In general, small businesses are very optimistic about the products or services that they sell. The business opens its doors assuming strong customer demand. But how do you know if there is strong customer demand? If you are wrong, you have a big problem. Fundera reported that 42% of small businesses fail because there is limited customer demand for the product or services that they are selling. These companies would save themselves a lot of heartache and money if they did their homework before opening those doors. Knowing customer demand for what you are selling is the most important key to your success.
Think of your business like a car driving at night. Insights from market research are the headlights that show you what is ahead of you. They will enable you to know if your product or service meets a consumer need. You can also define the competition that you face, characteristics of your potential customers and how to speak with them. When done well, market research will lead you to the ideal customer who will fall in love with what you are selling. It also provides you a picture of the niche that you can most profitably serve. One thing is certain, you cannot sell your product to everybody who might buy it. If you cast your net too wide, you may be limiting customer demand. Because you are diffusing your efforts. With market research, you will exactly understand customer demand.
How Can You Understand Customer Demand?
It may seem paradoxical, but as you narrow your potential customer base, you can increase your likelihood to sell. If you know the ideal customer, you will know what they want and how to best sell to them. You thus can concentrate your efforts.
To identify the ideal customer, the first logical step is to talk with your existing customer base. You should ask why they are buying from you? What do they like most about your product or service? You will also learn more about their lives. It is very helpful to establish demographics, psychographics/ attitudes and triggers of these customers. Then project this information onto a wider potential market.
You should fill in the following blanks as far as possible:
- Demographics: What is their age, income, education, gender, geographic location, etc.
- Psychographics/Attitudes: Interests, lifestyles, behaviors, hobbies, etc.
- Internal Triggers: generous, community orientation, cautious, adventurous, curious, etc.
This gives you information you can use to start developing a “buyer persona” which brings your customers to life. You are no longer selling into a vacuum. You can picture your customers and why they buy from you.
How Does The Buyer Persona Relate to Customer Demand?
Let’s say that you are launching a new line of sports clothing. You need to know more about your customers and if they would be interested. You contact one of your buyers (lets call him “Alex”) and develop the following persona. Alex prides himself on how he looks to the ladies. He is well educated and expects to rise quickly within his career. Exercise is an important part of his daily routine and your product appeals to him because it stands out from other more “boring” outfits. You can expect to efficiently reach others like Alex on Twitter, Tic Toc and YouTube. He is really excited about your product and is likely to become a big fan telling all his friends. This research suggests that your product launch will be a big success.
Do You Need Additional Market Research to Understand Customer Demand?
If you are starting a new business, launching a new product or need to grow your customer base you may need to go beyond the informal approach. The initial interviews are a good starting place, but if you want to grow, you may need to understand customer demand outside of your current customer base. You can use the Internet, social media, qualitative and quantitative research to get a picture of the wider potential for your company. The insights you gain are essential building blocks to understanding customer demand for your product.
How Market Research Can Help You Understand Customers
By knowing what you need to learn, you can decide on how to get there. There are various research approaches available to you. Without going into great detail, we can mention 3 major ways to learn more about customer demand:
- Secondary Research: This is often called “desk research” because you can use your computer to do it from the comfort of your home. While it is not as fancy as primary research, this approach has a distinct advantage. It can be done for little or no money. In these days of Google search, it has become very easy to find information about your product or category. You can tap into industry reports, government information (like the US Census) and other published primary information. Before paying for any research, this avenue should be investigated.
- Primary Qualitative Research: If you took the steps described above, you have already started to do qualitative research. You have spoken with your existing customers. You can now widen the net by speaking with customers who may not yet know about your product or service. You may conduct in-depth interviews or focus groups, to better understand their needs. This will enable you to understand more about purchase drivers and emotional reactions to your product or service. This provides you with the “why” information about their interest in your product or service.
- Primary Quantitative Research: This is a numbers game. Starting from hypothesis about your customers, you can use surveys to learn more. Generally speaking, these are conducted among a sample of respondents most likely to be your customers. Thinking of the example above, if we want to understand customer demand for sports clothing we should look for people who exercise. We can then ask them a wide variety of questions to understand their interest in your product.
Having done the homework, you can now answer the essential questions:
- Is there sufficient customer demand for my product/service?
- Who are my primary competitors and how is my product/service differentiated?
- Who is my ideal customer? Does my product product/service appeal to them?
- How large is the potential market for my product/service? Is it large enough to make a profit?
- How much are they willing to spend?
- How do I reach them?
- What messages can I use to persuade them to buy?
Insights from this investigation will make it far more likely that your business succeeds. IF there is limited customer demand, it is better to know at the start to save yourself heartache. Let’s hope that you are onto something really good! With this investigation, you will sleep better at night, knowing that there are plenty of customers out there ready to buy what you are selling.