A new takeaway restaurant has opened in the same premises where two similar restaurants failed. The product, which is essentially fast-food fish, chicken and Shawarmas, looks like it is good quality but the prices are at a premium. In fact, when I recently went to this fast-food restaurant to sample the food the prices were so high that I walked out of the store and went somewhere else where I could get better value for money.
I’m surprised that this fast-food restaurant franchise that is operated successfully in other areas has come to the local neighbourhood and set up their restaurant with prices being the highest out of eight or nine other eateries. Didn’t the owners do basic market research? Had they done their homework they would have found out, for example, that the local community consists of mainly middle-income earners with families who really only buy take out or go to restaurants on a Friday evening. This food, on the other hand, is priced for the young and upwardly mobile who have more discretionary income and can afford to eat out more regularly.
Market research can be expensive but there are basic ways to get a general idea of a local market that can avoid headaches later. It’s a simple procedure to do observation and look at what customers are buying from existing businesses. You’ll quickly find out the demographics of customers by seeing whether, for example, families with young children are not coming out on Fridays to eat, or whether it is mainly young couples. A brief scan of the neighbourhood would tell you things like whether there are office buildings for the lunchtime trade. You could also speak to other small business owners who are in non-competitive businesses to yours to find out their local customer knowledge.
It’s interesting how small business advice would cover areas such as forms of ownership, a business plan, production processes, purchasing, quality and logistics, administration and finance, funding your business and managing staff and training them but give scant attention to the market that you are targeting. The problem is that if you have not done your homework you could be targeting a narrow customer base. When you rely on a relatively small number of customers in a local community you put your business at risk. Soon you are unable to cover your overheads and even if you try various strategies and tactics you won’t be able to pull your small business out of difficulty.
Research on your potential customer market is vital. The more information, informal and formal research, you can obtain on potential customers, before you start up or opening your business doors, the stronger position you will be in. Don’t make assumptions based on opinions and flimsy notions about potential customer demand. Go out and find information for yourself first hand or if you do know someone who is experienced in this area, sit down with them and map out a basic market research plan.