for the organization. There are many techniques that you can use to analyze the collected data.

Transcription analysis

You should use human or automated market research transcription services to convert interviews into written text for further analysis. For example, by using a transcription service like Speak, you can transcribe audio during interviews and have a transcript ready for you in a matter of minutes. 

Our system also includes text and sentiment analysis tools, so you can effortlessly search for key information and prevalent keywords to discover patterns in your research data set. Moreover, Speak allows you to store media, search for specific moments, and analyze multiple data sets all in one centralized database.

Visual graphs and maps

One of the best ways to interpret data and present your research findings is through visuals such as graphs and perceptual maps. Diagrams such as line graphs and bar graphs are helpful in identifying patterns in the data set clearly. 

Perceptual mapping refers to plotting out where your brand and its competitors stand in relation to two attributes. A perceptual map such as the one shown above, shows you where your business is performing and what areas it can improve. Usually, perceptual maps are used to visualize qualitative data that are subjective as opposed to quantitative data. 

Statistical analysis

There are many techniques involved in statistical analysis, the most common being cross-tabulation and trend analysis. Both methods can be done in Excel and are easy to do.

Cross-tabulation: Cross-tabulation involves using tables to understand the relationship between 2 or more variables in quantitative data sets. 

Trend analysis: Trend analysis involves plotting data on a graph over a time period and drawing a trend line.

5. Implement the research findings and adjust accordingly

Interpreting and presenting the research findings is technically the final step in the market research process. However, it is not the end of your marketing strategy. 

Once you have formed a conclusion or hypothesis from the market research, it’s time to implement them into your business strategy. However, not all research findings are perfect and require A/B testing and adjustments to meet your KPIs. 

Sometimes, you may have to redo your market research, and that’s okay! A business is an organic entity that is constantly learning and growing. Ultimately, market research is an ongoing process and should be done regularly to guarantee the success of your organization.

tl;dr - Key Takeaways

Market research is important for all organizations, whether they are established forerunners or just starting out. However, conducting cost-effective market research without compromising results is a big challenge, especially for small businesses. 

There are many ways to conduct market research specifically for small businesses. Generally, market research for small businesses or startups involves four main steps: 

  1. Identifying business problems and research objectives
  2. Designing the research plan
  3. Collecting the data
  4. Interpreting the collected data. 

 

After these main steps are complete, you must implement the research findings and adjust your strategy accordingly.

Market research can also be categorized into primary and secondary research. You should use market research transcription services to ease the data collection process and improve your research workflow. Secondary research is a cost-effective and quick way to obtain large amounts of data from government publications, online communities, and other online sources.

Try Speak free for 14 days, no credit card required

Don’t Miss Out.

Transcribe and analyze your media like never before.

Automatically generate transcripts, captions, insights and reports with intuitive software and APIs.