Before jumping in the market and kick-starting your business, it is essential to plan, prepare, and research strategies. Without thorough market research, your business can sink quickly before it makes any profit.
Having a clear understanding of what you need to do to succeed is essential in a business plan. So, for a sweet start, one must conduct proper market research before diving deep into the business world. In this post, we will guide you on how you can perform market research to estimate the profits of your future business.
Why do you need to perform market research?
Estimation of the final price is probably one of the essential steps in a product life cycle, especially when there are lots of competitors offering the same products at highly competitive prices. Besides covering the manufacturing cost of the product, one also needs to earn profit from the sale. But on the other hand, it should also not be too high that it deters the customers from buying the product.
Profits are what keeps a business running. A business incurring recurring losses can maybe survive for a while, but it is ultimately bound for doom. Hence it is essential to find a way to generate continuous profits. And this is where market research comes into the picture.
3 Ways to Perform Market Research to Estimate Profits
One can perform market research in a variety of ways. These activities can enable you to determine the right price for your products.
Some of the ways in which you can perform market research to estimate your profits are:
#1 Conjoint Analysis
It is one of the most basic and widely used market research techniques. Conjoint Analysis determines and compares what the customers are paying for a product versus what the customers are gaining for their purchase.
This technique helps in determining how the customers make their buying decisions, which ultimately impacts the price of the product.
Using conjoint analysis, the market researchers can create a sustainable model to assess the costs of their products according to what the customers are willing to pay for the product. Depending on it, you can either change the price of your product or leave it as it is.
It is a direct marketing technique to perform market research. In this technique, the market directly asks the consumers what price are they willing to pay for a certain product. Depending upon their response, you can change the price. After changing feedback is taken from the customers if they will still go for the product at the new price. Once you choose a final price, you can model the production accordingly.
The only problem with this strategy is that the customers might ascertain or expect highly unrealistic prices. In such a case, if you set the price according to the expectation of customers, then your product might be defeated by stiff competition in the market.
#3 Van Westendrop
Just like the Gabor-Granger strategy, this is also a direct pricing technique. In this, the people are asked a set of questions related to the pricing and other attributes of a product. This data is then used to determine a competitive price for the product and to create a model for further efficient pricing.
Unlike the Gabor-Granger strategy, this method assumes that the customers know about the present conditions of the market and are responding accordingly. For maximum efficiency, one can combine with the above two techniques.
Apart from the above three techniques, various intelligence techniques to perform market research are being developed nowadays, which go through all the market research data to determine the best pricing policy. Using this, you can prepare your product for the stiff competition in the market while also earning profits from the sale.