What is Market Research?
Though there are all sorts of complex market research tools available on today, the basis of market research is simple. Market research is information meant to help companies figure out whether their decisions with regard to products and services will be profitable. This may mean having a better understanding of consumer preferences, or gathering information about what competitors are doing on the market. By carrying out research on the state of the market, companies can have a better idea if their own plans for the future have a good chance of being successful.
Why is market research important?
Some people have likened making business decisions without doing market research to going on a road trip without buying a map or looking at any street signs. While decision makers in a company might have an intuitive sense of the direction in which they want their business to go, it is risky to make these sorts of business decisions without well-sourced data on the state of the market. A solid market research plan should tell a company who their consumers are, and what would make them more likely to buy a product or service.
Defining the business question and research goal
It is never a good idea to do research just for the sake of doing research, and in fact, that would be a waste of time and money. Companies will want to decide on both a business question, and the goal of a particular research project. The business question involves figuring out the objectives of a piece of market research by asking about areas such as the performance of a particular product, potential new markets, or customer reactions to changes in the market.
Then, after figuring out the basic question behind the research, companies can determine the goal that they want their research to achieve. This may mean finding out whether there is a demand for a new product, who is currently buying a product, what competitors are doing in the market, or any other number of research goals.
Phase 1: Planning Phase
When to do market research?
In a perfect world, a company would make market research a recurring part of their business planning. After all, in a certain sense, it is always the right time to do market research, as the information derived through this research can help a company make decisions that will affect their bottom line. However, research can be time consuming, so there are a few times when it might be best for companies to focus on market research.
How market research fits into the product life cycle
The best time for companies to carry out a market research project is before launching a new product or service. This information can tell a company crucial things about the state of the consumer market, or what sorts of competing products are already being offered. Many companies will also carry out follow-up research after a product or service has been launched, as this can give insight into how the market is responding.
What is agile market research?
Agile market research attempts to respond to changes to the market in real time, often by taking advantage of information technology tools. Stages of research are broken down into a series of “sprints,” in which the information from a previous phase of market research can be incorporated into the next phase. These techniques have become increasingly popular with the powerful software tools now available for market research.
Tips for optimizing your survey for data quality
There are a few basic tips that companies can follow to make sure the data that they get from surveys is actually useful. Surveys or questionnaires should have very specific questions that are not too open-ended. It is important to screen those who are filling out a particular tool to make sure they meet the demographic that is preferred. Finally, allow people to say when they are unsure – having a “don’t know” or “none of these” option tends to increase the quality of data collected by survey or questionnaire.
Phase 2: Collecting Data
Market research data collection can be split into two categories: primary research and secondary research. It will be helpful to go over the specifics of each as these, as most businesses will be relying on some combination of both as they design market research plans.
Primary research is when a company collects data that is based on their current sales information and an analysis of whether their business practices are effective. In other words, this involves generating a new set of data that a company can then put into practice as they make future business decisions. Ideally, primary research will also gather information about competitors in a particular field. Any business owner can attest to how competitive their market can be, so primary research should take the plans and products of other businesses into account as well.
There are two basic kinds of primary research: quantitative and qualitative. While companies may sometimes favor one over the other, it is essential that both be carried out in any comprehensive market research plan.
Quantitative research is market research that results in a numerical data set that a company can then analyze. This sort of research can answer questions such as whether there is a market for a product or service in the first place, or whether there is market awareness of an existing company’s product. It can also shed light into topics such as what sort of people are loyal customers of a particular business, what their buying habits have been historically, and whether a company is accurately responding to the needs of their target market.
Quantitative Research Types
As quantitative research is meant to result in a large data set, multiple-choice questionnaires are popular to gain this sort of information. Surveys or phone interviews that ask a particular demographic to rank their experience with a particular product or service, or which ask consumers to choose between two potential options, can also provide the sort of data that a company is looking for. The material which is drawn from these types of research can then be subjected to statistical analysis, and has the benefit of providing clear, hard data about the state of the market.
Qualitative research typically involves asking a potential set of customers or clients to give their thoughts on a product or service in their own words. This might involve asking a customer what factors they consider when they purchase a product, or their likes and dislikes about what is already on the market. It can be helpful to ask customers what they might do to improve a product or service, as this can provide insight into how a company might increase their consumer base.
Qualitative Research Types
While the basic tools being used to conduct qualitative research are similar to those used for quantitative research, the data output is completely different. Interviews, surveys, and questionnaires would ask not for numerical data, but for the thoughts and feelings of customers about a particular product or service. Focus groups made up of potential customers and clients can be an excellent way of gathering qualitative research material. While quantitative research is key for any business, it is just as important to pair those findings with the results that come out of a qualitative research plan.
Unlike primary market research, which involves a company developing a new set of data based on responses to questionnaires, surveys, and the like, secondary research is based off of material gathered previously by another person or company. While market research should usually not be based entirely off of secondary sources, this is usually a good place to start. Not only is secondary research highly time and cost effective, but it can help a company figure out how to design a primary research project of their own.
Types of Secondary Research
Secondary research is typically based off of both external and internal sources. By external sources are meant material that is collected outside the context of a specific business. This may involve information that can be found in availably industry surveys, trade association publications, or journals and magazines. Internal source research, by contrast, will draw from documents such as inventory records, sales figures, and balance sheets.
DIY market research versus full-service market research
Some companies opt to do their own market research in-house, while others will decide to hire a full-service firm. Each of these methods has advantages and disadvantages. DIY market research will likely be more cost effective, though a company might not have the human resources to spare to carry out truly holistic market research projects. By contrast, while hiring an outside firm means that a company will be getting expert care, they may find that they are paying more for this sort of full-service research. The decision of which direction to go will be different for each company.
10 Common Market Research Mistakes
Even people who understand the value of market research and are willing to invest resources in it still make mistakes in the way they go about carrying it out. Unfortunately, there are a set of very common mistakes that businesses tend to make in going about conducting market research that end up backfiring. To carry out faulty research and design a business plan around it is almost as dangerous as doing no research at all. There are 10 common mistakes that anyone designing a market research plan will want to keep in mind.
1. Using only secondary research
While secondary research, as mentioned above, is a key element of market research, it should never be the sole basis of how a business explores the market. Looking at the published material of others is better as a place to start than a full research plan. Some secondary research is outdated, or it is addressing market variables that do not match up with what a forward-thinking business is trying to achieve. Secondary research is best complemented by primary research.
2. Too much focus on online resources
Since it is now possible to find almost anything with only a few clicks, some business rely heavily on what they are able to find on search engines to direct their market research plans. While such material should be included in any final report, it is rarely as customized as market research needs to be to truly make an impact. Most companies find it useful to pair online resources with material such as phone research or questionnaires.
3. Spending too much
When companies realize they don’t have a good grasp of the market, they sometimes panic and immediately spend a great deal of money on the first opportunity for market research they can find. Companies will want to shop around before deciding on a particular firm to carry out their research. While this sort of information is key to successful business practices, it ideally should not require an enormous budget.
4. Use of limited data
It is risky to only rely on one particular set of data when making business decisions. Whether the information came from a library or from a single survey, only using a single set of data risks missing out on market trends that might be captured by other tools.
5. Unfocused research goals
In their rush to attain market research information, companies might not spend enough time honing a focus group or survey audience that represents the demographic that they are trying to target. This sort of hasty research means that the final results may not give the optimal recommendations for what the company is actually trying to achieve.
6. Forgetting to research the competition
While a good deal of market research is focused on potential customers, it is typically a good idea to also have a solid understanding of what competing companies are doing in the same market. By overlooking the actions of their competitors, companies are left with an incomplete picture of what they are up against in trying to sell their own product.
7. Not researching price information
Data that tells more about what consumers want and need is at the core of market research, but too many firms do not take price into account. If a company doesn’t know what a certain demographic is willing to pay for their product in the first place, they will make it that much harder to get a foothold in a particular consumer base.
8. Not knowing what the research is for
A fundamental problem in market research is when companies simply don’t have a good idea of what they are looking for in the first place. Similar to the issue of unfocused research goals, this can lead to companies designing research projects that are not designed with clear outcomes in mind. What results is research for the sake of research, rather than material that can guide a company’s choices in the marketplace.
9. Research efforts are too timid
In order to figure out what customers are looking for, companies need to make sure their surveys and questionnaires are actually being filled out. One downfall of market research comes when research tools are distributed to consumers, but then are not actually completed. A more aggressive market research plan should incentivize customers to actually provide information that may be helpful in making business decisions.
10. Ignoring the results of market research
It may sound crazy, but some companies spend money on market research only to ignore the results altogether and make business decisions based on intuition. This is not only a waste of money, but can lead to business decisions that are not based in reality and are doomed to fail.
Thanks for reading "The Beginner’s Guide to Market Research and Understanding Your Market", by the Linchpin Team in Chicago, Raleigh, and Wake Forest.