In the ultra-competitive modern world, data is one of the keys to getting ahead. From understanding your customer’s wants and needs to finding new audiences for your products, market research plays a crucial role in the business world. Here’s everything you need to know about market research, including a guide on how to use it to your advantage.
What is market research?
Market research is the practice of studying various forms of data to determine the feasibility of new business ideas. The main goal is to understand who your audience is, how the market works, and how potential customers will react to your products or services.
Market research can be conducted directly by businesses, or it can be outsourced to dedicated market research companies for a fee. The results are used to inform better business decisions, marketing strategy, and improve the customer experience.
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Benefits of market research
There are several benefits of conducting market research, and it’s a key part of any business planning. You can find out details such as:
Who are your potential customers?
How big is your target market?
What are customers willing to pay?
Is the industry trending upwards?
Who are your competitors?
What are my potential customers’ buying habits and preferences?
Ultimately, market research allows you to make well-informed business decisions, learn more about your customers and find ways to capture more of the market.
7 market research methods
Market research methods are usually broken into primary and secondary categories.
To put these in really simple terms, primary market research refers to research that targets a specific customer base or demographic - or in other words, the people who are most likely to be interested in your products and services. This includes surveys, interviews, focus groups, observation and customer feedback.
Secondary market research involves using data that’s already been produced and often captures data from a broader section of the community. This may be government reports, industry publications and other commercial sources.
Surveys are easily the most common source of market research. You can send surveys to existing customers, potential customers, or even have them posted on your website. Many businesses choose to offer rewards to encourage users to participate in surveys.
For example, you may want to release a new product and gather information about how enthusiastic your current customers would be about it. Simply send an email survey to your customer list, and analyse the results.
The best thing about surveys is they can be extremely cheap, and if you get your questions right, the data is easy to analyse. On the negative side, sending too many surveys can irritate your customers, resulting in ‘unsubscribe’ requests which diminish your email marketing potential.
Conducting interviews with members of your target audience is extremely valuable to gain qualitative insight into their experience as a customer. Whether you choose some of your existing customers or non-customers in your target demographic is totally up to you.
For example, you may want people to test a new product. A post on Facebook asking for volunteers will usually be met with enthusiasm, especially if you offer the product for free. Then, conduct a video call or in-person meeting with the customer to ask questions about their experience.
The downside is you risk giving away products to people who don’t cooperate or provide insightful information. However, the benefits far outweigh the risk, because when you talk directly with people, you glean much more information than you would with survey questions.
3. Focus groups
Small businesses don’t often jump straight to focus groups because they’re expensive. It involves gathering a selection of your target audience together with a skilled moderator who leads a discussion based on your products or services.
Focus groups are used regularly when testing new products or services, but they can also be great for figuring out what customers want from your business.
Like interviews, focus groups give you some in-depth information. However, there is a larger risk of bias, such as a dominant participant influencing others or different moderators bringing out different results.
Observation research allows you to view a customer engaging with your product in their natural environment. For example, a video game manufacturer may send a company representative to watch customers try out a new game in their homes.
The great thing is, there are no distractions with this type of observational research, and nobody influences the participant’s experience. The cons are that generally, it’s purely an observation, meaning you don’t ask questions during or after the session, so it’s not always easy to know what the user is thinking.
5. Customer feedback
Customer feedback is also an extremely popular way of gathering marketing data. There are several tools available to collect feedback from your customers, whether it’s in-store, online or post-sale.
Businesses regularly send customer feedback emails after a sale to find out how they did in terms of the customer experience. But you can also ask questions about product quality, suggestions for improvement and anything else that’s relevant to your research goals.
6. Public sources
While less commonly used than primary market research methods, using public sources can be useful for gathering information. Plus, it’s often free. Government libraries are a great source of information, and while the research won’t be specific to your business, it may be relevant to your target audience as a whole.
7. Commercial sources
Commercial sources, as their name suggests, can be a little more expensive because you’re purchasing research that’s already been done. Industry publications, media outlets and magazines are good sources of information. The positive is they’re usually very reliable sources. The negative is they’re not always current, and they can be expensive.
How to do market research
This step-by-step guide is designed to show you how you can conduct market research effectively, regardless of the method you choose.
1. Define your research goals
Firstly, determine what you want to achieve from your research. Are you focusing on gathering feedback from existing customers, or are you testing a new market to see how viable your business ideas are? This is important because your methods and processes for gathering information may be very different depending on your goals.
2. Determine the industry’s outlook
Especially when dealing with market research for a new business, product or service, you need to understand the industry. This means looking at industry trends and projections to determine whether it’s a viable venture. You should also look on the periphery to get an idea of whether there is new technology or new businesses looking to disrupt the traditional model.
With proper industry analysis, you can avoid ending up in a business that suffers consistent losses through no fault of your own.
3. Decide on your target audience
Choosing a sample for your market research is important because you can’t survey everyone. There are a couple of methods to use here. Probability sampling is where the audience sample is chosen randomly. This ensures every member of the population has the same chance as any other on being selected. Alternatively, non-probability sampling is more targeted towards a specific demographic. This can be useful if you’re only interested in your target audience, rather than a random selection of the population.
The main thing to consider when deciding on your target audience is whether your sample selection is representative of your ideal customers. If your target audience is everybody, then a random population selection works best. If you market exclusively to senior citizens, your sample should only include this demographic.
Many businesses also choose to create buyer personas, which are fictional representations of members of their target audience. If you’ve created these, you can use buyer personas to narrow down your research sample.
4. Analyse your competitors
Competitor analysis is all part of market research. It helps you understand where your business sits in the market. Do you offer something that your competitors don’t? Can you beat them on price? Do you need another value proposition to entice customers from your competition? Competitor analysis answers a lot of questions that are important when it comes to business planning.
You can even go deeper and perform a SWOT analysis on your main competitors to see where your opportunities are.
5. Gather your data
The next step is to gather your data. As noted above, there are many different methods for collecting market research data, so the best idea is to choose one that delivers most effectively in line with your research goals.
6. Analyse the results
Even if you’ve done everything else well, if you don’t analyse your research results properly, you won’t get the results you desire. Much like sales analytics, you need to interpret and understand them correctly. Obviously, the results look different depending on your market research types.
Surveys and customer feedback metrics are easy to analyse, as responses are often numbered or ranked. Other methods such as observation, focus groups and interviews take a bit more work to analyse. When you deal more with feelings and the customer experience, you need to apply consistency in how you assess the results.
There are also ways to group your data according to participant demographics, such as age, location, job and much more. Check out our guide to data analysis to understand further how to analyse your data.
How to put analysis into action
Once you’ve got a clear picture of your results, it’s time to take action. This is where the analysis is so important because you need a good understanding of what your research tells you. In the best-case scenario, your business ideas are affirmed and you can progress with confidence. The worst-case scenario is that customers don’t want your products or services at all, and it’s time to consider something else.
However, mostly, your results will fall somewhere in between. You may find your target audience loves your idea, but you’d need to lower the price point. Or you need to make minor adjustments to your offering in order to attract customers away from your competition. Whatever the results tell you, put them into a clear plan with actionable tasks. Find ways to make the necessary changes, and you can confidently move forward with your ideas.
Market research examples
While not all businesses have the marketing and research budget of these companies, the market research methods they have successfully used can be adapted to a smaller research project.
Woolworths – The Gather program
The Woolworths Group is one of the largest retail operations in Australia, and part of its success is down to market research. Woolworths has introduced a program called Gather. It allows users to sign up by completing a short survey.
The Gather program interacts with customers in several different ways, including online surveys, product research, online group discussions, online or face to face interviews and more. These methods are in line with each customer’s preference.
It’s a great way for Woolworths to gather varying forms of data to find out what’s working well, and what needs improvement.
Coca Cola – Freestyle
Coca Cola has shown how technology can play a key part in market research. In 2019 the company redesigned their Coca Cola Freestyle vending machines to include touchscreen and Bluetooth functionality, allowing users to purchase drinks through an app. While this just suns like great technology, it’s actually a lot more.
Coca Cola uses information regarding purchases and consumption of drinks to fuel their research and development. For example, the brand noticed a spike in the consumption of Sprite and Cherry flavoured drinks. Thus, Sprite Cherry was born.
The result was the creation of the LEGO ‘Friends’ range, which is mostly targeted towards girls. The range is hugely successful, and the market research fuelled everything from the colour of packaging to the subject matter in the sets themselves.
As you can, see these massive companies value market research highly, and there’s no reason smaller companies can’t follow suit. Your research may be on a smaller scale with a lower budget, but by following best practices, you can obtain plenty of valuable data to help grow your business.