How to Do Market Research!
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How to Do Market Research!

I have an exciting investment opportunity
only for Two Cents viewers: Beard Oil for dogs! I call it Groomio, and it’s a guaranteed success! How do I know? Trust me! I just feel it in my gut! No serious investor will trust their money
to your gut. And you shouldn’t either. No matter how good you think your idea is,
before you mortgage your house or quit your day-job, you owe it to yourself to thoroughly
investigate its market viability—that is, a realistic, data-driven prediction on whether
it can succeed in this marketplace. This applies to Fortune 500 companies and
handmade soap sellers on Easy. One way or another, the market will judge
your product…wouldn’t you rather hear the verdict before you sink your life savings
into it? Ruth here has been giving her homemade artisanal
soaps to her friends and co-workers as gifts for a while now, and getting a lot of positive
feedback… enough that she’s actually entertaining the idea of starting a small business. But before she retires from her office job,
how can she know whether there’s really a market for this? The answer is market research. Marketing research companies generate exhaustive
reports on pretty much any industry you can think of, including the Handmade Global Soap
Market. They include findings like market size, growth
rate, demographics, industry leaders, even how facial scrubs perform vs. liquid body
washes. And it’s all available to Ruth as a downloadable
pdf for… $4,000. Maybe Ruth can afford that, but I can’t. Fortunately, there are plenty of cheaper options. I found this free report from the non-profit
American Pet Products Association, which says that U.S. spending on pet products and services
grew at an average rate of about 5% annually, comfortably above the GDP average, and that
pet ownership is increasing, especially among millennials, with dogs leading the way. This is all good news for Groomio, because the
bigger a market, the more potential customers, and the faster it’s growing, the more new
customers—who are much easier to sell to than older customers already stuck in their
ways. The report also tells me that the average
dog owner spends $84 a year on grooming supplies and services—very useful info as I decide
on a price. A major part of market research is analyzing
competitors. If Ruth wants to get into the homemade soap
market, she needs to know what the successful brands are, how much they cost, what are the
most popular ingredients and scents. She can even request credit reports on these
companies for a fee (unlike personal credit scores, business credit scores are publicly
available) which will tell her whether they’re financially stable, and how much risk there
is in the industry. Search engines and social media have made
collecting this type of information easier than ever. A simple Google or Twitter search will often
tell you who the major players in an industry are. With a GoogleAd account you can see how much
competition there is for your keywords. And Google Trends is an easy, kinda fun way
to find out what’s hot and what’s not. (Seriously, you can burn of lot hours here.) I can see that the search terms “dog grooming”
and “beard oil” have both grown slightly over the last 5 years. I can tell what times of year they’re most
on people’s minds, what geographic regions they live in, even what related searches tend
to overlap. This can all be useful when designing my product
and advertising strategy. All of this is considered secondary market
research, information that already exists that you can purchase or find for free. But if you’re really serious about success,
you need to do primary market research, which means collecting data on your own. It’s often more expensive and time-consuming
than secondary market research, but it always saves you money in the long run, because you
narrow down your audience and focus only on the features that they’re interested in. For example, Martin wants to introduce a new
sandwich at his popular food truck: a double-bacon BLT with garlic aioli and truffle oil. Before rolling it out, he asks his existing
customers to fill out a survey, posts some polls on his company’s social media accounts,
and just to be really thorough, pays a web service to get survey responses from the types
of people who frequent food trucks. Lo and behold, he finds that people who tend
to like bacon DON’T like truffle oil (because it’s disgusting). He almost wasted a lot of money on an expensive
ingredient that would’ve actually lowered sales. Thanks, Primary Market Research! Many experienced market researchers will tell
you that when it comes to collecting data, nothing beats face-to-face conversations. That’s because customers are humans with
emotions, and the most successful products are ones that solve a pain. “Market pains” are anything that causes
frustration or inconvenience in a consumer. It’s a problem that your product could potentially
solve, and the best way to find it is talking directly to people. Big companies conduct interviews with lots
of people of varying demographics and regions, but just because you can’t afford that doesn’t
mean you shouldn’t talk to people when you can. But—don’t bother asking your friends and
family! They’re likely to be nice and encouraging
when what you need is brutal honesty. For instance, Ruth starts taking her handmade
soaps to the local farmer’s market, and makes sure she strikes up a conversation with
anyone who’ll give her the time. She notices a trend in people who say they
wouldn’t buy handmade soap online because they’re concerned about the packaging waste. Aha, market pain! She decides to make sure all her packaging
is made from recyclable materials—and that it’s mentioned prominently in the advertising. For the truly introverted entrepreneur, the
internet does offer a sneaky shortcut to finding market pain: the dreaded comments section. If your competitor has one, you’ll find
people happy to complain about drawbacks or features they wish the product had. There’s even a successful electronics company
that has made its whole business model developing products based on complaints in Amazon reviews. “I love this nose hair trimmer but I wish
it was waterproof!” Bam, market pain. This is a very generalized overview of market
research. There’s a lot more to it: industry lifecycle,
market penetration, federal regulations— Oh shoot! I forgot to check if animal cosmetics require
FDA approval! Thankfully, there are a lot of resources out
there. The Small Business Administration provides
lists of organizations that offer free market reports, and can help connect you with a counselor
or advisor. But be careful of business coaches who think
their job is to just be your cheerleader. While this encouragement is nice, you don’t want
to be encouraged off a cliff. Ooh! The results of my survey are in! The percentage of dog owners who say they’d
be interested in Groom is… 4%. Maybe I shouldn’t take out that loan just
yet. And that’s the most important part of market
research: objective honesty. No matter how much you love your idea, if
the research tells you otherwise, well… that can be a good thing! It means you just saved yourself a lot of
money and effort. And freed up your time to develop an idea
that will work. And that’s our two cents! Thanks to out patrons for keeping Two Cents financially healthy. Click the link in the description if you’d like to support us on Patreon. If you’ve ever conducted market research,
share your experience with us in the comments!

About Ralph Robinson

Read All Posts By Ralph Robinson

94 thoughts on “How to Do Market Research!

  1. No one :

    Friend I haven't seen in 15 years : Do you want to be your own boss?

    Me : Is this a pyramid scheme?

    Friend : No, it's a triangular modelled business plan!

  2. Thank you two cents, do you think video about recession and what to do when it knocking on the doors will be great?

  3. Oof! I have done Market Research once. O used to sell Coca-Cola infused Jellies and Puddings, I put the price 3x the production cost and people are happy buying the product from me. I asked them for feedback and they say that the size didn't worth the price, but the taste did, also the didn't like the extra condensed milk I drenched the pudding with, so I lowered the price and cut the condensed milk from the recipe. My profit magin is almost 300% lol
    But then they start to ask if I can chill the jelly with ice when selling it or if I can provide them with small plastic spoon, and production cost soon makes the whole thing unprofitable, it still yielded income but it doesn't worth the selling effort so I just stopped.
    Lesson learned, not every input should be considered and I should build up customer base with lower price instead of just selling it crqzy expensive, because my competitor soon steal my idea and sell it a lot cheaper, so basically I'm screwed lol Fun times tho.

  4. you should do a video on what banks do with your money while it is sitting there. My sister asked me this and I think my explanation confused her a bit, but if you did it; it might make more sense since you do explanations real well and with pictures.

  5. I've started a side business designing and selling board games. I recently finished my first kickstarter campaign. Kickstarter was one step in validating the idea to reduce my financial risk to manufacture my game. Along the way, I also went to conventions to better understand the type of person interested in my board game. Looking for industry conventions is a great way to do market research because competitors and customers are all in one place. 🙂 Many times you can also ask competitors for advice and they're usually willing to help.

  6. I want to start an electric car and truck company that sells products for <$20,000 and has cars that charge in less than 10 minutes. The biggest market pain in the electric car market seems to be the high initial cost and the charging times.

  7. The only thing about market research is that your everyday person is unimaginative. They don't know what they want. I think it was Steve Jobs who said that if they did market research, they would have made a smaller phone, not the iPhone.

  8. The best approach is the lean startup approach. Start selling a minimum viable product, even if it's a demo of your real product, and sell it to real customers outside your social circles. Less money and time wasted.

  9. Wat if you have a good shop bud want to make it bether? How can i vind out wat i need to do? Great show realy hepls me to see things divrently somtimes!!!

  10. So 4% out of 70million dogs in the US isn't enough for you? That's 2.8 million interested customers that you can easily reach via pet stores / the internet. Even if just every 100th interested person would buy your grooming product for his dog that would still leave you with 28.000 regular customers. Depending on the coats upfront and the money you end up making I'd say great chance, go for it.

  11. there truly is a mystery to how two cents keep their videos so short yet packed with information, if it were another channel this topic would be a whole series with 40 minutes per video

  12. I'm actually about to something like that. I'm expecting to get beat up pretty badly. But I need this data, so into the perils feedback I go.

  13. Nothing, repeat nothing can take the place of talking to another in person. Social Media is not as ironclad reliable as people might believe. Part of the reason is Social Media's indirectness.

  14. Ummm your links are broken clicking on them gets a 404 message:…………………

  15. Thanks for not giving annoying entrepreneurship advice. There's enough of that on the YT. This is just good biz info.

  16. Glad I'd found this channel♥️ One of the most enjoyable and best financial coaching channels. A 17-year old subscriber here!

  17. I think the biggest hurdle for new business' is all the government red tape. Yes the tape is meant to protect consumers but it often prevents new business growth too. Also I noticed too much Google advertisement in the video. That company nearly owns everything now.

  18. Is it me or the USA just taking over the Canadian Company like Rona and Tim Hortons?

    No wonder the USA is hungry to take many companies this days.

  19. That last bit about being objective is great advice for pretty much everything.

    If the feedback is coming back negative, you should probably use your time and energy on something else.

  20. I liked to know what this “digital marketing” ads all over YouTube are about. The ones where people are in mansions with cars and girls everywhere. I know it’s a scam but how?

  21. I'd be interested in a video about doing taxes as a part time or full time freelancer. I recently started this as a way to make side income, and it's hard to find a straight answer on line. Thanks for the great video!

  22. Market research is as simple as doing your homework, the better your homework is done, the better you will perform in your work.

  23. Two Cents, what are the best books I can read to understand more about conducting effective market research? "Lean Startup"?

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