Initially you will have access to secondary data on your chosen industry, products and/or services, and customers. This data can be obtained directly from state, local, and federal sources. One excellent source of secondary data is from government agencies. Most of this data is free but you may have to pay a service fee if someone needs to compile the data and/or a postal fee if you request hard copies of the data.
This data can be obtained online from magazine articles, trade journals and industry publications, or you can directly contact an industry associations or trade organizations. Private companies also collect data on industries and markets, but their data may require permission and there is usually a fee to access it.
Secondary data is useful for determining:
- The number of companies operating in the industry – is the industry comprised of a few companies or are there many companies in the industry?
- Geographical concentration – where are the companies located? Are they in pockets or are they distributed around the country, state, or city?
- The size of companies operating in an industry – are there many large firms in the industry or is the industry dominated by many small companies?
- Annual revenue of companies in the industry – how much in sales/revenue do companies make? What are the average sales/revenue?
- Type of product(s) purchased – what product and/or services are competitors offering? Do they offer a single product or do they have a product line?
- Quantity of products purchased – how much of the product do consumers purchase?
- Frequency of product purchase – how often do consumers purchase the product or service?
These are just a few of the issues that secondary data can help you to determine. Depending on the industry, product and/or service type, or the consumer, there may be additional sources that you can access and use. In the business formation stage, it is prudent to cast a wide net and collect as much information as possible so you can have a good idea of the market and competitive structure.
Advantages of Secondary Data
- Accessibility/Convenience – the data can be compiled from your home or any other place of convenience.
- Availability – some of the data can be accessed and downloaded (or requested) quickly from many different sources.
- Affordability – the data is usually cheaper than primary research and, in many instances, it is free to the public without any investment.
- Time – the data can be collected almost instantaneously with minimal effort and does not require developing and implementing primary research collection procedures.
- Clarifying Research Issues/Questions – the data may allow the researcher to gain a more nuanced understanding of an issues which can help shape the type and direction of primary data collection.
- Extensiveness – secondary data is collected by many different agencies, institutions, and organizations so it can cover a large spectrum of issues that can be filtered for what is relevant to the issues/questions being considered.
Disadvantages of Secondary Data.
- Compatibility – the data may not be in a form that is consistent with what you are looking for.
- Definitions/Terminology – the definition of terms may not be given, may have changed over time, or may have been defined/categorized differently across sources.
- Assumptions – it may be difficult to determine what parameters and assumptions were used during the collection process.
- Inaccuracy – the individual collecting the data may have been biased or they may have used questionable data collection methods.
- Recency – when or how long ago the data was collected can be problematic because many things may have changed during that time and up to the present.
- Specificity – the data may be very broad and only superficially cover issues thus lacking the extensiveness necessary to address specific issues/questions.
- Trustworthiness – do the individuals, agencies, associations, or companies performing and collecting the research know what they are doing.
- Competency – do the individuals, agencies, associations, or companies doing the research have the necessary skills, knowledge and/or background to do a thorough.