What is market research?

Market research is the process of gathering, analyzing, and interpreting data about a target market, customers, competitors, and the industry overall. It helps businesses understand what consumers want, how they behave, and how the market is shifting. This information helps you to make smarter, data-driven decisions.

Understanding Market Activity: What do you think companies research before launching a new product? Let’s use some well-known companies to think about this:

Q. How might Nike develop new shoe design ideas when they already have so many kinds of shoes?
A. Nike uses athlete interviews to develop shoe designs.

Q. How does McDonald’s update or plan for new menu items when customers are already so familiar with the old ones?
A. McDonald’s uses regional surveys to customize menus.

Now, pick a product you already love and ask yourself these questions:

• What type of customer they were targeting? Think in terms of demographic
• What kind of research might have helped the company develop the product?
• How would you conduct market research for your business idea?

Types of Market Research: There are two main types of market research: primary and secondary. You can use either strategy or both! Certain types of business ideas might benefit more from one type of research or the other.

Primary research includes things like surveys, interviews, focus groups. This research is conducted by yourself or people you know that are directly asking about your product, service, or business idea.

Secondary research is researching done using existing data sources like industry reports and market analyses. Here are some websites that offer secondary research databases to explore:

• Association of Washington Business (AWB) Competitiveness Redbook
• AWB Institute
• AWB Grassroots Alliance – local chambers of commerce 
• Bureau of Labor Statistics (BLS)
• O*NET website
• SCORE website
• U.S. Small Business Administration (SBA)
• US Chamber of Commerce
• Washington State Department of Commerce, MyStartup365

Steps in your market research process and plan

The YEA crew is launching a Hot Chocolate Delivery Cart (HC/DC)—a mobile hot chocolate company that serves handcrafted hot and frozen cocoa made with high-quality, real ingredients. YEA Crew plans to operate from a bike cart that cruises around selling cocoa and that can pop up at parks, events, and local markets year-round. We’re also hoping to offer seasonal drinks, cater private events, and bring the cozy nostalgia, that feel-good feeling that a mug of cocoa brings to our community in a fun and memorable way.

Help us to figure out our next steps! Before moving forward with this idea, we’re going to think through our hot cocoa delivery service and you can use the same questions to help you think through your market research to better understand customers, pricing strategies, competition, and the best locations for our cart. The examples throughout the curriculum will use the HC/DC to help provide answers, as well.

Tips for writing your questions tailored to your business ideas

• Consider questions about customer preferences, behaviors, and values
• Think about competition and pricing
• Explore questions that help you choose your best locations or local or national (or international!?) partnerships

Analyzing competitors and market trends

Now that we have an idea and we’re analyzing the opportunities for a market for customers, let’s focus on analyzing competitors and trends in your industry.

Identifying competitors

Direct competitors v. Indirect competitors. This is kind of like primary and secondary customers. Who’s directly up against you? And who’s indirectly up against you? Remember – they’re competing with you as much as you’re competing with them!

HC/DC is directly competing with Starbucks, Dunkin Donuts, and the 50 local cafes that serve various versions of hot cocoa. HC/DC is indirectly competing against grocery stores that sell hot cocoa packets for folks to make at home (rather than ordering from us and having the bike deliver it piping hot – or freezing cold – to your door).

You might also use the secondary market research resources (all the links above) to browse a bit about primary and secondary competitors in your industry.

Now that we have a handle on customers and competitors, it’s time to analyze our business idea, itself. There are two strategic approaches were going to use: SWOT and Porter’s five (5) Elements:

A SWOT Analysis is a strategic planning tool used by organizations to identify and evaluate their Strengths, Weaknesses, Opportunities, and Threats. It is an acronym. It helps in understanding internal and external factors that impact a business, guiding decision-making and strategy development.

Elements of SWOT Analysis

• Strengths

Definition: Internal factors or capabilities that give your business a competitive advantage. What are you great at, and you know it? What is your business capable of doing really well?

Examples: Strong brand, reputation for being an honest and skilled worker, loyal customer base, unique technology, use local ingredients, etc.

Purpose: Starting with your strengths is a good way to build confidence and organize yourself and your business around your best points.

• Weaknesses

Definition: What is not going well? These are things that put your business at a disadvantage relative to competitors.

Examples: Outdated technology, poor brand recognition, limited transportation, limited financial resources, not yet very skilled with keeping good records.

Purpose: Identifies areas needing improvement and can help your business make plans for addressing or improving on weaknesses.

• Opportunities

Definition: Things outside of your business that could benefit the business or provide growth potential for yourself or other employees.

Examples: New markets, favorable local or state policies that reduces taxes for businesses, technological advancements, cheaper access to supplies/ingredients.

Purpose: Encourages you to pursue areas of growth and expansion fo your business.

• Threats

Definition: External challenges that could harm the business or negatively impact success.

Examples: Loss of clients, new competitors, changes in regulations, shifts in customer preferences, rising costs of materials or ingredients.

Purpose: Helps businesses anticipate and prepare for challenges, allowing them to develop back-up plans.

Example of a Simple SWOT Analysis with HC/DC:

HC/DC is a mobile hot cocoa company that serves handcrafted hot and frozen cocoa made with high-quality, real ingredients. We operate from a bike cart and pop up at events, parks, and markets year-round. We offer seasonal drinks, cater private events, and bring nostalgic, feel-good cocoa to communities in a fun, memorable way.

Strengths: Family-owned, high-quality Ingredients, mobile dervice, year-round appeal.

Weaknesses: Limited products to offer. Weather can impact our sales. Hard to scale this up when we’re tied to the bicycle for delivery. Storage & supply limits increase the cost of our ingredients because we can only buy in small batches.

Opportunities: Seasonal Pop-Ups & Events, Collaborations with local businesses and food suppliers, Subscription or Membership Deals, Merch & Branding – could create a logo mug!

Threats: Health trends. People are trying to eat healthier these days. Regulatory/licensing issues – not only is this a business, it’s a food business which means extra costs associated with getting all the paperwork needed to handle and sell food. If any one of the ingredients goes up in price we’ll have a hard time keeping prices affordable. Competition from cafés & chains, like Starbucks.

Tools and resources for conducting market research

Let’s learn about key tools and data sources for conducting market research, both in-person and online.

Online research. There are several online resources that enable you to spot and interpret trends within an industry. Conduct a search using Google Trends. Using Google Trends can be as simple as wondering how often people in your region are searching for key terms and comparing terms against others.

Step 1: Go to Google Trends. Type in a key search term that is relevant to your industry. In our case, we’re exploring hot cocoa competition!  Type in your term and click “explore.”

Step 2: Next, refine by your geographic region, time period, categories, web search, etc.

Example: We searched “hot chocolate” and narrowed it to WA state, in the past 30 days, all categories, web search. Turns out the Spokane region had over 100 searches in the last 30 days! Who knew Spokane loved their hot chocolate so much? I’m wondering if people are more familiar with the term “hot cocoa” and would they respond to that more than hot chocolate? So, we clicked “compare” and added “hot cocoa” as a search term. Turns out – no! The searches for “hot chocolate” were more than double those of “hot cocoa” in the same time period. Looks like we made a good choice for our company name “Hot Chocolate Delivery Company.”

Step 3: Go a step further and scroll down to see the “related topics” and “related queries” that might show you more information on this topic. “Queries” just means “searches.”

Example: We saw “frozen hot chocolate” as a related query and thought – ooh, this is what we need to know for summer. Has anyone been interested/searched for this? Turns out, yes! There were almost 50 searches in WA this month for this term, especially in the Seattle-Tacoma region of the state. Scrolling down further I see two “additional topics,” including a “recipe” and “Dairy Queen.” Ahh. Competition. We had only been thinking about Starbucks and other coffee shops as competition. But, for frozen hot chocolate, of course Dairy Queen is on the list!

Here are several other online resources that you can browse around to do online market research. Some are federal, some are unique to WA state, and some are even more local.

• BLS Website
• O*NET Website
• SCORE Website
• S. Small Business Administration
• WA Commerce Startup 365
• AWB Competitiveness Redbook
• AWB Institute
• US Chamber
• AWB Grassroots Alliance – local chambers

In-person market research through Interviews and focus groups

Sometimes, in-person research is the best way to get useful information for your market analysis. You can practice with friends and family – who we hope given honest feedback on your questions and business ideas. Ultimately, its best to interview or do focus groups with your target market.

These strategies are certainly helpful when you’re just starting. However, they’re also useful when you’re introducing a new product to an existing market or shifting to a new market. It can be helpful to come back to your original interview/focus group responses after you’ve been in business a minute and see if there’s any reflections for you to integrate into your work now that it is flowing.

Interviews: Interviews are considered a one-on-one conversation with a potential customer/client to get their feedback on your products or services. You might have a product for them to try to get a better idea of what they’re reacting to. You might offer a shortened form of the service in the same way.

You’ll want to draft a list of questions that help you answer key curiosities you have about your clients and potential market. Too few questions won’t get you the information you need. Too many will have the interviewee losing interest and disengaging. Its best to start with a list of 5-10 questions. Then, if you start with just five (5) in the interview, you have a few more to ask if the interviewer is interested and agreeable.

Drafting the questions ahead of the interview is important. If new questions come up during the interview, great! However, one of the reasons we draft questions in advance is so that you ask the same questions to each interviewee, which will give you something to compare and contrast.

Focus Groups: Focus groups are essentially group interviews. You have a small group, ranging from three to 10 people, in the space together answering the same questions, reacting to the same products, and talking together.

Sometimes focus groups are really helpful in getting different perspectives in less time. Another thing to consider is who is in your focus group. It’s important to keep in mind that not everyone will feel comfortable being totally honest in front of other people. This means you have to plan for a focus group that has people with similar “power” in the group together.

Another way to think about this is if someone said something that someone else disagrees with in the group, is there a potential for a negative response that would make someone feel badly? If so, see below to think about interviews or non-in-person market analysis options.

Using surveys and questionnaires

When you want to get a lot of feedback from many people, potential markets, or want to preserve anonymity and promote more honest feedback, you might want to use surveys or questionnaires. Surveys can be shared online – there are several free platforms (Google Forms, Survey Monkey, JotForm). Questionnaires might be handed out, in-person for completion later. You might even tie a promotion in with survey or questionnaire responses! Filling out the survey and showing proof of completion might be worth a one-time discount!

Similar to interviews and focus groups, its important the list of questions not be too long. In an online survey, unless you’re tying an incentive/promotion to completion, its wise not to expect people to answer more than five questions.

Crafting good survey questions is tied to the information you want to get out of the survey. Using yes/no responses can be helpful for specific feedback. Example: “did you like the taste of our hot chocolate?” It will be easy to see the responses and count the number of yes’s and no’s to a question like that.

However, more open-ended questions that don’t limit the answer to yes/no can get you a lot more information. “What did you like most remember about our hot chocolate” is a different way of asking if people liked it or not and you’ll get more specific feedback about what people did like. Example “it was so creamy! Chocolatey but not too sweet. Never too hot. So good but not sure where or how to order more?”

Creating a good survey comes with a balance of yes/no or multiple-choice questions with one or two open-ended questions. On a short survey, we always suggest including the “anything else you’d like to share with us?” kind of open-ended question, last.

Check what you learned

The Young Entrepreneur Academy unit assessment tool is available to you to help you practice what you learn.  You can pause and exit at any time and take the assessment as many times as you want. We don’t collect personal information nor do we use or show your name. Any data we do collect is anonymous and will be used to improve the curriculum. Your anonymous responses may be subject to public disclosure under RCW 42.56.

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