How to do market research with a small business budget

Key business takeaways

• Primary research (done by you) or secondary research (third-party resources) are the two main categories of market research
• Doing market research now can save you a lot of time and money down the line
• The types of questions to ask focus groups, questionnaires, or polls should always be open-ended to avoid bias

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When trying to reach potential customers, learning about what influences their decision-making process can help you become more appealing to them. Doing market research gives you insights into who your target market is and what motivates their shopping choices. 

Research makes it easier to adapt a marketing strategy that reflects your target customers‘ preferences, whether you’re launching new products, refining your pricing, or reinventing your brand messaging. Follow this guide to save time and resources by learning what your ideal customers want.

What is market research?

Market research is the process of gathering information about your target market and customers. It helps you discover and determine customer needs, and it’s a critical element of your business plan.

The market research process involves data collection such as online surveys, social media polls, and focus groups.

There are two main types of market research:

Primary research

• This is when you conduct market research yourself without outside resources
• Primary research involves real-time observation in the form of focus groups, questionnaires, interviews, and surveys
• It refers to the data or information you collect about a target demographic that’s critical to your business 

Secondary research

• This type of research includes studies, industry trends, or competitive analysis by a third party conducting market research on behalf of your business
• An example of secondary research may be looking at the Yelp Business Pages of your competition where customers share their rants and raves about products or services that are similar to yours
• This may inspire you to perform additional primary research that is more specific to your business

Reliable secondary research sources include The Small Business Association or the American Marketing Association. Government resources can also be helpful, like the U.S. Census Bureau or the Bureau of Labor Statistics.

There are also two main ways data can be collected:

• Qualitative research is largely performed through conversation, such as interviewing people and running focus groups, to understand how people think. Because of its informality, this method of research can be more cost effective than quantitative research.
• Quantitative research involves using polls, questionnaires, and surveys for the purpose of gathering data to inform your business strategy.

Take a well-rounded approach that includes both types of data to make the most of your marketing strategies.

Why is knowing how to do market research important?

Market research helps distill what’s most important to your potential customers when you’re launching or rebranding a new product, service, or business.

Market research can help you understand market segments (e.g., demographics, geographics, psychographics) and current industry trends, plus it can give you ideas on pricing strategies. This information can set you up to outperform competitors when creating and launching new products or services or improving existing ones.

Some other known benefits to market research include the chance to:

• Discover new business opportunities
• Reduce business risks by knowing customer preferences
• Improve your marketing materials and brand messaging
• Learn the best possible place to reach your target demographic with advertising
• Set better goals
• Simplify decision making

Even if you have a tight budget, learning how to do market research for your small business can enhance your bottom line.

How to do market research for a small business

Market research can be costly, but it doesn’t have to be. As long as you’re willing to invest some of your time and resources, it’s reasonably straightforward to learn how to do market research. Your research will mainly be asking questions to learn more about your target market and then compiling the results. Below are five steps to get started.

1. Define buyer personas

A buyer persona is a fictional representation of a customer category you have. Along with essential traits like age, gender, location, income, and employment and marital status, you’ll also want to probe a bit deeper with categories such as:

• Goals
• Obstacles
• How your product or service helps them with their goals or obstacles
• Life motto
• Common objections to purchasing

To illustrate who this person is, you might even choose a photograph or drawing to highlight what this potential customer might look like if you passed them on the street. 

Determining your buyer personas is best supported by real customer data that you collect from your salespeople or customer service team. If you don’t have much data, you can assume most traits until you take the next step with your market research. 

2. Research each persona with purpose

Once you’ve laid out your buyer personas with the customer data you have, it’s time to decide where you need more information. Be as clear as possible about the purpose or goal before you recruit participants.

Actionable tips on how to do market research:

• Narrow down participants to the buyer persona group(s) that you need more information about.
• Make sure you have about 10 customers to represent each persona (or at least the same number of participants in each group).
• Ensure these are customers who have made a recent purchasing decision with one of your products.
• Use Yelp to uncover customers who have interacted with your product, service, or business. If you see that people have left reviews, you can follow up with them the same way you would with a list of leads.

3. Prepare your questions

When thinking about what questions you want to ask your focus group, be sure they are always open-ended. This allows participants to share as much candid information as they’d like, giving you more feedback to use later.

There are excellent resources online to help you find the best questions for your market research.

Examples of open-ended questions vs. closed or leading questions:

• Open: Would you recommend our products to a friend or family member? Why or why not? 
• Closed: Is the product good quality or poor quality?
• Leading: How much do you enjoy using our products?

4. Engage participants

If this is your first time learning how to do market research, the following activities are an excellent place to start.

Online surveys

Try tools like SurveyMonkey, which provides a user-friendly way to reach large groups of customers through online surveys. With ready-made templates, you can plug in your questions and send them off in a matter of clicks. 

Interviews and focus groups

With advanced video conferencing software like Zoom or Skype, interviews and focus groups can reach even more customers from varied backgrounds and locations. 

To avoid unconscious bias, consider asking another person to carry out the interview while you remain a silent observer. If you have enough of a budget, you can always hire a third-party agency to handle everything from recruiting participants to collecting the results.

5. Make changes based on the data you collect

Taking all the data you’ve collected and making sense of it takes time, but it’s worthwhile. Look for themes and patterns within the participant feedback, and keep detailed notes that you can refer to when making updates to your marketing tactics.

After you’ve made the changes, be sure to monitor how they are actually impacting your business. Keep a close eye on your operations to see what’s working, what needs another look, and what new problems may result from the changes.

For example, a restaurant owner attempting to cut costs may do away with their host staff only to realize that now the customer service is suffering as a result. Market research is an ongoing process and may require tweaks and iterations before you reach peak form.

On the Yelp Blog: In addition to the tips above, check out how Yo’ Mama’s, a comfort food restaurant in Alabama, used market research to reach its target audience.

Where can you find great secondary sources?

For the most accurate information, go to .gov, .edu, and .org sites and respected trade associations in your field, such as:

• The Small Business Administration, the U.S. government’s website for small business owners
• The National Restaurant Association for restaurant owners and others in the industry

• The American Marketing Association, a professional marketing community with up-to-date marketing and business resources
• The National Retail Federation, an educational resource and advocate for retail and ecommerce businesses

Other useful resources to propel your research forward include:

• Rutgers University’s list of trade associations
• Census Bureau data
• Bureau of Labor Statistics
• Securities & Exchange Commission (SEC) for in-depth financial info on publicly traded companies
• Yelp research and surveys

In addition, when performing competitive analyses, be sure to review competitor websites, social media, and what people are saying about them on Yelp to learn how their customers view them, what inspires their loyalty, and any complaints they have about products, services, or experiences. Knowing what your competitors are doing right—and wrong—can show you where your own opportunities lay.

More sources of useful information

Keyword research

To help you learn more about your audience and competition, you can use free keyword research tools and search engine optimization (SEO) tools. These let you know the keywords consumers are using to find businesses like yours so you can optimize your targeting and marketing.

Competitor ads analysis

Some platforms, like Semrush, let you see the online ads your competition is running and how well they’re performing. This can give you valuable insight into your competitors’ business strategies that you might be able to use to your advantage.

Trend tracking tools

Spotting trends is crucial for many industries. On top of browsing social media to learn what your audience is interested in, there are free and paid trend tracking tools to help you identify trends before they decline in popularity—or even better, early so you can be ahead of the game.

Observing larger companies

Big companies are able to spend considerable funds on their marketing and product strategies—from the initial market research to product development, distribution, and advertising. By evaluating larger stores or service providers who have put significant budget into their endeavors, you might just be able to glean a few ideas to use in your own store, office, website, or social media.

Listen to what your market research is telling you 

As a small business owner, you might be so close to the day-to-day operations that you could be making incorrect assumptions about your customers that are costing you. 

Knowing how to do market research will help you successfully reconnect with your customers and learn what matters most to them. You can then pivot some of your relevant business decisions to suit their preferences. If that seems a little overwhelming, start simpler by looking at reviews on your Yelp Page. These reviews give you a free and easy way to gain insights from an audience that has likely interacted with your business.