The first step of the research process, defining the problem or opportunity, is often overlooked - but it is crucial. The root cause of the problem is harder to identify than its obvious manifestations; for example, a decline in sales is a problem, but its underlying cause is what must be corrected. To define the problem, list every factor that may have influenced it, then eliminate any that cannot be measured. Examine this list while conducting research to see if any factors ought to be added, but don't let it unduly influence data collection.

Assess Available Information

Assess the information that is immediately available. It may be that current knowledge supports one or more hypotheses, and solutions to the problem may become obvious through the process of defining it. Weigh the cost of gathering more information against its potential usefulness.

Gather Additional Information

Before considering surveys or field experiments, look at currently held information: sales records, complaints, receipts, and any other records that can show where customers live and work, and how and what they buy. One small business owner found that addresses on cash receipts allowed him to pinpoint customers in his market area. With this kind of information he could cross-reference his customers' addresses and the products they purchased to check the effectiveness of his advertising.

Customers' addresses tell much about them. Lifestyles - and buying habits - are often correlated with neighborhoods.

Credit records are an excellent source of information, giving information about customers' jobs, income levels, and marital status. Offering credit is a multifaceted marketing tool with well-known costs and risks.

Employees may be the best source of information about customer likes and dislikes. They hear customers' minor gripes about the store or service - the ones customers don't think important enough to take to the owner. Employees are aware of the items customers request that you do not stock. They can often supply good customer profiles from their day-to-day contacts.

Outside Data
Secondary Research

Secondary research exploits published sources like surveys, books, and magazines, applying or rearranging the information in them to bear on the problem or opportunity at hand. A tire sales business owner might guess that present retail sales of tires is strongly correlated with sales of new cars three years ago. To test this idea, it's easy to compare new car sales records with replacement tire sales three years later. Done over a range of recent years, this should prove or disprove the hypothesis and help marketing efforts tremendously.

Localized figures tend to provide better information as local conditions might buck national trends. Newspapers and other local media are often quite helpful.

There are many sources of secondary research material. It can be found in libraries, colleges, trade and general business publications, and newspapers. Trade associations and government agencies are rich sources of information - GALES' Directory is available at any public library.

Sources of Secondary Research
ASAE Directory of Associations Online
Ask a Librarian - U.S. Library of Congress
Bureau of Labor Statistics
Business Research Lab
Center for Business Women's Research
Economic Statistics & Research
Fedstats.gov
Internet Public Library
Population & Demography Resources

Primary Research

Primary research can be as simple as asking customers or suppliers how they feel about a business or as complex as surveys conducted by professional marketing research firms. Direct mail questionnaires, telephone surveys, experiments, panel studies, test marketing, and behavior observation are all examples of primary research.

Primary research is often divided into reactive and non-reactive research. Non-reactive primary research observes how real people behave in real market situations without influencing that behavior even accidentally. Reactive research, including surveys, interviews, and questionnaires, is best left to marketing professionals, as they can usually get more objective and sophisticated results.

Those who can't afford high-priced marketing research services should consider asking nearby college or university business schools for help.

Marketing Strategy

A marketing strategy identifies customer groups which a particular business can better serve than its target competitors, and tailors product offerings, prices, distribution, promotional efforts, and services toward those market segments. Ideally, the strategy should address unmet customer needs that offer adequate potential profitability. A good strategy helps a business focus on the target markets it can serve best.

Target Marketing

Owners of small businesses usually have limited resources to spend on marketing. Concentrating their efforts on one or a few key market segments - target marketing - gets the most return from small investments. There are two methods used to segment a market:

1. Geographical segmentation - Specializing in serving the needs of customers in a particular geographical area. For example, a neighborhood convenience store may send advertisements only to people living within one-half mile of the store.
2. Customer segmentation - Identifying those people most likely to buy the product or service and targeting those groups.

Managing the Market Mix
Every marketing program contains four key components:

• Products and Services
• Promotion
• Distribution
• Pricing

These are combined into an overall marketing program.

Products and Services - Product strategies may include concentrating on a narrow product line, developing a highly specialized product or service, or providing a product-service package containing unusually high-quality service.

Promotion - Promotion strategies include advertising and direct customer interaction. Good salesmanship is essential for small businesses because of their limited ability to spend on advertising. Good telephone book advertising is also important. Direct mail is an effective, low-cost medium available to small business.

Price - The right price is crucial for maximizing total revenue. Generally, higher prices mean lower volume and vice-versa; however, small businesses can often command higher prices because of their personalized service.

Distribution - The manufacturer and wholesaler must decide how to distribute their products. Working through established distributors or manufacturers' agents generally is easiest for small manufacturers. Small retailers should consider cost and traffic flow in site selection, especially since advertising and rent can be reciprocal: A low-cost, low-traffic location means spending more on advertising to build traffic.

The nature of the product or service is also important in siting decisions. If purchases are based largely on impulse, then high traffic and visibility are critical. On the other hand, location is less a concern for products or services that customers are willing to go out of their way to find. The recent availability of highly segmented mailing lists, purchased from list brokers, magazines, or other companies, has enabled certain small businesses to operate from any location yet serve national or international markets.