A case for conducting at least elementary market research before opening your new company.
History of the Problem
When there are 25 people in your clan [Europe], each has a specific responsibility or group of tasks to perform to keep the clan alive and well.
As populations grew, from prehistoric to today, fewer few growers were needed while more doctors were needed. Thus, the idea of specialization in work became an important skill; there is a greater demand for higher levels of skills/performance.
In agricultural economies, there might be a need for 25 pickers but if there are no educated or "otherwise" trained people, one might wind up with 250 or 2,500 pickers-thus, 90% of those people will be of marginal value to any company or th farm owner, even if the farm is cooperatively owned.
At the same time farms will have an overabundance of food pickers, the villages and cities surrounding will have few doctors, accountants, mechanics, etc.
Problem
In business, one needs to know what is needed by a community [or at least desired] that is not being provided. The idea behind small business ownership is a balancing act between “finding an unfilled need and filling it” and seeing if the community might like the thing that you have but they know nothing about. This last approach can include an improvement of a technology that was thought not possible or is barely known about but thought to be inefficient or inadequate to fulfill a specific need. A specific example of this is the fuel methanol.
Meth has been available for over 30 yrs an is in fact, a component of the fuel one buys for their vehicle. However, with slight [and unfortunately, necessary] modifications to one's vehicle engine, one can run on 100% methanol at 1/100th the cost of gasoline pump gas. [It is also thought that methanol runs poorly or that it is hard to come by; both rumors are false.]
Significance of the Problem
Both the U.S. Small Business administration and other research organizations claim that
eighty percent of new businesses fail within five years of startup.
One of the reason for the failure is inadequate research to confirm that there is a sufficient
number of customers for the new businesses.
From the time universities began stretching their research data and surveys to include small business, they began to include identifying the focus of the small business, called, in the mid 1980's, the Wow factor. This paper author, a small business faculty person, identifies the wow factor as simply an expression a new [or returning client] is likely to say when they enter a specific busin for the first or hundredth time since the customer is assured of timely service, quality products and often one or more other reasons for continuously engaging this business as a client.
When interviewed as to why a new entrepreneur started this or that business, it was uncovered that most of the new entrepreneurs just had an idea for a business and took the minimal steps necessary to open that business. Their new business in fact might have been the same as a relatives in another city or state, or just something to keep them from being bored.
Few of these budding entrepreneurs ever even thought, “what am I offering to the public
that is different from anyone else offering the same thing?
When further interviewed about the entrepreneurs favorite restaurant, clothing store, auto repair service site or place to shop often, the entrepreneur often easily states one or more reasons why he or she buys from that merchant. When asked, “then why do you not make something as easily identifiable within your firm that you easily identified in the places where you are a customer?
The question way too often puzzles and perplexes the entrepreneur and makes them also
wonder-and often, too late in their cycle of entrepreneurship.
I have had more students and clients tell me that they cannot afford to conduct market research. Actually, no entrepreneur can afford not to conduct market research. Research should consider what type of products the local market wants/needs; price, quantity wanted and how often to be bought. Market research will also specify whether the idea the entrepreneur has is viable.
The market researcher should also decide whether there is a need at all for the goods and services to be offered. There might be a competitor and the market research can help confirm whether there is a need for another firm to provide additional goods and services that your firm might provide.
Methodology
The author, a business consultant and college business teacher, has done primary research, and reviewed secondary literature regarding market research and did not discover anything new over the past fifty years; entrepreneurs do not wish to or know how to, take the steps needed to find out if there is a desire or need for his good or service.
