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The 5 Pitfalls of Market Research
By: Developer Shed
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    2003-11-12

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    The 5 Pitfalls of Market Research
    by Timothy Barton

    So what are the most common mistakes companies make in their
    market research.

    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
    market!

    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
    they don't!)

    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
    reports.

    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
    the report?

    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
    good.


    This may sound a little odd, but just think about it for a
    minute.

    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
    may exist.

    The problem is that most companies don't think this way! They
    only want to focus on the growth markets and ignore everything
    else.

    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
    great opportunities!

    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
    enough.

    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
    team!

    #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
    comfortable.

    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
    business.

    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
    direction.

    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
    potential.

    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
    possible targets.

    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!

    Happy hunting!

    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.
    DISCLAIMER: The content provided in this article is not warranted or guaranteed by Developer Shed, Inc. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials. If this is a hardware review, it is not recommended to open and/or modify your hardware.

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