Video 5 - Market Research
MARKET RESEARCH, (This is a transcript of the video lesson #5 of the same name, from the series of video lessons entitled “How To Start a Micro Business”.)
by Dr. Jerry Dean Epps, Ph. D.
Before Wal-Mart or Sears puts a store in an area, they do Market Research—before they ever buy land or build a building, they learn how many POTENTIAL CUSTOMERS live in the area where they are thinking about building a store. That is what you have to do. You have to learn HOW MANY customers will use WHAT KIND of store. Will 45 customers come into your little store each day, or 180? Are there competitors nearby? Is there a little store just 10 houses away from you? If so, not so many customers will come to your store. But if the next little store is a far away, then you will have lots of customers. How many are likely to come to your store?
THESE ARE VERY IMPORTANT QUESTIONS and you can not just say “I don’t know”. You have to look up the information on the internet, if it is available there—or from municipal and other public records. OR you have to walk around and count households. You can do it either way—but you must get the numbers. Sam Walton flew over areas in a helicopter looking at how many homes were being built and what the traffic pattern was to help him decide if would be good to put a new Walmart store.
Questions about how much money you can make:
How much money you can make from a micro business? Before you can answer that, you have to ask a series of questions.
HOW MANY people are in my market area?
How many of them are potential customers?
How many competitors are in my market area that I will have share the market with?
Will my customers buy one or many of the items I sell?
Will they buy repeatedly, or just on occasion?
Before you open the doors of your new micro business, we want to know it will be successful. We cannot have you start the business and then learn whether or not it will be successful. No, we have to know in advance (ahead of time) how many customers, all the costs, the estimated profit, etc. Learn everything first, then you will have success—if you work hard and operate smart.
Questions about people passing by your store:
How many people do you estimate DRIVE past your house each day?
How many people WALK past your house each day?
For example, if you had a little store, would people walk to it or would they drive to it, or both walk and drive? Specify HOW MANY would do each.
It is a very important difference if there are 85 households in the community that would use a little store OR if there are 200 households in the community that would shop at the store. AND, do very busy roads with fast traffic separate people from getting to your store, etc.? OR, if it is something like batteries, people will come from farther away to buy specialty items—so that makes the “market area” larger. How many households are there in this larger market area? OR, perhaps we should ask, how many functioning cars are in that market area? You have to know your market area very well.
What is the market potential for ordinary items (bread, cooking oil, batteries for flash light, ice cream, candy, etc.) and what is the market potential for specialty items like car batteries?
Markets have boundaries. There are physical boundaries like rivers, busy highways, rough terrain—these are barrios people do want to cross. And there are barrios created by the presence of competitors. People will not walk 200 meters to your store if there is a similar store 50 meters from them.
Market boundaries vary by price of the items the customer wants to buy. He/she will walk 2 hours to buy a motor cycle at a good price. But the same person will only walk 6 minutes to buy a bar of soap or cooking oil. Soap and cooking oil are cheap and plentiful—a person has no need to walk 2 hours for them.
Questions to help you know your market well:
WHAT IS THE MARKET FOR YOUR PRODUCTS? Study your market deeply. Know who will buy and a what price! There are additional questions on the website to help you know your market well. You must know your market before you can earn money from it!
Remember our motto, “You CAN start a micro business and earn money to improve your life and improve your community too.” See you for the next lesson. This is Dr. Epps, signing off.
The forms and worksheets that you need to get started in a micro business are located here.