What is Market Research?
You’re likely familiar with the term market research, and probably intuitively understand parts of its meaning, as the term is somewhat self-explanatory. But what is market research exactly? You research your target market, right?
Well, yes, but a more comprehensive market research definition is: ‘any set of techniques used to collect and process information on your target market, in order to test the viability of new products and services, or to see how old products or services could be improved’.
Large research firms exist whose sole job is to gather information on target audiences and produce research reports for business owners to make more informed decisions and ultimately more profit. Market research can be complex, using approaches ranging from market research surveys to focus groups and observation, and covering topics such as price elasticity, segmentation, behavioural science, brand loyalty and new product development to name just a few.
Still, it doesn’t have to be that complicated, here a simple example. Two young entrepreneurs decide to run a lemonade stand, but before they setup shop they go around the neighbourhood asking whether people whether they like sweet or sour lemonade, what size of cup is preferable, how much they are prepare to pay per cup and which brand name they prefer ‘The real lemonade company’ or ‘Local Lemonade’.
You got it – they are effectively doing market research, they’ve quickly collected the data they need to sell the right size product at the right price, from the brand the local neighbourhood like the most. Before investing all their capital, they have really understood their target market setting themselves up for success.
Now that you have more clarity over what market research is, we’ll move on to the more complicated aspects, as there is a reason why there are university courses on market research.
The benefits of market research
You likely understand what the benefits of market research are, but may be wondering if it is worth it? The short answer is yes, regardless of whether you operate a large or small business or are planning on starting one. It will allow you to understand your customers’ demands, identify any potential opportunities, help you with planning, and minimize investment risks.
Let’s say our lemonade stand entrepreneurs have grown up a bit and want to expand. They gather more market information that allows them to understand their consumers’ behaviour better. They find that most of their customers are working people who buy lemonade when going to work or buy lemonade for their parents.
With that, they’ve identified their primary market, but a new potential customer base opened up! Why aren’t the elderly buying it themselves? Are the economic trends so bad that they can’t buy it? No, so there must be other factors. The stall is too far away. What can they do now? Door-to-door selling seems like a good solution.
So, they form a focus group of the elderly to test whether they would buy lemonade if it were brought to them. Additionally, they do research to find what their new typical target customer likes. Yes, they would buy it and they like cute kids.
What can our young entrepreneurs do now? They get their younger sibling, the one with the reddest and most squeezable cheeks, to be their door-to-door salesperson. In this simple example, you see the benefit of market research – it allowed the kids to make an informed decision that will help them expand their business.
Types of market research
Now that we’ve answered the question of why do market research, we can continue to the types and methodologies used. The term “types of market research” doesn’t necessarily refer to the how you are conducting research, but on what.
You should always start by researching the market itself. Investigate existing and potential markets to better understand them. You research the economic trends and your competitor’s strengths and try to collect information on the demographics and behaviours of your target market.
Once you do the preliminary research on the market and identify your target audience, you need to conduct further research. The better you understand the values, attitudes, needs, and buying habits of your potential customers, the better decision you will make.
You need to compare your product with the research you have done. Does it meet the needs of your customers? Do they have the finances to buy it? How should you market it, given their attitudes and values? Market research on your products and services is essential if you want to make an informed decision.
Finally, you need to research your brand. People don’t always buy items because they believe them to be the best, but because of the brand. This is called brand loyalty. If people aren’t aware of your brand, they can’t be loyal. You need to research your reach and how to expand it.
Market research methods
Now that we have explained what market research is, its benefits, and the types, you need to know how to do it. The way you gather information is your market research methodology. There are 4 primary research methods you can employ:
Conducting a market research survey is the process of collecting and analysing data from multiple people, and it is used to collect data on a group. As surveys give in-depth information on a group, organizing them requires a lot of planning. Information technologies make it easy to reach the target audience of your research.
Social media is a good way to conduct surveys with large groups. Using online surveys in your research may not give you the most accurate data on an individual, but it will allow you to identify group trends.
Surveys can provide useful insights across each of the different types of research outlined earlier. From illuminating opportunities within a new or existing market, better understanding the needs and likes of the target audience for a product or service, testing out a product concept on the target consumer, gaining feedback on your branding, and measuring and improving your promotion and advertising.
Interviews are qualitative research methods that allow you to collect specific data on an individual. They cannot give insight into group behaviour, but they can give you in-depth insight into a single person. If that person is representative of your target audience, this type of research is invaluable.
Using questionnaires as a research method is common for doing interviews. They help you structure your interviews so that you don’t lose focus of your goal and are easier to do than full-length interviews. They can help you consistently collect less detailed data if that is your aim.
Focus groups are similar to single interviews but on a larger scale. Once you identify your target audience, a focus group is a cross-section of those people, who should be representative of the larger group. You can gather more in-depth information than in a survey, which will allow you to form specific business strategies.
Observing the market
Observing is a method used by researchers where the behaviour of consumers is observed under natural market conditions. It gives information on how consumers actually interact with the market, as their behaviour can sometimes be different from what was expected due to the responses they gave to surveys and interviews. Conducting regular questionnaires combined with observation can give you excellent insight into where the behaviours of consumers and the expected results diverge or converge.
Never stop doing research
You now know what market research is, the different types, the benefits it has, and the different methods you can employ, but there is still one crucial component missing – it needs to be done continually. Market conditions change and you would be hard-pressed to find any business that employs the same market strategies it did a decade ago. You will need to be adjustable to stay competitive, and regular and proper market research will allow you to focus on what is most important.