To develop an effective plan based on your customers’ needs and nature, you should be able to answer these questions:

• Who are they?
• Where are they?
• What do they need?
• How do they make their buying decisions?
• Where do they buy?
• How do you reach them with your marketing and sales messages?

Knowing the answers to these questions is critical no matter who your potential customers may be. This is also true when a nonprofit organization goes into a market looking for funding, in-kind contributions, and volunteer participation.

The specific research related to this market analysis begins with statistics that provide total numbers of households, classrooms, businesses, and workers in a market. These are your basic demographics. What you need depends on whether you’re looking at businesses, households, or individuals as your main target groups. When possible, you should be able to segment households by income level, businesses by size, and workers by job type, education, and other factors. Employment statistics can add information about types of workers and their education and background. You can also divide your target customers into groups according to psychographics. This is your strategic market segmentation, a core element of your marketing strategy.

Building your assumptions
While estimating the total potential market, you must necessarily make some wide-reaching basic assumptions. You have to assume a price level for the new product, a relationship to substitutes, and certain economic justifications. You have to assume that the total market potential is a stable concept, not changing annually. This assumption allows you to project a gradual increase in penetration.

Research, explore, explain
For each of your market segments, the market analysis should explain as much as possible about the target customers included in that group. That normally includes the segment description, needs and requirements, distribution channels, competitive forces, communications, and keys to success. Each of the following might be a topic in the plan:

Segment description
You need a basic description of each target segment that includes attributes that characterize the segment, such as the number of potential customers, annual growth rate, annual spending, and market value. The more detail you include, the better.

Needs and requirements
The best marketing always focuses on customer needs. Why do they need your product or service? What is going to make them buy? Don’t get trapped into merely marketing what you have when you should be identifying a customer need and working toward fulfilling it.

Distribution channels
What are the standard channels of distribution for this customer segment? How are they different from other segments? This is especially important for product businesses marketing through channels, but in all cases you need to know where your customers go to satisfy those needs and requirements you’ve identified.

Competitive forces
Know the buying process for these target customers. What are the key decision factors? For example, some customers are more sensitive to price than others, some segments are more concerned about quality than price, and some care most about availability and convenience. In each case, those customers are willing to pay to realize the desired benefits.

Communications
Where do members of this segment go for information? What kinds of information will be most effective? Know where to send marketing communications, such as advertising and press releases, so that the right customers will find them. Know how to create those messages so that they will generate the right response.

Keys to success
What factors make the most difference to success or failure with this market segment? Key factors will vary between segments, and may include price, value, availability, image, features, financing, upgrade or return policies, and customer service. List the most important three or four factors.

Getting market information
A great deal of market information is readily available. Look to the Internet first. This information is accessible, current, and much of it is free. Most of the sources listed should have websites, or publish information through search sites, in addition to more traditional methods of publication. Market research firms and industry experts publish much of their information in trade and business magazines. Reference works index these magazines and libraries stock them. Trade associations publish many listings and statistics. Public stock laws require detailed reporting of financial results and stock market information sources compile industry statistics from financial reports. You can probably find everything you need at a local library. If not, you can turn to computerized database services, professional information brokers, and United States government publications.

Many industries are blessed with an active trade association that serves as a vital source of industry-specific information. Such associations regularly publish member directories and the better ones publish statistical information that track industry sales, profits, economic trends, etc.

Originally published on Bplans.com.

Market research is the process of gaining information about your market. Preferably, this is specific information about your target market and the key factors that influence their buying decisions. Market research can be casual and limited in scope and, although it may not be “statistically significant” research, it can still be valuable. The value and “degree of fit” may be based on the quality, cost, or the amount of time to acquire the information using these practical market research tools.Determine what form of market research is going to work best for you. Make that decision based on the value you will receive, versus the time and other resources you need to invest to gain access to that information.

Market research is often confused with an elaborate process conducted by a third party that takes a tremendous amount of time and money. It may be important to take a different perspective on what market research is and how it is conducted.

Primary Market Research
Primary market research is research that you conduct yourself, rather than information that you find already published. Primary market research may result from you having direct contact with your customers or the public. This may be through the following types of information gathering.

• Focus groups gather a small group of people together for a discussion with an assigned leader.
• Customer surveys
  • Existing customers
  • Potential customers
• Your competition
  • Solutions
  • Technologies
  • Niches

Secondary Market Research
Market research may also come from secondary sources. This is information others have acquired and already published which you may find relevant. Access to this secondary market research data may be yours for the asking and cost you only an email, letter, phone call, or perhaps a nominal fee for copying and postage. Much of it is entirely free. Much of it is available to search on the Internet.

• Trade associations
• Government information
  • Federal, state and local government reports
  • Small Business Administration – SBA
  • Small Business Development Center – SBDC
  • Service Corp Of Retired Executives – SCORE
  • U.S. Bureau of Census
• Educational resources
• Chambers of Commerce
• Market research firms
  • General market profiles
  • Specific information

Where to Find Information on the Internet
There are many websites sponsored by a variety of organizations that can provide you with the business information you’ll need for your business and marketing plans. These provide a beginning, a jump off place for more in-depth research.

Market Data for the United States
Here are sites that provide excellent data within the United States:

• U.S. Census Cendata: This page has a menu of available reports that include reports on different manufacturing industries, county-specific economic surveys, business patterns for a specific zip code and others.
• zapdata.com: This site offers very good industry data reports, sorted by Standard Industrial Classification code, with a powerful SIC code searcher. The industry-specific (based on SIC code) reports tell you how many companies there are, average sales, and employees. There are also breakdowns by company size and location.
• CEOExpress: This site provides an excellent compilation of additional sites you might want to try.

Information from Trade and Industry Associations
Many industries are blessed with an active trade association that serves as a vital source of industry specific information. Such associations regularly publish directories for their members, and the better ones publish statistical information that track industry sales, profits, ratios, economic trends, and other valuable data. If you don’t know which trade associations apply to your industry, find out. Look for Associations on the Internet:

• Yahoo.com’s list of trade associations is an amazing list of hundreds of trade and industry associations.
• The Encyclopedia of Associations published by The Gale Group is probably the most established, respected source on associations. These cost several hundred dollars each and are normally available at reference libraries. This organization also offers the more updated Associations Unlimited online database of more than 400,000 organizations.
• The Internet Public Library has a large list of associations on the Web
• The Training Forum has an associations database on the Web listing more than 10,000 associations.
• “Action Without Borders” initiative from Idealist.org lists thousands of not-for-profit organizations.

The ultimate goal is information. Most of these associations have industry statistics, market statistics, guides, annual references, directories of industry participants, and other industry-specific information. Many provide business ratios by region or by comparable business size. Contact possible associations, visit their websites to see what information is available. When in doubt, call or email the industry association offices and communicate with the managers.

Information from Magazines and Publications
Industry-specific magazines offer a wealth of information on your business and your market. Business magazines are an important source of business information. Aside from the major general-interest business publications (Business Week, Wall Street Journal, etc.), there are many specialty publications that look at specific industries.

Specialization is an important trend in the publishing and Internet businesses. Dingbats and Widgets may be boring to the general public, but they are exciting to Dingbat and Widget manufacturers who read about them regularly in their specialized magazines. The magazines are an important medium for industry-specific advertising, which is important to readers as well as advertisers. The editorial staffs of these magazines have to fill the space between the ads. They do that by publishing as much industry-specific information as they can find, including statistics, forecasts, and industry profiles. Paging through one of these magazines or visiting a website can sometimes produce a great deal of business and market forecasting, and economic information.

Finding the Right Publications
If you don’t already know what magazines focus on your business area, then the best place to start looking is on the Internet:

• Yahoo.com listing of magazines.
• Ulrich’s International Periodicals Directory located on the R.R. Bowker website, this is probably the most established and respected source on associations and one of the largest listings of magazines. It is also available in hard copy (ask your library reference section, because it’s expensive) as well as online.
• Audit Bureau of Circulation is another source you can look for in library reference. If you have any association with an advertising agency, ask them to loan it to you for a few hours.

For traditional printed directories, several good reference sources list magazines, journals, and other publications. They also offer indexes to published articles which you can use to search for the exact references you need. These will be kept in the reference section of most libraries.

• Readers Guide to Periodical Literature, published by H.W. Wilson of New York, this guide indexes popular magazines. It is also available in most library reference sections.
• Business Periodicals Index also published by H.W. Wilson of New York, is an index of business magazines and journals only.

Getting the Information
Once you’ve identified the right magazines, contact the editorial departments using their website, fax or phone number and published contact information. Many industry-specific magazines publish statistical editions and market reviews at regular intervals.

Use the indexes to identify published information that might help your marketing plan. When you find an index listing for an article that forecasts your industry or talks about industry economics or trends, jot down basic information on the publication and ask the library for a copy of the publication.

• Web links for international economics: The American Economic Association offers a guide to resources for economists on the Internet, at http://rfe.wustl.edu/Data/World/index.html. This site has a good list, with links, of which statistical data are available for different countries and world regions.
• Statistical data locators: Nanyang Technology University’s library site, at http://www.ntu.edu.sg/library/ maintains another good collection of statistical and economic sources from different countries and regions.
• The United Nations Statistics Division site, http://unstats.un.org/unsd/default.htm, contains another list of national data sources within different countries.

U.S. Websites for Market Data on Other Countries
Although you should always check locally first, there are some US-oriented sites that offer data for other countries and other markets.

• The U.S. Census Foreign Trade Division includes an international trade report on U.S. trade with different countries.
• The Department of Commerce’s International Trade Administration has an international information site with a collection of data sources, including the country business reports.
• Yahoo.com also maintains lists of international trade data available within the U.S.

In most situations, the best way to create a market forecast estimate is to find an expert forecast, estimate from past data, find parallel data or apply a model.

Finding an Expert Forecast
If you can find an expert forecast already published, or if you have a budget to pay for an expert forecast, that’s a luxury. This probably means you don’t have to do your own.

Many expert forecasts are published where you can obtain their results for free. Some of these are government forecasts intended to be free, some are expert forecasts made during interviews or news media coverage, and some are professional forecasts whose highlights are released to the media as teasers to sell the more expensive research.

You can look for these forecasts in published news reports, on the Internet, in library reference materials, and in trade association publications. Where yours might be found depends on your industry and the exact nature of your business. Unfortunately, nobody but you can pinpoint exactly where to look for your industry and your plan, but at least you can consider some examples.

The U.S. Bureau of Labor Statistics regularly publishes job outlooks that include forecasts of the numbers of certain kinds of jobs into the future. If your marketing plan needed to project growth in the number of accountants, or chief executives, or heavy machinery operators, you could find that at the BLS site. You could also find a projection showing projected growth of computer industry jobs, or growth in specific employee categories.

If, for example, you are working on a marketing plan involving soft drinks you could go to the national soft drink association’s publication Beverage World for a detailed five-year forecast of soft drink consumption.

Several major business magazines publish economic forecasts regularly. You could go into a reference library and use the Reader’s Guide to Periodic Literature to find published data related to your data needs. Business Week magazine has a weekly column on business outlooks, and quarterly surveys of industry outlooks.

Estimating From Past Data
Although the past doesn’t really predict the future, it can indicate trends. Sometimes you can find past data on a market and use that to project into the future.The principle of using past data as a guideline for the future is one of the fundamentals of forecasting.

It’s particularly important for market forecasting, however, because you’ll frequently find ample data about your market’s recent past even when you can’t find a market forecast. Using the past data will get you a good starting point and a sense of reasonableness for your forecast.

Past Data Estimate-Example
For example, say I want to project the market for restaurant equipment in Lane County, Oregon. I can go to the U.S. Census Bureau County Business Patterns to find out that Lane County had 611 “eating and drinking places” in 1996 and 639 in 1999. I don’t particularly like the fact that these numbers are several years old, but they are the latest available and they are also better than any other numbers I can find. I could count eating and drinking establishments by using the Yellow Pages in the telephone directories, or some other means, but any alternative would be impractical and expensive. So I accept the latest available census data. So I accepted the latest available census data. I calculated the growth rate for 1996 to 1999 and applied that same rate into the future to create a market forecast.

Adding Common Sense and Educated Guessing
Is this the best I can do? Maybe not. I can probably take the past data as a base number, and then add my own research and common sense to improve on it. For example:

• I could contact the local Chamber of Commerce or restaurant association and ask for an expert opinion about the fate of eating and drinking establishments in the recent past and foreseeable future. If the local expert says there has been a boom in restaurants, or a problem with restaurants, then I can use that information to adjust my growth rate up or down. In my marketing plan text I would explain what the past growth rate was and why I was expecting it to change.
• I could also check with the Chamber of Commerce or the local governments to find economic growth numbers. I could compare general economic health in the 1996-1999 period to the 2000-2005 period as well as projections for the foreseeable future. I would then revise my projected growth rate accordingly, and explain in my text about the source of the growth rate figure.

The important point is that I wouldn’t have to just take a wild guess about the restaurant population. By starting with past numbers I improve the overall quality of the forecast. This is mainly just common sense and educated guessing.

• Who are they?
• How did they find you?
• What do they like about you?
• What don’t they like?

Use customer surveys, random interviews, feedback sheets, and a lot of common sense to acquire this information.

Start by classifying your customers into useful groups, or segments. Market segmentation can lead you to better marketing. Classifying customers can help you understand their needs, channels, and differences.

More is not necessarily better when it comes to customer data. If your company sells three products a year, the crucial data will come from these key customers. After collecting some demographic information, your company will be able to focus on the best way to get customer feedback. For example, if your company sells home and garden tools, your best target might presumably be the married, dual income, weekend shopper. As soon you have qualified the customer, move on to the surveys and complaint responses to build on this information.

Look at complaints and problems as a valuable source of customer market information. Studies show that 2-4% of dissatisfied customers complain, which leaves 96-98% unaccounted for. Can you identify these other unhappy customers? By contacting them you may learn of a product problem, discover a solution to a problem, and/or repair and save customer relationship. Remember, if they are not talking to you, they may be complaining to your next potential customer.

User Satisfaction Surveys

Consider using customer survey information to find out more about your customers. The obvious information includes general characteristics that help divide the customers into segments. Do your customers divide into groups by age, income, or gender? By profession or educational level? By type of company or industry? This information can be extremely useful. However, you may need to filter information from questions that might encourage customers to give incorrect answers, such as questions about age, income level, and intent to buy.

The following material is taken from the book Inc.’s “How to Really Deliver Superior Customer Service,” published by Inc. Magazine:

After systematically gathering targeted expectation data, consider using the following information to design a quantitative survey. Here are some guidelines for that survey. These were provided by Tom Carnes, of PDQ Printing in Las Vegas, NV:

1. Obtain inside agreement as to the purpose of the survey. Too many have eight purposes, none of which is served very well by a short survey. Firms need to ask all critical stakeholders: How do you think we should use the satisfaction data? Then consensus should be reached before the survey is designed.

2. Keep the survey fairly short. The response rate drops significantly when a survey starts to take more than 10 to 15 minutes to complete. At 10 or 15 minutes, though, you can achieve an average response of 65% to 75%.

3. Send the survey to more than one contact within the account. If this is not done, you run the risk of getting high levels of satisfaction and then having the relationship ended by a dissatisfied and unsurveyed account contact.

4. All responses need to be confidential. The rule of research is that unless confidentiality is guaranteed, you are probably not going to get the whole truth.

5. Use the appropriate scale to generate actionable data: account-prioritized improvement areas. A comparison of performance data with expectations provides comparison of the most robust improvement data.

Focus Groups

Consider using focus groups to find out more about your customers and what they think of your products and services. Most people know the focus-group technique, where customers are brought together and asked their opinion by a professional facilitator. In initial business-to-business satisfaction focus groups, we usually ask key account contacts a number of pointed questions about their expectations and how well the supplier is meeting them.

Focus groups may take more time and effort than surveys, but the interaction with the group may provide clearer feedback.

Many companies use focus groups to look at new products, or focus on identifying solutions to problems. Software publisher Intuit used focus groups to assemble people who hadn’t purchased its software but were considered potential customers. It asked them why they weren’t customers, what problems they had in related areas, how software could help them.

This case study was included in Inc.’s “How to Really Deliver Superior Customer Service.” The following is an excerpt from that case study:

Phelps County Bank of Rolla, Missouri, whose case is included in the same Inc. book, turned to focus groups to ask senior citizens what they liked and didn’t like about the bank. The bank invited 80 seniors from among its customers, and was surprised when 60 people, instead of the 20 it expected, showed up for a discussion. The facilitators broke the group into three separate groups, and ran three focus groups. Among the important discoveries was that seniors wanted special treatment, but didn’t like most existing programs in competing banks. Eventually the bank created a seniors group, called “PC-Bees,” that became very successful.