February 23, 2011
This may be obvious to many, but consider: Before starting research on potential target markets and customers, you need to identify the data required. What exactly are you looking for? Answer this question first and save yourself time, effort, and unhelpful results.
Many different types of data and data collection methods exist. To keep this short and simple, I’ll summarize the major areas. If you want to know more, I suggest reading various home-based business handbooks. Good examples include: Entrepreneur’s Ultimate Homebased Business Handbook or Home-Based Business for Dummies.
Types of data
Primary data: This is information collected by conducting your own research. If already running a business, this may include talking with customers, suppliers, competitors, and associates in the industry. You may be considering starting a similar business or buying the business you already work for. Direct conversation with customers about the product or service, the vendors about the existing supply chain or competitors about the marketplace is the best way to gain real feedback while gauging body language and emotion. Other methods of gathering primary data include mystery or comparison shopping, focus groups, and formal surveys.
Secondary data: This data is not generated via personal interaction and usually involves an outside source or third party. Secondary data can come from books, magazines, trade publications, the Internet, SCORE or government agencies at all levels. Endless volumes of information exist in libraries, bookstores, through businesses, chambers of commerce, etc.
A word of caution: Because so much information is available, identify first what you data you need to collect. Determining objectives will help maintain focus on what needs to be researched and keep you from collecting irrelevant data.
Quantitative vs. Qualitative
Quantitative data is expressed in numbers and percentages and is very useful to a small business owner. This data is objective, easily measured, and easily transferred to charts, graphs, and lists for planning purposes. An example is a survey with yes or no questions or a ranking scale of customer satisfaction (1-5). Results may be noted as 83 of 100 respondents0 vote yes or our satisfaction survey of 100 people indicates an average satisfaction rank of 4.4.
Numbers while very useful and easily compared to previous surveys, do have drawbacks. They provide results but not reasons for the numbers or percentages generated. Numerical data can also be manipulated in questionable ways. As Mark Twain famously stated: “There are three kinds of lies: lies, damned lies and statistics.”
By contrast, qualitative data is expressed in answers and statements. This data provides opinions on what customers and others think about your product or service, quality, pricing or anything else that can’t be expressed in numbers. One very important concept: Use open-ended questions to encourage people to express thoughts freely. These questions can be asked via surveys, focus groups or informal discussions.
Qualitative data is valuable because the information can reveal more precise details about what your customers or potential clients feel about issues specific to your business or the products or services involved. A downside is the data may be subject to bias, either by the person interpreting it or by the method of interpretation. Another problem is attempting to aggregate the data or represent it simply in graphs, charts or numbers.
Data gathering and knowing which data to collect is crucial to your research effort. Many resources and methods exist for gathering this information from a personal conversation to the anonymous survey. Don’t rely on strictly numerical data or solely on stated opinions. A combination of both is likely necessary and valuable.
By Dion D Shaw
Dion Shaw is the founder and owner of Homepreneurs.