Market Research on the Cheap

There's no need to spend a bundle on professionals when you can do Internet surveys, mine government data, or even take a clipboard to the mall

by John Tozzi

Large corporations spend millions on sophisticated surveys and focus groups from established researchers such as Harris Interactive (HPOL) and Survey Sampling to determine whether their products or services will appeal to customers at a price they're willing to pay. But for entrepreneurs operating on a shoestring budget, there are ways to gather key information about your customers and prospects without hiring an outside firm. Here are five practical suggestions to keep in mind.

1. Research the same way you sell. While "market research" may bring to mind spreadsheets and pie charts, your first step before introducing a new product or launching a business should be to interview your potential customers the same way you plan to sell to them, according to Rob Adams, director of the Moot Corp Business Plan Competition at the University of Texas, Austin and author of A Good Hard Kick in the Ass: Basic Training for Entrepreneurs.

"If you sell in person, survey in person. If you sell over the phone, survey over the phone," he says. And for entrepreneurs who plan to sell primarily online, a Web survey can gauge interest. "If you get no results, that should tell you something," says Adams. If you're not sure who to talk to, he says, take a clipboard to the mall (BusinessWeek.com, 11/19/07) on Saturday morning.

Above all, you must have a direct interaction with the people you imagine will buy your product, marketing experts say. John Hauser, a marketing professor at MIT's Sloan School of Management, says his students are astonished when they actually talk to members of their target market, because reality can be so different from their expectations. "I force them to go out and talk to customers. They come back and say, 'Wow, what an experience.' They're just overwhelmed," says Hauser.

2. Mine public data. You've already paid for some of the most expensive market research available—with your taxes. The U.S. Census Bureau Web site contains demographic information you can use, often broken down to the neighborhood level. The census data is far more detailed than just population and income levels. Trying to reach customers during their morning commute? Find out what time most people in your county leave for work. Starting a baby clothing company? Check how many women gave birth in the last year.

Beyond the census, you can search federal databases on banking, labor, housing, agriculture, and imports and exports, all without paying a cent. "You don't have to do primary research, you can do secondary research," says Tom Miller, president of Research Publishers in Madison, Wis., and a former market research professor. "Those data are free." To get started, visit this government site.

3. Recruit B-school students. You may not be able to afford professional researchers, but you can call a local business school and see if a marketing class can help you with your research needs. Many professors are eager to create assignments from projects for small business owners, and students benefit from real-world experience. "The business owner's obligation is to provide the time, share information about the company, and give feedback to the students when it's all over," Miller says.

A marketing class won't match the depth or access to specialized sample groups that professional firms offer. But you'll get a rigorous study at little, if any, cost. "The MBA students learn very systematically all the methods.