The cost of ignoring market research in business

Illustration: TBS

Thousands of entrepreneurs in Bangladesh launch businesses every year, with passion, ambition, and the belief that they know the market better than anyone else.

With over 50,000 f-commerce businesses and a Tk600 billion e-commerce market, one might assume that the business landscape is thriving.

But how many of these entrepreneurs question if their feasibility studies or market research actually follow established business methods? Or do they rely on casual conversations with friends and family who, while supportive, may lack the critical perspective needed to assess the business's potential?

Even in 2024, many entrepreneurs still rely on intuition instead of structured, data-driven research. But in today's fast-changing world, where AI is transforming industries and competition is intensifying, is this approach enough?

Entrepreneurs still follow traditional methods like gut feelings, popular beliefs, persuasion from CXOs (top executives), and community knowledge when making crucial decisions. Unfortunately, when things don't go as planned, they often attribute their misfortune to bad luck or resort to heavy promotions as a reactive solution.

Rush to launch

Many Bangladeshi entrepreneurs consider gathering data before launching a business as a luxury they can not afford. Limited time and resources drive a sense of urgency. The need for quick revenue means bypassing deeper research that could provide valuable insights.

Trends change rapidly, consumer behaviour shifts, and competition intensifies, with many leveraging advanced tools like Marketing 4.0. Without concrete data to support their decisions, even experienced entrepreneurs and seasoned strategists may find themselves disconnected from what customers really want.

Ahsan, a café owner in Mirpur Shagufta, is one such example. "Time is money," he said, recalling how he rushed to open his business. "I thought if I waited too long, I would miss my chance. Who has time to conduct surveys and analyse data?"

But Ahsan's haste resulted in consequences. After an initial buzz, his café began to struggle. He soon realised his competitors were offering more tailored services that resonated better with the local clientele.

Within six months, he was contemplating closing the store. His misstep? "I didn't realise how competitive the market was, and I missed a lot of details about what my competitors were offering," were his exact words.

The complexity barrier

For many entrepreneurs, especially small and medium-sized business owners, data-driven research can feel too complex and expensive, making it challenging for those who aren't familiar with data analysis or market research.

Even large corporations and conglomerates often fall into the sunk cost fallacy. From my experience at two leading consulting firms in Bangladesh, I've seen firsthand how many companies hesitate to invest in professional research, viewing it as an avoidable expense rather than a necessary investment.

Additionally, many corporations only think about conducting research after they have already started a project, which leaves them with fewer options when things do not go as planned.

Instead of doing thorough research before launching, they end up scrambling to fix problems later, often having to spend more on promotions or advertising to try and make up for the issues.

The issue? Businesses could make more strategic investments from the start if they viewed market research as essential rather than optional.

Another common behaviour among CXOs or board members is the tendency to justify investments in new ventures with subjective or sometimes irrational reasoning, even when thorough research does not provide a clear 'go-ahead'.

Overconfidence in intuition

It is common to hear entrepreneurs speak confidently about their understanding of the local market. When communicating with any businessperson, we often hear: "I have been in this area for over 15 years" (they may even add childhood experiences, such as visiting their parents' factory) and "I know exactly what customers want" (based on 15-minute supply-demand gap analysis during hangouts with friends at North End Coffee).

This reliance on intuition (non-methodical calculations) and outdated experience often leads Gen Z business owners to overlook the nuances that data could reveal.

As markets become more dynamic, these assumptions become increasingly risky. Gut feelings used to work when there were fewer competitors, or money could be used as leverage to promote a business or pressure smaller competitors.

However, trends change rapidly, consumer behaviour shifts, and competition intensifies, with many leveraging advanced tools like Marketing 4.0. Without concrete data to support their decisions, even experienced entrepreneurs and seasoned strategists may find themselves disconnected from what customers really want.

Short-term focus vs. long-term success

In Bangladesh's dynamic startup ecosystem, the pursuit of short-term profitability often eclipses the focus on long-term success. Entrepreneurs, pressed to cover operational costs, prioritise immediate gains over strategic planning. This mindset, while understandable, can jeopardise sustainable growth.

It is critical for entrepreneurs to recognise the value of long-term strategic thinking. Investing in business analytics and a data-driven approach may not provide immediate returns, but it is like planting seeds for the future.

Understanding the constantly changing market, competition, and customers allows us to build a business that can sustain itself in the long run.

The way forward

Despite these challenges, the positive aspect is that a growing number of entrepreneurs started to recognise the power of data-driven research. They are finding cost-effective ways to gather and analyse data, whether through simple customer surveys, social media trends, or other accessible tools.

In a world filled with digital data, why guess when you can know? Combining traditional data collection with digital strategies is the future.

As management guru Michael Porter famously said, "The essence of strategy is choosing what not to do." Entrepreneurs in Bangladesh need to embrace proper research to identify not just what to pursue, but also what to avoid.

Fazlul Karim Chowdhury. Sketch: TBS

Fazlul Karim Chowdhury, FMVA^® is a business strategist and management consultant, working with Innovision Consulting as a Portfolio Manager. Email: fazlulkchow@gmail.com 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.