What Is Market Research?
Market research is the process of collecting, analysing, and interpreting information about a market. This process can include data about many variables within that market, including, but not limited to:
- a product or service that is being sold
- the past or present buying habits of customers of a product
- the characteristics, spending habits, and geographical data of a business’s target market
- competitors’ products or marketing strategies
This data can inform many critical business decisions, ranging from determining the feasibility of a new business to ensuring that optimal product placement decisions are made. Market research can also identify critical areas for improvement and where there is room for innovation or disruption within a market.
Market research is composed of two different types or classes of information:
- Primary Data: This is data that you compile yourself or hire someone to compile for you that comes from original sources. When collecting primary data, you maintain control of the process from start to finish, which is one way to ensure the integrity of the data and to understand the limitations of the data.
- Secondary Data: Secondary data is information that has been aggregated and compiled by an external source and is now publicly available. Examples of this would include any data that is shared in trade reports, available online, in magazines or newspapers, or issued as a governmental report.
The majority of data used in market research is secondary data, which can provide great insight, but it has many deficiencies. You do not have any control of the process in collecting the data, and even if you analyse it in novel ways, it is still the same data available to many other individuals or entities, including competitors.
Despite this, secondary data is often readily available and can be accessed with little effort or financial commitment. When using secondary data, it is also imperative to look for highly reputable sources. While there is a seemingly endless quantity of sources for secondary data available online, far fewer produce very high-quality data, which means you must thoroughly vet the source of any data you potentially use to ensure that it can satisfactorily answer your market questions.
In most instances, primary data is preferred as it allows you to ask – with precision – for the specific data you are seeking. However, it also comes with some drawbacks. Namely, it is often far more expensive, uses your own resources, and is time-consuming. Types of commonly used primary data collection methods include:
- Surveys: Surveys can be conducted over the telephone, on paper, in person, or by using an online survey tool. Surveys allow you to ask customers a series of questions to gain an understanding of their feelings about a product or experience.
- Focus Groups: Focus groups, or group interviews, bring a mid-sized group (usually 8-10 people) of individuals with common characteristics together to ask more in-depth questions about their desires, needs, and aversions concerning a particular product or service.
- In-Depth Interviews: These are generally carried out over the telephone or in person and offer an opportunity to dive deeper into a topic with specific individuals. They are often valuable in understanding motivations and preferences.
- Observation: Observation for market research allows you to observe how someone interacts with a product in a natural setting. It offers the ability to provide entirely unbiased data but can be quite time-consuming.
When looking at market research, some of the best insights come when researchers juxtapose primary data and secondary data to develop an understanding of both data sets in relation to one another. While some market research data is fairly easy to comprehend for a layperson, in many instances, market research experts can spot trends in data that can lead to additional, valuable business insights.
Why Is Market Research So Important?
It’s easy to dismiss the importance of market research; after all, once you think of a business idea, spending time on market research is the last thing on your mind. However, market research is becoming more and more important across all industries: it gives you a competitive edge and insight and a proven way to increase customer satisfaction and enhance your business’s performance. It can optimise the performance of your marketing campaigns, increase sales, and even keep your business one step ahead of your competitors, which is becoming increasingly important in a hypercompetitive globalised economy.
Here are 4 different ways in which market research can enhance your performance, including the following:
- Reveal Business Opportunities: Market research tells you a lot about your business, your products, and your customers – including a lot of detail about their interests, values, and characteristics. This data can reveal business opportunities that you might currently not be leveraging effectively. It could suggest other businesses that might be suitable for joint promotions, allow you to customise product suggestions for your current clientele, and create targeted ad campaigns that are tailored to suit the culture of the geographical area where they are located.
- Identify Locations to Target: With a wide variety of advertising options available in today’s business environment, most company leaders struggle to know the best way to make the most of their advertising budget. Naturally, most would want to focus on advertising channels and locations that get the best possible returns, but in many instances, that knowledge isn’t obvious. Market research can help to ensure that you are reaching the audience you want to reach using the right marketing channel to maximise efficacy. It can help answer granular questions such as which social media platform to focus on, where to place physical advertisements, and even how to best deliver targeted ads to customers based upon their behaviors, life stage, interests, and other relevant information.
- Beat your Competitors: With market research, you can learn more about your customer base than your competition might know, which gives you a headstart at outperforming them. By analysing customer complaints on the competitors’ product reviews, you can identify ways to enhance your product line in a way that addresses these complaints. You can make a better product than what is currently on the market. You can also find out if there are unmet customer needs that aren’t currently being recognised. If so, you can expand your offerings or your advertising to encompass these unfulfilled areas.
- Lower your Risk: When people think of market research, they often equate it with new product testing and how that process can lower their risk. Admittedly, testing new products and designs to see how customers will respond before doing a full product launch is an essential function of market research, but it is not the only way to lower your risk. You can also get more information into current problem areas with existing products or gain a better understanding of why one-time customers don’t come back. All of these strategies can shed insight into ways to enhance your products and service, which ultimately works to lower your risk by making you much more equipped to address problems and customer concerns.
The above points are just start and as you can see, market research delivers crucial information that is vitally important to maintaining a competitive edge. But data gleaned from market research is only as good as the insights and actions that are taken from it. How much market research data is incorporated into the entire business process is highly variable from company to company. The reasons listed above only reflect some of the actions that can originate with this data.
Companies with market research highly incorporated in their operations often use it to answer many other questions, such as how to set goals for each department, whether to open a new location (and where), how to optimise production, and determining what types of promotions to offer. There are many other examples of why market research may be necessary to your business; it just comes down to what information you need to make the best strategic decisions possible.
What Kind Of Information Can Market Research Give Me?
That’s a good question, you may be wondering what type of data you can expect by conducting market research. There are several different data groups that you can glean information about, depending on the type of research you pursue.
Most market research is focused on several different types of data, including:
Many companies want to understand their target market better, allowing them to create messaging that appeals to their target market and understand their product needs and concerns better.
Market research can provide information about your target market, such as demographics like gender, age, marital status, family size, economic standing, job characteristics, interests, political affiliations, and even spiritual affiliations. Understanding this data allows you to create market segments and anticipate the needs and buying decisions of these segments. With this information in hand, you can define pricing, develop promotions, target geographical locations, and tailor advertising to maximise the effectiveness of any of your advertising campaigns.
Knowing about your competitors gives you the upper-hand when it comes to making decisions about your company’s future. You can find out information first hand about their successes and failures, and use that information to enhance your product without making their mistakes.
You can learn more not just about current competitors, but also the start-ups in your industry. Market research data can tell you details about their marketing plan, pricing strategy, sales successes, social media presence, and their relationship with former, current, and new customers. It can also tell you about the products and services they are currently offering. This data allows you to spot trends earlier than competitors and capitalise on their successes as well as your own.
Market research data can help you get the most out of your advertising budget in a big way. Advertising establishes your company’s brand, or identity, to the public at large. It also attracts new customers, and hopefully increases your sales revenue. But how do you know if you are doing this successfully?
Market research data can help you find out if you’re advertising in the best ways possible, and if you aren’t, it can reveal areas where you can improve your strategy. Market research can tell you whether your target audience likes or dislikes your current media messages, how they are responding to specific messages (are they clicking on promotional emails, etc.), what platforms or media sources they prefer, where they like to receive advertising messages (e.g. during their commute or while watching TV), and even give you insight into the ROI of current and potential media advertising placements. Ultimately, with market research data, you can create a far more effective advertising strategy that elicits more positive responses from your customers.
Market research can also help you identify your future growth strategies, including which ones to expand and which ones to ditch. Market research can tell you what trends are beginning, what future markets may look like, what areas may be ideal for expansion, and what strategies or campaigns may work in the future. The sum of all market research data, taken together, works to tell you who your market is, how to target them, how to create messages that will be effective, and how to deliver a better product or service than your competitors. The entire process serves to ensure continued success and future growth.
Clearly, market research can tell you a lot – a lot about your customers, a lot about your competitors, a lot about the effectiveness of your marketing and advertising strategies, and a lot about your company’s future. Without data from market research, you simply can’t make the data-driven decisions that will be integral to the continued success of your company.
How Does Market Research Help Me Sell My Products & Services?
Market research can help you sell your company’s products or services in several different ways, by providing insight on the product itself, the company, the market, the customers, and any relevant industry trends.
The most significant way that market research contributes to ensuring sales is by allowing for an opportunity to “test” a product or service before actually launching it. It’s often devastating when small companies launch a product, only to discover there is no market for it after investing heavily in the launch itself. Even mid-sized and large companies have a limited amount of time and money to spend on new products. So, how do they ensure every new launch is a success?
The answer is by conducting market research. This research can tell you whether or not the public is open to the product or service idea if it is a new niche, or it can give you insight into how to differentiate from existing products or services if you are considering entering an established industry. If you find out there is no money to be made, you can avoid a costly failed product launch before sinking more money into it. If there is market demand, you can use market research data to optimise your entry into the market by establishing a strategy that will differentiate you from existing competition.
Market research data can also help you refine your ability to establish and maintain credibility, or a reputable brand name, across the markets you serve. If you are entering a new market, you may be able to use a promotion to garner client reviews and testimonials; you can expand your client feedback options, and you can ensure your customer service team is providing peak performance. All of these actions help you make a name for your company that customers recognise and trust.
You can also use customer information from market research to determine your most effective advertising strategy. This strategy should reach the right people, at the right place, at the right time, and at the right price point. Knowing and understanding your customers’ needs and wants allows you to tailor a message with the best chances at successfully reaching them and converting to sales.
It can also tell you about any current strategies that are not working. If your market research reveals that your customer base uses one social media channel primarily, even though you are investing more heavily in another platform, you can change your strategy to focus more on where you can find your customers – this allows you to connect with them better while saving you money on the other channels that weren’t working as well.
How Do I Get Market Research?
Conducting market research can be an eye opening experience and is crucial in understanding not just where your company is at, but it can also help you to define a plan and strategy to get the company to where you want it to be in the future. But many companies simply don’t know how to get accurate, reliable, and timely market research data. Depending on what type of data you are seeking, there are a couple of different ways to get it.
In market research, primary data is data that you compile yourself or hire someone to gather for you that comes from original sources. If you choose to conduct it yourself, then you must devote in-house resources to the task, and you will control the process from start to finish. Often, companies do primary market research by encouraging customers to complete surveys, provide interviews, engage in trial offers, or participate in focus groups. This process allows customers to tell the company, in their own words, about their preferences.
Since this process is often time-consuming, labor-intensive, and may be vulnerable to the biases of the company’s employees, many organisations opt to outsource the collection of primary market research to a third party consulting firm. While it may initially appear that you are giving up control of the process, you can still have a big say in the design of the research methodologies and the objectives you’d like to meet during the data collection period. Either approach to collecting primary data is likely to be costly and resource-intensive; however, the business advantages of having this data usually outweigh the financial cost.
Secondary data often supplements primary data. In other instances, it is sought after because collecting primary data is too cost prohibitive for many organisations. Secondary data is information that has been aggregated and compiled by an external source and is now publicly available. Some of this data is free, such as data from the census bureau, while other options cost a fee, such as many Trade Association publications.
Examples of where secondary market research can be found include:
- Governmental sources, such as the Australian Bureau of Statistics and public libraries;
- Trade associations or commercial sources;
- Educational institutions, such as colleges and universities;
- Community organisations, such as the local Chamber of Commerce;
- Websites that feature statistical data, such as Statista and Pew Research Center; and
- Sites that feature market research tools, such as Audience Overlap Tool, Social Mention, and Google Trends
When you’re looking for secondary sources of data, it is always wise to determine the credibility of the source that you are using. Any insights you arrive at through market research analysis are only going to be as good as the data being used to make the decision. While the internet offers many sites with treasure troves of information, not all of them are credible. Some sites, while reputable, may be analysing data for their own agenda, which you need to understand while analysing and interpreting the data you find.
You can also find secondary data internal to your company in the form of data that you have already collected. Examples of this may include old inventory records, sales figures, profit and loss statements, and balance sheets. In most instances, this archived information may prove useful for determining future projects and goals.
As you can see, market research can be obtained in a variety of ways from a myriad of different sources. The best method for obtaining the data you need will be determined by what types of questions you would like answers to, and the amount of resources you can dedicate to answering those questions. However, in most instances, the best quality market research uses a blend of both primary and secondary data from numerous sources.