Whether you’re launching a product, trying to improve customer service or looking to expand your business beyond your niche, market research is an essential component of your success. Every business owner knows that risks come with the territory. Resources are limited, you want those risks to be calculated.
Keep in mind that, on a fundamental level, all consumer behaviour is dependent on context. Market research gives you insight into which type of context is most likely to encourage sales. This will help you tailor your products and marketing campaigns according to current trends, ideal customer profile, location, and market size.
In this article, we will go through the key aspects of market research. Outlining the main reasons why companies conduct market research, and some of the common mistakes to avoid.
What Is Market Research?
Companies use market research to determine whether new business opportunities are feasible. It’s the process of collecting information about your niche, target audience and buyer persona to determine the extent to which there is a demand for your products or services. Once the data is analyzed, if the results do not reflect an adequate demand, it’s likely that the business opportunity will not be profitable.
Depending on the source of information, there are two types of market research: primary research and secondary research.
1. Primary Research
As the name suggests, primary research involves firsthand information regarding your market and customers. You can use online surveys, phone interviews and focus groups to assess brand awareness and customer preferences.
Primary research is useful when you’re trying to segment your market and establish the different buyer personas you want to appeal to. Exploratory research is focused more on problems a marketing campaign might face and less on market trends. It’s usually done as a first step and involves surveys or open-ended interviews with a small number of people. Specific research is then used to dig deeper into the issues that were identified during exploratory research. It centres on a more precise segment of the audience and tries to ask the right question in order to find solutions to suspected problems.
2. Secondary Research
Secondary research is based on trend reports, industry content, market statistics and sales data – basically all public and internal records you can draw conclusions from. Thus, secondary research is particularly helpful when assessing your competitors.
Public sources such as government statistics are the most accessible type of data used for this research. Commercial resources such as market reports compiled by research agencies like Pew, Forrester or Gartner can also be very insightful, but you will have to pay to obtain access.
Then you have internal sources. This is the data your company already has in-house: customer retention rates, average revenue per sale and market history of previous products. These can all assist you in determining what buyers are interested in right now.
Main Benefits of Market Research
1. Better Understanding of Your Customers
Who is going to purchase the product? What’s your target audience, and what is the profile of your ideal customer persona? How often can you expect your target audience to make purchases? What do your costumers need, want, and expect?
The importance of market research to a company is emphasized by how valuable the answers to these questions are. You’ll need to create a detailed profile of your ideal customers taking into account factors like location, age, gender, income, values and lifestyle. These details allow you to develop the most effective advertisement and pricing strategies.
2. Evaluate Your Competitors
As we already mentioned, another major benefit of market research is that you can use it to keep track of industry and economic trends which will allow you to adapt your business to an ever-changing environment.
Your competitors are doing their own studies to increase their chances of success as much as possible. You need to do the same. You can analyze their ads, websites and social media campaigns to see if there are any gaps you can use to your advantage and what strategies are most effective in your sector.
3. Test Products or Services
Every business decision comes at a risk, and this is why you want to test it before full implementation. It will protect you from launching unrewarding products onto the market and the additional expenses entailed.
You can never be 100% sure that customers will respond positively to a new business venture, but market research will reveal what message resonates best, what features are most valued if your product adequately responds to consumer needs and trends, as well as the best time and place to launch it.
4. Opportunities for Growth
The goal of any company is to expand operations and grow, but this is easier said than done. To achieve such a goal, you need to have the right information so you can create a strong business plan which allows you to keep generating profit as you’re expanding into different markets.
Market research will help you detect viable business opportunities, understand the demands of new target audiences, plan successful marketing campaigns and minimize losses.
Common Market Research Mistakes
1. Underestimating the Value of Market Research
If you’ve spent years conducting business in your sector, you may think you already understand your customers very well. To the extent, you don’t need market research. Unfortunately, experience tends to make us accumulate a lot of preconceived notions regarding what customers need and want. We’re not always quick to adapt to changes. Avoid this common mistake by testing your assumptions with up-to-date insight into consumer trends.
2. Using Only Secondary Research
As we explained, there are two types of market research: primary and secondary. Because of the additional cost of conducting surveys and focus groups, many business owners prefer to use only secondary research. Although this type of research is a good starting point, and it gives you greater clarity regarding your industry, you will still need to understand consumer demand and expectations in real-time.
3. Starting without a Clear Idea of the Information You’re after
Lastly, another common mistake is starting without having a clear idea of what you want to find out through your research. Market research is an investment, so you want to have explicit objectives to help you decide which methodologies to use and what questions to ask.