How to Do Market Research
How to do market research: practical aspects of site traffic,
market niche and segmentation.
Market Research
How to do market research? You'll probably concentrate on three
areas: market niche, market segmentation and Internet traffic.
Market Niche
Whatever you're selling, it will not appeal to all market sectors.
Luxury cruises and cheap flights may be both part of the travel
business, for example, but they're very different in capitalization,
marketing and customer support. You may be moving an established
business online, or have access to a narrow range of products anyway,
but as much as possible you'll be supporting your choice by extensive
research.
Naturally, you'll be counting on some experience in the business
to ensure that you have the right personality, know-how, contacts,
ability to recruit good staff and network with others in the trade.
You'll also need to consult annual
reports to understand the strengths and weaknesses of your
potential competitors, which means researching their turnovers,
capitalization, profit margins and marketing budgets.
And who are these competitors? Make sure you've identified them
all by assiduously combing through the Internet
directories and search engines. And by running searches on
keywords at the natural and pay-per-click search engines. Then
you'll need to visit their websites to see how companies present
themselves, and work out how to improve on their efforts.
You'll also need figures for growth prospects in this market
niche, obtained as before by reading company reports and trade
news. Refer the resources
page for Internet sites where company reports and trade news
are available.
Market Segmentation
Not to be confused with market niche is market segmentation.
Some 80% of sales commonly come from 20% of customers, and market
segmentation helps identify those better customers more precisely.
You start by analyzing customers under various demographic groupings
– age, gender, ethnic group, education, occupation and income
to find the optimal profile. If you were selling specialist cultural
tours, for example, you might design your site to specifically
appeal to an audience with these characteristics:
Sales and growth information might of course be available only
from bricks-and-mortar companies, when you'd have to obtain estimates
of Internet users within such a grouping. The US
Department of Commerce, for example, in fact provides demographic
information on Internet users, and indeed by geographical
grouping within the USA. Sites providing market segmentation
data, both free and fee-based, are listed on our research
resources page.
Internet Traffic
How many visitors are you hoping to attract to your site, and
how many can you reasonably convert to customers? You require
hard data, which you can obtain as follows.
For the upper limits of traffic on your site, look at the traffic
figures published for the market leaders in your particular
sector.
To estimate figures for a company like yours, just moving onto
the Internet, do four things:
1. Scale down the upper limits in proportion to your site's popularity,
which you can estimate by finding
the number of sites linking to competitor sites.
2. Estimate the traffic expected from searches
on the keywords that you'll have placed in your webpage meta
tags.
3. Obtain the site traffic of competitors through a free program.
4. Consult the media kits of competitor sites.
Translating visitors per year into sales figures is a hazardous
business without knowing the conversion rates, and these naturally
vary with the market concerned. 0.1% to 5% are the figures generally
quoted (with 1-2% perhaps being the average), but you'll come
across more accurate statistics our section
on conversion rates. Alternatively, you can calculate rates by
comparing information in a company's annual report data with their
site traffic. Or you could try asking marketing
companies for a ballpark figure prior to engaging their services.
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