Market research is serious work. The idea of long, grueling hours spent poring over arcane statistics could hardly be appealing to anyone. It's only as difficult as you make it. The payoff, however, is well worth the effort expended. Without it, the odds of success diminish greatly.


The Three Phases of Market Research

Market research can be broken down into three basic phases:

• Phase I: Getting Started. The first step of any business is to have a product or service to promote. Start with what you know best and what excites you the most. Then it won't seem like work. If you already have a product or service, you're a step ahead of the game.

• Phase II: Researching the Market. Once you select a product or service, determining demand is vital. No demand makes the greatest product in the world useless. It's better to abandon a business at this stage than to invest time and money into something which has no potential. Don't be afraid to start over.

Determine how your product or service will make money. Will you generate lots of traffic and make money from ads or will you have less traffic but make your money from sales? Knowing this also helps you understand how to design your website.

• Phase III: Researching the Competition. If you have a great product or service and research shows there is a viable market, how can you break in? Are the barriers to entry high or low? Are there many small competitors and few, if any, large players or is the market dominated by one or two Goliaths?

If accurate research shows there is no competition, it's time to step back and analyze. Are you the first in the market, with its advantages and disadvantages? Or does the market have no potential? This is not a time for shortcuts. The wrong response will kill you.

If research shows your product or service can make a profit, has enough demand and barriers to entry are acceptable to you, then you'll still need some more research. Now you'll investigate your competition in detail. Subscribe to their email list, visit their blog, participate in their community. Examine their marketing methods, keywords, and how and where they advertise.

If you don't think it's ethical, you're being naive. Your competition knows all about you. There are no secrets on the internet.

That is a condensed version of the basics of market research. Evaluating the information you found is a critical skill. Use all statistics, not just those which support your preconceived notions.


Market Research: More Details and Specifics

• Local, National and International: You may consider expanding or contracting the scope of your research. If you have local competition, investigate how national and international competition markets the same product and vice-versa. Look for trends, either positive or negative. If you're getting in at the peak of the market and you try to expand, you could find yourself in serious trouble.

• Networking: Paraphrasing Machiavelli's adage, "Keep your friends close and your competition closer", couldn't be more accurate. Join local groups like the Chamber of Commerce, off-line networking groups and online networking groups like Entrepreneur Connect (from Entrepreneur magazine) and MeetUp.

• Suppliers and Vendors: If you sell products, your vendors and suppliers can be a wealth of information. Pay close attention to seemingly innocent comments, for they can often reveal some problems your competitors may have or even other business opportunities.

• Trends: Checking your competition's Alexa ranking can give you hints, too. If there is a significant increase or decrease in traffic, you need to know why and, if possible, take action so you can benefit.