The 5 Pitfalls of Market Research
by Timothy Barton
So what are the most common mistakes companies make in their
There may be more than 5, but here are the most common ones.
#1 A company chases an untried and unproven market-but
neglects the solid available business that is right under
their nose....their current customers!
It is easy to get caught up in the excitement of a new
It happens a lot. You launch a new product or a new
service, and you are certain that this will be the one that
gets you to the promised land!
You have wanted to crack into a certain market for a long
time, or you are tired of a competitor enjoying all of the
perks that come with servicing a hot market!
There certainly are times when hitting a new market makes
a lot of sense, but it is more common that the best strategy
is to stay close to home with the customers you already have!
Why is this an issue?
First, as you probably already are aware, it is never easy to
identify the best customers in a new market. At least not
without a fair amount of work. If this is your only choice,
than you are smart to target this new group. Most often,
however, you do have a choice.
Also, it is much more difficult to sell anything new into a
new market than it is to sell to your existing customer base.
This just makes sense. You already have established
credibility with your current customers, and if they trust
you then they will listen and often buy anything you offer
so long as they have a need for it (And even sometimes if
Similarly, it is more difficult and expensive to sell anything
new at all if you have the option to sell existing products.
For this reason, it may make more sense for you to sell
upgrades, add-ons or special offers for you current product
line rather than branch out into anything new.
As you think about how you are going to grow, keep this
thought in mind...
The best way for you to grow most often is by building on
your strengths before moving to the next level.
Step 1- Sell your core product to your current customer base
Step 2- Sell new products first to your existing customers
Step 3- Reach out to new customers with your new products
Step 4- Sell more new products to new customers
Do you see the progression?
The idea is to first focus on your existing customers, then
move on to new customers and eventually more new products!
Keep these thoughts in mind as you grow your business!
#2 Too much stock is placed in third party market research
There are bunches of research companies today, and they are
all competing for business just like you and me!
It is not uncommon for a research report to be driven by some
agenda that you are not aware of! Too often, there is an
underlying motive behind these reports, meaning that it may
spell out a situation that just may not exist.
There is no doubt that some reports are credible and accurate,
but how can you ever be sure? Do you know who funded a report,
or who really owns the market research firm who is conducting
Don't bother getting caught up in this game. The safest bet is
just to be mindful of any third party report. Use the
information to help round out and support other findings you
may have, but never rely on it as the sole source of your
information and decision making.
Try to perform as much research as you can on your own, or with
trusted partners who are addressing your specific needs.
#3 A growing market may be bad, and a slowing market may be
This may sound a little odd, but just think about it for a
Is it possible that there are opportunities for you in a
market that is not growing very much?
And is it possible that a high growth market may be the last
place you should be focusing your energies?
The answers are Yes and Yes! Of course these two situations
The problem is that most companies don't think this way! They
only want to focus on the growth markets and ignore everything
It makes sense that most companies would act this way since
that is what everybody thinks,right! You must focus on the
high growth markets or you won't survive!
The truth, however, is that you need to focus on the market
that will be perfect for you. And that doesn't always mean you
have to be in a high growth area.
You are no better off focusing on a high growth area that is
not right for you, than you would be focusing on a slow growth
area that is not right for you. In fact, it may be worse for
you to choose the wrong market in a high growth area because
you are more likely to pour more resources and money into
your efforts so you can keep up!
Can you say "dot com"! How many millions, if not billions
were spent on and by companies who just had to ride the wave!
And where are they now?
I have a friend who owns a small beer distributor. He has
found a way over the last 10 years to do very well for
himself, and yet he does nothing but focus on a small niche
market that has not shown any substantial growth year over
year for some time. But you know what, it is stable, it is
reliable and it is a perfect way for my friend to make a
comfortable living. He passed up numerous opportunities to
spend money and join the larger companies as they tested new
beer flavors, new marketing schemes and sponsorships. He
decided long ago that he was quite content to fly below the
radar and service his 'ho-hum' market. Don't get me wrong,
he continues to grab new customers, expand his product line
and grow, but it is at his pace and on his terms.
The point is that a slow growth market has provided him with
As you evaluate your own opportunities, just remember to
spend some time 'looking under the hood' to find out what
is really going on in each market segment. Be sure it is
right for you based on your criteria, and not just because
it is hot and enjoying a period of growth!
#4 Ignoring crucial internal sources of information
This is a big one! I am not sure of your particular
background, but if you have spent anytime in a company with
lots of employees, you mostly likely have experienced what I
am going to talk about.
It was like a mantra!! Day in and day out I remember hearing
the same things from fellow employees.
"No body listens to me".
And unfortunately this is very often the case. For reasons
that are hard to understand, most companies seem to value an
employee's opinion only when it serves their agenda.
Other companies do take the time to listen, but only as an
exercise to engender good feelings amoung the masses. It is
rare that you see companies really value the wealth of
information locked inside the employees and other team
members like vendors, consultants, etc.
To be fair, there are companies who do embrace the creative
potential of their staff, but I don't think it happens often
But here's the point.
If a company misses out on an opportunity, enters into a
new market or introduces a new product or service without
first getting internal feedback, it is not just the
employees who lose!
The company has the most to lose, and yet ignores one of the
more simple and effective research techniques available!
It sounds so logical that you would think all companies would
take the time to talk with it's sales team, customer service
agents, marketing staff or human resource department to see
what these people have to say. Who knows more about the market
than the people who are living in the marketplace everyday?
As obvious as it seems, it happens time after time. Companies
end up wasting time and money when they don't need to, or
head in a direction that had *warning signs* all over the
place...if they had only asked!
For you, unless you have a large organization, you may not be
faced with this issue. But beware, even the smallest firms
can miss key information from employees.
Don't expect your employees to volunteer information, and
don't expect them necessarily to be looking out for the
same things you need them to be looking out for.
Take the time to communicate and brainstorm with your
employees. They may very well unlock the next big
opportunity for you! And don't ever start something new
on a large scale without first getting feedback from your
#5 Failing to test
Have you ever sat on the side of a pool and watched
someone do this?
They stick their toe in the water first, just to be
sure that the water feels good before jumping in.
Of course, we all do that right!
Yet when it comes to their business...the very thing they
pour their heart and soul into...owners often decide not
to test the water!
Imagine looking across the room to a nice pool, one
that you have never seen before and have never been to.
It sure looks inviting and your sense is that the water
must be a good temperature...but you are not 100% sure.
Do you just run over and jump in, or are you inclined
to at least do that 'big toe test'? Some may just run
and jump in, but if the water is freezing they may
wish they hadn't. The smarter thing to do is to test,
just to confirm your expectation that the water is
In business, testing a potential target market is
important in much the same way. Even though you like
what you see, it makes no sense for you to dive right
in without first testing to confirm your assumptions.
There are three main ways in which not testing can hurt a
First, a business may analyze, and analyze and analyze some
more...but never get around to testing. This is the all
too common Analysis-Paralysis syndrome.
Doing the preliminary analysis is critical, but don't get
hung up on it. You can never answer each and every possible
question you will have about a potential target market,
not until you test it anyway.
I have seen businesses spin their wheels, thinking that they
are being productive when they spend most of their time
identifying and analyzing, but never testing. To be effective,
you need to be able to move from your analysis phase into
your testing phase or you will never find new customers-
you will only dream about them!
Once you have enough information to be reasonably confident
that you have found a good market, move into the testing
phase to answer your questions and test your hypothesis.
The market will respond and give you all of the information
you need to decide whether or not you should move ahead
on a larger scale.
The second way not testing may hurt a company is the most
common. It's just like the person who see's the pool and
jumps in headfirst before doing the 'big toe test',
only to find out the water was 40 degrees and they are
going to freeze!
It doesn't matter why you want to enter a new market, offer
a new product or add a new feature, you must take the time
to test the market first. Once again, I know this sounds
simple and obvious, but it happens all the time.
There is absolutely no reason to believe you will be
successful just because someone else is, or just
because you *think* you know why a customer buys from
you already. There are literally millions of reasons
why it might not work out the way you want it to, so don't
take the risk.
Businesses change, the market changes, laws change, budgets
change, seasons change and competitors change. You can't
predict any of this, so you need to take the time to do
some testing to be sure you are headed in the right
Testing doesn't take long, but it can make or break your
business decisions. If you want, you can hire someone to
do your testing for you, or you can simply set up a
system where you and/or your staff makes a committment
to talk with 2 or 3 contacts each day until you have a
pretty large pool of useful information.
The third and final error in testing is a little bit
different. Rather than not testing at all, or not
moving from analysis to testing, companies sometimes will
analyze, like what they see, but then move on to a
better market without bothering to test what could be
classified as a *lukewarm* target market.
Why is this important?
In some cases, it is important to make priorities, so of
course a company can't always test every market that looks
viable. But more often than not it is possible to explore
even the target markets that only appear to have some
Testing is not only simple and fast, it is also inexpensive
if you do it yourself.
Focus on your best markets first, but try not to completely
ignore the other markets that you have categorized as
Maybe you can't do any testing for these other markets right
now, but make a plan to get to them at some point soon.
There is a fine line between smart research and wasting your
time, and I can't tell you where to draw this line. To be
sure, don't waste your time on markets that you are certain
are not right for you, but be cautious about throwing away
other *lower rung* markets before a little testing.
You may find some pleasant surprises! And if not, you
haven't wasted much time or money. Besides, you are
guaranteed to learn from your testing, and who knows what
other ideas or strategies may come out of your research!
And remember what Edison said...
"Genius is 1% inspiration and 99% perspiration"
Don't expect to have all of the answers.
But do expect that you will find them along the way if you
take the time to ask.
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