market research business plan

Market Research for a Business Plan: How to Do It in a Day

Whether it’s your first time using market research for a business plan or this isn’t exactly your first rodeo: a quick refresh on the topic can do no harm.

If anything, it’s the smart route to take. Particularly when you consider modern-day market research data can be obtained quicker than ever – when the right tools are used.

Today, I’m going to explain exactly how to conduct market research for a business plan, and how to access that key data and juicy intel without hassle.

The importance of market research in business planning

They say knowledge is power, and where your rivals and your market are concerned, there’s nothing quite like it. By looking at things like consumer behavior, the competitive landscape , market size, and the digital strategies of others; companies at any stage in their lifecycle can stay relevant, maintain a competitive edge, set strategic direction, and experience growth. Doing periodic market research also helps businesses develop a deeper, more informed understanding of a market, its audience, and key players. If you’re seeking financial backing, doing market research is essential to show credibility and build confidence in your plans.

How to conduct market research for a business plan

Good market research for a business plan should be contextualized with information about your company, its goals, products, pricing, and financials. Sounds like a lot of work, right? Read on to learn how to conduct all the market research for a business plan you’re going to need – quickly, using the most up-to-date data there is. I’ll show you how to:

• Understand your audience
• Identify target personas
• Size your market 
• Research the competition 
• Discover your unique sales proposition
• Define marketing priorities 

Before you start, make sure your business planning document includes the following 10 headings:

This format is considered best practice, so I’ve indicated the specific sections that each element of your market research fits into.

Sound good? Then let’s get started.

1. Understand your audience

What it is – A target audience is a social segment of people who are likely to be interested in your products or services. It’s a snapshot of your target customer base, sorted by certain characteristics. It’s also known as audience demographics and can contain data like age, gender, location, values, attitudes, behaviors, and more.     

Where to use this market research in a business plan – Demographical data can help determine the size of your market, which slots into the executive summary, marketing plan, market sizing, and financial sections of the plan. What’s more, when you use it to identify groups of people to target, it can also be used in the products and services, competitive research tools , and SWOT analysis sections.

Bonus: Audience demographics can also help you develop stronger branding by choosing imagery that appeals most to your ideal customers.

How to do a quick audience analysis

Similarweb Research Intelligence gives you the ability to view almost any industry in a few seconds; you can also create a custom industry based on specific players in your market.  Here’s how to see relevant audience demographics in a market. For this example, I chose the airline industry.

View typical audience relevant to your sector with gender and age distribution, along with geographical data . You can see which companies are experiencing growth and at what rate. Audience loyalty is also key to understanding how people behave, if they tend to shop around and what search terms they use to discover sites in any niche.

Read more: Learn more about how to do a demographic analysis of your market’s audience .

2. Identify target personas

What it is – An audience or target persona is a typical customer profile. It starts with audience demographics, and then zooms into a much deeper level. Most organizations develop multiple target personas, based on things like pain points, location, gender, background, occupation, influential factors, decision-making, likes, dislikes, goals, ideals, and more. 

Pro Tip: If you’re in B2B, your target personas are based on the people who make purchasing decisions, not the business itself.

Where to use this market research in a business plan – Creating target personas for your business shows you know whom you’re targeting, and how to market to them. This information will help you complete market sizing, product or service overview, marketing plan, and could fit into the competitive research section too.

How to create a buyer persona in five steps

Guesswork does not equal less work – there’s no place for shortcuts here. Your success depends on developing the most accurate representation of who your customers are, and what they care about. 

1. Research: If you’re already in business, use market research surveys as a tool to collect information about your customers. If you’re a startup or pre-startup, you can use a platform like Similarweb to establish a typical customer profile for your market. Don’t forget to use mobile app intelligence and website analytics in tandem to build a complete picture of your audience. 

Pro Tip: Secondary market research is another good source of intel for startups. You might be able to find published surveys that relate to your products or market to learn more.

2. Analysis: Here, you’re looking to answer key questions to fill in the blanks and build a complete picture of your ideal customer. Tools like Similarweb Digital Research Intelligence, Google Analytics, and competitors’ social media channels can help you find this out. Typical questions include:

• Where is your audience coming from?
• What channels do they use to find your site?
• Do they favor access via mobile site, app, or desktop?
• What are their demographics? Think age, job, salary, location, and gender.

3. Competitive market research: This shows you what marketing channels, referral partners, and keywords are sending traffic to businesses similar to yours When you combine this data with what you learned in sections 1 + 2, you are ready to build your personas.

4. Fill in a buyer persona template: We’ve done the hard work for you. Download a pre-made template below .

Further reading: The complete guide to creating buyer personas

3. Size your market

What it is – Market sizing is a way to determine the potential size of a target market using informed estimation. This is how you find out the potential revenue and market volume applicable to your business . There are three key metrics: total addressable market (TAM), service addressable market (SAM), and service obtainable market (SOM).

Where to use this market research in a business plan – Knowing how big the slice of the pie you’re going after is crucial. It can inform any goal setting and help with forecasting too. This data can be used in your executive summary, marketing plan, competitive research, SWOT analysis, market sizing, operations, and financial sections.

Further reading: How to do market sizing shows you how to calculate the TAM, SAM, and SOM for your business.

4. Research the competition

What it is – Competitive landscaping shows who you’re up against and how your offering stacks up vs others in your space. By evaluating rivals in-depth and looking at things like features, pricing, support, content, and additional products, you can form a detailed picture of the competition.

Where to use this market research in a business plan – The information you gain from performing a competitive analysis can transform what you offer and how you go to market. In business planning, this market research supports the executive summary, product or service overview, marketing plan, competitive research, SWOT analysis, and operation sections.  

How to do competitive landscaping

Using the industry overview section of Similarweb Digital Research Intelligence, competitor research is made quick and easy. Access key metrics on an industry or specific players, then download raw data in a workable excel file or get a PNG image of charts in an instant. Most data can be downloaded via excel or as an image and included in the resource section of your plan.

Here, you can see a summary of a market, yearly growth, and top sites. A quick click to industry leaders shows you market leaders and rising stars. Select any name for a complete picture of their digital presence – use this to spot potential opportunities to gain a competitive advantage.

Read more: See how to do a competitive analysis and get a free template to help you get started.

5. Discover your unique sales proposition

What it is – Not all businesses have them, and that’s OK. A unique selling proposition (USP) is something distinctive your business offers but your rivals don’t . It can be anything that’s unique to a product, service, pricing model, or other.  

Why it’s useful – Having a compelling USP helps your company stand out in a market. It can make your business more valuable to a customer vs the competition, and ultimately help you win and retain more customers.

Where to use this market research in a business plan – Your USP should be highlighted in the executive summary, the product and service overview, and the SWOT analysis.

How to find your USP

Unless you’ve developed a unique product or service, or you’re planning to sell to the market at a lower-than-average price point, you’re going to have to look for some kind of service differentiator that’ll help you stand out. In my experience, the quickest way to discover this is through competitive benchmarking. Here, I’m talking about evaluating your closest rivals to uncover things they’re not doing, or looking for gaps that your business can capitalize on. 

A competitive review of their site should look at things like:

• Customer support: do they have live chat, email support, telephone support, etc.?
• Content: do they produce additional content that offers value, free resources, etc.?
• Offers: what promotions or offers do they run?
• Loyalty or referral programs: do they reward loyalty or referrals?
• Service level agreements: what commitments do they make to their customers?
• Operations: consider delivery methods, lead times, returns policy etc.
• Price promises: what satisfaction or price promises do they offer, if at all?

Go easy on yourself and create a basic template that details each point. Once complete, look for opportunities to provide something unique that nobody else currently offers.

6. Define marketing priorities

What it is – A detailed plan showing how you position and market your products or service. It should define realistic, clear, and measurable goals that articulate tactics, customer profiles, and the position of your products in the market.

Where to use this market research in a business plan – Relevant intel you uncover should inform the marketing plan first and foremost. However, it can also be used in the SWOT analysis, operation, and financial sections.

How to do it – with a market research example

Using the marketing channels within Similarweb Digital Research Intelligence, you can short-cut the lengthy (and often costly) process of trial and error when trying to decide which channels and activities work best.

Let me show you how.

Using Similarweb Digital Research Intelligence, I can hone in on any site I like, and look at key marketing intel to uncover the strategies they’re using, along with insights into what’s driving traffic, and traffic opportunities.

In less than 60 seconds, I can see easyJet’s complete online presence; its marketing and social channels, and a snapshot of every metric that matters, like referrals, organic and paid ads, keywords, and more. Expand any section to get granular data, and view insights that show exactly where key losses, gains, and opportunities exist.

You can take this a step further and add other sites into the mix. Compare sites side-by-side to see who is winning, and how they’re doing it. While this snapshot shows a comparison of a single competitor, you can compare five at any one time. What’s more, I can see industry leaders, rising players, and any relevant mobile app intelligence stats, should a company or its rivals have an app as part of their offering.

Best practice for market research data in business plans

When doing any type of market research , it’s important to use the most up-to-date data you can get your hands on. There are two key factors for data are timeliness and trustworthiness.

For any market, look for data that applies to any period over the last 12 months. With how fast markets evolve and how quickly consumer behaviors change, being able to view dynamic data is key. What’s more, the source of any data matters just as much as its age.

To emphasize the importance of using the right type of data in a business plan, here’s some timely advice from SBA commercial lending expert and VP of Commerce National Bank and Trust, Steve Fulmer. As someone who, in the past 15 years, has approved approximately $150 million in loans to SMBs; his advice is worth paying attention to.

“ For anybody doing market research for a business plan, they must cite sources. Most new or small businesses lack historical performance data, which removes substantial confidence in their plans. As a lender, we cannot support assumptions in their business plan or their projections if their data hasn’t come from a trustworthy source.”

Wrapping up…

Now you know the six ways to do market research for a business plan, it’s time to knuckle down and get started. With Similarweb, you’ve got access to all the market intel you’re going to need to conduct timely, accurate, and reliable market research. What’s more, you can return to the platform anytime to benchmark your performance , get fresh insights, and adapt your strategies to focus on growth – helping you build a sustainable business that can withstand the test of time.

How do I do market research for a business plan?

By using Digital Research Intelligence tools like Similarweb, you can quickly conduct audience research, company research, market analysis, and benchmarking from a single place. Another method is secondary market research, but this takes more time and data isn’t always up to date. 

Why does a business plan need market research?

Doing market research for a business plan is the quickest and easiest way to validate a business idea and establish a clear view of the market and competitive landscape. When done right, it can show you opportunities for growth, strategies to avoid, and effective ways to market your business. 

What is market research in a business plan?

Market research in business planning is one of the most powerful tools you can use to flesh out and validate your company or its products. It can tell you whether there’s a market for your product, and how big that market is – it also helps you discover industry trends, and examine the strategies of the rising stars and industry leaders in detail. 

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Understanding market research for your business plan.

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When you’re building a business plan, market research needs to happen pretty early in the process. It’s where you learn about your audience’s wants and needs and the financial trends in your industry, and where you combine the data, and uncover trends that tell you what customers want and how to provide it most effectively.

The results of that research and analysis will shape aspects of the rest of your business plan. Assessments of your market and competition inform critical decisions in areas such as product design or service offerings, price, marketing methods, and business location.

That means accurate and comprehensive market research matters. To be comprehensive, your information and analysis should answer every possible question about the market you plan to enter and the consumers you believe will buy your product or service, including (but not limited to):

• Demand: Do consumers want what you’re offering?

• Economic indicators: Do they have the money to buy your product/service?

• Pricing: How much will they pay for your product/service?

• Location: Where do they live, and where are they likely to make their purchases?

• Saturation: How many other options do they currently have for that product/service?

First Steps: Budget

You can spend a lot answering these questions. Many large businesses hire firms to do the research and analysis, employing large-scale surveys, focus groups and statistical models, among other methods. However, for entrepreneurs just starting out, marketing budgets are typically too slim to cover that kind of research.

So, the work needs to stay in-house and fit a small marketing budget. Affordable, effective market research is possible. It may not be as specific to your market as the big-budget stuff, but it can get you the information you need to work out a solid understanding of your market.

First Steps: Market-Research Objectives

Before you start your research and analysis, determine your objectives. Decide what you want to learn from the process. It will guide the data you search for and how you use it, so be specific. Write down actual goals – what would give you the most accurate, comprehensive and useful picture of your market? This could include areas such as demographics, competitor offerings and customer pain points.

First Steps: Research Terminology

In market research, you’re basically dealing with two types of research and two types of data:

• Primary research: This is research you perform yourself in order to get very specific insights into your very specific business. It includes methods such as surveys, interviews and direct observations (by visiting competitor locations, for instance). It can help you gather qualitative data. This is data that goes beyond statistics and market trends. It can tell you what your consumers want, what they don’t want and how they feel about your offerings.

• Secondary research: This is research other people have performed and analyzed. To conduct secondary research, you can visit government websites such as the U.S. Census Bureau and the Bureau of Labor Statistics, as well as private data collectors such as Google and market-research companies. It can help you gather quantitative data. This is generally statistical data and can reveal insights on consumer demographics, spending patterns, market trends and earnings projections.

Where To Start Your Market Research

There’s a ton of existing research out there, and a lot of it is totally free. The Small Business Administration website has a list of free government sources for various types of quantitative data, such as industry statistics, consumer demographics, consumer demand and spending, and sales indicators. Much of it comes from the U.S. Census Bureau and the Bureau of Labor Statistics. A simple search will turn up enough places to start gathering secondary research to build a picture of your market.

With a good understanding of your market from secondary sources, you’re in a good position to know which types of primary research, if any, would be worth an investment of your time and energy. Maybe a well-designed survey completed by everyone you know could help fill in some holes.

You can also conduct primary research by visiting and speaking with your would-be competition and their customers; through crowdsourcing forums such as Quora, where you can glean raw data from comments and responses and post questions related to your product, service and market; on social-media websites such as Facebook, where you can parse conversations in relevant interest groups; and by reading product and service reviews on sites such as Amazon or Yelp.

Analyzing Your Market Research

Armed with all your data, you’ll draw conclusions that will help guide many of your business decisions.

But first, make sure all of your data will benefit those decisions. Don’t start analyzing until you weed out extraneous information that will waste your time and hinder focused insights. If it doesn’t relate directly to your business and your market, set it aside.

Then organize the relevant data into tables, graphs, lists and pie charts, and see what trends emerge. What do those trends mean for your business? Your product? Your location? Your planned promotions?

Be open to whatever the data tells you. Even if your research findings are unexpected, embrace them, and make any necessary adjustments. Listening to good market research can save you a lot of headaches down the road: The better you know your consumers, the better your chances of successfully selling to them.

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How to Create a Market Research Plan

Table of Contents

While having a great idea is an important part of establishing a business, you’ll only get so far without laying the proper groundwork. To help your business take off, not only do you need to size up the competition, but you also need to identify who will buy your product, how much it will cost, the best approach to selling it and how many people will demand it.

To get answers to these questions, you’ll need a market research plan, which you can create yourself or pay a specialist to create for you. Market research plans define an existing problem and/or outline an opportunity. From there, the marketing strategy is broken down task by task. Your plan should include objectives and the methods that you’ll use to achieve those objectives, along with a time frame for completing the work.

What should a market research plan include?

A market research plan should provide a thorough examination of how your product or service will fare in a defined area. It should include:

• An examination of the current marketplace and an analysis of the need for your product or service: To know where you fit in the market, it’s important to have a broad understanding of your industry — covering everything from its annual revenue to the industry standards to the total number of businesses operating within it. Start by gathering statistical data from sources like the U.S. Bureau of Labor Statistics and BMI Research and consider the industry’s market size, potential customer base and how external factors such as laws, technology, world events and socioeconomic changes impact it.
• An assessment of the competition: By analyzing your competitors, you can discover strategies to fill market gaps. This involves identifying well-known competitors and noting trends they employ successfully, scrutinizing customer feedback about businesses in your sector, such as through online reviews, and understanding competitors’ product or service offerings. This knowledge can then guide the refinement of your own products or services to differentiate them from others in the market.
• Data about customers: Identify which segment of potential customers in your industry you can effectively target, considering their demographics — such as age, ethnicity, income and location and psychographics, including beliefs, values and lifestyle. Learn about the challenges your customers face in their daily lives and determine how the features and benefits of your offerings address their needs.
• The direction for your marketing in the upcoming year: Your plan should provide a clear roadmap for your marketing strategies for the next year, focusing on approaches to distinguish your brand from competitors. Develop marketing messages that resonate with and display empathy toward your target market and find ways to address customers’ needs and demonstrate value.
• Goals to be met: Outline goals your business would like to achieve and make these goals clear to all employees on your team. Create goals that are realistic and attainable while also making a meaningful impact on the business’s growth. Consider factors including your target number of products or services, the expected number of units to sell based on market size, target market behavior, pricing for each item and the cost of production and advertising.

How to create your market research plan

Doing business without having a marketing plan is like driving without directions. You may eventually reach your destination, but there will be many costly and time-consuming mistakes made along the way.

Many entrepreneurs mistakenly believe there is a big demand for their service or product but, in reality, there may not be, your prices may be too high or too low or you may be going into a business with so many restrictions that it’s almost impossible to be successful. A market research plan will help you uncover significant issues or roadblocks.

Step 1. Conduct a comprehensive situation analysis.

One of the first steps in constructing your marketing plan is to create a strengths, weaknesses, opportunities and threats (SWOT) analysis , which is used to identify your competition, to know how they operate and then to understand their strengths and weaknesses.

Step 2: Develop clear marketing objectives.

In this section, describe the desired outcome for your marketing plan with realistic and attainable objectives, the targets and a clear and concise time frame. The most common way to approach this is with marketing objectives, which may include the total number of customers and the retention rate, the average volume of purchases, total market share and the proportion of your potential market that makes purchases.

Step 3: Make a financial plan.

A financial plan is essentia l for creating a solid marketing plan. The financial plan answers a range of questions that are critical components of your business, such as how much you intend to sell, what will you charge, how much will it cost to deliver your services or produce your products, how much will it cost for your basic operating expenses and how much financing will you need to operate your business.

In your business plan, be sure to describe who you are, what your business will be about, your business goals and what your inspiration was to buy, begin or grow your business.

Step 4: Determine your target audience.

Once you know what makes you stand out from your competitors and how you’ll market yourself, you should decide who to target with all this information. That’s why your market research plan should delineate your target audience. What are their demographics and how will these qualities affect your plan? How do your company’s current products and services affect which consumers you can realistically make customers? Will that change in the future? All of these questions should be answered in your plan.

Step 5: List your research methods.

Rarely does one research avenue make for a comprehensive market research plan. Instead, your plan should indicate several methods that will be used to determine the market share you can realistically obtain. This way, you get as much information as possible from as many sources as possible. The result is a more robust path toward establishing the exact footprint you desire for your company.

Step 6: Establish a timeline.

With your plan in place, you’ll need to figure out how long your market research process will take. Project management charts are often helpful in this regard as they divide tasks and personnel over a timeframe that you have set. No matter which type of project management chart you use, try to build some flexibility into your timeframe. A two-week buffer toward the home stretch comes in handy when a process scheduled for one week takes two — that buffer will keep you on deadline.

Step 7: Acknowledge ethical concerns.

Market research always presents opportunities for ethical missteps. After all, you’ll need to obtain competitor information and sensitive financial data that may not always be readily available. Your market research plan should thus encourage your team to not take any dicey steps to obtain this information. It may be better to state, “we could not obtain this competitor information,” than to spy on the competitor or pressure their current employees for knowledge. Plus, there’s nothing wrong with simply feeling better about the final state of your plan and how you got it there.

Using a market research firm

If the thought of trying to create your own market research plan seems daunting or too time-consuming, there are plenty of other people willing to do the work for you.

Pros of using a market research firm

As an objective third party, businesses can benefit from a market research firm’s impartial perspective and guidance, helping to shape impactful brand strategies and marketing campaigns. These firms, which can help businesses with everything from their marketing campaigns to brand launches, deliver precise results, drawing on their expertise and experience to provide in-depth insights and solutions tailored specifically to your company’s needs. 

Even more, working with a market research firm can elevate a brand above the competition, as they provide credible and unique research that is highly valued by the media, enhancing brand credibility and potentially increasing website traffic, social media shares and online visibility.

Cons of using a market research firm

Although hiring a firm can provide businesses with tremendous results, certain downsides can lead a business toward the do-it-yourself route. Most notably, market research firms can be a costly expense that some businesses can’t afford. However, businesses that can allocate the funds will likely see a positive return on investment, as they are paying for the expertise and proficiency of seasoned professionals in the field.

Additionally, finding the right market research firm for your business’s needs can take some time — and even longer, ranging from weeks to months, for a market research firm to complete a plan. This lack of immediate results can be detrimental for businesses that don’t have the time to wait. 

Market research firms can charge into the thousands of dollars for a market research plan, but there are ways to get help more affordably, including:

• Outline your plans carefully and spell out objectives.
• Examine as many sources as possible.
• Before paying for any information, check with librarians, small business development centers or market research professors to see if they can help you access market research data for free.
• You may think you’ll need to spend a hefty sum to create a market research plan, but there are plenty of free and low-cost sources available, especially through university business schools that will guide you through the process.

Miranda Fraraccio contributed to this article. 

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How to Do Market Research

Noah Parsons

18 min. read

Updated May 10, 2024

One of the biggest and most expensive mistakes I’ve made in my business career could have been avoided by doing a little homework.

In the late 2000s, my team and I came up with what we thought was a great idea for a product . Tons of businesses would need it, and it was almost guaranteed to be a huge hit!

But, we neglected to do our market research. 

We ended up with a product searching for a market instead of figuring out who our ideal customer was and building a product specifically for them.

You can avoid making this same mistake. 

Let’s learn from my experience and go over the basics of how to conduct market research. 

• What is market research?

Market research is the process of gathering information about your potential customers. 

It helps you define your target market, craft customer personas , and understand the viability of your business, by answering questions like: 

• Who are your customers?
• What are their buying and shopping habits?
• How many of them are there? 

By exploring your ideal customers’ problems, desires, and current solutions, you can build your product, service, and overall business strategy to better serve them.

• Why is market research important?

When starting a business , conducting market research to get to know your customers is one of the most important things you can do. 

If you don’t understand your customer, you don’t know:

• How you can solve their problems . 
• What kind of marketing messages and advertising work. 
• If your product or service is actually something your customers will spend money on.

Beyond that, market research can help you:

• Reduce risk: Inform critical decisions with real-world data.
• Understand your competitors: Know how competitors and alternatives to your business represent themselves in pricing, quality, and placement.
• Identify market trends: Stay ahead by spotting emerging trends and shifts in the market.
• Enhance customer experience: Improve customer satisfaction by addressing their pain points.

Gathering data on your customers should become a regular practice for your business. 

The more in tune you are with your customers, the better you can serve them and the more likely you are to grow your business. You should never just let assumptions about your customers drive business decisions.

Developing primary and secondary data through market research is how you get an accurate reflection of your customers’ needs.

Further Reading: 6 things to consider before entering a market

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Things to consider before conducting market research

Market research can be incredibly time-consuming (and even a waste of time) when done without the right preparation.

Here are a few questions to answer to help ensure you make the most of your efforts.

What are your objectives?

A research objective is a stated purpose that explains why you’re doing market research. It should include a specific result you intend to achieve, using available resources within a certain time frame. 

Without an objective, you’ll pour over a sea of data without knowing what you’re looking for. And if you speak to customers without a goal, you’ll struggle to ask useful questions and dig deeper.

Don’t overthink it.

Your objective should be easy to understand and connected to your business needs. 

For example, if you’re just starting, your objective may be to verify before investing in production if your chosen customer base is interested and willing to purchase your product or service.

What research methods will you use?

You don’t need to have every question prepped or a list of people to interview at the start—but you should know what research methods you intend to use.

The research options you choose will impact the data you collect, and the time it will take to complete it. By doing this ahead of time, you’ll be better prepared to create a timeline of when to take specific actions and what milestones to hit to stay on track.

What tools and resources do you need?

You likely won’t know every resource you’ll need until you start doing research. However, that doesn’t mean you can’t be proactive. 

If you know the methods you’ll be using, research what tools you’ll need to:

• Conduct interviews
• Create surveys
• Observe customer behavior

If you use third-party data, identify reputable sources to provide the information you want.

• How to conduct market research

Every business will do market research differently. The sources, the methods of data collection, and how you’ll use that data are entirely up to you. 

However, the core steps you should take remain the same. Here’s my recommendation for how to structure your research efforts:

1. Start by identifying your target market

Imagine that someone walks into your business, reaches out online, or picks up the phone and calls you. 

It’s your perfect customer: someone who has the problem that you solve and is willing to spend money on your solution. 

Now imagine the details about this person. Who are they? Can you describe them?

Ideal customers and common traits

This “ideal customer” is your target market . Your business might have several target markets, but it will usually serve you best to keep your list of target customers to two or three.

Each of your target markets should share common traits . These might be demographic traits such as: 

• Income levels
• Locations 

They might be psychographic traits—groups of people that like the same things or have similar interests. Or, your target market might be a certain type of employee at another company, such as a Chief Technology Officer or head of marketing.

Most often, target markets are blends of demographic and psychographic groups. For example, you might develop a new type of shoe targeted at female triathletes. Or you might be opening a hair salon targeting urban, hipster men.

Further Reading: Why niche audiences are important and how to find yours

Market segmentation

Creating multiple target markets for your company is doing what’s called “ market segmentation .” 

This sounds complex, but all you’re doing is dividing your target markets into different groups you hope to sell to. Each market segment might have different characteristics and buy your product or service for different reasons.

You might create different marketing campaigns or customize your product or service for each segment.

Further Reading:

Target marketing explained

Your target market is your ideal customer who needs your solution. They share common traits like age, gender, income, interests, or job roles. To start, focus your efforts on one target customer.

Consider focusing on a younger audience

Younger consumers are often overlooked in favor of older customers who currently make purchasing decisions. However, if you can crack the interests of a younger audience, it may lead to long-term loyalty.

2. Find out if your market is big enough

Are there enough potential customers to sustain you and your competitors? If the answer is no, then you need to consider changing your product or service offering.

Use the attributes you defined in the target market step and determine how many people meet your demographic, psychographic, or location criteria. I’ve got some links to resources to help you figure this out at the end of this article.

For example: If your target market only has a few thousand potential customers, you must either sell to them frequently or at a fairly high price to create a sustainable, profitable business.

Further Reading: How to use TAM, SAM, SOM to determine market size

If you are targeting an existing market with established competitors, you do what’s called industry research . 

For example, perhaps you are building a new company in the market for sports drinks or the market for cell phones. In cases like this, understanding how much people buy of existing offerings will give you the best sense of your potential market size. 

In this case, you want to look for industry reports and read trade publications for your industry. These publications often summarize the market size.

Further Reading: Differences between industry and market research explained

3. Talk to your potential customers

Once you have identified your target market, or at least made a good guess at who your target market is, you need to take the most important step in this entire market research process. 

You need to get up from your desk, leave behind your computer, and go outside. That’s right, you need to go and talk to people in your potential target markets. 

Yes, you can do online surveys and other research, but that’s no substitute for actually talking to potential customers. 

You’ll gain more insight into your customers through first-hand accounts than any survey will ever tell you.

Do this one thing, and you’ll be miles ahead of your competition. Why? Because most people skip this step. It’s intimidating to talk to strangers. What if they don’t want to buy what you plan on making?

So, don’t be like most entrepreneurs (including me!) and skip this critical step. 

It can mean the difference between success and failure. Getting this step done early will help you refine your business model and make a clear impact on your future success.

Further Reading: How to Create a Market Penetration Strategy  

4. Identify and analyze your competitors

Part of understanding your customers is knowing what solutions they already use. 

These are your competitors, and they may directly compete with you or provide a reasonable substitution customers settle for. 

You’ll understand how to position your business to take advantage of potential opportunities and mitigate risks by analyzing who they are, what they do, and how customers respond.  

Document your known competitors

To keep things simple, start by listing your known competitors . Account for businesses that offer a similar product/service, and those that indirectly compete with their solution or industry expertise. 

Example:   You operate an outdoor goods retail store. Your mission is to provide hands-on direction for customers to find camping, hiking, and survival gear that they will love. You offer a wide selection of well-known brands, local options, and in-house creations.

Your direct competitors are the large brands themselves, less niche retail stores, and online sellers. You must also account for other businesses that provide expert-level information on outdoor activities. 

They likely don’t sell the products, but may provide guided tours, reviews, or other insights that overlap with your business. 

Analyze your competitors

Once you have your list, it’s time to get to know the competition. Check out their websites, social media, customer reviews, and news stories from the last year. 

Sign up for their email lists, visit their stores (if they have them), and track down any industry reports that give you an idea of their size, performance, and strategic direction.

You don’t have to do everything I just listed. But you must go deep enough to clearly understand your competitors and why potential customers may choose them over you. 

It may even be useful to use the SWOT analysis framework to provide additional structure for your research. 

Further Reading: 10 ways to determine what your competitors are doing

5. Document your findings

The final (and easiest) step is to document your findings. How formal your documentation is will depend on how you plan on using it.

If you only need to share your findings with business partners and others in your business, then you can probably communicate fairly informally. 

However, if you’re looking for investors for your business, you may need to write a more formal market analysis and do a market forecast.

Presenting your market research

The single piece of documentation that every business should create is a buyer persona . 

A persona is a description of a person that hits on all of the key aspects of your target market. And, just like you might have several target markets for your business, you might have several different buyer personas.

Creating a buyer persona converts your target marketing information from dry research into a living, breathing person. 

For LivePlan , we’ve created a persona named Garrett, who drives much of our product development. Garrett embodies the attributes of our ideal customer.

When we think about creating a new marketing campaign or developing a new feature for our products, we ask, “Would Garrett like this?” You can read about the process we used to create Garrett in this article.

How to create a detailed user or buyer persona

Visualizing your customers when reviewing a sea of data can be tricky. So, create a customer persona and turn that data into the living, breathing person you imagine your customer to be.

LivePlan customer persona example

Check out this real-world customer persona used by the business planning and management software LivePlan.

When should you conduct market research?

Market research is vital when starting a business. It will improve your product or service and help you avoid starting a business without customers.

However, market research shouldn’t be exclusive to new businesses. Conditions are bound to change, and you must stay up-to-date on your industry , competitors, and emerging trends. 

Here are a few other business events where market research can make a difference:

• Launching a new product/service or updating current features.
• Expanding into a new market.
• Consistent dips in financial performance. 
• Widespread market changes.
• New competitors enter the market.

Primary vs secondary market research explained

No matter how you decide to gather information, the methods can be boiled down to primary and secondary research. As a business owner, it’s worth understanding the basics of each type of research and how they work together.

What is primary research?

Primary research is the first-hand information collected (by you or someone you’ve hired) from customers within your market. Primary research cuts out the middleman and ensures that the results you are gathering are straight from the source. 

That’s why you should conduct primary research when validating your business idea. 

Furthermore, it can be broken down into two result categories — exploratory and specific.

Exploratory primary research

Exploratory primary research involves non-quantifiable customer feedback. This means you’re not trying to measure results but to record interest or an emotional response. You’ll accomplish this by asking open-ended questions in formats like focus groups or 1:1 interviews.

Asking for open-ended feedback ensures that the results are unfiltered and honest. You aren’t unintentionally leading or hindering their responses. 

Specific primary research

Specific research allows you to dig deeper into issues or opportunities you identified through your exploratory research. 

You may target a smaller segment of customers from the larger group you’ve spoken to, conduct additional interviews, or shift to more quantifiable research such as beta-testing or surveys.

What is secondary research?

Secondary research covers every other piece of data you have available. This includes resources such as:

• Public sources: Typically free and highly accessible information gathered through government-sponsored research projects. 
• Commercial sources: Research studies conducted by private organizations regarding the state of specific markets, industries, or innovations. 
• Internal sources: Data you have collected through everyday business operations. Everything from financial statements to Analytics reports can qualify.

Which is better: primary or secondary research?

Neither primary nor secondary research is better than the other. They simply have different use cases. So, aim for a healthy mix.

When starting, focus on conducting primary research to ensure you get the necessary information to validate your business. 

Compare those findings to secondary resources such as industry benchmarks , market reports, and internal data you’ve collected. 

You’ll likely leverage secondary research more consistently as you grow—but it’s wise to run primary research initiatives occasionally, especially when approaching a strategic decision. Only with both types of research will you fully understand the story of your place in the market. 

Further Reading: Types of market research explained and how to use them

Types of market research to try

1. face-to-face, remote, or phone interviews.

I mentioned this before, but the best thing you can do is get out and talk to your potential or current customers, virtually or in person. 

Be sure you have a refined set of closed and open-ended questions ready, and consider the interviewee’s tone, body language, and interest alongside their answers.

2. Focus groups

Similar to interviews, focus groups can provide direct feedback from your customer mix. Rather than receiving answers or reactions in a bubble, you get to see how customers may act when influenced by others in the market. You can simply ask questions, run product tests, or have them watch a demo.

3. Observational research

Observational research is about watching how potential customers engage with your product or service. You’re attempting to understand what roadblocks or frustrations they may be hitting, what functionality seems to resonate, what they want from your business, etc.

To conduct observational research, you can set up an official testing environment that you control. Or you can just go out and observe your potential customers and see how they shop, make purchases, and what factors encourage or deter them from purchasing.

4. Pricing research

You may include questions about pricing when conducting interviews or focus groups, but you can also specifically develop research around pricing. 

This can be anything from testing different pricing options on your website ( A/B testing ), offering discounts to exclusive segments, or running ad campaigns with different pricing positions. The goal is to understand what your customers are willing to pay and what they consider a fair price .

5. Brand awareness research

This type of research is about understanding if your target market knows about your brand and how much they happen to know. What do they associate with your brand? What competitors come to mind first?

It’s a great way to understand your current market penetration and who your competitors are. You can integrate this type of questioning within your other tests or conduct surveys to get this data.

6. Customer interest

As part of your initial validation process, you should try to understand current customer interest. At its most basic, you’re asking: Are customers willing to buy your product or service? 

You can simply ask questions and look for yes or no answers, but it may be wise to run a limited-time sale or pre-sale to actually line up initial revenue for your business. 

You can offer the chance to purchase during your interviews or focus groups, as well as run pre-orders through a simple landing page or by measuring engagement with a paid ad campaign.

7. Customer satisfaction

This research will help you understand current customer loyalty and what it will take to get customers to come back. Again, you can do this research within focus groups or interviews. 

Still, you can also test loyalty programs, limited-time promotions, customer service initiatives, and other ways to improve customer loyalty. 

Market research tools and resources

Finding market research data depends on the market you are targeting and the industry you are in. 

Here are a few of my go-to sources for market research:

• U.S. Census : If you’re opening a business in the U.S., the U.S. Census site is a goldmine of information. Check out the Census Business Builder to get population data and data on how much people spend in a given area on your type of business.
• Bureau of Labor Statistics : Another U.S.-centric resource, but a fantastic site for information on specific industries: hiring and expense trends as well as industry sizes. If your target market is other businesses, this is a good place to look for data.
• Consumer Expenditure Survey : If you want to know what people spend their money on, this is your source.
• SBDCNet Business Snapshots : You’ll find a great collection of industry profiles that describe how industries are growing and changing, who their customers are, and what typical startup costs are. You should also check out their list of market research resources, sorted by industry .
• ChatGPT : All data generated from AI models like ChatGPT must be verified. But it can still be an excellent market research assistant. With the right prompting, you can generate customer segments, understand their nuances, and prioritize them based on your needs.

Further Reading: 21 best market research resources for small businesses

Market research informs your startup decisions

Effective market research can help you avoid costly mistakes early on in the life of your business. 

However, it should remain a core practice that you regularly implement when approaching crucial business decisions, growth opportunities, or just to reaffirm your understanding of the market. 

Revisit this framework whenever you’re approaching a key strategic decision . Confirm that you still understand your customers, competitors, and where the market is headed.

Then use this information to inform your planning and adjust your strategy if necessary.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Before conducting market research
• When to conduct market research
• Primary vs secondary research
• Types of market research
• Tools and resources
• Market research informs your decisions

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What are your customers’ needs? How does your product compare to the competition? What are the emerging trends and opportunities in your industry? If these questions keep you up at night, it’s time to conduct market research.

Market research plays a pivotal role in your ability to stay competitive and relevant, helping you anticipate shifts in consumer behavior and industry dynamics. It involves gathering these insights using a wide range of techniques, from surveys and interviews to data analysis and observational studies.

In this guide, we’ll explore why market research is crucial, the various types of market research, the methods used in data collection, and how to effectively conduct market research to drive informed decision-making and success.

What is market research?

Market research is the systematic process of gathering, analyzing and interpreting information about a specific market or industry. The purpose of market research is to offer valuable insight into the preferences and behaviors of your target audience, and anticipate shifts in market trends and the competitive landscape. This information helps you make data-driven decisions, develop effective strategies for your business, and maximize your chances of long-term growth.

Why is market research important? 

By understanding the significance of market research, you can make sure you’re asking the right questions and using the process to your advantage. Some of the benefits of market research include:

• Informed decision-making: Market research provides you with the data and insights you need to make smart decisions for your business. It helps you identify opportunities, assess risks and tailor your strategies to meet the demands of the market. Without market research, decisions are often based on assumptions or guesswork, leading to costly mistakes.
• Customer-centric approach: A cornerstone of market research involves developing a deep understanding of customer needs and preferences. This gives you valuable insights into your target audience, helping you develop products, services and marketing campaigns that resonate with your customers.
• Competitive advantage: By conducting market research, you’ll gain a competitive edge. You’ll be able to identify gaps in the market, analyze competitor strengths and weaknesses, and position your business strategically. This enables you to create unique value propositions, differentiate yourself from competitors, and seize opportunities that others may overlook.
• Risk mitigation: Market research helps you anticipate market shifts and potential challenges. By identifying threats early, you can proactively adjust their strategies to mitigate risks and respond effectively to changing circumstances. This proactive approach is particularly valuable in volatile industries.
• Resource optimization: Conducting market research allows organizations to allocate their time, money and resources more efficiently. It ensures that investments are made in areas with the highest potential return on investment, reducing wasted resources and improving overall business performance.
• Adaptation to market trends: Markets evolve rapidly, driven by technological advancements, cultural shifts and changing consumer attitudes. Market research ensures that you stay ahead of these trends and adapt your offerings accordingly so you can avoid becoming obsolete. 

As you can see, market research empowers businesses to make data-driven decisions, cater to customer needs, outperform competitors, mitigate risks, optimize resources and stay agile in a dynamic marketplace. These benefits make it a huge industry; the global market research services market is expected to grow from $76.37 billion in 2021 to $108.57 billion in 2026 . Now, let’s dig into the different types of market research that can help you achieve these benefits.

Types of market research 

• Qualitative research
• Quantitative research
• Exploratory research
• Descriptive research
• Causal research
• Cross-sectional research
• Longitudinal research

Despite its advantages, 23% of organizations don’t have a clear market research strategy. Part of developing a strategy involves choosing the right type of market research for your business goals. The most commonly used approaches include:

1. Qualitative research

Qualitative research focuses on understanding the underlying motivations, attitudes and perceptions of individuals or groups. It is typically conducted through techniques like in-depth interviews, focus groups and content analysis — methods we’ll discuss further in the sections below. Qualitative research provides rich, nuanced insights that can inform product development, marketing strategies and brand positioning.

2. Quantitative research

Quantitative research, in contrast to qualitative research, involves the collection and analysis of numerical data, often through surveys, experiments and structured questionnaires. This approach allows for statistical analysis and the measurement of trends, making it suitable for large-scale market studies and hypothesis testing. While it’s worthwhile using a mix of qualitative and quantitative research, most businesses prioritize the latter because it is scientific, measurable and easily replicated across different experiments.

3. Exploratory research

Whether you’re conducting qualitative or quantitative research or a mix of both, exploratory research is often the first step. Its primary goal is to help you understand a market or problem so you can gain insights and identify potential issues or opportunities. This type of market research is less structured and is typically conducted through open-ended interviews, focus groups or secondary data analysis. Exploratory research is valuable when entering new markets or exploring new product ideas.

4. Descriptive research

As its name implies, descriptive research seeks to describe a market, population or phenomenon in detail. It involves collecting and summarizing data to answer questions about audience demographics and behaviors, market size, and current trends. Surveys, observational studies and content analysis are common methods used in descriptive research. 

5. Causal research

Causal research aims to establish cause-and-effect relationships between variables. It investigates whether changes in one variable result in changes in another. Experimental designs, A/B testing and regression analysis are common causal research methods. This sheds light on how specific marketing strategies or product changes impact consumer behavior.

6. Cross-sectional research

Cross-sectional market research involves collecting data from a sample of the population at a single point in time. It is used to analyze differences, relationships or trends among various groups within a population. Cross-sectional studies are helpful for market segmentation, identifying target audiences and assessing market trends at a specific moment.

7. Longitudinal research

Longitudinal research, in contrast to cross-sectional research, collects data from the same subjects over an extended period. This allows for the analysis of trends, changes and developments over time. Longitudinal studies are useful for tracking long-term developments in consumer preferences, brand loyalty and market dynamics.

Each type of market research has its strengths and weaknesses, and the method you choose depends on your specific research goals and the depth of understanding you’re aiming to achieve. In the following sections, we’ll delve into primary and secondary research approaches and specific research methods.

Primary vs. secondary market research

Market research of all types can be broadly categorized into two main approaches: primary research and secondary research. By understanding the differences between these approaches, you can better determine the most appropriate research method for your specific goals.

Primary market research 

Primary research involves the collection of original data straight from the source. Typically, this involves communicating directly with your target audience — through surveys, interviews, focus groups and more — to gather information. Here are some key attributes of primary market research:

• Customized data: Primary research provides data that is tailored to your research needs. You design a custom research study and gather information specific to your goals.
• Up-to-date insights: Because primary research involves communicating with customers, the data you collect reflects the most current market conditions and consumer behaviors.
• Time-consuming and resource-intensive: Despite its advantages, primary research can be labor-intensive and costly, especially when dealing with large sample sizes or complex study designs. Whether you hire a market research consultant, agency or use an in-house team, primary research studies consume a large amount of resources and time.

Secondary market research 

Secondary research, on the other hand, involves analyzing data that has already been compiled by third-party sources, such as online research tools, databases, news sites, industry reports and academic studies.

Here are the main characteristics of secondary market research:

• Cost-effective: Secondary research is generally more cost-effective than primary research since it doesn’t require building a research plan from scratch. You and your team can look at databases, websites and publications on an ongoing basis, without needing to design a custom experiment or hire a consultant. 
• Leverages multiple sources: Data tools and software extract data from multiple places across the web, and then consolidate that information within a single platform. This means you’ll get a greater amount of data and a wider scope from secondary research.
• Quick to access: You can access a wide range of information rapidly — often in seconds — if you’re using online research tools and databases. Because of this, you can act on insights sooner, rather than taking the time to develop an experiment. 

So, when should you use primary vs. secondary research? In practice, many market research projects incorporate both primary and secondary research to take advantage of the strengths of each approach.

One rule of thumb is to focus on secondary research to obtain background information, market trends or industry benchmarks. It is especially valuable for conducting preliminary research, competitor analysis, or when time and budget constraints are tight. Then, if you still have knowledge gaps or need to answer specific questions unique to your business model, use primary research to create a custom experiment. 

Market research methods

• Surveys and questionnaires
• Focus groups
• Observational research
• Online research tools
• Experiments
• Content analysis
• Ethnographic research

How do primary and secondary research approaches translate into specific research methods? Let’s take a look at the different ways you can gather data: 

1. Surveys and questionnaires

Surveys and questionnaires are popular methods for collecting structured data from a large number of respondents. They involve a set of predetermined questions that participants answer. Surveys can be conducted through various channels, including online tools, telephone interviews and in-person or online questionnaires. They are useful for gathering quantitative data and assessing customer demographics, opinions, preferences and needs. On average, customer surveys have a 33% response rate , so keep that in mind as you consider your sample size.

2. Interviews

Interviews are in-depth conversations with individuals or groups to gather qualitative insights. They can be structured (with predefined questions) or unstructured (with open-ended discussions). Interviews are valuable for exploring complex topics, uncovering motivations and obtaining detailed feedback. 

3. Focus groups

The most common primary research methods are in-depth webcam interviews and focus groups. Focus groups are a small gathering of participants who discuss a specific topic or product under the guidance of a moderator. These discussions are valuable for primary market research because they reveal insights into consumer attitudes, perceptions and emotions. Focus groups are especially useful for idea generation, concept testing and understanding group dynamics within your target audience.

4. Observational research

Observational research involves observing and recording participant behavior in a natural setting. This method is particularly valuable when studying consumer behavior in physical spaces, such as retail stores or public places. In some types of observational research, participants are aware you’re watching them; in other cases, you discreetly watch consumers without their knowledge, as they use your product. Either way, observational research provides firsthand insights into how people interact with products or environments.

5. Online research tools

You and your team can do your own secondary market research using online tools. These tools include data prospecting platforms and databases, as well as online surveys, social media listening, web analytics and sentiment analysis platforms. They help you gather data from online sources, monitor industry trends, track competitors, understand consumer preferences and keep tabs on online behavior. We’ll talk more about choosing the right market research tools in the sections that follow.

6. Experiments

Market research experiments are controlled tests of variables to determine causal relationships. While experiments are often associated with scientific research, they are also used in market research to assess the impact of specific marketing strategies, product features, or pricing and packaging changes.

7. Content analysis

Content analysis involves the systematic examination of textual, visual or audio content to identify patterns, themes and trends. It’s commonly applied to customer reviews, social media posts and other forms of online content to analyze consumer opinions and sentiments.

8. Ethnographic research

Ethnographic research immerses researchers into the daily lives of consumers to understand their behavior and culture. This method is particularly valuable when studying niche markets or exploring the cultural context of consumer choices.

How to do market research

• Set clear objectives
• Identify your target audience
• Choose your research methods
• Use the right market research tools
• Collect data
• Analyze data 
• Interpret your findings
• Identify opportunities and challenges
• Make informed business decisions
• Monitor and adapt

Now that you have gained insights into the various market research methods at your disposal, let’s delve into the practical aspects of how to conduct market research effectively. Here’s a quick step-by-step overview, from defining objectives to monitoring market shifts.

1. Set clear objectives

When you set clear and specific goals, you’re essentially creating a compass to guide your research questions and methodology. Start by precisely defining what you want to achieve. Are you launching a new product and want to understand its viability in the market? Are you evaluating customer satisfaction with a product redesign? 

Start by creating SMART goals — objectives that are specific, measurable, achievable, relevant and time-bound. Not only will this clarify your research focus from the outset, but it will also help you track progress and benchmark your success throughout the process. 

You should also consult with key stakeholders and team members to ensure alignment on your research objectives before diving into data collecting. This will help you gain diverse perspectives and insights that will shape your research approach.

2. Identify your target audience

Next, you’ll need to pinpoint your target audience to determine who should be included in your research. Begin by creating detailed buyer personas or stakeholder profiles. Consider demographic factors like age, gender, income and location, but also delve into psychographics, such as interests, values and pain points.

The more specific your target audience, the more accurate and actionable your research will be. Additionally, segment your audience if your research objectives involve studying different groups, such as current customers and potential leads.

If you already have existing customers, you can also hold conversations with them to better understand your target market. From there, you can refine your buyer personas and tailor your research methods accordingly.

3. Choose your research methods

Selecting the right research methods is crucial for gathering high-quality data. Start by considering the nature of your research objectives. If you’re exploring consumer preferences, surveys and interviews can provide valuable insights. For in-depth understanding, focus groups or observational research might be suitable. Consider using a mix of quantitative and qualitative methods to gain a well-rounded perspective. 

You’ll also need to consider your budget. Think about what you can realistically achieve using the time and resources available to you. If you have a fairly generous budget, you may want to try a mix of primary and secondary research approaches. If you’re doing market research for a startup , on the other hand, chances are your budget is somewhat limited. If that’s the case, try addressing your goals with secondary research tools before investing time and effort in a primary research study. 

4. Use the right market research tools

Whether you’re conducting primary or secondary research, you’ll need to choose the right tools. These can help you do anything from sending surveys to customers to monitoring trends and analyzing data. Here are some examples of popular market research tools:

• Market research software: Crunchbase is a platform that provides best-in-class company data, making it valuable for market research on growing companies and industries. You can use Crunchbase to access trusted, first-party funding data, revenue data, news and firmographics, enabling you to monitor industry trends and understand customer needs.

• Survey and questionnaire tools: SurveyMonkey is a widely used online survey platform that allows you to create, distribute and analyze surveys. Google Forms is a free tool that lets you create surveys and collect responses through Google Drive.
• Data analysis software: Microsoft Excel and Google Sheets are useful for conducting statistical analyses. SPSS is a powerful statistical analysis software used for data processing, analysis and reporting.
• Social listening tools: Brandwatch is a social listening and analytics platform that helps you monitor social media conversations, track sentiment and analyze trends. Mention is a media monitoring tool that allows you to track mentions of your brand, competitors and keywords across various online sources.
• Data visualization platforms: Tableau is a data visualization tool that helps you create interactive and shareable dashboards and reports. Power BI by Microsoft is a business analytics tool for creating interactive visualizations and reports.

5. Collect data

There’s an infinite amount of data you could be collecting using these tools, so you’ll need to be intentional about going after the data that aligns with your research goals. Implement your chosen research methods, whether it’s distributing surveys, conducting interviews or pulling from secondary research platforms. Pay close attention to data quality and accuracy, and stick to a standardized process to streamline data capture and reduce errors. 

6. Analyze data

Once data is collected, you’ll need to analyze it systematically. Use statistical software or analysis tools to identify patterns, trends and correlations. For qualitative data, employ thematic analysis to extract common themes and insights. Visualize your findings with charts, graphs and tables to make complex data more understandable.

If you’re not proficient in data analysis, consider outsourcing or collaborating with a data analyst who can assist in processing and interpreting your data accurately.

7. Interpret your findings

Interpreting your market research findings involves understanding what the data means in the context of your objectives. Are there significant trends that uncover the answers to your initial research questions? Consider the implications of your findings on your business strategy. It’s essential to move beyond raw data and extract actionable insights that inform decision-making.

Hold a cross-functional meeting or workshop with relevant team members to collectively interpret the findings. Different perspectives can lead to more comprehensive insights and innovative solutions.

8. Identify opportunities and challenges

Use your research findings to identify potential growth opportunities and challenges within your market. What segments of your audience are underserved or overlooked? Are there emerging trends you can capitalize on? Conversely, what obstacles or competitors could hinder your progress?

Lay out this information in a clear and organized way by conducting a SWOT analysis, which stands for strengths, weaknesses, opportunities and threats. Jot down notes for each of these areas to provide a structured overview of gaps and hurdles in the market.

9. Make informed business decisions

Market research is only valuable if it leads to informed decisions for your company. Based on your insights, devise actionable strategies and initiatives that align with your research objectives. Whether it’s refining your product, targeting new customer segments or adjusting pricing, ensure your decisions are rooted in the data.

At this point, it’s also crucial to keep your team aligned and accountable. Create an action plan that outlines specific steps, responsibilities and timelines for implementing the recommendations derived from your research. 

10. Monitor and adapt

Market research isn’t a one-time activity; it’s an ongoing process. Continuously monitor market conditions, customer behaviors and industry trends. Set up mechanisms to collect real-time data and feedback. As you gather new information, be prepared to adapt your strategies and tactics accordingly. Regularly revisiting your research ensures your business remains agile and reflects changing market dynamics and consumer preferences.

Online market research sources

As you go through the steps above, you’ll want to turn to trusted, reputable sources to gather your data. Here’s a list to get you started:

• Crunchbase: As mentioned above, Crunchbase is an online platform with an extensive dataset, allowing you to access in-depth insights on market trends, consumer behavior and competitive analysis. You can also customize your search options to tailor your research to specific industries, geographic regions or customer personas.

• Academic databases: Academic databases, such as ProQuest and JSTOR , are treasure troves of scholarly research papers, studies and academic journals. They offer in-depth analyses of various subjects, including market trends, consumer preferences and industry-specific insights. Researchers can access a wealth of peer-reviewed publications to gain a deeper understanding of their research topics.
• Government and NGO databases: Government agencies, nongovernmental organizations and other institutions frequently maintain databases containing valuable economic, demographic and industry-related data. These sources offer credible statistics and reports on a wide range of topics, making them essential for market researchers. Examples include the U.S. Census Bureau , the Bureau of Labor Statistics and the Pew Research Center .
• Industry reports: Industry reports and market studies are comprehensive documents prepared by research firms, industry associations and consulting companies. They provide in-depth insights into specific markets, including market size, trends, competitive analysis and consumer behavior. You can find this information by looking at relevant industry association databases; examples include the American Marketing Association and the National Retail Federation .
• Social media and online communities: Social media platforms like LinkedIn or Twitter (X) , forums such as Reddit and Quora , and review platforms such as G2 can provide real-time insights into consumer sentiment, opinions and trends. 

Market research examples

At this point, you have market research tools and data sources — but how do you act on the data you gather? Let’s go over some real-world examples that illustrate the practical application of market research across various industries. These examples showcase how market research can lead to smart decision-making and successful business decisions.

Example 1: Apple’s iPhone launch

Apple ’s iconic iPhone launch in 2007 serves as a prime example of market research driving product innovation in tech. Before the iPhone’s release, Apple conducted extensive market research to understand consumer preferences, pain points and unmet needs in the mobile phone industry. This research led to the development of a touchscreen smartphone with a user-friendly interface, addressing consumer demands for a more intuitive and versatile device. The result was a revolutionary product that disrupted the market and redefined the smartphone industry.

Example 2: McDonald’s global expansion

McDonald’s successful global expansion strategy demonstrates the importance of market research when expanding into new territories. Before entering a new market, McDonald’s conducts thorough research to understand local tastes, preferences and cultural nuances. This research informs menu customization, marketing strategies and store design. For instance, in India, McDonald’s offers a menu tailored to local preferences, including vegetarian options. This market-specific approach has enabled McDonald’s to adapt and thrive in diverse global markets.

Example 3: Organic and sustainable farming

The shift toward organic and sustainable farming practices in the food industry is driven by market research that indicates increased consumer demand for healthier and environmentally friendly food options. As a result, food producers and retailers invest in sustainable sourcing and organic product lines — such as with these sustainable seafood startups — to align with this shift in consumer values. 

The bottom line? Market research has multiple use cases and is a critical practice for any industry. Whether it’s launching groundbreaking products, entering new markets or responding to changing consumer preferences, you can use market research to shape successful strategies and outcomes.

Market research templates

You finally have a strong understanding of how to do market research and apply it in the real world. Before we wrap up, here are some market research templates that you can use as a starting point for your projects:

• Smartsheet competitive analysis templates : These spreadsheets can serve as a framework for gathering information about the competitive landscape and obtaining valuable lessons to apply to your business strategy.
• SurveyMonkey product survey template : Customize the questions on this survey based on what you want to learn from your target customers.
• HubSpot templates : HubSpot offers a wide range of free templates you can use for market research, business planning and more.
• SCORE templates : SCORE is a nonprofit organization that provides templates for business plans, market analysis and financial projections.
• SBA.gov : The U.S. Small Business Administration offers templates for every aspect of your business, including market research, and is particularly valuable for new startups. 

Strengthen your business with market research

When conducted effectively, market research is like a guiding star. Equipped with the right tools and techniques, you can uncover valuable insights, stay competitive, foster innovation and navigate the complexities of your industry.

Throughout this guide, we’ve discussed the definition of market research, different research methods, and how to conduct it effectively. We’ve also explored various types of market research and shared practical insights and templates for getting started. 

Now, it’s time to start the research process. Trust in data, listen to the market and make informed decisions that guide your company toward lasting success.

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A lot of preparation goes into starting a business before you can open your doors to the public or launch your online store. One of your first steps should be to write a business plan . A business plan will serve as your roadmap when building your business.

Within your business plan, there’s an important section you should pay careful attention to: your market analysis. Your market analysis helps you understand your target market and how you can thrive within it.

Simply put, your market analysis shows that you’ve done your research. It also contributes to your marketing strategy by defining your target customer and researching their buying habits. Overall, a market analysis will yield invaluable data if you have limited knowledge about your market, the market has fierce competition, and if you require a business loan. In this guide, we'll explore how to conduct your own market analysis.

How to conduct a market analysis: A step-by-step guide

In your market analysis, you can expect to cover the following:

Industry outlook

Target market

Market value

Competition

Barriers to entry

Let’s dive into an in-depth look into each section:

Step 1: Define your objective

Before you begin your market analysis, it’s important to define your objective for writing a market analysis. Are you writing it for internal purposes or for external purposes?

If you were doing a market analysis for internal purposes, you might be brainstorming new products to launch or adjusting your marketing tactics. An example of an external purpose might be that you need a market analysis to get approved for a business loan .

The comprehensiveness of your market analysis will depend on your objective. If you’re preparing for a new product launch, you might focus more heavily on researching the competition. A market analysis for a loan approval would require heavy data and research into market size and growth, share potential, and pricing.

Step 2: Provide an industry outlook

An industry outlook is a general direction of where your industry is heading. Lenders want to know whether you’re targeting a growing industry or declining industry. For example, if you’re looking to sell VCRs in 2020, it’s unlikely that your business will succeed.

Starting your market analysis with an industry outlook offers a preliminary view of the market and what to expect in your market analysis. When writing this section, you'll want to include:

Market size

Are you chasing big markets or are you targeting very niche markets? If you’re targeting a niche market, are there enough customers to support your business and buy your product?

Product life cycle

If you develop a product, what will its life cycle look like? Lenders want an overview of how your product will come into fruition after it’s developed and launched. In this section, you can discuss your product’s:

Research and development

Projected growth

How do you see your company performing over time? Calculating your year-over-year growth will help you and lenders see how your business has grown thus far. Calculating your projected growth shows how your business will fare in future projected market conditions.

Step 3: Determine your target market

This section of your market analysis is dedicated to your potential customer. Who is your ideal target customer? How can you cater your product to serve them specifically?

Don’t make the mistake of wanting to sell your product to everybody. Your target customer should be specific. For example, if you’re selling mittens, you wouldn’t want to market to warmer climates like Hawaii. You should target customers who live in colder regions. The more nuanced your target market is, the more information you’ll have to inform your business and marketing strategy.

With that in mind, your target market section should include the following points:

Demographics

This is where you leave nothing to mystery about your ideal customer. You want to know every aspect of your customer so you can best serve them. Dedicate time to researching the following demographics:

Income level

Create a customer persona

Creating a customer persona can help you better understand your customer. It can be easier to market to a person than data on paper. You can give this persona a name, background, and job. Mold this persona into your target customer.

What are your customer’s pain points? How do these pain points influence how they buy products? What matters most to them? Why do they choose one brand over another?

Research and supporting material

Information without data are just claims. To add credibility to your market analysis, you need to include data. Some methods for collecting data include:

Target group surveys

Focus groups

Reading reviews

Feedback surveys

You can also consult resources online. For example, the U.S. Census Bureau can help you find demographics in calculating your market share. The U.S. Department of Commerce and the U.S. Small Business Administration also offer general data that can help you research your target industry.

Step 4: Calculate market value

You can use either top-down analysis or bottom-up analysis to calculate an estimate of your market value.

A top-down analysis tends to be the easier option of the two. It requires for you to calculate the entire market and then estimate how much of a share you expect your business to get. For example, let’s assume your target market consists of 100,000 people. If you’re optimistic and manage to get 1% of that market, you can expect to make 1,000 sales.

A bottom-up analysis is more data-driven and requires more research. You calculate the individual factors of your business and then estimate how high you can scale them to arrive at a projected market share. Some factors to consider when doing a bottom-up analysis include:

Where products are sold

Who your competition is

The price per unit

How many consumers you expect to reach

The average amount a customer would buy over time

While a bottom-up analysis requires more data than a top-down analysis, you can usually arrive at a more accurate calculation.

Step 5: Get to know your competition

Before you start a business, you need to research the level of competition within your market. Are there certain companies getting the lion’s share of the market? How can you position yourself to stand out from the competition?

There are two types of competitors that you should be aware of: direct competitors and indirect competitors.

Direct competitors are other businesses who sell the same product as you. If you and the company across town both sell apples, you are direct competitors.

An indirect competitor sells a different but similar product to yours. If that company across town sells oranges instead, they are an indirect competitor. Apples and oranges are different but they still target a similar market: people who eat fruits.

Also, here are some questions you want to answer when writing this section of your market analysis:

What are your competitor’s strengths?

What are your competitor’s weaknesses?

How can you cover your competitor’s weaknesses in your own business?

How can you solve the same problems better or differently than your competitors?

How can you leverage technology to better serve your customers?

How big of a threat are your competitors if you open your business?

Step 6: Identify your barriers

Writing a market analysis can help you identify some glaring barriers to starting your business. Researching these barriers will help you avoid any costly legal or business mistakes down the line. Some entry barriers to address in your marketing analysis include:

Technology: How rapid is technology advancing and can it render your product obsolete within the next five years?

Branding: You need to establish your brand identity to stand out in a saturated market.

Cost of entry: Startup costs, like renting a space and hiring employees, are expensive. Also, specialty equipment often comes with hefty price tags. (Consider researching equipment financing to help finance these purchases.)

Location: You need to secure a prime location if you’re opening a physical store.

Competition: A market with fierce competition can be a steep uphill battle (like attempting to go toe-to-toe with Apple or Amazon).

Step 7: Know the regulations

When starting a business, it’s your responsibility to research governmental and state business regulations within your market. Some regulations to keep in mind include (but aren’t limited to):

Employment and labor laws

Advertising

Environmental regulations

If you’re a newer entrepreneur and this is your first business, this part can be daunting so you might want to consult with a business attorney. A legal professional will help you identify the legal requirements specific to your business. You can also check online legal help sites like LegalZoom or Rocket Lawyer.

Tips when writing your market analysis

We wouldn’t be surprised if you feel overwhelmed by the sheer volume of information needed in a market analysis. Keep in mind, though, this research is key to launching a successful business. You don’t want to cut corners, but here are a few tips to help you out when writing your market analysis:

Use visual aids

Nobody likes 30 pages of nothing but text. Using visual aids can break up those text blocks, making your market analysis more visually appealing. When discussing statistics and metrics, charts and graphs will help you better communicate your data.

Include a summary

If you’ve ever read an article from an academic journal, you’ll notice that writers include an abstract that offers the reader a preview.

Use this same tactic when writing your market analysis. It will prime the reader of your market highlights before they dive into the hard data.

Get to the point

It’s better to keep your market analysis concise than to stuff it with fluff and repetition. You’ll want to present your data, analyze it, and then tie it back into how your business can thrive within your target market.

Revisit your market analysis regularly

Markets are always changing and it's important that your business changes with your target market. Revisiting your market analysis ensures that your business operations align with changing market conditions. The best businesses are the ones that can adapt.

Why should you write a market analysis?

Your market analysis helps you look at factors within your market to determine if it’s a good fit for your business model. A market analysis will help you:

1. Learn how to analyze the market need

Markets are always shifting and it’s a good idea to identify current and projected market conditions. These trends will help you understand the size of your market and whether there are paying customers waiting for you. Doing a market analysis helps you confirm that your target market is a lucrative market.

2. Learn about your customers

The best way to serve your customer is to understand them. A market analysis will examine your customer’s buying habits, pain points, and desires. This information will aid you in developing a business that addresses those points.

3. Get approved for a business loan

Starting a business, especially if it’s your first one, requires startup funding. A good first step is to apply for a business loan with your bank or other financial institution.

A thorough market analysis shows that you’re professional, prepared, and worth the investment from lenders. This preparation inspires confidence within the lender that you can build a business and repay the loan.

4. Beat the competition

Your research will offer valuable insight and certain advantages that the competition might not have. For example, thoroughly understanding your customer’s pain points and desires will help you develop a superior product or service than your competitors. If your business is already up and running, an updated market analysis can upgrade your marketing strategy or help you launch a new product.

Final thoughts

There is a saying that the first step to cutting down a tree is to sharpen an axe. In other words, preparation is the key to success. In business, preparation increases the chances that your business will succeed, even in a competitive market.

The market analysis section of your business plan separates the entrepreneurs who have done their homework from those who haven’t. Now that you’ve learned how to write a market analysis, it’s time for you to sharpen your axe and grow a successful business. And keep in mind, if you need help crafting your business plan, you can always turn to business plan software or a free template to help you stay organized.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

On a similar note...

Market Research: A How-To Guide and Template

Discover the different types of market research, how to conduct your own market research, and use a free template to help you along the way.

MARKET RESEARCH KIT

5 Research and Planning Templates + a Free Guide on How to Use Them in Your Market Research

Updated: 02/21/24

Published: 02/21/24

Today's consumers have a lot of power. As a business, you must have a deep understanding of who your buyers are and what influences their purchase decisions.

Enter: Market Research.

Whether you're new to market research or not, I created this guide to help you conduct a thorough study of your market, target audience, competition, and more. Let’s dive in.

Table of Contents

What is market research?

Primary vs. secondary research, types of market research, how to do market research, market research report template, market research examples.

Market research is the process of gathering information about your target market and customers to verify the success of a new product, help your team iterate on an existing product, or understand brand perception to ensure your team is effectively communicating your company's value effectively.

Market research can answer various questions about the state of an industry. But if you ask me, it's hardly a crystal ball that marketers can rely on for insights on their customers.

Market researchers investigate several areas of the market, and it can take weeks or even months to paint an accurate picture of the business landscape.

However, researching just one of those areas can make you more intuitive to who your buyers are and how to deliver value that no other business is offering them right now.

How? Consider these two things:

• Your competitors also have experienced individuals in the industry and a customer base. It‘s very possible that your immediate resources are, in many ways, equal to those of your competition’s immediate resources. Seeking a larger sample size for answers can provide a better edge.
• Your customers don't represent the attitudes of an entire market. They represent the attitudes of the part of the market that is already drawn to your brand.

The market research services market is growing rapidly, which signifies a strong interest in market research as we enter 2024. The market is expected to grow from roughly $75 billion in 2021 to $90.79 billion in 2025 .

Free Market Research Kit

• SWOT Analysis Template
• Survey Template
• Focus Group Template

You're all set!

Click this link to access this resource at any time.

Why do market research?

Market research allows you to meet your buyer where they are.

As our world becomes louder and demands more of our attention, this proves invaluable.

By understanding your buyer's problems, pain points, and desired solutions, you can aptly craft your product or service to naturally appeal to them.

Market research also provides insight into the following:

• Where your target audience and current customers conduct their product or service research
• Which of your competitors your target audience looks to for information, options, or purchases
• What's trending in your industry and in the eyes of your buyer
• Who makes up your market and what their challenges are
• What influences purchases and conversions among your target audience
• Consumer attitudes about a particular topic, pain, product, or brand
• Whether there‘s demand for the business initiatives you’re investing in
• Unaddressed or underserved customer needs that can be flipped into selling opportunity
• Attitudes about pricing for a particular product or service

Ultimately, market research allows you to get information from a larger sample size of your target audience, eliminating bias and assumptions so that you can get to the heart of consumer attitudes.

As a result, you can make better business decisions.

To give you an idea of how extensive market research can get , consider that it can either be qualitative or quantitative in nature — depending on the studies you conduct and what you're trying to learn about your industry.

Qualitative research is concerned with public opinion, and explores how the market feels about the products currently available in that market.

Quantitative research is concerned with data, and looks for relevant trends in the information that's gathered from public records.

That said, there are two main types of market research that your business can conduct to collect actionable information on your products: primary research and secondary research.

Primary Research

Primary research is the pursuit of first-hand information about your market and the customers within your market.

It's useful when segmenting your market and establishing your buyer personas.

Primary market research tends to fall into one of two buckets:

• Exploratory Primary Research: This kind of primary market research normally takes place as a first step — before any specific research has been performed — and may involve open-ended interviews or surveys with small numbers of people.
• Specific Primary Research: This type of research often follows exploratory research. In specific research, you take a smaller or more precise segment of your audience and ask questions aimed at solving a suspected problem.

Secondary Research

Secondary research is all the data and public records you have at your disposal to draw conclusions from (e.g. trend reports, market statistics, industry content, and sales data you already have on your business).

Secondary research is particularly useful for analyzing your competitors . The main buckets your secondary market research will fall into include:

• Public Sources: These sources are your first and most-accessible layer of material when conducting secondary market research. They're often free to find and review — like government statistics (e.g., from the U.S. Census Bureau ).
• Commercial Sources: These sources often come in the form of pay-to-access market reports, consisting of industry insight compiled by a research agency like Pew , Gartner , or Forrester .
• Internal Sources: This is the market data your organization already has like average revenue per sale, customer retention rates, and other historical data that can help you draw conclusions on buyer needs.
• Focus Groups
• Product/ Service Use Research
• Observation-Based Research
• Buyer Persona Research
• Market Segmentation Research
• Pricing Research
• Competitive Analysis Research
• Customer Satisfaction and Loyalty Research
• Brand Awareness Research
• Campaign Research

1. Interviews

Interviews allow for face-to-face discussions so you can allow for a natural flow of conversation. Your interviewees can answer questions about themselves to help you design your buyer personas and shape your entire marketing strategy.

2. Focus Groups

Focus groups provide you with a handful of carefully-selected people that can test out your product and provide feedback. This type of market research can give you ideas for product differentiation.

3. Product/Service Use Research

Product or service use research offers insight into how and why your audience uses your product or service. This type of market research also gives you an idea of the product or service's usability for your target audience.

4. Observation-Based Research

Observation-based research allows you to sit back and watch the ways in which your target audience members go about using your product or service, what works well in terms of UX , and which aspects of it could be improved.

5. Buyer Persona Research

Buyer persona research gives you a realistic look at who makes up your target audience, what their challenges are, why they want your product or service, and what they need from your business or brand.

6. Market Segmentation Research

Market segmentation research allows you to categorize your target audience into different groups (or segments) based on specific and defining characteristics. This way, you can determine effective ways to meet their needs.

7. Pricing Research

Pricing research helps you define your pricing strategy . It gives you an idea of what similar products or services in your market sell for and what your target audience is willing to pay.

8. Competitive Analysis

Competitive analyses give you a deep understanding of the competition in your market and industry. You can learn about what's doing well in your industry and how you can separate yourself from the competition .

9. Customer Satisfaction and Loyalty Research

Customer satisfaction and loyalty research gives you a look into how you can get current customers to return for more business and what will motivate them to do so (e.g., loyalty programs , rewards, remarkable customer service).

10. Brand Awareness Research

Brand awareness research tells you what your target audience knows about and recognizes from your brand. It tells you about the associations people make when they think about your business.

11. Campaign Research

Campaign research entails looking into your past campaigns and analyzing their success among your target audience and current customers. The goal is to use these learnings to inform future campaigns.

• Define your buyer persona.
• Identify a persona group to engage.
• Prepare research questions for your market research participants.
• List your primary competitors.
• Summarize your findings.

1. Define your buyer persona.

You have to understand who your customers are and how customers in your industry make buying decisions.

This is where your buyer personas come in handy. Buyer personas — sometimes referred to as marketing personas — are fictional, generalized representations of your ideal customers.

Use a free tool to create a buyer persona that your entire company can use to market, sell, and serve better.

Don't forget to share this post!

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How to Conduct Market Research for a Business Plan

Rev › Blog › Marketing › How to Conduct Market Research for a Business Plan

Any successful business starts with a thorough, written business plan. For most small business owners, the prospect of gathering and compiling all the data required for a business plan can often seem intimidating. Fortunately, several helpful tools can make conducting market research faster and easier, especially when conducting target customer interviews.

What Does a Business Plan Include?

When building a business plan, you may include different sections or topics depending on how you intend to use the final product. For instance, business plans for internal use might not need to be quite as detailed or structured as plans that will be presented externally in order to secure financing from investors. Regardless of your purpose, most business plans include the following core sections:

• Industry Background – Include analysis of special business considerations that apply to your particular industries, such as trends, growth rates, or recent litigation.
• Value Proposition – Your value proposition (or Unique Selling Proposition) outlines how your business plans to bring value to its target customers in a way that isn’t currently being fulfilled in the market.
• Product Analysis – Describe in detail the product or service you offer, including features that are better than or differentiate you from current market offerings.
• Market Analysis – Examine your company’s target market, including customer demographics, estimated market capture, personas, and customer needs.
• Competitive Analysis – Here, you’ll compare the intended product or service to other offerings in the market and outline your company’s competitive advantages.
• Financial Analysis – Typically, your financial analysis will include estimated sales for the first 1-3 years of operation, as well as more detailed financial projections depending on who will be reading the plan.

Conducting a Market Analysis

Specific industries have different potential customers. It’s easier to reach your potential customers when you have a clear view of who they are. A market analysis helps clarify your ideal customer personas by researching both qualitative and quantitative aspects of your target market.

To better understand your potential customers, start by researching the demographics and segmentation of individuals who typically buy products and services in your industry. Your market analysis should also include:

• Research on the total size of the market
• How much additional market share is available
• Any currently unmet needs that could be sources of competitive advantage
• Features and qualities potential customers find valuable  

Using Market Research to Support Your Business Plan

Market research helps assess a business idea’s strengths and weaknesses. his research will serve as the basis for strategic marketing decisions, price positioning, and financial projections listed in the Financial Analysis section of your business plan. You can also use it to help your management team think through important decisions, ultimately leading to choices that will resonate with your target audience and get customers to buy your product or service.

Secondary Research

Conducting market research begins with fact-finding through the internet and other publicly available resources. This secondary research, or research originally conducted and compiled by others, gathers statistics on market size, average market pricing, competitor promotional effectiveness, manufacturing costs, and more.

Secondary research is necessary because it is often expensive and time-consuming for individual business owners to conduct this research firsthand. There are many reliable professional research firms that gather comprehensive industry statistics and make them available at a much more granular level than individuals could gather on their own. Some governmental organizations, such as the U.S. Bureau of Labor Statistics will even provide this information at no charge. Fortunately for business owners, a free resource is still perfectly valid as long as it’s reputable.

Primary Research

Beyond the initial secondary research, you should also conduct thorough primary research to vet your business idea. Primary research is conducted by talking to members of the target audience firsthand through surveys, interviews, and focus groups . These tools can provide valuable insight into how prospects judge your product or service and how they compare it to alternative options.

Primary research efforts will typically generate qualitative data in the form of audio and video recordings. These interviews are not always brief, and therefore can be difficult to process efficiently unless first converted to text. You can quickly and easily incorporate the content of these interviews into your plan once they’ve been transcribed.

With a speech-to-text service like Rev, you can get 99% accurate transcripts of your market research interviews in a matter of hours. Dramatically streamlining your business planning process with Rev gives you faster access to valuable customer feedback and potential insights, letting you skip the busy-work and get down to business.

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How to do market research in 4 steps: a lean approach to marketing research

From pinpointing your target audience and assessing your competitive advantage, to ongoing product development and customer satisfaction efforts, market research is a practice your business can only benefit from.

Learn how to conduct quick and effective market research using a lean approach in this article full of strategies and practical examples. 

Last updated

Reading time.

A comprehensive (and successful) business strategy is not complete without some form of market research—you can’t make informed and profitable business decisions without truly understanding your customer base and the current market trends that drive your business.

In this article, you’ll learn how to conduct quick, effective market research  using an approach called 'lean market research'. It’s easier than you might think, and it can be done at any stage in a product’s lifecycle.

How to conduct lean market research in 4 steps

What is market research, why is market research so valuable, advantages of lean market research, 4 common market research methods, 5 common market research questions, market research faqs.

We’ll jump right into our 4-step approach to lean market research. To show you how it’s done in the real world, each step includes a practical example from Smallpdf , a Swiss company that used lean market research to reduce their tool’s error rate by 75% and boost their Net Promoter Score® (NPS) by 1%.

Research your market the lean way...

From on-page surveys to user interviews, Hotjar has the tools to help you scope out your market and get to know your customers—without breaking the bank.

The following four steps and practical examples will give you a solid market research plan for understanding who your users are and what they want from a company like yours.

1. Create simple user personas

A user persona is a semi-fictional character based on psychographic and demographic data from people who use websites and products similar to your own. Start by defining broad user categories, then elaborate on them later to further segment your customer base and determine your ideal customer profile .

How to get the data: use on-page or emailed surveys and interviews to understand your users and what drives them to your business.

How to do it right: whatever survey or interview questions you ask, they should answer the following questions about the customer:

Who are they?

What is their main goal?

What is their main barrier to achieving this goal?

Pitfalls to avoid:

Don’t ask too many questions! Keep it to five or less, otherwise you’ll inundate them and they’ll stop answering thoughtfully.

Don’t worry too much about typical demographic questions like age or background. Instead, focus on the role these people play (as it relates to your product) and their goals.

How Smallpdf did it: Smallpdf ran an on-page survey for a couple of weeks and received 1,000 replies. They learned that many of their users were administrative assistants, students, and teachers.

Next, they used the survey results to create simple user personas like this one for admins:

Who are they? Administrative Assistants.

What is their main goal? Creating Word documents from a scanned, hard-copy document or a PDF where the source file was lost.

What is their main barrier to achieving it? Converting a scanned PDF doc to a Word file.

💡Pro tip: Smallpdf used Hotjar Surveys to run their user persona survey. Our survey tool helped them avoid the pitfalls of guesswork and find out who their users really are, in their own words. 

You can design a survey and start running it in minutes with our easy-to-use drag and drop builder. Customize your survey to fit your needs, from a sleek one-question pop-up survey to a fully branded questionnaire sent via email. 

We've also created 40+ free survey templates that you can start collecting data with, including a user persona survey like the one Smallpdf used.

2. Conduct observational research

Observational research involves taking notes while watching someone use your product (or a similar product).

Overt vs. covert observation

Overt observation involves asking customers if they’ll let you watch them use your product. This method is often used for user testing and it provides a great opportunity for collecting live product or customer feedback .

Covert observation means studying users ‘in the wild’ without them knowing. This method works well if you sell a type of product that people use regularly, and it offers the purest observational data because people often behave differently when they know they’re being watched. 

Tips to do it right:

Record an entry in your field notes, along with a timestamp, each time an action or event occurs.

Make note of the users' workflow, capturing the ‘what,’ ‘why,’ and ‘for whom’ of each action.

Don’t record identifiable video or audio data without consent. If recording people using your product is helpful for achieving your research goal, make sure all participants are informed and agree to the terms.

Don’t forget to explain why you’d like to observe them (for overt observation). People are more likely to cooperate if you tell them you want to improve the product.

💡Pro tip: while conducting field research out in the wild can wield rewarding results, you can also conduct observational research remotely. Hotjar Recordings is a tool that lets you capture anonymized user sessions of real people interacting with your website. 

Observe how customers navigate your pages and products to gain an inside look into their user behavior . This method is great for conducting exploratory research with the purpose of identifying more specific issues to investigate further, like pain points along the customer journey and opportunities for optimizing conversion .

With Hotjar Recordings you can observe real people using your site without capturing their sensitive information

How Smallpdf did it: here’s how Smallpdf observed two different user personas both covertly and overtly.

Observing students (covert): Kristina Wagner, Principle Product Manager at Smallpdf, went to cafes and libraries at two local universities and waited until she saw students doing PDF-related activities. Then she watched and took notes from a distance. One thing that struck her was the difference between how students self-reported their activities vs. how they behaved (i.e, the self-reporting bias). Students, she found, spent hours talking, listening to music, or simply staring at a blank screen rather than working. When she did find students who were working, she recorded the task they were performing and the software they were using (if she recognized it).

Observing administrative assistants (overt): Kristina sent emails to admins explaining that she’d like to observe them at work, and she asked those who agreed to try to batch their PDF work for her observation day. While watching admins work, she learned that they frequently needed to scan documents into PDF-format and then convert those PDFs into Word docs. By observing the challenges admins faced, Smallpdf knew which products to target for improvement.

“Data is really good for discovery and validation, but there is a bit in the middle where you have to go and find the human.”

3. Conduct individual interviews

Interviews are one-on-one conversations with members of your target market. They allow you to dig deep and explore their concerns, which can lead to all sorts of revelations.

Listen more, talk less. Be curious.

Act like a journalist, not a salesperson. Rather than trying to talk your company up, ask people about their lives, their needs, their frustrations, and how a product like yours could help.

Ask "why?" so you can dig deeper. Get into the specifics and learn about their past behavior.

Record the conversation. Focus on the conversation and avoid relying solely on notes by recording the interview. There are plenty of services that will transcribe recorded conversations for a good price (including Hotjar!).

Avoid asking leading questions , which reveal bias on your part and pushes respondents to answer in a certain direction (e.g. “Have you taken advantage of the amazing new features we just released?).

Don't ask loaded questions , which sneak in an assumption which, if untrue, would make it impossible to answer honestly. For example, we can’t ask you, “What did you find most useful about this article?” without asking whether you found the article useful in the first place.

Be cautious when asking opinions about the future (or predictions of future behavior). Studies suggest that people aren’t very good at predicting their future behavior. This is due to several cognitive biases, from the misguided exceptionalism bias (we’re good at guessing what others will do, but we somehow think we’re different), to the optimism bias (which makes us see things with rose-colored glasses), to the ‘illusion of control’ (which makes us forget the role of randomness in future events).

How Smallpdf did it: Kristina explored her teacher user persona by speaking with university professors at a local graduate school. She learned that the school was mostly paperless and rarely used PDFs, so for the sake of time, she moved on to the admins.

A bit of a letdown? Sure. But this story highlights an important lesson: sometimes you follow a lead and come up short, so you have to make adjustments on the fly. Lean market research is about getting solid, actionable insights quickly so you can tweak things and see what works.

💡Pro tip: to save even more time, conduct remote interviews using an online user research service like Hotjar Engage , which automates the entire interview process, from recruitment and scheduling to hosting and recording.

You can interview your own customers or connect with people from our diverse pool of 200,000+ participants from 130+ countries and 25 industries. And no need to fret about taking meticulous notes—Engage will automatically transcribe the interview for you.

4. Analyze the data (without drowning in it)

The following techniques will help you wrap your head around the market data you collect without losing yourself in it. Remember, the point of lean market research is to find quick, actionable insights.

A flow model is a diagram that tracks the flow of information within a system. By creating a simple visual representation of how users interact with your product and each other, you can better assess their needs.

You’ll notice that admins are at the center of Smallpdf’s flow model, which represents the flow of PDF-related documents throughout a school. This flow model shows the challenges that admins face as they work to satisfy their own internal and external customers.

Affinity diagram

An affinity diagram is a way of sorting large amounts of data into groups to better understand the big picture. For example, if you ask your users about their profession, you’ll notice some general themes start to form, even though the individual responses differ. Depending on your needs, you could group them by profession, or more generally by industry.

We wrote a guide about how to analyze open-ended questions to help you sort through and categorize large volumes of response data. You can also do this by hand by clipping up survey responses or interview notes and grouping them (which is what Kristina does).

“For an interview, you will have somewhere between 30 and 60 notes, and those notes are usually direct phrases. And when you literally cut them up into separate pieces of paper and group them, they should make sense by themselves.”

Pro tip: if you’re conducting an online survey with Hotjar, keep your team in the loop by sharing survey responses automatically via our Slack and Microsoft Team integrations. Reading answers as they come in lets you digest the data in pieces and can help prepare you for identifying common themes when it comes time for analysis.

Hotjar lets you easily share survey responses with your team

Customer journey map

A customer journey map is a diagram that shows the way a typical prospect becomes a paying customer. It outlines their first interaction with your brand and every step in the sales cycle, from awareness to repurchase (and hopefully advocacy).

The above  customer journey map , created by our team at Hotjar, shows many ways a customer might engage with our tool. Your map will be based on your own data and business model.

📚 Read more: if you’re new to customer journey maps, we wrote this step-by-step guide to creating your first customer journey map in 2 and 1/2 days with free templates you can download and start using immediately.

Next steps: from research to results

So, how do you turn market research insights into tangible business results? Let’s look at the actions Smallpdf took after conducting their lean market research: first they implemented changes, then measured the impact.

Implement changes

Based on what Smallpdf learned about the challenges that one key user segment (admins) face when trying to convert PDFs into Word files, they improved their ‘PDF to Word’ conversion tool.

We won’t go into the details here because it involves a lot of technical jargon, but they made the entire process simpler and more straightforward for users. Plus, they made it so that their system recognized when you drop a PDF file into their ‘Word to PDF’ converter instead of the ‘PDF to Word’ converter, so users wouldn’t have to redo the task when they made that mistake. 

In other words: simple market segmentation for admins showed a business need that had to be accounted for, and customers are happier overall after Smallpdf implemented an informed change to their product.

Measure results

According to the Lean UX model, product and UX changes aren’t retained unless they achieve results.

Smallpdf’s changes produced:

A 75% reduction in error rate for the ‘PDF to Word’ converter

A 1% increase in NPS

Greater confidence in the team’s marketing efforts

"With all the changes said and done, we've cut our original error rate in four, which is huge. We increased our NPS by +1%, which isn't huge, but it means that of the users who received a file, they were still slightly happier than before, even if they didn't notice that anything special happened at all.”

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Market research (or marketing research) is any set of techniques used to gather information and better understand a company’s target market. This might include primary research on brand awareness and customer satisfaction or secondary market research on market size and competitive analysis. Businesses use this information to design better products, improve user experience, and craft a marketing strategy that attracts quality leads and improves conversion rates.

David Darmanin, one of Hotjar’s founders, launched two startups before Hotjar took off—but both companies crashed and burned. Each time, he and his team spent months trying to design an amazing new product and user experience, but they failed because they didn’t have a clear understanding of what the market demanded.

With Hotjar, they did things differently . Long story short, they conducted market research in the early stages to figure out what consumers really wanted, and the team made (and continues to make) constant improvements based on market and user research.

Without market research, it’s impossible to understand your users. Sure, you might have a general idea of who they are and what they need, but you have to dig deep if you want to win their loyalty.

Here’s why research matters:

Obsessing over your users is the only way to win. If you don’t care deeply about them, you’ll lose potential customers to someone who does.

Analytics gives you the ‘what’, while research gives you the ‘why’. Big data, user analytics , and dashboards can tell you what people do at scale, but only research can tell you what they’re thinking and why they do what they do. For example, analytics can tell you that customers leave when they reach your pricing page, but only research can explain why.

Research beats assumptions, trends, and so-called best practices. Have you ever watched your colleagues rally behind a terrible decision? Bad ideas are often the result of guesswork, emotional reasoning, death by best practices , and defaulting to the Highest Paid Person’s Opinion (HiPPO). By listening to your users and focusing on their customer experience , you’re less likely to get pulled in the wrong direction.

Research keeps you from planning in a vacuum. Your team might be amazing, but you and your colleagues simply can’t experience your product the way your customers do. Customers might use your product in a way that surprises you, and product features that seem obvious to you might confuse them. Over-planning and refusing to test your assumptions is a waste of time, money, and effort because you’ll likely need to make changes once your untested business plan gets put into practice.

Lean User Experience (UX) design is a model for continuous improvement that relies on quick, efficient research to understand customer needs and test new product features.

Lean market research can help you become more...

Efficient: it gets you closer to your customers, faster.

Cost-effective: no need to hire an expensive marketing firm to get things started.

Competitive: quick, powerful insights can place your products on the cutting edge.

As a small business or sole proprietor, conducting lean market research is an attractive option when investing in a full-blown research project might seem out of scope or budget.

There are lots of different ways you could conduct market research and collect customer data, but you don’t have to limit yourself to just one research method. Four common types of market research techniques include surveys, interviews, focus groups, and customer observation.

Which method you use may vary based on your business type: ecommerce business owners have different goals from SaaS businesses, so it’s typically prudent to mix and match these methods based on your particular goals and what you need to know.

1. Surveys: the most commonly used

Surveys are a form of qualitative research that ask respondents a short series of open- or closed-ended questions, which can be delivered as an on-screen questionnaire or via email. When we asked 2,000 Customer Experience (CX) professionals about their company’s approach to research , surveys proved to be the most commonly used market research technique.

What makes online surveys so popular?  

They’re easy and inexpensive to conduct, and you can do a lot of data collection quickly. Plus, the data is pretty straightforward to analyze, even when you have to analyze open-ended questions whose answers might initially appear difficult to categorize.

We've built a number of survey templates ready and waiting for you. Grab a template and share with your customers in just a few clicks.

💡 Pro tip: you can also get started with Hotjar AI for Surveys to create a survey in mere seconds . Just enter your market research goal and watch as the AI generates a survey and populates it with relevant questions. 

Once you’re ready for data analysis, the AI will prepare an automated research report that succinctly summarizes key findings, quotes, and suggested next steps.

An example research report generated by Hotjar AI for Surveys

2. Interviews: the most insightful

Interviews are one-on-one conversations with members of your target market. Nothing beats a face-to-face interview for diving deep (and reading non-verbal cues), but if an in-person meeting isn’t possible, video conferencing is a solid second choice.

Regardless of how you conduct it, any type of in-depth interview will produce big benefits in understanding your target customers.

What makes interviews so insightful?

By speaking directly with an ideal customer, you’ll gain greater empathy for their experience , and you can follow insightful threads that can produce plenty of 'Aha!' moments.

3. Focus groups: the most unreliable

Focus groups bring together a carefully selected group of people who fit a company’s target market. A trained moderator leads a conversation surrounding the product, user experience, or marketing message to gain deeper insights.

What makes focus groups so unreliable?

If you’re new to market research, we wouldn’t recommend starting with focus groups. Doing it right is expensive , and if you cut corners, your research could fall victim to all kinds of errors. Dominance bias (when a forceful participant influences the group) and moderator style bias (when different moderator personalities bring about different results in the same study) are two of the many ways your focus group data could get skewed.

4. Observation: the most powerful

During a customer observation session, someone from the company takes notes while they watch an ideal user engage with their product (or a similar product from a competitor).

What makes observation so clever and powerful?

‘Fly-on-the-wall’ observation is a great alternative to focus groups. It’s not only less expensive, but you’ll see people interact with your product in a natural setting without influencing each other. The only downside is that you can’t get inside their heads, so observation still isn't a recommended replacement for customer surveys and interviews.

The following questions will help you get to know your users on a deeper level when you interview them. They’re general questions, of course, so don’t be afraid to make them your own.

1. Who are you and what do you do?

How you ask this question, and what you want to know, will vary depending on your business model (e.g. business-to-business marketing is usually more focused on someone’s profession than business-to-consumer marketing).

It’s a great question to start with, and it’ll help you understand what’s relevant about your user demographics (age, race, gender, profession, education, etc.), but it’s not the be-all-end-all of market research. The more specific questions come later.

2. What does your day look like?

This question helps you understand your users’ day-to-day life and the challenges they face. It will help you gain empathy for them, and you may stumble across something relevant to their buying habits.

3. Do you ever purchase [product/service type]?

This is a ‘yes or no’ question. A ‘yes’ will lead you to the next question.

4. What problem were you trying to solve or what goal were you trying to achieve?

This question strikes to the core of what someone’s trying to accomplish and why they might be willing to pay for your solution.

5. Take me back to the day when you first decided you needed to solve this kind of problem or achieve this goal.

This is the golden question, and it comes from Adele Revella, Founder and CEO of Buyer Persona Institute . It helps you get in the heads of your users and figure out what they were thinking the day they decided to spend money to solve a problem.

If you take your time with this question, digging deeper where it makes sense, you should be able to answer all the relevant information you need to understand their perspective.

“The only scripted question I want you to ask them is this one: take me back to the day when you first decided that you needed to solve this kind of problem or achieve this kind of a goal. Not to buy my product, that’s not the day. We want to go back to the day that when you thought it was urgent and compelling to go spend money to solve a particular problem or achieve a goal. Just tell me what happened.”

— Adele Revella , Founder/CEO at Buyer Persona Institute

Bonus question: is there anything else you’d like to tell me?

This question isn’t just a nice way to wrap it up—it might just give participants the opportunity they need to tell you something you really need to know.

That’s why Sarah Doody, author of UX Notebook , adds it to the end of her written surveys.

“I always have a last question, which is just open-ended: “Is there anything else you would like to tell me?” And sometimes, that’s where you get four paragraphs of amazing content that you would never have gotten if it was just a Net Promoter Score [survey] or something like that.”

What is the difference between qualitative and quantitative research?

Qualitative research asks questions that can’t be reduced to a number, such as, “What is your job title?” or “What did you like most about your customer service experience?” 

Quantitative research asks questions that can be answered with a numeric value, such as, “What is your annual salary?” or “How was your customer service experience on a scale of 1-5?”

 → Read more about the differences between qualitative and quantitative user research .

How do I do my own market research?

You can do your own quick and effective market research by 

Surveying your customers

Building user personas

Studying your users through interviews and observation

Wrapping your head around your data with tools like flow models, affinity diagrams, and customer journey maps

What is the difference between market research and user research?

Market research takes a broad look at potential customers—what problems they’re trying to solve, their buying experience, and overall demand. User research, on the other hand, is more narrowly focused on the use (and usability ) of specific products.

What are the main criticisms of market research?

Many marketing professionals are critical of market research because it can be expensive and time-consuming. It’s often easier to convince your CEO or CMO to let you do lean market research rather than something more extensive because you can do it yourself. It also gives you quick answers so you can stay ahead of the competition.

Do I need a market research firm to get reliable data?

Absolutely not! In fact, we recommend that you start small and do it yourself in the beginning. By following a lean market research strategy, you can uncover some solid insights about your clients. Then you can make changes, test them out, and see whether the results are positive. This is an excellent strategy for making quick changes and remaining competitive.

Net Promoter, Net Promoter System, Net Promoter Score, NPS, and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld, and Satmetrix Systems, Inc.

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How to Conduct Market Research for a Startup

• 17 Mar 2022

With every innovative product idea comes the pressing question: “Will people want to buy it?”

As an entrepreneur with a big idea, what’s the best way to determine how potential customers will react to your product? Conducting market research can provide the data needed to decide whether your product fits your target market.

Before launching a new venture, you should understand market research. Here’s how to conduct market research for a startup and why it’s important.

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What Is Market Research?

Market research is the process of gathering information about customers and the market as a whole to determine a product or service’s viability. Market research includes interviews, surveys, focus groups, and industry data analyses.

The goal of market research is to better understand potential customers, how well your product or service fits their needs, and how it compares to competitors’ offerings.

There are two types of research you can conduct: primary and secondary.

• Primary research requires collecting data to learn about your specific customers or target market segment. It’s useful for creating buyer personas, segmenting your market, and improving your product to cater to customers’ needs .
• Secondary research is conducted using data you didn’t collect yourself. Industry reports, public databases, and other companies’ proprietary data can be used to gain insights into your target market segment and industry.

Why Is Market Research Important for Entrepreneurs?

Before launching your venture, it’s wise to conduct market research to ensure your product or service will be well received. Feedback from people who fall into your target demographics can be invaluable as you iterate on and improve your product.

Performing market research can also help you determine a pricing strategy by gauging customers’ willingness to pay for your product. Additionally, it can improve the user experience by revealing what features matter most to potential customers.

When assessing which startups to fund, investors place heavy importance on thorough market research that indicates promising potential. Providing tangible proof that your product fulfills a market need and demonstrating you’ve taken the time to iterate on and improve it signal that your startup could be a worthwhile investment.

Related: How to Talk to Potential Investors: 5 Tips

How to Do Market Research for a Startup

1. form hypotheses.

What questions do you aim to answer through market research? Using those questions, you can make predictions called hypotheses . Defining your hypotheses upfront can help guide your approach to selecting subjects, researching questions, and testing designs.

An example question you may ask is: “How much are people in my target demographic willing to pay for the current version of my product?” Your hypothesis could be: “If my product contains all its current features, customers will be willing to pay $500 for it.”

Another example question you may ask is: “What’s the user’s biggest pain point, and is my product meeting their needs?” Your hypothesis could be: “I believe the user’s biggest pain point is needing an easy, unintimidating way to learn basic car maintenance, and I predict that my product meets that need.”

You can and should test multiple hypotheses, but try to select no more than a few per test, so the research stays focused.

Related: A Beginner’s Guide to Hypothesis Testing in Business

2. Select the Type of Research Needed to Test Hypotheses

Once you’ve formed your hypotheses, determine which type of research to conduct.

If your hypotheses focus on determining your startup’s place in the broader market, start with secondary research. This can include using existing data to determine market size, how much of that market your startup could reasonably own, who your biggest competitors are, and how your brand and product compare to theirs.

If your hypotheses require primary research, decide which data collection method best fits your needs. These can include one-on-one interviews, surveys, focus groups, and polls. Primary research allows you to gather insights into customer satisfaction and loyalty, brand awareness and perception, and real-time product usability.

3. Identify Target Demographics and Recruit Subjects

To gather meaningful insights, you need to understand your target demographic. Do you aim to cater to working parents, young athletes, or pet owners? Determine the type of person who can benefit from your product.

If you conduct primary research, you need to recruit subjects. This can be done in several ways, including:

• Word of mouth: The simplest but least reliable way to recruit participants is by word of mouth. Ask people you know to refer others to be research subjects, then screen them to confirm they fit your target demographic.
• Promoting the study on social media: Many social media platforms enable you to show an ad to people who fall into specific demographic categories or have certain interests. This allows you to get the word out to a large number of people who qualify.
• Hiring a third-party market research company: Some companies provide full market research services and recruit participants and conduct research on your behalf.

However you recruit subjects, ensure they take a screener survey beforehand, which allows you to determine whether they fit the specific demographic you want to study or have a trait that eliminates them from the research pool. It also provides demographic data—such as age and race—that enables you to select a diverse subset of your target demographic.

In addition, you can offer compensation to boost participation, such as money, meal vouchers, gift cards, or early access to your product. Make it clear that compensation is in appreciation for subjects’ time and honest feedback.

4. Conduct the Research

Once you’ve determined the type of research and target demographic necessary to test your hypotheses, conduct your research. To reduce bias, enlist someone unfamiliar with your hypotheses to perform interviews or lead focus groups.

Ask questions based on your audience and hypotheses. For instance, if you’re aiming to test existing customers’ purchase motivations, you may ask: “What challenge were you trying to solve when you first bought the product?”

If examining brand perception, your audience should consist of potential customers who don’t yet know your brand. Present them with a list of competitor logos—with yours in the mix—and ask them to rank the brands by perceived reliability.

While the questions you ask are vehicles to prove or disprove hypotheses, ensure they don’t lead subjects in one direction. To craft unbiased research questions , use neutral language and vary the order of options in multiple-choice questions. This can keep subjects from selecting the same option each time if they sense the third option is always mapped to a certain outcome. It also helps account for primacy bias (the tendency to select the first option in a list) and recency bias (the tendency to select the final option in a list).

Once you’ve collected data, ensure it’s organized efficiently and securely so you can protect subjects’ identities .

Related: 3 Examples of Bad Survey Questions and How to Fix Them

5. Gather Insights and Determine Action Items

After you’ve organized your data, analyze it to extract actionable insights. While some of the data will be qualitative rather than quantitative, you can detect patterns in responses to make it quantifiable. For instance, noting that 15 of 20 subjects mentioned feeling overwhelmed when attempting to assemble your product.

Once you’ve analyzed the data and communicated emerging trends using data visualizations , outline action items.

If the majority of users in your target demographic reported feeling overwhelmed while assembling your product, action items might include:

• Creating different versions of assembly instructions to test with other groups, varying diagrams and instructional language
• Researching instruction manual best practices

Each round of market research can offer more information about how your product is perceived and experienced by potential users.

Market Research as an Ongoing Endeavor

While it’s useful to conduct market research before launching your product, you should revisit your hypotheses and form new ones over the course of building your venture.

By conducting market research with each version of your product, you can gradually improve it and ensure it continues to fit target customers’ needs.

Are you interested in bolstering your entrepreneurship skills? Explore our four-week online course Entrepreneurship Essentials and our other entrepreneurship and innovation courses to learn to speak the language of the startup world.

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How to Do Market Research for a Business Plan Successfully

The entrepreneurial-minded folks may long have wondered how to do market research for a business plan. 

After all, a business plan lays out the foundation, purpose and expectations of a new business venture. Given that the risks of starting a new business are manifold , entrepreneurs must conduct market research.

20% of American businesses fail after only their first year of operation, a dismal reality that climbs to 30% after two years.

Newfound entrepreneurs and serial entrepreneurs alike should therefore carefully commit to and execute a business plan.

While market research applies to a wide breadth of applications that cover various business cycles and processes, including opening and operating a new business, it too can be used for producing a 

This article expounds upon how to do market research for a business plan — and succeed in your venture.

Defining A Business Plan and Its Needs

Before you set out to formulate a business plan, it is vital to fully understand all that it entails. Usually created for startups, it is necessary for all businesses to implement. 

A business plan is a written document that summarizes the main aspects of starting up and managing a business, making it the foundation for your business .

A business plan specifically details a business’s objectives, along with its financial, marketing and operational needs and a roadmap thereof. 

It is created to guide a business through each stage in its establishment and management.  As such, it allows business owners to lay out their needs and goals and track them as the business grows.

A business plan must be updated at regular intervals , as priorities and goals are subject to change. Additionally, when an established business moves in a different direction, it needs a new or completely updated business plan.  

The Importance of a Business Plan

A business plan is an important document and not merely for the purpose of monitoring your business as it develops. This is because this document is also needed to obtain investment , especially in the early stages of the business, in which it does not have an evidential track record.

Thus, a business plan shows investors whether your business is on the right course and is worth investing their funds into. Lenders will require proof of a business plan when they deliberate the approval of a loan. 

Here are several other reasons as to why creating and updating a business plan is important:

• Making important decisions. It allows you to answer difficult questions at the onset, before they emerge. Understanding these decisions helps you understand how they fit into your overall strategy.
• Addressing key issues to avoid future problems . These include pricing, competition evaluation, market demand, capital and team members.
• Proving the viability of your business . Planning your vision into a full-fledged business bridges the gap between an idea and reality. Market research is essential for this point, as it helps you find key insights on various aspects of your industry, including your competitors and customers. 
• Communicating objectives with team members and all those involved . This is important for larger teams, particularly for assistance when you are too busy to relay information or guidance to your team members. This may also help investors or partners who cannot reach you, as it lays out objectives and criteria.
• Standardizing and carrying out key objectives . Placing your objectives, criteria and other needs gives them more weight and attention. If they aren’t in your business plan, thereby, in writing, they can easily fall by the wayside. A business plan helps avoid this, standardizing key objectives and benchmarks.
• Guiding consultants, freelancers and other workers . When employing freelancers and contractors, you can turn to specific sections of a business plan to guide these workers, to ensure they understand your vision, goal and other key business aspects.
• Obtaining financial support. Whether it is via borrowing from a bank, turning to venture capitalists or putting your business up for an acquisition, a business plan makes your business and its viability clear for these key financial players. 
• Acclimating to market changes . Updating your business plan can help you during periods of critical change in your market. These changes include: changes in customer needs, new regulations, trends or updates in your industry.

Defining Market Research

Market Research is a wide-encompassing practice that involves gathering information to bolster knowledge about a business’s industry, niche and target market . 

It involves the systematic process of amassing, analyzing and interpreting data and information around the state of a business’s industry and its key actors . The key actors entail a business’s target market, competitors and the movers and shakers within its industry.

As such, it involves gathering research around the niche, trends and industry as a whole. 

This involves gathering secondary research , research that has already been conducted and made available, along with primary research , the kind that requires you to conduct yourself. These main types of research gathering involve various means, techniques and tools that researchers can use.

Market research largely deals with evaluating the viability of a new product or service, although this aspect is primarily referred to as customer development . By conducting market research, you can therefore gather information on virtually all areas of your business. 

Why a Business Plan Needs Market Research

A potent document, one that properly lays out the 7 components of a business plan , from the executive summary, to the market analysis, to the strategy, financial plan and all other in-betweens, most use market research to develop it. 

Market research provides the key data, information and nuances your business plan needs. Although a new business or business idea is born on intuition, a business plan must be backed up with data to prove its viability and positioning in its industry. 

As such, market research must be performed in the early stages of the business plan, as it is the phase in which you learn all about your niche, its trends and the demands of your target market (including the makeup of your target market via market segmentation ).

Only after analyzing all of your market research results, will you be able to populate the business plan within key areas such as market analysis, financial projections, strategy and implementation, marketing endeavors, pricing and location . 

A business plan must be comprehensive, another way in which market research is of utmost importance, in that there are various methods and tools you can use to conduct it. By consolidating all of the different market research techniques , you are establishing an exhaustive business plan, the kind that leaves no key consideration out.

The following presents the key data and information of a business plan that market research can extract:

• Demand : Does your product/service have enough market potential to justify a new business?
• Pricing : How will you determine the pricing of your offerings? 
• Target Market : Who makes up your target market? Do they have enough spending power to buy your product or service?
• Location : Does your business require opening a physical store or can it effectively reach its target market via ecommerce? Perhaps it needs both?
• Historic data on your product/ service : How have the products and services in your niche performed over time? How do they perform currently? 
• Marketing and Market Entry : How will you form an explanation on how you’ll enter the market? How will you promote your products/services to solidify your entry?
• Labor Requirements : Do you have enough manpower to form a business? How many employees and contractors will your business require?
• Financial Plan : Do you have the financial means to cover all operations?

How to Conduct Market Research for a Business Plan

Since a business plan ought to include concrete information to pave the way for business success, it requires thorough market research. Given that market research encompasses so many modes and forms, it can be overwhelming and even intimidating to begin to conduct it for your business plan.

The following provides a step-by-step guide on how to do market research for a business plan, so you can craft your plan in an informed manner, equipped with critical market research.

• First, search the secondary sources available; while some are free, there will be many that aren’t.
• Then, narrow it down to a specific niche, with suspected market segments.
• Focus your research via secondary sources on your market. Look at trade publications, new sites dedicated to your market, industry reports, local reports, statistics websites, blogs on the startups in your niche, including their stories of success and failure and other secondary resources.
• Conduct further secondary research on your priorities.
• Then, switch to primary research methods to zero in on your most critical research subjects.
• You can achieve this by conducting secondary research on your target market.
• Use an online survey, a focus group or a survey panel .
• Segment your target market further and start building personas from the shared characteristics they exhibit.
• Be sure to find similar offerings available to identify your competitors.
• Survey your target market on their needs and feelings towards similar products/services, along with their aversions and desires for updates.
• This will help you understand how to set up your prices as well.
• Research the costs of marketing and publicizing the launch of your business.
• Compare all costs and establish a preliminary business budget.
• Jot down their strengths and weaknesses.
• Compare your offering to theirs, does it fill any gaps or voids? Is it better price-wise?
• Break this down from high to low levels of research. Ex: From the general industry to the exact niche, from a large target market, to specific segments, to specific personas.
• Adjust your budget, goals and plans.
• The executive summary, company description, products and services, market analysis, strategy and implementation, organization and management, financial plan and projections.
• Assure that everything makes sense. If there are gaps in the information you have outlined, consider conducting more research.
• Highlight areas of opportunity, along with areas of risk. 
• Edit your business plan as needed.

Empowering Your Market Research-Powered Business Plan

Market research is a wide-reaching practice that blends consumer behavior and economic trends to help you validate and improve a business idea. It can also help you change the course or style of an already established business.

Thus, it is not solely for startups. Market research can be difficult to conduct and manage , as there are so many business aspects you’ll need to consider to lower your risk of failure. Concurrently, there is so many kinds of market research you can stand to conduct.

Even with the steps listed above, navigating through the jungle of market research can be a laborious and difficult task. While you can’t control secondary resources, you can wield control of your primary research endeavors via an online survey platform . 

This kind of market research tool allows you to take the reigns in every aspect: from asking the exact questions you seek answers to , to targeting a specific market segment , to deploying your surveys across the most-frequented websites and apps. 

A potent survey platform will complete all of these crucial tasks , making primary research an easy task. The trick is to find an online survey platform that can handle all of these tasks, along with making it easy to analyze the data.

Do you want to distribute your survey? Pollfish offers you access to millions of targeted consumers to get survey responses from $0.95 per complete. Launch your survey today.

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How to Write a Market Research Plan (+ Free Template)

Chris martin, pitch it: the business case for customer salience.

As insight experts, we understand the power of insights, their inherent value in key decision-making...

Emily James

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A market research plan, similar to a brief, is a vital document that details important information about your market research project. Though it is often an overlooked step of the market research process , an effective plan is often a critical factor in determining whether or not your market research efforts are successful.

Why? Because a well-thought through plan, more so than objectives alone, can be a vital instrument in focusing your investment. It ensures you know, ahead of the commencement date, the timeline, budget and desired outcomes from the project. It can even be used as a tool for receiving quicker sign-off from management when embarking on a new venture.

But it’s also important to remember that the research plan is not just for your team. To make full use of this document, it should be written in a way that can be distributed to agency partners as well – ensuring that your insight team and specialist partners are all working towards the same goal.

Tips for Crafting a Successful Plan

The first rule of writing a successful market research plan is to keep it short. The perfect length is between 1-2 pages, but as an absolute maximum try to ensure that it never exceeds 3. This will give you enough space to explain the background, scope and practicalities of the project while ensuring it is concise enough to be read in full. Throughout these few short pages, the tone of your plan should be informative. Remember that you are outlining information that you already know.

Write in a way that holistically encompasses all aspects of the project. Throughout the duration of your scripting, data collection, analysis and reporting stages of your project you should always be referring back to this document in order to remain focused. As any researcher knows, one of the biggest challenges in any research project is staying true to your original objectives.

With both exploratory and confirmatory research alike, new information is likely to arise which may spark other ideas or bring light to previously unknown issues. Remember these, but set them aside for further investigation at a later date. Travelling too far down the rabbit hole is the quickest way to overspend and under deliver on your original goal.

The 10 Elements of the Best Research Plans

First, let me preface this with a reminder: every project is different. A long term co-creation community will have different needs and requirements to a customer feedback survey or ad testing project. However, despite this – it is important to give equal consideration to all projects, and plan each with the same high degree of meticulous care. With this in mind, these are the 10 key aspects we recommend that all research plans should include:

1. Overview

Use this first section to outline the background to the problem that you are attempting to solve. Include background information on the business to provide context, as well as the circumstances that have led to the need for research. Overviews should be limited to 200 words at most, with most of the word count dedicated to the business circumstances & challenges surrounding the research.

2. Objectives

Arguably the most important aspect of the entire document, objectives should be in bullet point format. List 3-5 of the decisions or initiatives that the research will inform – this will become the remit of the project. Below are a few examples of both well and poorly written objectives:

Well written research objectives:

• Understand the channels in which our customers are most comfortable shopping, in order to decide which should be prioritised in the 2017 Q1 budget
• Develop an active co-creation community that contributes 2 user-generated product improvements for testing to the R & D team per month
• Learn what is leading to an increase in customer churn so that a new retention strategy can be put in place within 12 weeks

Poorly written research objectives:

• Survey 1,000 potential customers to find out how our products can be improved
• Develop a panel of employees that are able to provide answers to research questions on an ad-hoc basis
• Learn how our company is perceived in comparison to competitors and how we can stand out in the marketplace

3. Deliverable outcomes

This section acts as a list what you expect to be produced at the end of the project. This can include, but is not limited to: a target number of responses you expect to receive, descriptions of how the data should be presented and the extent to which the data will be used to inform future decisions. In long term projects such as panels or communities, this may include a target for the amount of decisions that research is expected to inform and/or a pipeline for new ideas in exploratory studies.

4. Target audience

Different to sample, your target audience describes the population that you wish to research. This can be defined by a number of factors depending on the nature of your project. Some of the most common include: demographics, psychographics, life stages and company/ product interaction.

5. Sample plan

The sample plan should be used to indicate the amount of participants you wish to research, as well as a breakdown of each group. This will be affected by the choice to use qualitative, quantitative or multi-method approaches, as well as the estimated size of the target population.

6. Research Methods

List the different research methods that you plan to use in your project. This will be used by your team and agency partners to ensure that the insight you need comes from the most appropriate tools. Be sure to include any non-traditional methods you plan to use as well – it’s important that your team are aware of how data will be captured, even if it is being gathered by an experimental technique.

7. Timeline

These usually take the form of a Gantt chart, but can vary depending on the scope and length of your project. Try to break down tasks as much as possible but be wary of dependencies within your chart. Be sure to schedule enough time in case some research tasks over-run or response rates are lower than expected.

Perhaps the most dreaded aspect of any research plan, budgeting is never easy. But by providing a breakdown of costs and outlining which elements of the project require most investment, a well-planned budget can be a benefit rather than a hurdle.

9 & 10. Ethical and Further considerations

Finally, you should outline any ethical/ other considerations or issues that may arise throughout the course of your project. Whether these are as simple as a conflict of interest or a concern about supplier relationships – this is your chance to address any problems that may arise before they do.

Free Market Research Plan Template

Use this link to download our   free market research plan template . The template comes complete with each of the sections outlined above, with instructions on usage and tips on how to make the most out of it. Currently available in .docx format, please email   [email protected]  if you have any problems with the download.

What do you believe should be included in a successful market research plan? Share your advice with us in the comments below and join the conversation.

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Chris is an experienced executive and marketing strategist in the insight and technology sectors. He also hosts our MRX Lab podcast.

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How to Write the Market Analysis Section of a Business Plan

Alyssa Gregory is an entrepreneur, writer, and marketer with 20 years of experience in the business world. She is the founder of the Small Business Bonfire, a community for entrepreneurs, and has authored more than 2,500 articles for The Balance and other popular small business websites.

The market analysis section of your business plan comes after the products or services section and should provide a detailed overview of the industry you intend to sell your product or service in, including statistics to support your claims.

In general, the market analysis section should include information about the industry, your target market, your competition, and how you intend to make a place for your own product and service. Extensive data for this section should be added to the end of the business plan as appendices, with only the most important statistics included in the market analysis section itself.

What Should a Market Analysis Include?

The market analysis section of your small business plan should include the following:

• Industry Description and Outlook : Describe your industry both qualitatively and quantitatively by laying out the factors that make your industry an attractive place to start and grow a business. Be sure to include detailed statistics that define the industry including size, growth rate , trends, and outlook.
• Target Market : Who is your ideal client/customer? This data should include demographics on the group you are targeting including age, gender, income level, and lifestyle preferences. This section should also include data on the size of the target market, the purchase potential and motivations of the audience, and how you intend to reach the market.
• Market Test Results : This is where you include the results of the market research you conducted as part of your initial investigation into the market. Details about your testing process and supporting statistics should be included in the appendix.
• Lead Time : Lead time is the amount of time it takes for an order to be fulfilled once a customer makes a purchase. This is where you provide information on the research you've completed on how long it will take to handle individual orders and large volume purchases, if applicable.
• Competitive Analysis : Who is your competition? What are the strengths and weaknesses of the competition? What are the potential roadblocks preventing you from entering the market?

7 Tips for Writing a Market Analysis

Here is a collection of tips to help you write an effective and well-rounded market analysis for your small business plan.

• Use the Internet : Since much of the market analysis section relies on raw data, the Internet is a great place to start. Demographic data can be gathered from the U.S. Census Bureau. A series of searches can uncover information on your competition, and you can conduct a portion of your market research online.
• Be the Customer : One of the most effective ways to gauge opportunity among your target market is to look at your products and services through the eyes of a purchaser. What is the problem that needs to be solved? How does the competition solve that problem? How will you solve the problem better or differently?
• Cut to the Chase : It can be helpful to your business plan audience if you include a summary of the market analysis section before diving into the details. This gives the reader an idea about what's to come and helps them zero in on the most important details quickly.
• Conduct Thorough Market Research : Put in the necessary time during the initial exploration phase to research the market and gather as much information as you can. Send out surveys, conduct focus groups, and ask for feedback when you have an opportunity. Then use the data gathered as supporting materials for your market analysis.
• Use Visual Aids : Information that is highly number-driven, such as statistics and metrics included in the market analysis, is typically easier to grasp when it's presented visually. Use charts and graphs to illustrate the most important numbers.
• Be Concise : In most cases, those reading your business plan already have some understanding of the market. Include the most important data and results in the market analysis section and move the support documentation and statistics to the appendix.
• Relate Back to Your Business : All of the statistics and data you incorporate in your market analysis should be related back to your company and your products and services. When you outline the target market's needs, put the focus on how you are uniquely positioned to fulfill those needs.

How To Do Market Research For Your Business

Before you start a new business, new product, or service, it is important to conduct thorough and accurate market research. Market research includes research into the target customer of the product or service as well as any competitors that may already be providing a similar product or service.

In this article, we will give you some tips on how to go about conducting market research for your new business.  

What is Market Research?

First, let’s take a look at what market research actually is. Market research is the process of collecting information about a particular market sector or industry. This information can be used to help you understand your target customer, their needs and wants, as well as any potential competition.

Why Do Market Research?

There are a few key reasons why it is important to conduct market research before starting a business:

• To understand your target audience and what they want/need
• To understand the size of the potential market for your product or service
• To identify any potential competition and how you can differentiate yourself from them
• To understand the costs and revenue potential for your business
• To develop a marketing strategy

It is important to remember that market research should not be conducted solely to sell your product or service. The purpose of market research is to help you understand what customers want and need, as well as how many potential customers there are in your target area. If a business does not meet the needs of its customer base, it will lose out on a lot of revenue.

Primary and Secondary Research Methods For A Business

There are two main types of market research methods – primary and secondary research.

Conducting Primary Research

Primary market research is the process of gathering information from people who may be interested in your business or potential customers directly. This type of market research can be done through a number of different methods, including:

• Focus groups allow you to find out what consumers think about a product or service. In a focus group, a small group of people are brought together to discuss a particular topic.
• In-depth interviews are one-on-one interviews with potential customers about their needs and wants when it comes to your product or service.
• Questionnaires allow you to gather information from a large number of people in a short period of time.
• Online surveys involve emailing potential customers and asking them questions about their needs and wants with regard to your new business.

Exploratory Primary Research

Exploratory primary research provides you with the opportunity to test your great business idea before starting up. This method of primary market research is conducted on people who are not customers yet but could be in the future. It typically involves collecting information about consumers’ needs and wants when it comes to a product or service that would meet those needs.

Specific Primary Research

Specific primary research is conducted when you already have a product or service and are looking to find out more about it. This information can help you identify any areas of improvement for your product or service, as well as provide insight into where the market will be in the future.

Conducting Secondary Research

Secondary market research is the process of gathering information that has already been gathered by someone else. This information can be found in a number of different places, including:

• Market reports analyze data from a particular market or industry.
• Company websites can be a great source of information about your potential competitors.
• Trade journals contain articles about specific industries or consumer markets.
• Government websites often have market statistics about various industries.

Public Sources

There are several public market data sources available including directories, databases, and other websites that provide publicly available information.

• Business directories allow you to find a list of other companies in a particular industry.
• Product review websites can help you understand the quality of your competitors’ products.
• Market research reports give you current data on a particular market or industry.
• Government census reports can give you valuable insight into industry trends.
• Databases allow you to search for a particular company or product.

Commercial Sources

There are commercial secondary data sources that provide a vast amount of information on various industries, but you have to pay for a subscription in order to access their database. These include:

• Industry-specific databases allow you to search a number of different sources for information about a particular market or industry. These types of databases can be very expensive.
• Trade magazines contain articles that are mostly targeted at business owners and managers, while trade journals tend to target academics and other professionals in the field who want to gain new consumer insights.
• Market research firms offer a variety of services, from providing market analysis to conducting focus groups.
• An industry trade association often has market research reports that are available to members only.

Once you have a general understanding of the different types of market research, you need to decide which type(s) will work best for your new business. The following questions can help you make that decision:

Do you have a product or service to sell?

If you have a product or service to sell, then you will need to conduct specific-problem research in order to understand how your product or service meets the needs and wants of potential customers.

What is the target market for your product or service?

If you know who your target audience is, then you can focus your research on that particular group of people.

What are the needs and wants of your target market?

To understand what the needs and wants of your target market are, you will need to do some exploratory research. This involves talking to potential customers about their needs and wants, as well as researching what is currently available in the market.

What are your competitors’ products and services?

If you know what your competitors are selling, you can use that information to understand the needs and wants of your target market. You can also use it to identify any areas where you may have an advantage over your competitors.

Types of Market Research

There are several types of market research including:

• Specific-Problem Research : This type of market research is most commonly used for new products or services. It involves understanding the problems that customers are having with existing solutions, and how your product or service can provide a solution to those problems.
• Exploratory Research : This type of research is used to gain a better understanding of a particular market or group of customers. It involves talking to potential customers about their needs and wants, as well as researching what is currently out there.
• Competitive Research & Intelligence : This research is used to identify the strengths and weaknesses of your direct and indirect competitors, in order to help figure out how you can differentiate your company or product.
• Market Segment Research : Market segmentation involves separating your potential customers into groups based on similar needs, wants, or characteristics.
• Product Positioning : Product positioning focuses on how you want your product to be viewed in the market by your target audience.
• Economic Research & Analysis : This research is often conducted when deciding whether or not to start a business in a particular industry. It involves understanding the economic factors that could impact your business.
• Marketing Research : This research is used to understand consumer behavior, including what products or services they are interested in, and how much they are willing to spend on them.
• New Product Development : This type of market research is done during the development stage of a new product or service, and involves testing different options with consumers to determine which version would be most successful on the market.
• Social Research & Analysis : This research focuses on understanding the impact that your company’s social actions have on the public and how to use this information in a positive way.
• Distribution Research : This type of research is focused on understanding where consumers purchase products and services, and how to gain access to those distribution channels.
• Allocation Research : This type of research focuses on understanding which distribution channel will best reach your target audience.
• Market Forecasting and Trends Analysis : This research looks at historical primary data to determine future market trends.
• Pricing Research : This research is focused on understanding how much your target audience is willing to pay for your product or service, and what the competition is charging for similar products.

Once you have identified the type of research you will be conducting, you need to decide who your target market is. This can be done by doing a customer profile, which will help you understand what your target customer looks like. You will also need to determine where to find these target customers and how to reach them.

How to Do Good Market Research

Let’s take a look at the market research process. The following steps will help you get started:

Determine the purpose of your market research

To start the market research process, you need to determine the purpose of your research. What do you want to find out? What are your goals?

Define your target customer

The first step in conducting market research is to define your target customer. This is the group of people that you are hoping to sell your product or service to. You need to understand who they are, what they want, and what needs your product or service can meet.

Gather data about the market

Once you have defined your target customer, you need to gather data about the market. This data can include detailed information such as population data, demographics (age, gender, income, etc.), purchasing power, and what products and services are already available.

Analyze your data

Once you have gathered data about the market, you need to analyze it to see what trends it brings to light. For example, if your target customer wants a product that is inexpensive and easy to use, this information will be useful when you are deciding on your product features. If you are providing a service, you need to research the average salary in your target area so that you can price your services correctly.

Perform a SWOT analysis

Once you have gathered your data and conducted your interviews, you need to perform a SWOT analysis. A SWOT analysis will help you consolidate all of the information that you have gathered and identify your business’s strengths, weaknesses, opportunities, and threats.

Conduct a competitive analysis

Once you have analyzed the specific market research data, it’s time to conduct an analysis to better understand the competitive environment. This entails researching other businesses in your area that provide similar products or services and understanding how they operate. It is important to understand what makes your business different from the competition and how you can capitalize on it.

Create a business plan

Once you have completed your market research, it is important to include the findings in your business plan. The business plan will help you to determine if your new business is feasible and how you will go about marketing and selling your product or service.

This document will outline your business goals, marketing strategies, and how you plan on achieving them. Your market research should be included in the appendix as a supporting document for your claims within the business plan.

Market research should not be conducted solely to sell your product or service. The purpose of market research is to help you understand what customers want and need, as well as how many potential consumers there are in your target area.

Do Market Research Regularly

Once you have started your business, it is a good idea to conduct market research on a regular basis. This will help you identify any changes in consumer behavior and adjust your marketing plan accordingly. You can also conduct market research to identify your target market, which will help you to tailor your product or service to them.

Don’t Forget the Business Plan!

Once you have completed your market research, remember that it should be included in your business plan. Your business plan provides a method for showing investors that you are qualified and competent to start and run a business. The market research should be included in the appendix as a supporting document for your claims within the business plan.

Market research is an important step in starting any new business. By researching the target customer, the market, and the competition, you will be able to create a well-informed business plan that will help you to start and run a successful enterprise.  

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Conducting market research is an essential step in starting a new business. By following the steps outlined in this article, you will be able to gather the information you need to make informed decisions about your product or service.

Some businesses may be tempted to conduct research themselves as opposed to hiring outside agencies. However, that is not to say that there are no businesses that should conduct their own market research. Instead, it all depends on the type of business and who makes up your target audience.

All businesses need to take an active interest in understanding their target customers and how they behave so they can provide products or services that will best suit their needs. Market research will help you to understand your customers and the market that they operate in.

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Other Helpful Business Plan Articles & Templates

Market Research Business Plan Examples in PDF

According to Statista, as of 2018, Wix is the leading website builder in terms of the  market share  with a 22.61% market share. Squarespace, Weebly, GoCentral, Google Sites, and Blogger completed the top six with the highest percentage. We all know the number of people who has access to the internet is increasing as time goes by. This phenomenon pushes businesses to create an online store to increase their sales. Although building an online store is a promising investment, many businessmen, especially those who run a small or startup company, cannot afford to execute this development just yet. This time is where the web designers and developers that offer services to firms with lower budgets come in. By including affordable services in their web design market research business plan , they managed to increase and stand out with their market share.

What is Market Research Business Plan?

Obtaining a market analysis is a crucial part of developing a business plan. This type of research allows you to get detailed information about your target market and its affecting factors with an end goal of attaining the marketing business goals. To materialize this objective, you need to build a market research business plan. This plan contains detailed information on how your market research will proceed, making it an essential part to include in your market research proposal.

Market Research Questions for Business Plan

As mentioned earlier, market research intends to understand the factors revolving around your business’ potential customers. The question is, how can we say that a research project has served its purpose efficiently? Determine the success of your market research by asking yourself the following basic market research questions.

1. Who are your customers?

This question is one of the crucial ones that you should ask yourself to ensure that you are doing your research right. Your investigation should have a profile persona about your customers to obtain a more specific target market . Represent these individuals with personal information such as age, gender, occupation, income, lifestyle, educational attainment, etc.

2. What do they buy now?

Dig deeper into the existing industry of your proposed business. You can start by knowing the buying habits of your potential customers that are relevant to your product or service. Identify the sellers, current prices, and features of the existing products. You will also include the number of units they buy with the current products.

3. Why do they buy the products?

If there is no demand for a product, there is no business opportunity. You should know why the customers will buy the said product to determine its demand level. What are the uses of the product? How important is it that they will buy the product given the budget that they have.

4. What will make them buy from you?

To answer this question, you should identify the unique features or characteristics that your product or business has that will make them buy from you instead of your competitors. This question will allow you to know if your company will survive.

2+ Market Research Business Plan Examples

Test and observe the following templates and examples to know if these market research business plans are efficient based on the market research questions that we have discussed in the previous section. You can download these documents in PDF format.

1. Sample Market Research Business Plan Example

Size: 124 KB

2. Basic Market Research Business Plan Example

3. Formal Market Research Business Plan Example

Size: 600 KB

Tips on Executing a Market Research Company Business Plan?

Before you go ahead and spend your money on carrying out your research, read the following tips first to ensure that you are doing it correctly.

1. Determine the Important Details About Your Market

There are tons of information that you can get during your examination that can help you with your business. However, some of this information can complicate your investigation, making it a hindrance to attaining your goal. Therefore, it is crucial to focus on the essential details that you need on a specific marketing goal in mind.

2. Focus on the Outcomes of the First Step

As we have mentioned, there is much information that you can get throughout the research, which can distract you from attaining your goal. Thus, you must concentrate on the relevant data that you have obtained.

3. Consider Using Cheaper Market Research Alteratives

Investing in this type of research can be essential to your business. However, it can be too expensive for a small company. Thus, you can consider seeking help from organizations such as the Small Business Development Centers or Small Business Administration. These agencies give support to entrepreneurs and small businesses.

4. Study the Cost of a Market Research

As a businessman, you should know how much you need to spend on conducting market research. Consider using a cost analysis template to determine if you can afford this type of business activity. It is also essential to know that the internet has a vast amount of free information that you may use in conducting this type of research yourself. However, if you want to hire a research consultant or a market researcher, you have to keep in mind that it is your goal, and you don’t want to spend your money on something that you don’t need.

Understanding your target market is a crucial part of your business plan. This business step is indeed a good investment. However, as the digital world rises, better methods are emerging. With that said, knowing more about market research through the internet, either on your own or with the online courses, is way more practical. Be realistic and decide what is best for your company.

Text prompt

• Instructive
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Create a study plan for final exams in high school

Develop a project timeline for a middle school science fair.

by Saunder Schroeder • January 14, 2022

What is a Marketing Plan? [+ A Marketing Plan Example in 6 Steps]

By Saunder Schroeder

In past times, you could post an ad in the newspaper, pass out flyers, or advertise with a billboard, and it was enough to drive business to your door. These days, people are flooded with even more ads throughout the day via digital platforms like social media, TV, and streaming services.

Executing a data-driven marketing plan helps you efficiently reach your target customers who are most likely to be interested in your product or service. A good marketing plan is well researched and offers strategies designed to connect you to the people who would benefit most from your business.

Your marketing plan can be tailored based on your company size, specific goals, and marketing priorities. With the amount of research and work done to create one, starting your plan can be daunting. To alleviate that feeling, we offer marketing plan examples that you can refine to meet your specific business needs.

What is a Marketing Plan? 

Your marketing plan should paint a picture of where you fit into the market, including an analysis of your target audience, research on your main competitors, and action steps you can take to meet your goals. 

Next, it offers a marketing strategy you can use to improve your position to stand out to your best potential customers. 

Read on to see a marketing plan example for ideas on how you can write your own. Get more familiar with what you need to include in this marketing plan template  and come back to see examples for businesses of all sizes. 

Marketing Plan Examples

This sample marketing plan should give you an idea of how to complete your own. Yours will differ slightly based on your own goals and objectives, but the following example will show you what to consider and research when developing it. 

How you write your marketing plan will depend on the size of your business and your overall objectives. 

The plan for a large, international corporation will differ from that of a local boutique shop. But there are elements you need to include regardless of your business’ size. 

This detailed marketing plan example is written for a fictional small clothing boutique called Main Street Chic, specializing in mid-level, inclusive women’s wear. Each section includes additional marketing plan examples you can use to tailor yours.  

1. Executive Summary

In this section, break your marketing plan down into a simple summary. It should be detailed enough to convey relevant information to anyone who doesn’t have time to read through the entire plan. 

Introduce your business, your mission, your products and services, and the high-level results of your competitive analysis. This sample marketing plan includes the following executive summary. 

Example: Main Street Chic offers a high-end shopping experience without exclusivity. Our mission is to make high-end fashion accessible to members of the community with an inclusive selection of brands and sizes that cater to people who value quality and timeless style.

Main Street Chic embraces slow fashion, focusing on quality brands whose pieces can shift from season to season, pairing with a variety of others. We carry wardrobe staples from brands like Phoebe Grace, Faithfull, and Everlane, among others. Our inventory includes a wide range of sizes reflecting the needs of today’s customers. 

We believe in service, personalizing the shopping experience for each customer. We are the only boutique in our area carrying trendy styles with sizes ranging from 0-28. 

Whatever your business size is, distill your marketing plan into its main points for this summary. 

2. Mission Statement

Every marketing strategy  template will include a section for your mission statement, which is the reason why you’re in business. It’s a short statement that sums up what you do, why you do it, and who you do it for. Every business activity should revolve around your mission, including your marketing plan . 

Example: Main Street Chic’s mission is to bring the luxury boutique shopping experience to all, specializing in timeless, quality pieces our customers can build their wardrobe around. We believe that fashion should be accessible and bring personalized service to all. 

If you’re having trouble thinking of your mission statement, check out these examples from well-known brands: 

• Fitbit: “To empower and inspire you to live a healthier, more active life. We design products and experiences that fit seamlessly into your life so you can achieve your health and fitness goals, whatever they may be.” 
• Spotify: “To unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art, and billions of fans the opportunity to enjoy and be inspired by these creators.” 
• Nike: “Bring inspiration and innovation to every athlete in the world. *If you have a body, you are an athlete.”

3. Where You Stand: Situation Analysis

For best results, your marketing plan should be based on tactics that will improve your visibility with target customers. You will build your digital marketing strategy and other marketing activities around the value you provide to a potential customer. Finding out where you stand in the current landscape and researching your ideal customer gives you a basis on which to build your marketing strategy . 

This section should include the following: 

Competitive Analysis

Swot analysis, buyer personas, unique selling proposition, marketing objectives.

In your marketing plan template, include a competitive analysis. Here is where you would assess how your product or service stacks up among the competition. Evaluate the top competitors in your market, making note of their products and services, their prices, their marketing mix , their service delivery, and other information that can help you distinguish how your business is different. 

Example: Main Street Chic is located in an up-and-coming neighborhood in a mid-sized city. There is a shopping mall nearby that includes Nordstrom, Macy’s, and Neiman Marcus department stores. Also nearby are a wide selection of high-end branded shops of various price points from luxury (Hermes, Louis Vuitton, etc.) to mid-range (Coach, For Love and Lemons, Kate Spade, etc.). 

Clothing stores in the area sell items at similar price points ($50-$500 per piece), and Main Street Chic is on par with other shops. Our difference lies in personalized service typical to the luxury stores in the area.

If you’re operating a large business or a franchise, your competitors might include other national chains. If you’re operating an ecommerce store, your main competition will vary based on your product, but might also include Amazon, eBay, and other large online retailers.  

Your SWOT Analysis will help you assess where you stand in your market. This marketing plan tool is a good starting point for defining your unique value proposition and creating a marketing strategy. Use your SWOT analysis to develop a marketing plan that helps improve your weaknesses and explore your opportunities. 

Example: Main Street Chic currently sits in the following situation: 

• Strengths: Quality clothing that is more affordable than luxury brands. We offer more inclusive sizes to serve a broader customer base. 
• Weaknesses: Our current social media following is smaller than other businesses in the area. We can improve our digital marketing strategy . Our brand awareness isn’t as high as well-known stores in the nearby shopping center. 
• Opportunities: We have the chance to appeal to shoppers of all sizes in our area. We can leverage our personal shoppers to host special events and add value to clients. 
• Threats: Competition from ecommerce shops and resale websites that sell designer merchandise for a lower price. 

Your SWOT analysis is an important way to stay ahead of the game. If you’re a small business owner, send out a customer survey to existing clients and look at reviews to get a sense of your strengths and weaknesses. While larger businesses might seem threatening, look for opportunities to leverage your relationships with people in the neighborhood. 

Developing a marketing plan with a thorough understanding of your target market will improve your chances of successfully reaching your best customers. If you’ve been in business for a while and you’re refining your marketing strategy, look for similarities in your top-dollar customers. 

You might have collected demographic information through your loyalty program or customer surveys. If you’re a new business, look through market research reports, or conduct focus groups and interviews of potential customers to get a picture of your best customer. 

Once you have a handle on your ideal customer, create several different buyer personas outlining demographic information, shopping habits, communication preferences, and other important information that will help you personalize your messaging. In the sample marketing plan, one buyer persona might consist of these traits. 

Example: Main Street Chic’s ideal customer is: 

• Female between the ages of 30 and 45
• Has an income of $75,000 a year or more
• Likes to look professional
• Uses social media more than once a day
• Responds well to SMS marketing
• Values quality over quantity
• Our ideal customer wants to look good without negatively impacting the earth. She wants clothing that is versatile and lasts a long time without looking cheap. 
• She is interested in fashion, art, architecture, and hanging out with friends. She attends new events in the area and likes to socialize in a variety of situations.

Through your competitive analysis, you should have gained an understanding of your competitors and how you are different. Create a marketing plan with strategies that address your value to potential customers. 

To find yours, consider your target audience and the challenge your product or service solves for them. Discover what you offer that your competitors don’t. When you’ve narrowed it down, write your unique selling proposition and keep refining it until you’ve landed on the best one. 

Example: Main Street Chic offers a personalized shopping experience with professionals who can help you put your best foot forward. We offer luxury service at an affordable price with sizes for everyone. 

Use the information in the rest of your situational analysis to create marketing objectives. This will be the basis of your marketing plan, informing everything from social media messaging to your content marketing strategy.

Your objectives help you develop a data-driven marketing plan with achievable goals and outcomes. For small, medium, or large businesses, your marketing goals should be based on overall company goals. For example, if your goal is to improve revenue by 5% in the coming year, your marketing objectives could be: 

• Grow social media following by 10%
• Develop a clear content marketing strategy
• Become more consistent with email marketing 
• Improve website traffic by 15%
• Create more targeted social media ads geared to our buyer persona

4. Develop Your Marketing Strategy

The results of your research and analysis in step 3 will serve as the basis for your marketing strategy. Once you have defined your buyer personas and developed your objective, you can round out your strategy by looking at your current marketing activities and identifying which tools you can use to achieve your objectives. 

Your strategy will also include: 

• SEO strategy
• Content marketing strategy
• Defining your marketing channels
• Social media marketing plan
• key performance indicators (KPIs) to track 

Example: Main Street Chic’s marketing objectives include growing our social media presence, improving our website traffic by 20%, and strengthening our brand.

• To achieve this, we will run a series of social media ads, targeting people in our area based on their demographics and interests. We will build on these ads by creating compelling video content, including style tips and a breakdown of what’s happening on runways worldwide. 
• We will track which content generates the most interest and use it to refine our content marketing. We will be more consistent, engaging our community at least three times per day with discussions and links to relevant articles and interesting tips. 
• To reach a broader audience, we will research local influencer partners to boost social media visibility. We will supplement digital marketing efforts with in-store events and promotions designed to bring traffic into the store. 
• To gauge our success, we will regularly track social media analytics and email open rates to see if how they have changed over time. 
• We will also create an ecommerce marketing  strategy to improve sales in our online store. 

In your marketing plan, be specific. Outline clear strategies with action items to achieve your overarching goals. As a larger, established business with brand recognition, you might use social media less to build awareness and more to reach a new market. In this case, your goal would be to target new consumers with your existing product or service. 

5. Set Your Budget 

You might be tempted to set a budget and tailor your marketing plan to meet it, but you should complete the plan first. This will help you set priorities and maximize your budget. If you’re established, look at past marketing budgets and compare them with the ROI for each year. This should give you an idea of which marketing channels tend to bring in the most revenue. 

Once you know how much you can allocate to marketing, decide how to distribute it based on your goals. The marketing plan example throughout this article includes a primary goal of improving Main Street Chic’s social media presence. In this case, much of the marketing budget might be allocated to paid social media ads and influencer partnerships. 

You can always allocate your budget quarterly so you can adjust it as you start evaluating your KPIs. If you focus on improving social media content in the first quarter and find that you are getting more traffic from SMS or podcast ads, you can shift your budget to these more successful marketing efforts.

6. Prioritize Your Marketing and Distribution Channels

After you’ve created a content and social media strategy, you can start figuring out which channels to use to reach your ideal customers. Your focus will probably shift depending on which stage of the buyer’s journey you’re targeting.  

At this stage, your customer has never heard of you. Thus, you want to increase your visibility. In our marketing plan example, Main Street Chic could build awareness with these types of content: 

• Blog posts: How to make the most of 5 staple wardrobe pieces
• Listicles: Five wardrobe basics and how to style them multiple ways

Consideration

In this stage, a potential customer has heard of you, but they might not know all the benefits of your company. Your content should be centered around building trust and credibility. 

Example: 

• Video: The benefits of slow fashion
• Podcast interview: How to choose the best outfit for a first date
• Video: What to wear to all of your summer weddings

Decision 

In this stage, you can hook your target customer by highlighting your benefits and elevating your brand above your competition. Create content that showcases your unique selling point. 

In our marketing plan example, Main Street Chic should consider these types of content and promotions to stand out:

• Testimonials: include happy customer reviews on the company homepage
• Promo coupon for people who spend a certain amount in the store
• Video: How Main Street Chic helped me nail my wardrobe

Once you have an idea of content types to produce for different stages of the buyer journey, consider how you will distribute content. 

Social Media

There are multiple social media platforms available, and they all have advantages and disadvantages. Include strategies and action items for each platform in your marketing plan. 

Decide which ones you will use based on your buyer personas. You may also have an idea of which has successfully driven traffic to your website in the past. 

Example: Main Street Chic has an active presence on Facebook, Instagram, and Pinterest. We will focus on improving our Instagram grid with professional photographs. We will target people in the discovery and consideration phases with shoppable pins on Pinterest that they can include in various mood boards. 

We will drive traffic to our website with paid Facebook ads and shoppable Instagram ads that customers can click to purchase certain items.

Our Instagram page is most active between 6 and 8 pm on weekdays, so we will post our best content at this time. 

Email Marketing

Email is still a great way to reach potential customers. Include a sign-up form on your website and send out regular content to your leads through email. Outline your email strategy in your marketing plan, detailing how you will use it to send out newsletters, promotional announcements, and special event invitations. 

However you use email, ensure that your content is valuable to the people who signed up. 

Example: Main Street Chic will send out weekly emails to people on our list. We will segment the list into valuable customers, sometime customers, and new customers. 

We will use email to send out coupons, notifications of promotions, links to seasonal merchandise, and links to content. We will contact our most loyal customers with exclusive offers and events. 

We will use strong subject lines to pique interest and include a call to action in every email. We will also be sure to link back to our website since this is a prime strategy to drive traffic. 

Offline Marketing

Your marketing plan should also consider offline marketing concepts . If you’re a smaller business owner, you might not be interested in buying a billboard or signage at a bus stop. But you might consider sponsoring a local charity event, advertising on local radio, or placing ads in a local paper or circular.

Offline marketing also includes elements of the marketing mix like packaging and other placement. In our sample marketing plan, Main Street Chic would outline strategies for offline marketing including cash register displays, window displays, in-store merchandising standards, and customer service standards. 

Getting Started on Your Marketing Plan

Having a solid marketing plan helps you develop creative marketing strategies  that are focused. It lets you create targeted messages to reach specific goals and objectives and improves your chances of getting your messages in front of the right people. 

Start out by doing some research on your past marketing efforts. Look at your return on investment and note which strategies were most successful. Then, do some market research and assess where you stand in relation to your competition. 

Use your research to develop realistic and achievable goals and objectives that align with other business goals. Set your budget and start creating strategies for each distribution channel.

Your marketing plan doesn’t have to be overwhelming. Focus on one step at a time, and you’ll have a solid plan in no time. 

If you want more help, contact us so we can  you get started. 

Saunder Schroeder

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Home » Home » Unlocking Success: A Comprehensive Guide on How to Start a Beauty Business

Unlocking Success: A Comprehensive Guide on How to Start a Beauty Business

By Space Coast Daily  //  May 15, 2024

Embarking on the journey of starting a beauty business is an exciting endeavor filled with creativity, passion, and entrepreneurial spirit. However, navigating the complexities of the beauty industry requires strategic planning, market knowledge, and access to reliable suppliers.

In this comprehensive guide, we unveil the essential steps and insights on how to start a successful beauty business, including valuable tips on finding suppliers and leveraging Beauty Supply wholesale catalogs for sourcing top-quality products.

Step 1: Define Your Niche and Business Model

Identify your target market, niche specialization (e.g., skincare, haircare, cosmetics), and unique selling propositions (USPs).

Determine your business model, whether it’s a salon, retail store, online shop, or a combination of these.

Step 2: Conduct Market Research and Develop a Business Plan

Research industry trends, competitive landscape, customer preferences, and market demand for beauty products and services.

Create a detailed business plan outlining your objectives, strategies, financial projections, marketing plans, and operational structure.

Step 3: Register Your Business and Obtain Licenses

Register your beauty business with the appropriate authorities, such as obtaining a business license, tax identification number, and any necessary permits or certifications.

Ensure compliance with regulatory requirements related to beauty products, services, and salon operations.

Step 4: Build Your Brand Identity and Online Presence

Develop a compelling brand identity, including a memorable name, logo, branding elements, and brand messaging that resonates with your target audience.

Establish an online presence through a professional website, social media platforms, and digital marketing strategies to reach and engage potential customers.

Step 5: Source Reliable Suppliers and High-Quality Products

Leverage Beauty Supply wholesale catalogs on BeautySourcing to discover reputable suppliers offering a diverse range of high-quality beauty products at competitive wholesale prices.

Consider factors such as product authenticity, quality assurance, pricing, MOQs (Minimum Order Quantities), shipping options, and supplier reliability when selecting suppliers.

Step 6: Create Unique Product Offerings and Services

Curate a unique product lineup tailored to your target market’s preferences, including exclusive offerings, innovative formulations, and trending beauty products.

Offer personalized services, such as consultations, treatments, and beauty experiences, to enhance customer satisfaction and loyalty.

Step 7: Implement Effective Marketing and Sales Strategies

Develop a multi-channel marketing strategy encompassing online advertising, social media marketing, influencer partnerships, email campaigns, and promotions to attract and retain customers.

Implement sales strategies, such as bundling deals, loyalty programs, cross-selling, and upselling, to maximize revenue and customer value.

Step 8: Provide Exceptional Customer Experience and Feedback

Focus on delivering exceptional customer service, personalized recommendations, and seamless shopping experiences to build strong customer relationships and drive repeat business.

Encourage customer feedback, reviews, and testimonials to gain insights, improve offerings, and enhance overall customer satisfaction and loyalty.

Step 9: Monitor Performance, Adapt, and Grow

Continuously monitor key performance indicators (KPIs), sales metrics, customer feedback, market trends, and competitive analysis to assess business performance and make data-driven decisions.

Adapt and evolve your business strategies, product offerings, marketing tactics, and operational processes based on insights and market dynamics to sustain growth and competitiveness.

Conclusion:

Starting a beauty business requires careful planning, strategic execution, and access to reliable suppliers for high-quality products. By following this comprehensive guide and leveraging resources like Beauty Supply wholesale catalogs, you can unlock the pathways to success in the dynamic and vibrant beauty industry. Empower your beauty business journey with insights, innovative products, and trusted suppliers to create a thriving and profitable venture that delights customers and stands out in the competitive market.

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Swap Old for New: China's Latest Property Market Plan off to a Poor Start

Swap Old for New: China's Latest Property Market Plan off to a Poor Start

FILE PHOTO: A drone view of an under-construction residential development by Country Garden in Shanghai, China February 29, 2024. REUTERS/Xihao Jiang/File Photo

By Liangping Gao and Clare Jim

BEIJING/HONG KONG (Reuters) - A campaign by Chinese authorities to encourage people to replace their old apartments with new ones is attracting interest, but faces one major hurdle: the participants in the scheme are struggling to sell their current homes.

Flagged at a key political meeting last month, the campaign is meant to help cities across China offload their growing stock of new apartments and provide crucial cash flow to ailing developers. As of May 6, more than 50 cities have launched their own versions of the "swap old for new" scheme, according to a private survey by China Index Academy.

But analysts, real estate agents and developers say buying interest in second-hand homes is very limited, casting doubt over the success of the campaign and suggesting the property sector downturn in China has further to run.

"Some people have enquired about the campaign, but so far we haven't had any successful transactions," said Qin Yi, a property agent in Shanghai.

"The biggest problem is selling the second-hand properties."

The swap scheme is the latest in a string of support measures China has taken since 2022 as it tries to breathe life into a sector that represented around a fifth of economic activity at its peak and remains a major drag on growth.

China has lowered interest rates and down payments and most cities have eased or removed prior purchase restrictions. A whitelist developer funding programme for project completion is also struggling to get traction.

Demand for both new and second-home properties in China has been falling, especially in smaller cities, as would-be buyers worry prices may drop further and that some developers would not be able to complete projects.

At the same time, the number of both types of properties listed for sale has been growing.

There were 395 million square metres (4.25 billion square feet) of new housing for sale in January-March, up 24% year-on-year, the latest official data show. Meanwhile, new home sales stood at 189.42 million square m in the same period, down 28% year-on-year.

'OFF A CLIFF'

In the secondary market, the number of properties listed for sale was 20 times higher than the number of transactions in April, according to a survey of 14 cities by Zhuge Real Estate Data Research Centre. Listings were up 294% year-on-year in Shenzhen, and 39% in Shanghai, it said.

Additionally, tens of millions of apartments are yet to be completed in China.

"Sales have been falling off a cliff," says Ma Hong, senior analyst at GDDCE Research Institution in Shanghai, who estimates the swap programme will have a limited impact. "Very few people dare to buy a house."

"Absent more innovative tools, such as a property stabilisation fund, the market downtrend will continue."

Some 96% of Chinese households already own at least one home. Before the market turned, the Chinese had for decades regarded apartments - especially the new, more modern ones - as the safest place to park their savings.

Most of the cities taking part in the scheme are asking buyers to put down a deposit for a newly built apartment, which they can take back in full after two or three months if they fail to sell their existing homes to finance the purchase. Cities are offering lower taxes and fees for the transaction if completed.

A property agent in the tech hub of Shenzhen, who only gave his surname Zhou, said more than a dozen people have placed deposits, but that their homes "don't seem to have sold yet."

In Chongqing, a city of more than 30 million in southwestern China, which has piloted the scheme since February, an agent surnamed You said it "had no obvious effect" on demand.

Zhengzhou, a central city of about 13 million, has asked developers to purchase second-hand homes.

One executive at a Chinese developer, asking for anonymity due to the topic's sensitivity, said their firm "had no interest in participating" because the second-hand market was "very bad." An executive from another developer described the swap programme as "meaningless."

"Nobody is buying, so how do you sell to swap?" the second developer said.

Given limited success of existing incentives to spur demand, China is considering a plan for local governments nationwide to buy millions of unsold homes, Bloomberg News reported.

"The government may need to intervene and manage secondary market supply if housing price expectations remain negative," Goldman Sachs analysts said in a note this week.

(Writing by Marius Zaharia; Editing by Tomasz Janowski)

Copyright 2024 Thomson Reuters .

Tags: Hong Kong

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