How to Do Market Research

How to do market research: practical aspects of site traffic, market niche and segmentation.

Market Research
How to do market research? You'll probably concentrate on three areas: market niche, market
segmentation and Internet traffic.

Market Niche
Whatever you're selling, it will not appeal to all market sectors. Luxury cruises and cheap flights
may be both part of the travel business, for example, but they're very different in capitalization,
marketing and customer support. You may be moving an established business online, or have
access to a narrow range of products anyway, but as much as possible you'll be supporting your
choice by extensive research.

Naturally, you'll be counting on some experience in the business to ensure that you have the right
personality, know-how, contacts, ability to recruit good staff and network with others in the
trade. You'll also need to consult annual reports to understand the strengths and weaknesses of
your potential competitors, which means researching their turnovers, capitalization, profit
margins and marketing budgets.

And who are these competitors? Make sure you've identified them all by assiduously combing
through the Internet directories and search engines. And by running searches on keywords at the
natural and pay-per-click search engines. Then you'll need to visit their websites to see how
companies present themselves, and work out how to improve on their efforts.

You'll also need figures for growth prospects in this market niche, obtained as before by reading
company reports and trade news. Refer the resources page for Internet sites where company
reports and trade news are available.

Market Segmentation
Not to be confused with market niche is market segmentation. Some 80% of sales commonly
come from 20% of customers, and market segmentation helps identify those better customers
more precisely.

You start by analyzing customers under various demographic groupings – age, gender, ethnic
group, education, occupation and income to find the optimal profile. If you were selling
specialist cultural tours, for example, you might design your site to specifically appeal to an
audience with these characteristics:

 age: 35-55 years old

Sales and growth information might of course be available only from bricks-and-mortar
companies, when you'd have to obtain estimates of Internet users within such a grouping. The
US Department of Commerce, for example, in fact provides demographic information on
Internet users, and indeed by geographical grouping within the USA. Sites providing market
segmentation data, both free and fee-based, are listed on our research resources page.

Internet Traffic
How many visitors are you hoping to attract to your site, and how many can you reasonably
convert to customers? You require hard data, which you can obtain as follows.

For the upper limits of traffic on your site, look at the traffic figures published for the market
leaders in your particular sector.

To estimate figures for a company like yours, just moving onto the Internet, do four things:

1. Scale down the upper limits in proportion to your site's popularity, which you can estimate by
finding the number of sites linking to competitor sites.

2. Estimate the traffic expected from searches on the keywords that you'll have placed in your
webpage meta tags.

3. Obtain the site traffic of competitors through a free program.

4. Consult the media kits of competitor sites.

Translating visitors per year into sales figures is a hazardous business without knowing the
conversion rates, and these naturally vary with the market concerned. 0.1% to 5% are the figures
generally quoted (with 1-2% perhaps being the average), but you'll come across more accurate
statistics our section on conversion rates. Alternatively, you can calculate rates by comparing
information in a company's annual report data with their site traffic. Or you could try asking
marketing companies for a ballpark figure prior to engaging their services.

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