AOF EntrepreneurshipLesson 4 Establishing Your Market
Teacher Resource 4.1
Presentation Notes: Market Research MethodsBefore you show or display this presentation, use the text accompanying each slide to develop presentation notes. Writing the notes yourself enables you to approach the subject matter in a way that is comfortable to you and engaging for your students.
Developing a great idea is only the first step toward entrepreneurial success. Before sinking time and money into a product or service, entrepreneurs have to make sure there are people who will buy it. Furthermore, entrepreneurs must know as much about their potential buyers as possible. The way entrepreneurs get to know their market—the people who are likely to have a need for the new product—is through market research.
This presentation introduces methods for primary data collection for the purposes of market research, including observation, networking, interviews, focus groups, surveys and questionnaires.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Market researchers and entrepreneurs can conduct primary research in many different ways. Some methods are informal and involve casual discussions, while other methods require careful preparation and analysis.
The important goal of research is to understand the market, relevant trends, and customers’ desires and needs. Businesses are most likely to be successful when they have a clear understanding of their local market as well, including both their competitors and their customers.
AOF EntrepreneurshipLesson 4 Establishing Your Market
One of the simplest ways to research customer groups and their buying behavior is just to watch them shop or use products. By watching how they interact with products, and what they actually purchase, entrepreneurs can learn what customers like and what they dislike.
Through observation, entrepreneurs can also identify any problems people have interacting with existing products or services. One example might be customers shopping for electronics such as phones, which sometimes have confusing buttons. If a customer has trouble figuring out how to use a product in the way it was intended, it may be designed poorly. An observant entrepreneur can exploit the opportunity that a competitor’s poorly designed product provides: the entrepreneur can identify a need in the market—a phone that’s easy to use—and get an idea of how to design a phone that’s intuitive, simply by watching consumers interact with a phone they’re considering buying.
Observation can also reveal the conditions in which people are likely to shop and buy. When entrepreneurs observe what customers do in the real world, such as at a shopping mall, they gain authentic information that sometimes is more valuable than just talking to people. Sometimes what people say they will do and what they actually do are different. For example, a customer might say he or she is interested in something but then not actually buy it, so watching how customers behave is important when making decisions about what really works.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Social skills are highly important to successful business. By talking with people and forming connections and friendships, entrepreneurs learn how people in their industry think and behave. Many entrepreneurs credit their success to their friends, colleagues, and even competitors who provided insight, advice, or critical information. This information can help businesses make good decisions about what direction to take with new products and services.
Professional networking is the process of talking with people and developing a network of contacts. These people can provide support, information, and guidance. Building trust with colleagues, competitors, and customers will make them want to work with you and buy from your business.
Networking is an informal way of performing market research, but it can be inexpensive and highly valuable. Sometimes it may be easier to collect information by talking with people casually, because they may be more likely to open up to someone that they trust—or they may be more likely to speak candidly in a casual chat than in a formal setting where they may not be as comfortable.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Market surveys are often the most popular ways of conducting research because they can be used to poll potential customers about many different topics, including their habits and what they’d like in a specific product. Surveys and interviews can be done by phone, by mail, in person, or online. Each method has its benefits and drawbacks. For example, some methods are easier and cheaper to do than others, and people may answer differently depending on the method.
In fact, a drawback of survey research is that people may say they like a product or may exhibit interest, but when the product is actually offered, they may be less interested. This isn’t because people are dishonest; they sometimes don’t know how they will feel ahead of time, or their thoughts may change given different circumstances. What people say they are going to do does not always reflect their behavior. This is why many entrepreneurs want to use other methods of research, like observation and networking, as well as formal survey research.
When surveys are complete, the information collected can be reviewed and analyzed in qualitative ways by looking at what people say and feel. They can also be analyzed quantitatively; that is, by identifying the most common concerns and priorities of customers. This helps give an entrepreneur a more detailed, targeted view of the customer’s thoughts about the products.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Focus groups gather between 8 and 12 potential customers into a small room, often a conference room. An experienced researcher leads the discussion and asks questions that address the information researchers want. They listen to how customers discuss a product or a service and learn how their thought process works. By listening to customers talk about a product, the researcher learns what customers already know about the product and hears what customers want in a potential product or service.
Since focus groups involve an informal discussion with customers, they should be conducted by someone other than the entrepreneur. This is because an entrepreneur may not be able to interact objectively with customers about his or her “big idea” or really listen to what they say. Entrepreneurs usually feel strongly about what they want or expect, so it’s useful to have someone objective and experienced lead a panel or focus-group discussion.
Focus groups can be an expensive way to conduct research, because they require identifying and inviting customers, securing space for the discussion, and paying impartial researchers to lead the talks. Often, they will also compensate the customers for their time and insight. Despite the costs and difficulty, they can be highly valuable for companies, providing in-depth insight into the customer’s perspective.
AOF EntrepreneurshipLesson 4 Establishing Your Market
When a market researcher has finished talking with potential customers and learning their concerns, the next step is to try out different products or services. By introducing products and services, the businessperson can see how customers react to them and what they will actually buy.
For complicated products, an entrepreneur might first make a prototype of a product. A prototype is a first version, like a model or a demonstration of the final version. This can be used to show potential customers and investors what the entrepreneurs intend to produce. By asking customers what they think of the prototype, entrepreneurs can also gain valuable information and make changes to the product before it is mass produced. Then the final product will be improved before it is sold to customers.
The next stage of the product can be offered for sale, and entrepreneurs can track how successful it is. By adjusting product offerings over time, an entrepreneur will find out which are most successful.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Observing customers and networking can be done informally at low cost.
A survey is the most popular method for doing formal, targeted research, but it’s also more expensive to conduct.
Focus groups allow customers to talk about a product or service and bounce ideas off of each other, but that means that some customers may be influenced by others, and their buying patterns may differ from what they say in the group discussion.
Eventually, when an entrepreneur has gotten solid information in several ways, he or she will have to begin experimenting by developing a real product or service and trying to sell it.
Over time, with careful research and adjusting the products and services to match the customer’s needs and buying patterns, the entrepreneur can work toward success.
Using the following criteria, assess whether the students met each one.
Met Partially Met
Didn’t Meet
The survey questions address the goals of the research and target specific information about customers and the local market.
□ □ □
The questions are written in an unbiased and effective manner. □ □ □The survey samples were collected at an appropriate location and time for targeting the group of potential customers.
□ □ □
The findings demonstrate students’ ability to apply interpretive, statistical models, including cross-tabulation, to gain insight into key data points.
□ □ □
The research conclusions are logical, appropriate, and insightful and describe how the research could influence an entrepreneur’s decisions in starting a new business.
□ □ □
The work turned in is neat, legible, and presentable. □ □ □
Using the following criteria, assess whether the students met each one.
Met Partially Met
Didn’t Meet
All of the required components are included on the poster. □ □ □The subjects interviewed were appropriate to the product, and the data collection method chosen is logical and appropriate.
□ □ □
The connection between the product and the target market is expressed clearly and makes sense. □ □ □The conclusion drawn is logical, appropriate, and insightful. □ □ □The poster is neat and legible. □ □ □
AOF EntrepreneurshipLesson 4 Establishing Your Market
Teacher Resource 4.5
Key Vocabulary: Establishing Your Market
Terms Definition
added value The increase in worth of a product or service as a result of a particular activity.
bias A preference or subjective background that prevents someone from considering an issue objectively.
cross-tabulation A table or a chart that compares two different sets of data by including one variable in a column against a different variable in rows.
customer profile A list of the characteristics of one group of customers or potential customers.
demographics Data that separates and distinguishes people by population characteristics, such as age, race, gender, education, or income level.
focus group A small group of approximately 8–12 potential customers, guided by a researcher to discuss and give opinions, thoughts, and information about a new business proposal, product, service, or marketing campaign.
frequency Number of respondents in a survey giving a specific response.
leading question A question phrased in a way that suggests the answer that an interviewer wants to hear.
market research Research conducted by entrepreneurs or marketers to learn about the customers’ needs, opinions, preferences, and background.
market segmentation The process of dividing customers into different groups in order to understand their different product preferences or to learn how to effectively target them in a marketing campaign.
market trends Shifting preferences in the market. Trends reflect changing opinions, habits, and ideas that can affect what types of products and services customers will buy.
networking In the professional realm, the process of forming social and business relationships that help provide insight, guidance, and support along a career path.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Terms Definition
niche market A small, nontraditional segment of the market, defined by more specific characteristics than is typical.
panel discussion See focus group.
prototype A first model of a new product that shows its style and capabilities; used to demonstrate the capability of creating the product and to identify possible improvements to future iterations of the product.
psychographics Data that separates and distinguishes people by their lifestyle choices, behavior, or personality characteristics.
screening The process of filtering survey respondents to ensure that only those who match the customer profile are surveyed.
survey sample (also, market sample)
A collection of results from market research representing the profiles or opinions of the survey takers.
AOF EntrepreneurshipLesson 4 Establishing Your Market
Teacher Resource 4.6
Bibliography: Establishing Your MarketThe following sources were used in the preparation of this lesson and may be useful for your reference or as classroom resources. We check and update the URLs annually to ensure that they continue to be useful.
PrintHisrich, Robert D., Michael P. Peters, and Dean A. Shepherd. Entrepreneurship, 7th ed. New York: McGraw-Hill, 2008.
Lesonsky, Rieva. Start Your Own Business, 4th ed. Canada: Entrepreneur Media, 2007.
Meyer, Earl C., PhD, and Kathleen R. Allen, PhD. Entrepreneurship and Small Business Management, 2nd ed. Woodland Hills, CA: McGraw-Hill, 2000.
Online“Cross Tabulation.” CustomInsight, http://www.custominsight.com/articles/crosstab-sample.asp (accessed March 13, 2015).
“Ethical Behavior Is Good Business,” http://www.entre-ed.org/_teach/ethics.htm (accessed March 13, 2015).
Hixon, Todd. “What Kind of Person Prefers an iPhone?” Forbes, April 10, 2014, http://www.forbes.com/sites/toddhixon/2014/04/10/what-kind-of-person-prefers-an-iphone/ (accessed March 13, 2015).
Lella, Adam. “iPhone Users Earn Higher Income, Engage More on Apps than Android Users.” comScore, http://www.comscore.com/Insights/Data-Mine/iPhone-Users-Earn-Higher-Income-Engage-More-on-Apps-than-Android-Users (accessed March 13, 2015).
“Why Do Some People Buy iPhones Over Android Phones? Are They Really Better?” Quora, http://www.quora.com/Why-do-some-people-buy-iPhones-over-Android-phones-Are-they-really-better (accessed March 13, 2015).
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