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

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.

We teach them survey, focus groups, in-depth interviews," says Hai Che, marketing professor at UC Berkeley's Haas School of Business. "That can be a high-quality but low-cost method."

4. Survey online. You can select from an array of Internet survey companies to get a quick take on a product or service. Some online polls are free for a limited number of responses. The premium version from Zoomerang, at $599 a year, allows unlimited surveys of your existing customer lists. For extra fees, you can tap into the company's global panel of 2.5 million people and tailor your survey to specific niches. "We offer the ability for companies of any size to select samples of a particular group," says Pam Kramer, chief marketing officer of Zoomerang's parent company, MarketTools. Kramer says purchasing a sample runs around $1,500, but the narrower the group you want to sample, the more you'll pay.

Vizu, which places survey questions in banner ad spaces on blogs and Web sites, can target polls based on the audiences of those sites. "If they want to access business people or tech enthusiasts, we'll limit where we place the poll," says Vizu Chief Executive Dan Beltramo. Marketing experts caution that using online samples may not be as accurate as professionally selected panels. But Beltramo says Vizu's results line up with national polls. For entrepreneurs looking to test a concept before acting on it, online surveys can provide a quick and cheap solution.

5. Create an online community. Web-based businesses in particular can set up and moderate panels online to glean insight from customers. Forums or live chats reveal customers' experience with your product or perception of your brand. If you already have a database of customer information, you can handpick which customers to invite to the forum to get the sample you want.

"Community management is less expensive than traditional market research consulting," says Barry Libert, co-CEO of Mzinga, which creates and moderates customer communities. The company's self-service option, in which the client moderates the community, costs $1,000 per month. Another player in the customer community space, Networked Insights, charges several thousand per month, based on the number of interactions users have in the forum.

Dan Neely, Networked Insights' founder, says companies value being able to gather information directly from their communities. "It's not just small businesses, but businesses all over are looking for tools to let them do the research themselves," he says. The online community provides that tool, he says. "It's like having 500 of your customers standing in a room chatting and you just get to stand there and listen."

Most survey companies like Vizu or Zoomerang offer templates for questions, and marketers suggest asking several iterations of your question to get a sense of how reliable your data are. Even with do-it-yourself solutions available, hiring a professional market research firm can be worth the price. You might test an idea with some homespun queries, but formal surveys provide more precise data to inform a potentially costly decision. Adams, of the Moot Corp competition, advises companies to budget 5% to 10% of their startup costs for market research before making a bigger investment. "I'd rather find out after spending $10,000 that nothing's there, than find out after I personally guaranteed a lease," he says.