Finding a customer: Primary Market Research
The purpose of primary market research is first of all to understand whether there is an opportunity at all for the new venture's idea and then to understand it in as much detail as possible. The understanding one gets from primary market research is qualitative.
What you need to know about a potential customer
There are many things you need to learn about potential customers. This list is an overview of the key issues.
A more exhaustive list can be found at Market Opportunity (in the process section of this website).
The basic steps in primary market research are the following.
The process of market research is iterative. It involves forming hypotheses, testing them (through dialog and experiment), revising and further testing. Many ventures have gone awry because this process was done poorly. Often the biggest problem is that entrepreneurs do not listen or they hear what they want to hear. Good primary market research involves getting at the potential buyers perceptions, beliefs and desires in as objective a manner as possible.
The approaches to primary market research are observation, dialog and experimentation. The entrepreneur should try to find the best means for getting the necessary information and will generally use all three approaches. This table summarizes some of the characteristics of these approaches.
How to conduct a dialog with a potential customer
The objective of a dialog with a potential customer is to understand his/her perceptions, beliefs and desires as accurately as possible, not to get the customer to say what you want to hear.
The foundation for a good dialog is some level of familiarity with the customer as it relates to your area of interest. What topics you probe will depend a lot of what you really need to know, so there is not a generic one size fits all guide to a customer interview. Nonetheless, the following should serve as a rough guideline.
It is helpful to think of a dialog as consisting of three phases.
It is never the case that you can learn everything you need to know in one conversation, so it is important to leave the door open to further conversations as you end the interview.
How to create a customer profile
A customer profile represents a "kind" of customer. It is a comprehensive description of the attributes that are relevant to your business opportunity. For consumer products, this will include some demographic information and some personal characteristics. For business solutions, it may include information about the customer's industry, size, business processes, etc. Ideally, a customer profile includes all the attributes that are relevant to buying your proposed solution, and will exclude everything else. Although this may sound simple, it is not.
A customer profile is the basis for quantifying your market opportunity. Simply stated, sizing your opportunity involves counting the customers who fit all of the profiles you intend to satisfy.
Having a good set of customer profiles is also the first step in crafting a strategy for your business, namely selecting a target customer.
The customer profile is also the first step in creating a market launch plan and all subsequent marketing plans.
Any business is well served by having a deep understanding of their customers. The primary dimensions of information are depicted in this picture.Connection to planning
The information gather in qualitative market research should drive many elements of the ventures operating plan.
See our slides on Market Research (includes a Practical Guide to Primary Market Research).
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