Many thanks for your letter on “Starting a business”. I will be interested in what you have to say about market research, because there is very little market research that helps OBCs and Dalits who wish to start in business!
Yes, you are right. There is indeed very little market research that helps OBC, Dalitbahujan entrepreneurs. Actually, we have very little market research in India in any case, especially considering how big our economy is. The reasons for that are simple: all business operates on the basis of knowledge, we Indians have traditionally not shared knowledge, and our business communities certainly do not like to share their business knowledge because that would only lead to more competition!
Moreover, till a few years ago, business and market knowledge was less important than having the right connections, because it was those which gave you access to business opportunities, not merit (which, in business means the quality and price of your product or service). Liberalization has done many good and bad things. One of the good things has been at least reducing the need for connections, while increasing the need for merit in business. Well, that is all very well, but it does not tell you about market research! So here are the essentials: Market research is the systematic gathering and analysis of information about market need, market size and competition. Let us take the first of these: in order to understand market need, you need to observe what people believe, want, and act. Generally, anything that enables people to satisfy their needs. A man called Abraham Maslow became famous for conceptualising a Hierarchy of Needs. Even though it is not really correct, it is enough for the purpose of discussing market need. It helps to see where in that hierarchy the need is that your business is trying to fulfil.
You also need to consider the disposable income or buying power of your customers. If you want to reach customers who are poor but have a lot of time, they will be willing to walk a long way to get a product or service that is cheaper than yours, assuming that it is of the same quality as yours. On the other hand, if you want to reach customers who are rich but pressed for time, their main criterion for purchase, assuming that your product meets their minimum quality level, will be whether they can buy it quickly, so that the key factor becomes having your product available at some place that makes it quick and easy for them to buy. But if you want to reach customers who are rich and have a lot of time, then they will be bothered neither about price nor about convenience but rather about whether the quality suits them. There are many other such considerations that you will need to study and analyse. As there will be little or not published market research, you will need to do all this by personal observation and or discussion with family, friends and business colleagues.
Let us move on to market size. Naturally, in a country like India, the size of the market is huge. But you are not interested in the market size as a whole; you are interested in the size of the market you could reach. That will depend on, for example, your location, the cost and availability of transport, and what other channels you are proposing to use. Proposing to have a sweets shop in New Delhi railway station is not the same as trying to have a shop in a basti or a jhuggi colony, or trying to sell your sweets by post.
That takes us immediately to the topic of competition. In our country, there is huge competition in almost every field of business. But what you need to gather information on is in relation to the market that you wish to serve: who are your competitors? Why do customers buy their products or services (is it convenience, price, quality, and/or service)? How often do they buy? What time do they buy? How much do they tend to buy at one time? The more information you can gather about what sort of customer buys from which of your competitors, the better you can position your product or service so that they prefer to buy from you instead. Your goal is to offer a better alternative to customers than is offered by your competitors.
But remember that competitors are never static. They are all trying to understand and to respond to how the market is changing, how customer behaviour is changing, how the competitive field is changing. That is why, in addition to understanding the current state of the competition, you need to consider anticipating competitor response to your entry into the market. If you come into business offering a similar quality product at a cheaper price, what will be the reaction of your competitors? Will they simply drop their price to match yours? Or will they simply ignore you and stand their ground because they feel they can get away with it as they are better established than you? Will they even raise their price in order to emphasise the perceived quality of their establishment as against your newcomer status? If you are offering better service, will your competitors also improve their service? And then you have to think and act in relation to that continuing change in market need, size and competition
Business is all about implementation and action. But in order to act in the right way and implement the right things, you need to have done your homework – the background research into market need, size and competition
Published in the August 2013 issue of the Forward Press magazine