Market Research As Tool For Business Success

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1 year ago
Market Research As Tool For Business Success

Irene was a lucky girl. Unlike many young Kenyans she had secured a good job immediately after she graduated from university and life was good. Her job entailed auditing information systems for hotel clients. You see hotels are busy during the day and to avoid disrupting business Irene and her colleagues worked at night. Working at night meant Irene had some spare time, which she used to come up with a business plan. Wondering how it all began? Irene had a close friend who after graduating from university ventured into business. She was envious of her friend’s flexible working hours. Saturdays were fun days for her friend, but poor Irene had sweating out her weekends computerizing and auditing systems. Although she did not have the guts to quit her job, Irene decided to design a business plan hoping to be like her friend someday. But, that day came suddenly and unexpectedly. One day she was summoned by her boss and informed that she would be laid off. To say it was devastating to her would be an understatement; she did not know where to start, but she remembered the business plan she had developed. Since she had some money from her savings and terminal dues, Irene decided it was the right time to start her own business. She sought advice from friends who advised her to start a hotel business. “Look at Kinyua” one of her close friends offered, “he is making a lot of money from the restaurant he started the other day. Go for it gal!” And going for it, she did. Irene opened a hotel business. But things never turned out as expected and six months down the line the business closed shop. She realized, rather too late, that competition was stiff, and where she had put up the hotel they were many food kiosks selling cheap food. Even though her hotel was clean and had quality food, most customers found the prices high and unaffordable. Could Irene have avoided the tragedy? Read on.

 

Starting a business is an adventure, fraught with risks, uncertainty, and ambiguity. Having the funds to launch a startup does not guarantee success. What, we ask, does a startup require to navigate the murky waters of business? Knowledge. Knowledge about the product demand. Knowledge about the market size. Knowledge about competition. Knowledge about the right price. Knowledge about the location. Knowledge about similar products in the market. This knowledge comes from market research. Unfortunately, many young people, Irene, venture into business in the context of not understanding the demands of running a venture.

One successful entrepreneur, David, explained the dangers of starting a venture with the correct information.

“A lot of businesses I got into were not that I knew them; it was because I talked to Ken, and he told me restaurants have got money. So, when I hear that I say, “you hear, you see this guy, he has a lot of money”, yet Ken has got no knowledge about restaurants, he is just doing hearsay. That’s how to find many people get into businesses for the wrong reasons. You go into business because you have heard that there is food money. Because Ken is telling you that there is a friend of his who opened a bar and is doing so well and maybe not even realizing that the guy is struggling to sustain the bar. A lot of people put money into businesses, but they don’t understand. And I think one of the key things that one needs to do is not to put money into something because of hearsay. What people need to do is Market research, which is something many of us don’t do. You look at a woman who retires, gets a handshake (terminal dues), and goes to open a saloon; the man goes opens a bar. But nobody has thought of the business if they can manage it or run it. So, I think that’s an important aspect people should learn not to jump into something because of what they have heard. And I think most of the people who are talking have no idea even about the business, and what they are giving you is what you may call firsthand information of what we call hearsay.”

What is market research? It is the process of gathering, analyzing, and interpreting information about a particular market, industry, or consumer group to understand better the opportunities embedded therein, and the possible challenges to encounter in pursuit of the opportunities. Such opportunities include customer preferences, behaviors, and perceptions.

According to Susan Adongo, a business consultant with vast experience in coaching and working with small and medium-sized enterprises, by overlooking market research a business runs the risk of making costly mistakes and missing out on potential opportunities. Some of the potential consequences include an inaccurate understanding of customer needs, wasted time and resources, making poor or wrong decisions, and a lack of knowledge about competitors. She goes on to explain several ways one could conduct market research.

  • Online: Most market research firms have websites and social media handles where you can gather knowledge about their products, customers, and target market. You can also contact them as a mystery shopper to gather some market intelligence.
  • Networking: Make friends with your competitors and their employees and build a solid network of people in business. Attend social networking events; this is where a lot of business ideas are shared freely.
  • Trade shows:  Attend trade shows to see the kind of products and competition in the market.
  • Know people: Make friends with people, especially, guards, cleaners, and tea girls and boys. This may seem strange, but they can share a lot of useful intelligence.
  • Social media: Use social media to monitor what customers are saying about the products in the market. Get to know their preferences, attitudes, opinions, and expectations.

Listening to David, our entrepreneur shares his experience of how he recollected himself after failing in businesses started through hearsay and gathered market intelligence before his next venture, which succeeded. He started by spotting an opportunity in the real estate sector.

“There were no developers, there were no developments going on and everyone you would talk to would say the real estate market is dead. So, I decided to find out whether it was dead instead of believing what people were saying. To my utter surprise, I found that it was very vibrant. Now what shocked me was to find that, there was a clique of people who were doing real estate development. It was so busy, it was shocking, they would use adverts which is the reason nobody knew about it. I went to the estates with my friend, I sit with him, and he will tell you, “ahaaa property don’t touch, right now it is the worst thing, the last three years nothing is going on”. So, it was shocking now when you are from talking to the estate agents first to find that the actual reality on the ground was looking different. Most times I would go as a buyer, I would go there and ask questions, and they will give answers. I would ask leading questions; I would ask questions like “when did you start building? how long did you take to build these buildings? Was it very expensive? What was the rate? How do you pay your contractors?” or something like that. They would give me a rate. Even as you are talking, you try and ask him “how big is the house?” He tells you “si uingie ndani uangalie size yake (get inside and check the size)”. But the shocking thing, is all that because these guys would be doing maybe 40 units, and they are maybe on the ground floor or first floor, and they are all sold out, maybe 3 or 4 units are left. And you start asking what you mean that you are sold out, and you pretend, you start saying “I wanted ground floor” because you do want any house, and he tells you it’s not possible. Because you have done research now, you find let’s say he gives you a rate but how do I know what it has cost? So, I would find time and come back when he is not there, give his watchman some chai (tea – a euphemism for a small bribe), and measure the house, room by room. When you do that you realize this is the sort of costing, this is the sort of return, and you realize the guy is making money. I used that information to try out my first project.”

How much time should you devote to market research? It depends on the type of business you are venturing but is generally recommended that businesses spend a significant amount of time on market research to ensure that they have a comprehensive understanding of their target market and the competition. As for David, it took him a whole year to gather enough information to start the venture. Make sure your factor in some funds to conduct market research.

DO NOT RUSH TO INITIATE YOUR VENTURE WITHOUT MARKET KNOWLEDGE

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