You're supposed to have done this already. Conventional wisdom suggests that you should do a market analysis before you open up for business, to get a sense of the demand for your services in your area. But if you're anything like Seattle remodeler Gary Potter —and there's a good chance that you are — you didn't. “Market analysis?” Potter says with a laugh. “I didn't know those two words when I started [in 1979].”
But Potter is finding that a market analysis can be useful to a company as established as his. In fact, Enrique Brito, an investment banker who doubles as a seminar leader for the Small Business Administration's Service Corps of Retired Executives (SCORE), suggests that small companies do some kind of market research a minimum of every three years. “If you don't do it, you're missing important business opportunities,” Brito says.
It's not something you have to take on by yourself. You can get a local consultant to help you with it, at a minimum cost of around $2,000, though the price tag can climb significantly higher depending on how extensively you decide to redo your marketing materials. But if you're short on monetary resources and have the time, you can do most of it on your own. So welcome to Market Analysis 101. What follows are the five steps to a better position in your marketplace.
Step One: Know Your Goals What it is: Establishing what you want the end-product of the market analysis to be.
Why it's important: Goal-setting will help you focus what can be a very broad task. Potter undertook his market analysis because he wanted a new logo, and previous attempts at one were, in his words, “different, but not better.” The development of a new logo lead to new marketing materials, with different designs and updated written copy.
How it's done: Ask yourself what you think the weaknesses of your company are. What keeps you awake at night? Bob Lehner, owner of Lehner Brunton Remodelers in Warrenville, Ill., felt that his marketing campaign wasn't sufficient. “Doing a blanket marketing campaign is not feasible,” he says. “[What works] changes from community to community.” As a solution to that problem, Lehner set out to do a market analysis with the hopes of finding his company's “key client.” Indeed, that's a popular reason for undertaking this project. Larry Tremonti, a SCORE counselor, says that most of the existing businesses he deals with “don't have a target customer. They think they want to sell to everybody.”
Step Two: Know Yourself What it is: Analyzing your database of past and current jobs, searching for a “bread and butter” project or client type.
Why it's important: “You have to find out who your target customer is,” Tremonti says. “If you can define it by a set of criteria —for example, income, gender, and social status — you can really narrow down who that individual is.”
Chances are, you have an idea in your head as to what kinds of jobs your company does best, or what your “target demographic” is. But without looking at the hard data, how can you really know, particularly if you originally established your “target client” without doing any market research? “You may think that you are offering your product or services to one customer segment, but it may turn out you're not reaching them,” Tremonti says. In other words, you may have a marketing plan that you think is perfectly tailored to two-income, professional households, but if the bulk of your business has come from selling replacement windows to single mothers or decks to retirees, you may want to change how you present yourself.
How it's done: Go back and take a look at some previous jobs you have done. Try to make sure it's a significant sample: If you do a hundred projects annually, you may just need to go back a couple of years; if you only do a handful of jobs a year, you may need to take the entire history of your company into consideration. Chart them by job type, client income, neighborhood, etc. You're looking for trends. What kind of projects are you doing the most of? What kind of clients are responding to your ads? Like it or not, that's your bread and butter.
Aside from the demographics, it's also a good idea to survey your customers, to get an idea of why they chose you and what's important to them. “You're looking for holes,” Brito says. “What needs aren't being satisfied? What do homeowners hate the most [about remodeling]?”
There are specific ways you can frame your questions in order to get the most useful response. Geoff Graham, president and founder of GuildQuality (a national firm that measures customer satisfaction for builders and remodelers), points out that there is a big difference between the customer satisfaction surveys you might give clients at the end of the job and the marketing surveys you would use for an analysis. “You're trying to understand what your customers are like and what their priorities are,” Graham says. He suggests asking questions like “How did you find out about us?” and “What was most important to you in making your decision?” rather than standard “rate-us-on-a-scale” questions.
Brian Moline, president of Modus Marketing Group, the company that is assisting Lehner with his market analysis, suggests grouping several qualities people look for in a company (quality, service, cost, etc.), and asking customers to rank them from most important to least. Knowing that customers aren't buying from you because of price will go a long way towards understanding your company's place in the market.