The purpose of market research
Understanding the market
Understanding the market means finding out what is already happening in the area where an entrepreneur plans to sell, before they commit time or money. A market is made up of the customers who might buy, the businesses already selling to them, and the products those businesses already offer.
What to find out
Market research is how an entrepreneur builds up this picture, and it means finding out about three things:
| Who or what | What the entrepreneur finds out | Example: pop-up phone case customising stall at a Saturday makers' market |
|---|---|---|
| Customers | Who would buy, what they already buy and how much they usually spend. | Most 13–15 year olds spend under £8 on phone accessories and replace a case when it cracks; older teens buy less often. |
| Competitors | Which other businesses sell something similar, and how they compare on price, quality and speed. | A phone shop in town sells plain cases, and a market stall sells ready-made stickers for decorating cases. |
| What is already offered | The range of products on sale, their prices and what customers think of them. | No stall makes personalised phone cases while the customer waits. |
Finding a gap in the market
Putting all three together can reveal a gap in the market: something customers would buy that no business nearby is providing, or not providing well. In the example, the phone shop only sells plain cases and the sticker stall only sells ready-made stickers, so a custom phone case for £7 made in five minutes fills a space nobody else is using. A gap is only worth pursuing if enough customers want the product and can afford it, which is why you should research the market before building the stall, not after.
Practise this
Cambridge National Enterprise & Marketing · 2.1 The purpose of market research