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The information on these pages explains:

• what you need to know about market and customer research
• how to build your knowledge
• how using field research can fill in the gaps

A successful business needs a deep understanding of potential and existing customers and the marketplace they work in.

This understanding allows you to:

• target customers
• sell effectively
• compete with other suppliers
• identify new opportunities

Carrying out market research on potential customers and your competitors will help you to gain this vital knowledge.

Published market information

You can build a picture of general trends using published market information.

You can get this from free government statistics and data to paid-for market reports from commercial providers.

Your own contacts and sales records can also be a great resource.

Field research

You can add to your knowledge by using field research from surveys and discussions to product tests.

You can do this to investigate customers' attitudes and examine questions specific to your business.

Carrying out customer research on loyalty, satisfaction and service can make a big difference to your business.

You should focus on finding out as much as you can about existing and potential customers.

If you can work out how they make their buying decisions, you can adapt your sales methods and techniques to fit your customers' needs.

Business customers

For business customers, you'll want to know:

• how big their businesses are
• what sectors they're in
• who would make the decision to buy your product or service

Individual consumers

If you're targeting individual consumers, it may be useful to know about their:

• gender
• age
• occupation
• income
• lifestyle
• attitudes

Existing customers

For your existing customers, try to find out:

• what they think about your products or services
• why they need your product or service - this may be different from what you believe
• why they buy from you and not your competitors
• what they think of your prices
• what they expect from you, e.g. reliable delivery
• how they rate your customer service
• how they think you could develop or refine your products or services

Potential customers

For your potential customers, try to find out:

• who your potential customers are and what groups they fall into
• how many potential customers there are
• how much of your kind of product or service they already buy from your competitors
• the criteria on which they make buying decisions
• what it would take to get them to buy from you
• what developments they expect in your product or service
• when and where they prefer to buy

Understanding market trends is important if your business is to make the most of its opportunities and remain competitive.

You also need to understand your competitors and be aware of what they are doing in order to predict their next moves and exploit any weaknesses.

Try to get answers on:

• Demand for your product or service - is it growing or shrinking?
• What are the current general economic and market trends?
• How customer requirements and buying behaviour could change in the future.
• What new products are in your competitor's pipeline - could they make yours look outdated?
• How competitors are changing - what are their plans?
• What do competitors offer and what prices do they charge?
• How do your competitors advertise and promote themselves?
• Is there any forthcoming legislation which could affect your market?

External data might not be in a useful format to use easily. 

It may have been collected for other purposes or be from a range that doesn't tally with your target market.

Beware of out-of-date market information. This can be misleading, as the market may have changed significantly since the information was published.

It can be particularly hard to tell how recent any information published on the internet is.

Some information on the web can be unreliable or biased.

Remember that statistics can sometimes mask the true picture.

For example, an 'average' income for the population in your area might conceal a high proportion of low earners - meaning fewer people can afford your product than it appears.

The same principle applies to your own sales records - one or two major customers could distort the picture.

Most importantly, don't make up your mind in advance.

Finding market information that simply confirms what you already believe is easy - but only a realistic picture of your customers and markets will be useful to your business.

Published market information and your own data can tell you a lot about your customers and your market - but it's unlikely to tell you everything.

Field research can be quantitative or qualitative:

• Quantitative research
  Provides statistical information - for example, how many potential customers there are and what their average incomes are.
• Qualitative research
  Examines people's feelings and attitudes towards your product or service, and what motivates them.

You'll probably need to carry out some of your own quantitative and qualitative field research - talking, observing or carrying out product tests with customers and potential customers.

This can help you to:

• Test customers' reactions to a new product, and adapt it if necessary
• Investigate attitudes of customers and potential customers
• Find information specific to your business or a local market, rather than the market as a whole

Good planning is essential if you want to get the right results from field research.

First you need to decide how to collect the information you want. Popular methods include:

• A survey using a fixed set of questions
  The most effective way of carrying out a survey is typically with face-to-face interviews, but phone interviews, online questionnaires and postal surveys are also possibilities.
• A discussion
  Often held in small focus groups. Discussions are good for qualitative research as they allow you to explore people's attitudes in more detail.
• Observation
  To investigate what people do rather than what they say. For example, look at how shoppers react when they pass a particular point-of-sale display.
• An experiment
  You might run a blind taste test of your soft drink against your competitors' products. Alternatively, you could lend your new product to a customer and ask for feedback.

Once you have decided how you'll gather the information, you'll need to work out how to make it happen. 

Budget how much time and money will be needed, as the time involved will normally be significant.

You'll need to design your research. For example, drawing up a questionnaire or deciding how you'll run a focus group.

Then there are the logistics. If you want to carry out street interviews, make sure your researchers have the required local authority licence and identity card.

If you want to run a focus group or conduct face-to-face interviews or product tests, think about:

• where you will hold them
• where you'll find the participants
• who'll run the session

Consider carefully whether you have got the skills in-house to do this.

If not, it may be a good idea to get a market research agency to do your research for you.

The way that you conduct your field research will have a significant impact on the quality of the results.

Below are the key points to remember when conducting your research and interpreting your results.

Ask the right questions

If your questions are badly phrased then they may produce misleading results.

Avoid closed questions which encourage the answer "yes" or "no".

A stationery shop that asks customers if they intend to buy pens in the next year will find out just that - but they won't discover what type of pens, e.g. specially engraved pens or cheap biros.

Talk to the right people

A survey at a railway station, for example, will get answers from commuters.

If you're targeting people who stay at home with young children, this won't be representative of your market.

Talk to enough people

A survey of two people won't get you enough information.

Some market research professionals suggest asking at least 150 people in order to get a complete picture.

Keep research impartial

It's easy to encourage people to give the answer you want. For example, by asking leading questions or smiling at the 'right' answer.

Discussions, where you're not working from a list of set questions, are particularly easy to distort.

In a focus group, individuals with strong opinions may influence the views of others.

Interpret results with care

You need to make sure you draw the right conclusions from your research.

Bear in mind that people may distort answers in the hope of affecting what you do.

For example, they might say they would be interested in a product "if the price was lower".

Qualitative research, where you're investigating feelings and attitudes, can be particularly difficult to interpret.

Be realistic

It can be tempting to pick out results that confirm what you want to hear, and ignore the rest.

Ignoring negative results could damage your business. Be prepared to modify your plans if necessary.

If you don't have the time or skills to carry out research yourself, consider using a market research agency.