Why is Research Important?
First, let me say that research is not so important that you should spend so much on it that it stops you from funding other important areas of your business.
If you google, Calgary Market Research, you will see companies offering telephone call centers and other very expensive forms of research. These tools can be important but for the average piece of research, a budget of $2,500 to $5000 should be sufficient to get the necessary answers.
According to Industry Canada, businesses that fail to pass $30,000 in annual revenue have a 45 percent failure rate after three years (http://www.ic.gc.ca/eic/site/sbrp-rppe.nsf/eng/rd02345.html).
For small and medium-sized business Industry Canada says this:
Survival is defined as the percentage of new firms that continue to operate when they reach a given age. Failure rates for small businesses in Canada decline over time. About 96 percent of small businesses (1�€“99 employees) that enter the marketplace survive for one full year, 85 percent survive for three years and 70 percent survive for five years.
In 2007 I read in Canada's CA magazine that the failure rate was 80 percent after three years. Whether it's 45 percent or 80 percent, one of the purposes of market research it to make that number ZERO percent.
The simplest way to say it is: The purpose of market research is to make the most money possible with the least amount of risk.
I've had the privilege of working on two different sides of market and marketing research, corporate and academic. In the early 90s I worked for a company in Vancouver called Marktrend Research Inc.
Marktrend was a market (information that was used to define a population) and marketing (information that is used to determine best practices in selling goods) research company. Most research fell in to two areas, political & environmental opinion and product & service usage (mainly for retailing). Some of the research was quite particular such as shopper preference in the colour of cheese or public transit usage.
Other research was quite complicated and often involved asking the same question that was worded differently to insure the respondent wasn't just answering the question to get the survey over with. In the end, I worked on about 100 research projects with Marktrend.
On the academic side, I work on two projects with professors and the University of Lethbridge's Department of Marketing. One project was in collaboration with Worksafe BC and required the gathering of information from males 18-24 years of age (an age group that is almost impossible to track).
The second project was for a branch of marketing called Cause Related Marketing and in this project the 'cause' was the relationships between not-for-profit organizations and their corporate donors.
I've also done quite a bit of reading of research case studies. As much as I enjoy and respect the research process, I'd like to share two short stories with you about how listening too closely to people can lead you in the wrong direction.
"I Like Broccoli"
One late afternoon, Billy was at his friend Tommy's house. When Tommy's mother got home she looked at the time and suggested that Billy stay for dinner. Tommy's mother asked Billy, "I'm going to cook dinner and was thinking of having broccoli as well, do you like broccoli?" "I like broccoli fine," said Billy. As they sat at the dinner table, Tommy's mom looked at Billy's plate and saw that everything was eaten except for the broccoli. "I though you said you liked broccoli," she said. To which Billy replied, "Oh, I like broccoli, I just don't like to eat it!" The moral of this story for the purpose of research is that you have to be very careful with how you ask questions.
Asking the wrong question can set up a business for a quick failure.
When Henry Ford began production of the automobile someone approached him and posed the question as to how he came up with the idea. The inquiring person asked Ford if he had asked other people what they wanted for transportation. Ford replied, "If I asked anyone what they wanted I knew invariably that I'd get the same answer, ' A faster horse.'"
Unlike the broccoli story, Faster Horses is a classic example of knowing when you are really on to something. Some ideas are so innovative that no outside opinion would help because no one could have an opinion on something they couldn't even imagine.
DIY Market Research
Marketing Research tends to cost $1000 to $10000+ plus expenses. If this is over your budget but you have lots of time I would suggest you properly educate yourself on good research techniques, then try a little of your own research.
Here are three places to start:
- Entrepreneur magazine is good for general information. http://www.entrepreneur.com/article/217388
- Stats Canada is the authority on many data sets. http://www.statcan.gc.ca/start-debut-eng.html
- Another Canada Federal Gov. site good for market research information is http://www.canadabusiness.ca/eng/page/2691/