How to Conduct Primary Market Research for Your Small Business
Primary research is the process of collecting information directly from the people from the target market, which in my case is the Lithuanian market. I will be analyzing the Lithuanian market through questionnaires since they involve direct user involvement and provide a reflection of Lithuanian people’s needs. I will also observe the customer shopping habits in “The Brother’s Food Store” to draw any further findings that may prove useful when starting up the “Lithuanian Sunset” food store. To see the full questionnaire please refer to Appendix 5.
Overall, I have selected a sample of 50 Lithuanians to complete the questionnaire regarding a new Lithuanian shop called “Lithuanian Sunset” in the Stratford area. All questionnaires were completed by Lithuanians next to the “Brother’s Food Store” in Stratford Inn Shops.
- What is your age?
92% of the interviewees were from 18 and under to 40 years of age. In turn, “The Lithuanian Sunset” will have a great task ahead of itself because the needs of almost all age groups will have to be satisfied and this will involve selling a variety of produce aimed at almost all age groups, but particularly at youngsters to middle aged people hence the questionnaire results. On the one hand, catering for all age groups increases the feasibility of a Lithuanian shop since “The Lithuanian Sunset” will be able to exploit the Lithuanian market and leave all customers satisfied and in effect, build up a customer base and maximize its profit margin. If in any case the relationship between “The Lithuanian Sunset” and the supplier is stalled, then “The Lithuanian Sunset” will still be able to generate income from other age groups. This would in effect increase the feasibility of another Lithuanian shop, as the risk of operating is spread over several age groups. On the Other hand, catering for all age groups will involve a lot of organisation and work since “The Lithuanian Sunset” may have to negotiate with different suppliers in order to purchase Lithuanian goods suited for different age groups and target their adverts at different age groups, which could prove very costly and act as a strain on the cash flow. In turn, this would make an establishment of another Lithuanian shop less feasible.
- How long have you been living in the U.K.?
An astounding 70% of the interviewees have been living in the U.K. for less than two years and further 20% for fewer than 3 years. Most interviewees said that they came into U.K. to hunt for jobs since Lithuania has joined the E.U. However, the results show that only 10% of the interviewees have been living in the U.K. for over 3 years, which suggests that “The Lithuanian Sunset” will have to use a penetration pricing strategy in order to attract as many possible customers as possible. Despite the fact that “The Lithuanian Sunset” will provide luxurious goods to Lithuanians since such produce is very limited in London, the products will be income elastic since changes in people’s incomes will determine their spending habits. Moreover, the fact that the vast majority of Lithuanians have been living in the U.K. for less than 3 years will mean that their English language may be limited and so “The Lithuanian Sunset” will have to employ staff who are able to speak Lithuanian language in order to make the Lithuanian customers feel like they are in their native country. The design of the shop will have to be benchmarked against a typical shop in Lithuania in order to add that extra element of home. Yet, the results may also suggest that a Lithuanian shop in Stratford is less feasible as Lithuanians are in U.K. temporarily, most job hunting, and would therefore be willing to try new products that they perhaps would not be able to get in Lithuania. Nevertheless, most Lithuanians find it rather difficult to adapt to other cultures and so prefer the idea of food from their native country to which they have been used to which in effect heralds a lucrative market for “The Lithuanian Sunset”.
- What is your yearly income?
A staggering 70% of Lithuanians earn in the region of £0-20k and other 30% earn around £20-40k. Such findings suggest that “The Lithuanian Sunset” will have to keep their prices fairly low in comparison to the “Brother’s Food Store”, it’s main future competitor, and possibly adapt a penetration pricing in order to maximize its market share. In turn, lower prices will not only mean a higher number of customers and customer loyalty but higher profit margins and a high capacity utilization, which would ensure that “The Lithuanian Sunset” will sell as many products as possible and avoid obsolete stock. Given such conditions, there is a greater feasibility for a Lithuanian shop due to both expected high demand and great stock turnover. Yet, the fact that most people are low earners in comparison to the U.K. economy, makes a new Lithuanian shop in Stratford less feasible as “The Lithuanian Sunset” will have to charge lower prices in order to attract enough customers, which means that more products would have to be sold in order to make enough contribution to cover the fixed costs. “The Lithuanian Sunset” may have difficulty in finding low priced Lithuanian imports in the U.K. which may pose as a problem and a balance between the expectations of low prices from customers and cost of imported goods will have to be found in order to keep the customers and “The Lithuanian Sunset” equally happy. Also, exchange rates will play a great role in determining the cost of imports since Lithuanian goods will have to be bought using British currency which will have to be exchanged into Lithuanian Litas in order to cover the costs of imports. Although when the pound is low against the Litas “The Lithuanian Sunset” will experience many problems and may be presented with a predicament. Lastly, the interest rate will also affect the buying habits of the Lithuanians since the interest rates are set to rise in 2007, a Lithuanian shop will be less feasible as most people would prefer to keep money in the bank and earn interest, and it would be harder and more expensive to take out loans due to a higher interest charge (for more details please see appendix 3).
- 4.How much money will you be willing to spend in “The Lithuanian Sunset”?
- 88% of the interviewees say that they will be willing to spend under £10, whereas the other 12% will be willing to spend more than £10 in a Lithuanian shop. As a result, this will mean that “The Lithuanian Sunset” will have to keep their prices fairly low so that people would think that they are getting a good value for money. Since each person is prepared to spend around £10 then “The Lithuanian Sunset” will have to appeal to as many categories of different people as possible so that by attracting more groups of people the sales revenue would increase. Such a forecast makes a Lithuanian shop in Stratford less feasible as a greater number of people would have to be attracted in order to breakeven, which in turn would make profit harder to achieve. This could potentially lead to a shortage of working capital and eventually overtrading. Although the sales revenue and profits in turn would remain steady because the amount spent by customers would not vary, “The Lithuanian Sunset” could aim to diversify to provide similar goods to people from Eastern Europe who share a similar culture to Lithuanians, in order to make a Lithuanian shop more feasible.
Types of products you would like to see in “The Lithuanian Sunset”
51% of the sample said that they would like to see smoked meat and beverages in the new Lithuanian shop, which will mean that “The Lithuanian Sunset will have to provide an extensive range of smoked meats and beverages since these would be the cash cows of the store and would allow “The Lithuanian Sunset” to cross-subsidise on other products. 21% would like to see confectionary, 10% dairy products and the minority want to see conserves, frozen, and fish products. “The Lithuanian Sunset” could prove other less preferred products on a test trial to see how they sell and whether it is worth stocking them. However, “The Lithuanian Sunset” should not rely so much on the questionnaire as to what products they should stock since the sample is not reflective of the entire Lithuanian population in Stratford. Stocking too many products could also pose as a threat to business and make it less feasible because dairy products may get outdated very quickly and if they don’t sell there may be a lot of ruined stock, in order to sell alcoholic drinks “The Lithuanian Sunset” will have to pay for a license regardless of how many drinks are sold and alcoholic drinks could prove to be a dog and lose the business money. Instead, “The Lithuanian Sunset” should put all products on a test trial for a certain period of time and mainly stock the products that are regular sellers in order to reduce the risk involved in the business and in turn make the operation of the business more feasible.
- How often would you shop in “The Lithuanian Sunset”?
70% of the interviewees said that they would shop in “The Lithuanian Sunset” every 5 days and the further 30% said that they would shop weekly or daily. In order to satisfy the needs of the consumers “The Lithuanian Sunset” will have to use a just-in-time system that will be responsible for immediately re-ordering stock as soon as it runs out. The frequent demand and short liquidity cycle will make the concept of a Lithuanian shop in Stratford more feasible as stock turnover would be high and “The Lithuanian Sunset” would be in a better liquidity position due to its ability to generate cash from stock fairly quickly.
- Is there a need for another Lithuanian store?
96% of the interviewees have said that they would like to see another Lithuanian store in Stratford despite the already open “The Brother’s Food Store”. This in effect underscores the fact that “The Brother’s Food Store” is unable to satisfy the ever increasing demand for Lithuanian Produce and it can be deduced that “The Brother’s Food Store” is working at a full capacity, which in turn leaves more scope for “The Lithuanian Sunset”. Because people are so convincing that there is a scope for a new Lithuanian store suggests that less money will have to be spent on advertising and less costs will be incurred from competition. However, there are limitations to this response since the sample size is not extensive enough to make a significance decision of opening a new Lithuanian store, which may prove to be a leap into the dark.
- What would you feel would be the most important aspect of “The Lithuanian Sunset”?
72% of the interviewees have said that both price and quality of Lithuanian produce would be equally as important. In effect, such response makes Lithuanian shop less feasible as quality will inflate the prices and put “The Lithuanian Sunset” in a worse liquidity position as more cash would have to be spent on quality and stock management techniques as well as on ordering quality stock. Yet, the high cost of stock can be replenished by the higher prices that “The Lithuanian Sunset” will be able to charge its customers. “The Lithuanian Sunset” will have to ensure that it buys its stock from the highest quality suppliers and introduces some sort of quality control tool that could help to ensure the produce are not gone off or defected. “The Lithuanian Sunset” may well introduce a Just In Time (JIT) system to make sure that no produce are stocked, enabling “The Lithuanian Sunset” to order fresh produce whenever the stock is at a re-order level. However, the main disadvantage with a JIT system is that it may make “The Lithuanian Sunset” too reliant on its suppliers who could inflate the prices and so put “The Lithuanian Sunset” in a less competitive position.
- How did you hear about “The Brothers Food Store”?
70% of the interviewees have heard about “The Brother’s Food Store” through the word of mouth, whereas 30% through the media. Such a response makes a Lithuanian shop in Stratford more feasible as, “The Lithuanian Sunset” will incur low advertising costs since most people were informed about “The Brother’s Food Store” through the word of mouth. The cash outflow for the Lithuanian store is likely to be much lower than expected and so “The Lithuanian Sunset” may spend its budget more effectively without incurring high opportunity costs and at the same time decreasing the probability of business going into the red as the spending expenditure is likely to be much lower without advertising costs, which may also decrease the need for a loan and company’s gearing. In contrast, what happened to “The Brother’s Food Store” is an assumption that is attributed to “The Lithuanian Sunset” and so has a high risk attached to it as what may have worked successfully for “The Brother’s Food Store” cannot be directly transferred to “The Lithuanian Sunset” due to changing business and economic environment, which slightly reduces the feasibility for a Lithuanian shop. Promotion is likely to be introduced at the beginning of business operation in order to inform potential buyers of the new store and in effect build a customer base and it is then that the cash outflow is likely to be the highest thus requiring some sort of a loan.
- Where would you like the new Lithuanian shop to be located?
68% of the interviewees would like to see the new Lithuanian store in the old premises of “Iceland” rather than Vicarage Lane or the Stratford Inn Shops (for map please see appendix 4). The premises of the former “Iceland” shop are located next to the entrance of the Inn Shops and are in a very noticeable location. This in turn increases the feasibility for a Lithuanian shop, as it would be within a close proximity to the local infrastructure and could make it more convenient for customers to shop.
I have carried out an observation into the shopping habits of people shopping at “The Brother’s Food Store” in order to gain a deeper insight into consumer wants and highlight the weaknesses of “The Brother’s Food Store”. The Observation has produced astounding results and suggests that by and large the people are unhappy about the limited choice of produce available to them at “The Brother’s Food Store” and high prices and low quality of food, most of which is not actually from Lithuania but an alternative replacement for Lithuanian food from neighboring Eastern European countries such as Latvia and Poland. In effect, this increases the feasibility for a Lithuanian shop as “The Lithuanian Sunset” could gain a competitive advantage over “The Brother’s Food Store” by providing genuine Lithuanian produce at lower prices. Yet, the finding that an increasing number of people want fresher food suggests that “The Lithuanian Sunset” will have to produce quickly perishable goods in the U.K. using Lithuanian produce. This would increase the risk of high wastage levels and costs, which would make the concept of a Lithuanian shop less feasible.
Surprisingly, most people are prepared to travel to “The Brother’s Food Store” from outside Stratford including Forest Gate, Layton, and Canning Town, which in turn implies that “The Lithuanian Sunset” will be able to increase its market share through an increasing number of sales.