A solid knowledge of your market is absolutely crucial to making better business decisions.
This is why market research is such a big business. Companies spend billions of dollars every year trying to communicate with their customers and prospective customers so they can make informed decisions on which products to launch, which brands to expand, and which ways of engaging with customers are most productive.
So it’s incredibly important to understand your market before you make a big investment. However, many companies are still making the mistake of heavily investing in a new product or market without having a clear sense of whether or not the investment is going to pay off. Ahem, survey anyone?
Here are a few common mistakes that companies make with their business strategy and marketing decisions. And of course, we’ll go over how these mistakes can be avoided with a little help from market research:
1. Being too trusting
Sometimes companies rely on a sense of trust based on promises from a client. For example, you might hear someone say, “Our one major client loves this product, so introducing it to a bigger market can’t fail!” Or, “Our biggest client said that they’d buy more of this product if we just expand production!”
It’s great to have trusting relationships with your clients, but one client does not make a market. What happens if you invest in ramping up production, only to discover that your biggest client isn’t able to buy as much as they first expected? What if your big client was the only one who had a big use for your product and it’s not as popular with other buyers in the market?
Even if you feel like an investment is a can’t miss decision, if you’re overly dependent on a single client, complications might come up that are beyond anyone’s control—and worse, you might get stuck with a whole lot of product that no one wants to buy.
How to avoid this predicament? Enter customer surveys. Sending surveys puts your questions directly in front of your target audience. A well-conducted survey will help evaluate customer buying habits and trends. Another way to avoid a failed investment is to get a contract in place—make sure your customer is really willing and able to buy as much of your expanded production as they say. Or if you’re going to expand sales to multiple buyers, do some preliminary testing first—in the form of market research in order to ensure enough demand exists beyond your one big customer.
2. Relying on intuition
Another pitfall for business leaders is relying too much on intuition—“trusting their gut”—to the exclusion of actual evidence. Maybe you think you’ve got a great product, service or solution, maybe you’ve gotten great feedback from other people in your life—maybe you have every confidence that the market is ready to buy what you’re selling.
The problem? Intuition isn’t always right. It’s natural to be confident! That’s a sign of a great entrepreneur. But even if you love your product and your friends tell you that they love it, that doesn’t mean actual buyers will spend actual money buying it. Building relationships with buyers is a different order of magnitude.
This is where market research and testing your market can help you clarify your expectations and figure out where intuition might have led you off-track. Then, armed with market research and accurate business intelligence, you can harness the power of your confidence to get out and sell. Market research doesn’t have to replace your gut instinct. But market research can help make your intuition even more effective.
3. Excessive optimism
Another problem common with startups is, well, too much happy. Optimism is great and necessary but too much optimism can lead to unnecessary risk-taking. Startups in particular often have an idea of what their product should be and what the market should like about it—even though there’s no strong evidence for the optimism. This is risky! Sometimes if you think you’re the first one to enter a market, this actually just means that it’s not a good market.
Startups often overestimate the size of their market. They think, “Our product is totally new! Demand will be huge!” But actually the reason they don’t see other companies already serving the market…is because there isn’t a good market for the product. Startups often find they need to pivot and make some changes to the features or marketing emphasis of their product before they’re really ready to sell. The only way to learn these hard lessons is to test the market—the sooner the better.
There’s a lot of venture capital money out there for startups and many have tried their hands at launching new products and starting new businesses. It’s natural for entrepreneurs to be optimistic and have lofty goals for their companies—but before you set out to conquer the world, make sure you have a map. This is where market research, customer surveys, truly testing the market and making adjustments based on what you find—all this can make all the difference for your business’s success.
Gregg Schwartz is the Vice President of Sales at Strategic Sales & Marketing, one of the industry-founding lead generation companies for B2B major account lead generation and appointment setting services.