What is small business market research?

Ever wondered why some small businesses thrive while others struggle to stay afloat? What separates the success stories from those that fade into obscurity? The secret often lies in a powerful tool that can shape the future of any business: market research.

Market research isn't just a buzzword – it's a vital process that allows you to gather and analyse data about your target audience, competitors and overall industry trends.

By employing effective market research techniques, you can uncover your customers' needs and preferences, identify gaps in the market and make informed decisions that drive growth.

In this blog, we explain what market research is, why it's essential and how you can use it to better understand your potential customers, competitors and opportunities.

What is market research?

At its core, market research is the process of gathering information to better understand your target market. This includes learning about your customers – their needs, preferences and behaviours – as well as your competitors and the economic trends that could have an impact on your business.

Think of market research as the foundation of your business strategy. It's like having a map that shows you where your customers are, what they want and how you can stand out in your industry.

For example, if you own a bakery in Manchester, market research might reveal that there's a growing demand for vegan baked goods in your area. With that insight, you can adjust your product offerings to meet customers' needs and outpace your competitors.

Conducting market research will give you a deeper understanding of the direction in which you should look to take your business.

After all, if you're working on the release of a new product feature, or hoping to implement a brand-new advertising strategy, wouldn't you want to know ahead of time how these are likely to be received?

• Looking to chat to a market research expert? Match to an Enterprise Nation adviser.

Why is market research important?

Small businesses often operate on tight budgets, which makes every decision more critical. Here's how market research helps:

1. Understand your customers

Knowing who your customers are and what they want is the first step to success. By doing market research, you can identify key information such as:

• demographics (age, gender, location and so on)

• buying habits and preferences

• pain points or problems they want solved

For instance, a small café in London might survey its customers and find out that many prefer plant-based milk options. By adding oat or almond milk to the menu, the café can attract more customers and build loyalty.

Target demographics and potential new customers won't magically present themselves – you have to unearth exactly who's likely to buy your product or service. Age, income and location are all factors to consider, so bear this in mind when gathering your data.

Identify the competition

Your competitors aren't just your challenges – they're also your teachers. Market research can reveal what they're doing well and where they're falling short, so you can position your business uniquely.

Take the example of a small tech repair shop in Birmingham. By researching their competitors, they might discover that most shops in the area don't offer same-day repairs.

With this insight, they could market themselves as the go-to option for urgent repairs, giving them a competitive edge.

Spot opportunities and challenges

Market research helps you identify trends and gaps in your industry, opening the door to new opportunities or helping you prepare for challenges.

For example, a clothing retailer in Glasgow might notice through market research that sustainable fashion is trending. They could start offering eco-friendly clothing lines to tap in to this growing demand.

The marketplace is an ever-evolving beast, so regular exploratory research into changing business trends can help you when developing strategies.

Reduce risk

If your small business is looking to undertake a significant rebrand, or perhaps redesign an already popular product, testing it within your community before pulling the trigger will provide crucial information as to whether these changes are worthwhile. That reduces the risk of them being poorly received.

Get better at marketing

Knowing your audience will also provide important clues as to where you should be focusing your marketing efforts.

Whether you're advertising on social media or placing ads in physical spaces, you're more likely to connect with your ideal audience following solid market research.

Make informed business decisions

Every pound counts when you're running a small business. Market research removes guesswork, allowing you to focus your resources on strategies that are most likely to succeed.

Improve areas of the business

Feedback from current customers is a great type of market research and can give you meaningful insights into how you improve existing parts of your business.

VIDEO: Everything to know about market research

Anna Morrish looks at how businesses can understand their position online, including how and what they appear for in the search results. She also touches on competitors, and what you can learn from them in order to take more of the market share:

Examples relevant to small businesses in the UK

Retail

A family-owned gift shop in Yorkshire conducted a customer survey and found that personalised products were in high demand, especially around the holidays. By adding personalised gifts to their product line, they saw a significant increase in sales during the festive season.

Hospitality

A small restaurant in Bristol noticed through online reviews that customers wanted more gluten-free options. By tweaking their menu and marketing their gluten-free dishes, they attracted a new customer base.

Service sector

A cleaning company in Edinburgh researched local demand for eco-friendly cleaning products. They decided to offer green cleaning services, which became a key selling point in their marketing efforts.

Common misconceptions about market research

"Market research is expensive."

Not true! Many types of market research, such as surveys, social media analytics and competitor analysis, are free or low-cost.

"Market research is only for big businesses."

Absolutely not. Small businesses often benefit the most from market research because it helps them make smarter decisions with limited resources.

"You need to hire a professional to do market research."

While professional market research companies can offer advanced insights, you can easily do effective research on your own. Free tools like Google Forms, Google Trends and social media analytics are simple to use and highly accessible.

"Market research takes too much time."

It can be as quick or as in-depth as you need. Even a short customer survey or a 30-minute review of your competitors' online presence can uncover actionable insights. Start small and expand as you grow.

"It's too complicated for small business owners."

Market research doesn't have to be complex. It's about asking simple questions like, "What do my customers need?" or "What are my competitors doing?" Easy-to-use resources and step-by-step guides make the process straightforward for anyone.

"Market research only matters before starting a business."

While market research is crucial for launching a business, it's just as important for maintaining and growing it. Regular research helps you adapt to changing consumer preferences, stay ahead of competitors and identify new opportunities.

"All the data you need is online."

While online research is a great starting point, it doesn't tell the full story. Speaking directly to your customers through surveys or in-depth interviews often reveals valuable insights you can't find on the internet.

VIDEO: Know your customers and grow your business

Marketing specialist Heather Westgate guides you through the process of understanding your customer base and using this information to improve your marketing campaigns:

What market research does for new businesses

Market research will help you make the right decisions about where to invest your time, money and effort. If you get it right, it'll make your business plan easy.

How? When you start to learn about your target customers and what they want.

• You get more customers because you know where to find them and why they buy.

• You create products or services that are exactly what they want.

• You can create a brand that resonates with them.

• You can create marketing that converts to sales.

• You have evidence to back up your decisions about where to invest your time, money and effort – you're not just hoping you're right!

• You're confident you're creating a business which will succeed.

• You can inspire the people you work with – and sell to – with a clear picture of who you serve.

• You can avoid having big decisions going round and round in your head.

• You have more fun! Because you're learning all about some of the most important people in your business.

Why new businesses sometimes get stuck with market research

There are a few reasons for this. For a start, it's a totally new skillset for most people. But a big obstacle is fear.

If you have a new idea for a business, product or service, it can make you feel vulnerable to put it out there and ask your target customers what they think of it. What if they hate it or just think it's a bit rubbish?

This is a worry that 99.9% of the time turns out to be unnecessary. If you've put effort and thought into your business and your ideas, chances are you're on to something.

But how good would it be to know – for sure – that you're creating a business or product or service that is pitch-perfect for your customers? And that everything about your marketing is working to its full potential?

The other worry is spending too much time 'going down the rabbit hole', when new businesses have too many questions and get overwhelmed or confused by answering them. And this is where doing a few things in the right order can make the process a lot easier.

Key takeaways

Market research is an invaluable tool for small business owners. By understanding your customers, staying ahead of your competitors and spotting opportunities, you can make good strategic decisions that drive growth.

You don't need a big budget or a dedicated team to get started – small steps, like gathering customer feedback or researching trends online, can make a huge difference.

Relevant resources

• How to do market research and test demand for your product

• What are the benefits of market research?

• Five key questions you need to include in your market research