Market research is a technique used by entrepreneurs and experienced business people. The market research process is focused on gathering and analyzing information and getting actionable insights.
This type of research is used for many different purposes like developing strategies, setting future business goals, making sales decisions, and more. Market research can give any business a very good picture of the market, products and services, customer behavior, and more.
By researching specific topics, a company can also get an idea of what needs to be changed within the business like delivery methods, packaging design, or new offerings.
As you can already see, market research is vital for the success of every business. It gives invaluable and actionable insights and shows the direction for growth and improvement. Everyone who wants to keep their business’s competitive edge must be able to conduct market research.
In this article, we will discuss everything you need to know about market research and how to make it work for your business. After reading this, you will be ready to conduct your own research and understand your customers, and market much better. Let’s get started!
What is the Purpose of Market Research?
Market research is a structured approach that is used to gather and analyze information about your market, audience, competition and get actionable insights out of it. Conducting this research is a crucial step in developing everything from your product to packaging, marketing channels, pricing, market segmentation, and more.
Market research gives you a picture of the market and where you stand. You get to know your audience, their needs, and opinions, what does your competition do, etc.
To be able to conduct proper market research you need to gather data. The more information you collect, the better. Sometimes it may take long until you understand what you are looking for, so it is important to find the key information you need quickly and use it in the right way.
The Benefits of Market Research
Why do you need market research when you already have a lot on your plate? It is hard to make time to do market research especially if you are a small business owner. But if you don’t do it you could be missing great opportunities because of lack of information.
Market research has many benefits for small businesses. It can help create more effective marketing materials, identify new audiences and niches, give ideas for new products and services, minimize the risk of bad positioning and give you early updates on market trends.
In a few words, effective market research can help your business be more successful and attract new customers.
When you need to do research on a tight budget, it can be challenging to find the tools and techniques with the best value. So, when it comes to popular and affordable market research techniques, several sources are invaluable like Facebook groups, Reddit, Quora, trade associations, competitors, and asking the audience directly on social media.
The Role of Market Research in a Business
Markets are saturated and competitive, so it is hard to provide high-quality products and services. If you are just launching your business without conducting at least basic market research, having a competitive advantage in the market will be even more difficult.
Most people stay away from research because they think it means you need a lot of skills and sophisticated tools to conduct one. Others think that research is just useless data that nobody reads. But these are just myths and misunderstandings.
The truth is that the most successful business people have conducted at least some basic market research before launching their company. Besides, you don’t need special skills or techniques to get some basic insights from the data you already have available.
As we already mentioned market research has different purposes and benefits. The type of research and data collection method you choose depends very much on the outcome you are looking for.
Here is a breakdown of some of the primary uses of market research and the data collection methods that work best for each of them.
Identify new business opportunities
Market research can help you understand what people want and need. If you want to check if a certain group of potential customers has unmet needs, try interviewing them, doing focus groups, and follow industry trends. You need to become a careful listener and observer to understand what they really need and want. The next step is developing a new version of your product or service and testing the market if it will sell.
Verify the market size
Ok, you now know there is an unmet need, but how many people have it? If you want to scale your business, you need to know what the size of the market is. Segment it and identify the subgroups with their unique features and preferences. What helps in this process is checking customer demographics or interviewing key people within these segments. Here you can make use of secondary data.
Meet the need in the best way
Now you know the unmet need and you have the size and segments in the market. However, the question remains what is the best way to meet that need? Here is where focus groups can really help you. You need to determine how to create a product with the right features and benefits that meet the need and specific requirements of your customers. Ask your potential customers about their preferences and what the best way to meet their needs is. Share your ideas with them and ask them if they would be willing to pay for your product or service.
Know your competition
The best way to see if you are on the right track is to investigate the competition. So, you will need to do a competitive analysis. Check the sites of your competition, look at their products and services, their pricing, and advertising techniques. Even better, go ahead and try your competitor’s products and services. Become their customer and experience it for yourself.
Formulate your unique value proposition
You need to be very clear about why others should choose your product or service over the competition. Again, focus groups are a valuable source of information and feedback. Gether some potential clients and tell them why your offering is unique and see what they think about it.
Meet customers’ needs effectively
Do you really meet the needs of your customers? You need to evaluate to make sure your product or service really meets customers’ needs. The evaluation includes the use of different data collection methods in combination for example interviews, observation, product testing, case studies, etc.
Use the right advertising strategies
Check if your advertising and promotions are working. The best way to do this is to track the results. Depending on where you advertise you have a different way of collecting data. Some data collection methods you can use are observing clients and talking to them if it is a local business or reaching out online with customer surveys and case studies.
Types of Market Research
There are two types of market research that you can conduct to collect information and get actionable results. They are primary and secondary research.
This type of research is called primary because it uses firsthand information. You can use online surveys, phone interviews, focus groups and other methods to get fresh details about your customers and brand awareness.
Primary research is very useful when you are segmenting the market and creating your buyer personas. Primary research can be exploratory and specific.
Exploratory research – This type of research is concerned with potential problems rather than measurable customer trends. It normally comes before the specific research and involves surveys and interviews with a group of selected people.
Specific research – This research comes as a next step and is used to dive deeper into opportunities and issues that are already important for the business. In specific research, you can take a more precise segment of your clients and ask them specific questions aimed at solving an existing problem.
Secondary research deals with publicly available data and sources that you have at your disposal and you can directly draw conclusions from. These may be existing industry reports, sales data, market statistics, etc. Secondary research is used primarily for analyzing competitors and market trends. Here is a breakdown of sources that can be used for secondary research.
Public Information- This information is available at sources that are free and publicly accessible. They are a great place to start your research. For example, the U.S Census Bureau and the Labor and Statistics Bureau offer helpful and valuable information about various industries.
Commercial Information – These are usually market reports issued by research agencies and trade associations. The reports can be downloaded and usually are not free.
Internal information – Internal information can be very useful for market research, unfortunately, it doesn’t get enough credit. This is the data your company already has, for example, customer retention rates, the revenue per sale, and other information that can help you draw conclusions for your business.
Market research can also be quantitative and qualitative. These two types of research can be done separately or in combination to get an even better picture and deeper insights.
This is the process of gathering numerical data (quantitative data) and making sense of it. Quantitative research is structured and can be done with large sample sizes because statistics and numerical results are easy to summarize.
This type of research focuses on particular topics and aims at understanding thoughts, experiences and opinions, and the reasons behind them. In qualitative research, you explore and collect unstructured data like audio, video, text and summarize the conclusions into themes. That is why this type of research is done with small sample size. Examples of qualitative research techniques are in-market experiments, surveys, focus groups, in-depth interviews.
Basic Steps for Conducting Market Research
Conducting market research and coming up with actionable insights is not something that happens overnight. This type of research has a structured process and steps that need to be followed.
Here are the basic steps for conducting market research for your company.
Clarify the purpose of your study
As we already discussed there are many reasons why a business might need market research. The conclusions may be used to find opportunities, assess business risks, or test new products.
However, before starting any market research, you need to clarify the purpose of it. Is it for external or internal use? Are you trying to improve business operations (internal purpose) or to attract new investors (external purpose)?
Market research is a critical part of your business plan. It shows that you know the industry and that your business has growth potential. The type of research you decide to conduct will determine the data collection method and analysis. For example for internal research, you will not need to collect much public data but rather concentrate on your internal sources of information.
Make sure you have the purpose of your research clear before you proceed with the next steps. Depending on the purpose you will have to skip some of these steps and focus more on others.
Get to know your target audience
One of the most important questions for a business is what is the target audience? Identifying your potential customers is a huge part of your research because you cannot conduct it properly without this part.
Who are you selling to? Who is your product or service made for? How do you connect with these people? All these questions need an answer much before you create your buyer persona. You should know their age, gender, income, values, education, interest, location, and any other relevant information.
Often there are several audiences, so you need to understand who they are, create accurate buyer personas and categorize them into subgroups.
For this step, you can use social media, surveys, and even government analytics to fill in all gaps and answer all the important questions.
Identify industry trends
In your research outline, you need to look at the current state of your industry and where it is heading. You can use metrics like projected growth, size, and trends. Be sure your data is up to date and relevant.
If you are looking for lenders or investors this part will convince them that you have done your homework and you know the industry well. Of course, this will help them decide if the industry is worth their money and time.
Look at the competition
Competitive analysis is another important part of market research. It helps you understand the market better. You see who is out there, what is their offering, who they are selling to, and at what price. You want to understand the value and unique selling proposition of each one of your competitors.
Start by making a list of all your main competitors. Go through each one of them and determine their strengths and weaknesses. Get all the information you can about marketing, pricing, positioning, etc.
All this will help you decide on the price you can charge for your product, what your value proposition can be to stand out, what offers may appeal to the target audience etc. This part of the market research can also give you a good idea about the marketing your competitors are using to attract customers and what the audience is responsive to.
Check competitors’ websites and social media, are they having a strong, informative, well-positioned blog or are they advertising heavily on Google and Facebook?
There are tools you can use to see what your competitors are doing in terms of marketing. This information can be very useful for your own marketing strategy.
Collect more data
Information is your best friend when it comes to market research. The more you have the better off your insights will be. The data you collect should be up to date, unbiased, structured, factual, and relevant. You should use credible sources so that your research can be accurate and reliable. After all, you want to be able to back up your business decisions on it.
For your primary research, you want to reach out to your audience and learn more about their experience and opinion. This stage is very important if you want to develop and launch additional products or services, or to improve your existing offering. Reach out to your current customers and ask them. You can compile focus groups of people who are already fans of your brand. Even if it takes time and effort, the result will be worth it, because you will get first-hand answers, impressions, and opinions.
You can also hire a company to help you with this or send surveys directly to your customers. Another way you can reach out to your audience is through social media. Use the polls on your page or in Facebook groups to learn what people think.
Most people love to share their opinion, so take full advantage of that. Don’t assume anything because most of the time their answers may surprise you or give you new ideas.
For your secondary research, you can take advantage of trade journals, state and local data. Finding data really depends on the market and industry you are in.
Here are a few sources where you can find accurate, publicly available data.
Labor and Statistics Bureau – A great source of information for U.S based businesses. Here you will find information by industry: sizes, expense trends, and more. If your clients are other businesses, this is a great place to look for information.
Census Bureau – This site is a gold mine for useful data if your business is in the U.S. Here you will find data on customer spending per area and type of business, which is very valuable for local businesses. The U.S Census has great search resources, so it is definitely worth exploring.
My Best Segments – A tool by Nielsen which helps you find demographic and psychographic data for groups in different areas. The basic information is free and it is enough to give you some good insights. If you are looking for more detailed information, check out the paid detail report.
Census Viewer – This is a great free tool that gives access to Census data in a more user-friendly format. You have great visuals, a map, and detailed reports on state, city and county levels.
Zoom Prospector – This tool is designed to help you find the perfect location for your business. Whether you are looking to relocate or are ready to expand, this information is worth checking out.
Consumer Expenditure – This is survey data that will tell you what people spend their money on. It is a great source for entrepreneurs and business owners looking for new niches or products.
SBDCNet – The Business Snapshots are a collection of industry profiles that describe how industries develop, their customers, and startup costs. There is also a list of market research sources by an industry that can be very helpful.
Compile and analyze the data
By now, you have enough data to work with. Compile it, sort it, organize it and start analyzing it. It’s time to start making sense of all this information.
Take a look at your findings and organize them into sections – your purpose, audience, industry, competition. Depending on the purpose of the research you can extend any of these sections with more detailed information.
For example, you can include a longer overview of the industry, projections of your market share percentages or cash flow, discounts and promotions you plan on offering, buying trends, growth forecast, pricing trends, results and conclusions of previous research, and more.
Your research will not only give you a good picture of the market but will also allow you to forecast different things for your business such as gross margins, growth, market share, cash flow cycles, customer habits, etc.
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Make it actionable
Market research may seem challenging and even boring for some, but your business will thank you for the effort over time. You have probably spent a lot of time on your research already – gathering data, structuring it, and analyzing it. Now it’s time to make it actionable!
Look at the conclusions of your analysis and try to extract actionable insights from them. There are golden nuggets that will push your business forward and will back up your decisions.
If your research was conducted for internal purposes, look at how you can use it to improve your business in different areas. Use the findings to see where you can step in and make things work better and more efficiently.
If the research was meant for external purposes, be prepared to present your conclusions in front of potential investors and lenders. Make sure to show them you know the industry and customers and let them see the potential that you see in this niche or business.
Many people do the research and forget about it or put it away for future use. That’s not the way to go. If you have already put the effort into it why not use it? Revisit it every now and then, add new things and let it guide you and your business in the industry and market.
Common Market Research Mistakes
Here are the most common mistakes people make when conducting market research.
Relying on secondary research
If you want to get the full picture of the market you cannot use only the conclusions published by others. It is a great way to start your own research but it can never give you the answers you need. Plus, you need to be very careful with your sources and secondary research data, because many times it can be outdated or simply unreliable. There is a risk of missing out on important information relevant to your business needs.
The Internet is an invaluable source of information, but if you use the common search engines you will get information that everyone else is seeing. Moreover, it may not be complete or fully accurate. If you need deeper and more specific research without going over your budget, use local resources available at university campuses, business organizations, or government institutions.
Asking your friends
If you only interview your family and friends you will not get objective results that you can work with. To get the most accurate data you need to talk to your potential customers about their needs, expectations, and wants. You need respondents that are objective and are in your target audience. Be prepared for criticism and do your best to make it constructive and turn it into actionable steps to improve your business.
Market research can provide all the necessary insight to get your business on the right foot from the very beginning. It is invaluable when you write your business plan and come up with business strategies.
You should conduct market research before you start developing your products, creating marketing content or a new website. You need to know your audience, specific market segments with unique requirements, competitors and so much more; so that you know your focus is on the right customers and market. This will give you the best results and direction to move forward.
Now you understand the basics of market research and it will prove very beneficial if you get into the habit of checking with your market regularly. Customers’ needs and preferences evolve and so does the market, so one of the best ways to stay up to date and one step ahead of the competition is to research your market often.
And don’t forget that you are doing research to make it actionable. It should you insights that you can base your decisions on. Don’t leave it halfway or just put it somewhere for later, keep it up to date and revisit it often to get an idea of where you stand and where you are headed.
What is the first thing you will use market research for in your business? What are the challenges that your company is facing at this point?