How To Do A Market Analysis
by Tom Egelhoff
Small Town Market vs. Big City Market Analysis
One of the most important parts of any marketing plan must deal with which market you want to target and does that market, in fact, exist. Once you have identified that market, a market analysis will tell you what's happening within that market. You might feel that this is easier in a small town than in a large one but, in my opinion--the opposite is true.
Small Town Market Analysis Tougher Than Big City?
Why? In a large city people tend to mark off territories and shop within them. Stores falling outside these territories are "cost prohibitive" or "time prohibitive" to shop. There are more similar competitors within this area than is small towns but because of traffic, distance and time convenience they tend to shop the stores they feel comfortable with. When I lived in San Diego we would often travel 100 miles on a Saturday hitting just two or three shopping centers but only five stores. We knew what we wanted and knew from experience, or yellow pages, who had it. Also keep in mind in Gallatin County, where we live now, there are about 60,000 people. In San Diego County there are 7 million.
In small towns, it's not uncommon for a customer to shop all stores in the area because they are close together, and time, traffic, parking and location are not as much of a hassle as in large cities. Rural customers often come to town prepared to spend the day doing the family shopping and visit many stores and maybe even seeing a movie before returning home. Saturdays are famous for all the "farmers coming to town" and are big days for small town merchants.
So How Do You Do A Market Analysis In A Small Town?
The first order of business is to capitalize on the strengths that a small town already has. That strength is that people in small towns tend to know each other. Many businesses will know a sizable percentage of their customers by name. This will be your customer base. If you ask one of these customers to fill out a survey about your business they will probably want to help you out.
In large cities, customers will be skeptical that they will end up on some kind of mailing list and may be reluctant to give you any information. If time permits talk to your customers and ask them the questions (don't read the form to them) in casual conversation and listen to the feedback they provide. Another strength in small town with high tourism. These folks are easier to identify than in larger cities. Ask them questions about your business to improve your tourist traffic. What products did they expect to find in your part of the world?
What Kind Of Information Am I Looking For In My Market Analysis?
There are two kinds of questions you need to know.
1.) Questions regarding your current operation. Are customers happy with current service and products? What improvements would they like to see?
2.) Questions regarding future operations. Would you like to see us add or delete "X" service or products in the future?
Here are a few things to ask yourself:
- Can I identify my market? As I discussed above it's not always easy.
- How can I reach them? What advertising mediums are available to you? Which ones do your customers use?
- How big or small is your market? The smaller it is the cheaper to reach, but also harder to make a living.
- Is your market growing or shrinking? What will this do to your business?
- Can the market be segmented? Farmers? Retired? Generation X? Tourists? Men? Women? Should you target all or just specific ones?
- Does geography play a part? Bozeman attracts a lot of skiers during the winter. Can you capitalize on your location?
- How do your customers feel about your competitors products or services? Like them? Hate them? Shop them?
- Is there a way to make your products or services unique in the marketplace? See: "How to Make Your Product Or Service Unique."
- Are customers paying more or less in your market for the same products or services? How do you stack up?
- What factors are most important to your customers about your business? Quality? Delivery? Price? Time?
- How many direct competitors do you have? What markets are they targeting? Are they successful? How is their pricing? Are they making any changes? Can you position yourself away from them? See: Positioning chapter in "How To Market, Advertise and Promote Your Business or Service In A Small Town."
- Is your industry regulated?
- Do customers tend to be loyal to your industry? Barbers? Hairdressers? Doctors? Veterinarian?
Sources Of Market Analysis Information
Since the government and the marketing industry tend to focus on the Fortune 500, it's not always easy to find help for small businesses in small towns. Here are a few of the resources I often use:
Public Library - They will have both national and local census information as well as other good sources that will be included later in this list.
Encyclopedia of Associations - National Trade & Professional Associations of The United States (Library) I don't care what kind of business you're in, there is a trade association for it somewhere. I never ceases to amaze me how diverse these are. Contains over 30,000 trade associations and trade magazines.
Encyclopedia of Periodicals - (Library) Most businesses have associations, they also have magazines. Concrete Today, Beanie Babies Today, Piano Today, you name it there is probably a magazine about it.
Rand-McNally Commercial Atlas and Marketing Guide - This is a great source of information for cities or all sizes as well as county information. You could play a football game on the cover. It's a big book. Contains retail sales data (amounts spent on food, housing, clothing, etc.) as well as state and county population trends.
Sales and Marketing Magazine (Survey of Buying Power) - Published yearly. Contains info similar to the Rand-McNally above. Good for county info but, like so many other sources, only has info on cities with populations over 10,000. City info includes: Total population, number of households & income per household, how affluent a city is compared to nearby cities, amounts spent on: auto, drug, food, furniture and appliances.
Local Radio & TV Stations - These people make it their business to know the demographics of their audience. If they're wrong, you're advertising won't work and they're out of business. They often have very specific demographic information.
Chamber of Commerce - A good chamber will have local demographics and feedback from its members that can help. They often do surveys of members on a variety of subjects.
Local Colleges and Universities - Check out any local colleges in your area. Contact the head of the marketing department and have them do the research for you at little or no cost as a class project. They will be well supervised and are often very enthusiastic to do a good job and get the right information.
What Methods Do I Use To Gather The Research Information?
The three most common methods of market research are:
The One-On-One interview - As I mentioned above, talk to your customers. This will give you the most accurate information or all methods because the person is right there to answer questions and give feedback. You can also show samples or do product testing. Average effectiveness 90%.
The Phone Interview - One hundred phone calls is equal to 1,000 pieces of direct mail. It's convenient can be done at your place of business or home. Start by calling people you know to get your confidence up and to practice giving the questions. You might ask their permission to call them before you call them. Get their feedback and improve your questions. Average effectiveness 60%.
Direct Mail - If you are covering a large area, direct mail is one of the best ways to do it. In a small town this is probably the least effective way to get the feedback you are looking for. The average response from direct mail nationwide ranges from .5% to 3% (3 responses per hundred surveys). As you can see in some small towns you may not get a single response. You may want to offer some kind of reward for completing your survey such as a coupon or discount.
What Does All This Information Tell You?
It tells you who your customers should be. Once you have all the information from all your surveys one type of person should rise to the top. Age, education, income, etc. This is the customer you should be reaching with your advertising. It may surprise you who they are.
But if you can find them and reach them, they will keep you in business a long time.
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Based in Bozeman, MT, Tom Egelhoff is the author of How To Market, Advertise & Promote Your Business Or Service In A Small Town, and The Small Town Advertising Handbook: How To Say More And Spend Less. He is also a seminar and workshop presenter and trainer. He may be reached at 888-550-6100 or PO Box 271, Bozeman, MT 59771-0271
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