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Market research and competitive analysis

Market research helps you find customers for your business. Competitive analysis helps you make your business unique. Combine them to find a competitive advantage for your small business.

How to use market research to find customers

Market research combines consumer behavior and economic trends to confirm and improve your business idea.

It is crucial to understand your consumer base from the beginning. Market research allows you to reduce risk even while your business is still just a glimmer in your eye.

Gather demographic information to better understand the opportunities and constraints for obtaining clients. This could include population data on age, wealth, family, interests, or whatever else is relevant to your business.

Questions for market research

So answer these questions to get a good idea of ​​your market.

  • Demand: Is there a desire for your product or service?
  • Size of the market: How many people would be interested in your offer?
  • Economic indicators: What is the income range and the employment rate?
  • Location: Where do your customers live and where can your business go?
  • Market saturation: How many similar options are already available to consumers?
  • Prices: How much do potential customers pay for these alternatives?

You’ll also want to keep up with the latest small business trends. It is important to have an idea of ​​the specific market share that will affect your profits.

You can do market research using existing sources, or you can do the research yourself and go directly to consumers.

Existing sources can save you a lot of time and energy, but the information may not be as specific to your audience as you would like. Use it to answer questions that are both general and quantifiable, such as industry trends, demographics, and household income.

Asking consumers yourself can give you a nuanced understanding of your specific target audience. However, direct research can be time consuming and expensive. Use it to answer questions about your business or specific customers, such as reactions to your logo, improvements you could make to the shopping experience, and where customers could go instead of your business.

Direct research methods in a market study

Here are some of the methods you can use to conduct direct investigations:

  • Polls
  • Questionnaires
  • Thematic groups
  • In-depth interviews

For guidance on deciding which methods are worth your while for your small business, the Small Business Administration offers counseling services through the SBA local partner network.

How to use competitive analysis to find a market advantage

Competitive analysis helps you learn from businesses that are competing for your potential customers. This is key to defining a competitive advantage that generates sustainable income.

Your competitive analysis should identify your competition by product or service line and market segment. Assess the following characteristics of the competitive landscape:

  • Market share
  • Strengths and weaknesses
  • Your window of opportunity to enter the market
  • The importance of your target market to your competitors
  • Any barrier that may hinder your entry into the market
  • Indirect or secondary competitors that can affect your success

The tool SizeUp helps small business owners discover how their businesses stack up against competition by city and industry. It is a market analysis tool that you can use:

  • Create benchmarks against existing companies
  • Location map of competitors, customers and suppliers
  • Find the best places to advertise

Multiple industries could be competing to serve the same market that you are targeting. This is why you should be sure to differentiate your competitive analysis by industry. Important industry factors to consider include the level of competition, the threat of new competitors or services, and the effect of suppliers and customers on prices.

Free data and trends for small businesses

There are many reliable sources that provide customer and market information at no cost. Free statistics are available to help future small business owners.

Consider these types of business statistics in your market research and competitive analysis:

Focus Goal Reference

General business statistics

Find statistics on industries, business conditions

Consumer statistics

Gain info on potential customers, consumer markets

Demographics

Segment the population for targeting customers

Economic indicators

Know unemployment rates, loans granted and more

Employment statistics

Dig deeper into employment trends for your market

Income statistics

Pay your employees fair rates based on earnings data

Money and interest rates

Keep money by mastering exchange and interest rates

Production and sales statistics

Understand demand, costs and consumer spending

Consumer Spending, Gross Domestic Product (GDP)

Trade statistics

Track indicators of sales and market performance

Statistics of specific industries

Use a wealth of federal agency data on industries