Market research is a systematic and objective way of determining who your potential and actual customers are and gaining information to gain an understanding of their needs, desires and —most importantly— their behavior. Market research often helps define who wants to buy a product or service, who can afford to buy a product or service and who actually spends the money on a product or service.

You may find in a survey that nearly everyone may want a trip to Hawaii, for example. But, who can afford the trip? That question narrows the field considerably. Next, who actually spends money on such trips? Again, the field of potential buyers vs. real spenders is funneled down to a smaller pool of individuals. You need to know how large your potential pool of customers will be, their ability to pay for your product or service and the history of spending that indicates the likeliness that your product or service will sell in the marketplace.

Big corporations spend millions of dollars annually to study the marketplace. The small business has an edge. As a small business owner, you are closer to the customer. The small business is often able to detect buying patterns and customer desires (as indicated by special requests) more quickly and react almost immediately. Market research informal as with in-store observances or formal via a survey or focus group can provide valuable information.

Market research gathers, focuses and organizes information about your market. It reduces your business risks by making your business more responsive to the market, so you can keep them coming back to your store. Market research can also help identify particular sales and profit opportunities, as well as indicating waning interest in a product line. You already conduct some research as a part of doing business. For example, you use merchandise returns as a guide of products not to restock. You watch what your competition is doing. And, you gather trade information from your professional or trade association.

There is probably a great deal of published information available on your particular type of business. The Census Bureau has a wealth of employment, income and demographic data available. You can download pages of information from the Census Bureau’s web site at http://www.census.gov. You can also call the Census Bureau’s customer service center at (301) 457-4100 to find out what publications and reports are available; the bureau may charge a fee for publications.

You can also conduct a focus group or survey yourself. If you have a slim marketing budget, this can provide some valuable information. Remember that although helpful, self-organized market research will not be as objective as outside research. For added confidence in research results, consider hiring a advertising agency or market research company to create, implement and report specific market research to you.

If you would like some free and confidential advice on market research, sign up for counseling and a SCORE counselor will help.