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Understanding your market
Read time : 6 mins Added: 25/05/2023
In order to build a successful business, it’s essential to understand how your market works. By finding out what your customers really want, you can improve your products and services to meet their needs. And by discovering how your competitors operate, you can find ways to outperform them.
5 things you’ll learn from this guide:
Every business needs to know whether there is demand for their product or service and what people will pay for it, especially when times are hard.
But market research can also help in other ways:
- It reduces the risk of making bad decisions
- It helps you identify potential new opportunities
- It helps identify your unique selling points and improves your marketing
- It provides ideas for product and service development
- It helps you better understand your competition
- It can inform your business plan
Understanding your customers
Statistics on population, spending power and consumption patterns can help you identify target market areas. This could have a direct impact on pricing, marketing and product placement. It could also influence where a business might choose to set up or where it might expand to.
Understanding your market
In uncertain times, it can firstly be worthwhile to understand the overall health of the economy. This type of research helps you factor in a future recession or boom so you can understand whether a new opportunity is worth pursuing.
It could then also help you focus on trends that affect your industry. Different sectors react differently to recessions and booms. For example, low price point items may be less vulnerable to recessions than major purchases such as new cars or holidays.
You’ll find useful information at Lloyds Business Barometer and our UK Sector Tracker.
Lloyds Bank customers have access to Business KnowledgeBox through Internet Banking, which contains guides to setting up and running over 500 types of businesses, including key market trends.
Our customers can also use the Lloyds Bank International Trade Portal which provides a gateway to explore international trade opportunities and detailed market information.
Understanding your competitors
It can be daunting trying to learn more about your competitors, but the insights you gain can be very valuable. You could:
- Research your main competitors at Companies House
- Study trade websites and the business sections of local newspapers
- Look at trade directories as soon as they are published, and noting any changes
- Try out competitor services as a ‘mystery shopper’
- Talk with your competitors’ customers
- Chat with your competitors
While doing the above research, remember your obligations under competition laws. You’ll find out more from the Competition and Markets Authority.
While not having the same statistical rigour as commissioned formal research, informal research can provide useful insights into your customer attitudes and can often be compiled fairly quickly.
Run surveys
Ask your customers for their views by post, email or on your website. Remember to keep your surveys short and anonymous.
Free online surveys and questionnaires are good options. You could even offer prizes to encourage people to take part. However, your promotion would then become a prize draw which is governed by Gambling Commission rules.
Collecting information from participants may be subject to government rules on data protection. Find out more by visiting GOV.UK. If you intend to promote your survey, you should also be sure to follow Advertising Standard Authority rules.
Collect customer comments
Anyone in your business dealing with customers, retailers or distributors should use the opportunity to find out what they think. By setting up a system for recording and capturing their views, you could improve your services. Even if your business grows rapidly, always deal with a few customers yourself to stay in touch with what’s happening.
You could also ask your customers directly for feedback on the phone, by email or face-to-face. However, you must be careful not to break data protection laws regarding unsolicited calls.
Visit the Information Commissioner's Office for more information.
Look at social media and customer reviews
It can help to maintain a watchful eye on both your own social channels, and those of competitors. There are social listening tools that allow you to track what is being said about your brand and the sentiment behind those conversations. Its aim is to look deeper than just the number of times you get mentioned. This can deepen your understanding of your offering and help you adjust your strategy accordingly.
What would a customer’s ideal service look like?
Watch for even the smallest signs of dissatisfaction – people will often stop buying/using your service rather than complain.
Ask them, “If you could change one thing about our product or service, what would it be?” Then work towards delivering it.
Complaints are also a good source of understanding what has gone wrong. Customers today expect to be able to share feedback about a business wherever and whenever they want to. It might be through social media, via review sites, or by adding comments to your own website, where that is possible. By using a public forum for their complaints, they hope their issue will be addressed promptly.
Customers also say they consult these sources when making purchase decisions, so negative online reviews could make them avoid certain businesses.
Turning a negative into a positive
It can be tough to read criticism of your hard work, but even negative comments can have positive outcomes. You can use them to improve your business or to update your website’s frequently asked questions (FAQs) section. Best of all, people whose complaints are handled satisfactorily can become advocates of your business.
If you're writing a business plan or have an idea for a new product or service, you should consider formal market research. This is a more professional and structured type of research that can provide actionable insights for your business. As well as qualitative and quantitative research, it could also include a more extensive type of secondary research.
Good formal research programmes, whether quantitative or qualitative, require a lot of care to set up and conduct, so you should consider employing a professional firm to carry it out. They will need the clearest possible brief explaining what you want to find out, along with your budget and timescales.