What Is Market Research?
Market research is the process of gathering, analyzing, and interpreting information to help a company or individual assess the viability of a product or service and make sound business decisions. It is of immense importance to entrepreneurs and startup companies to evaluate the feasibility of a business before committing further resources to the venture.
Market research is critical in accomplishing the following tasks:
- Building a picture of consumer behavior
- Establishing how well a product or service meets the needs of the market
- Evaluating the size of the market for a particular product or service
- Helping with the business planning process
- Devising a marketing strategy for the business
- Solving marketing challenges that an enterprise faces
- Identifying major competitors
- Establishing a unique value proposition that sets a company apart from competitors
- Identifying opportunities for business growth
In their enthusiasm, many entrepreneurs and startups make the mistake of diving into the market without first conducting thorough market research, thinking that they know what the market wants. This can cause a business to make costly mistakes and is often a recipe for failure.
How to Conduct Market Research
The starting point for any market research endeavor is to gather data on the relevant market sector. This involves two types of data:
- Primary information. This is information you gather yourself or hire someone else to obtain for you. Primary research can be of an exploratory or specific nature. Exploratory research helps to build up a broad picture of your market and identify any specific opportunities for market growth. Specific research is more focused and usually used to assess the market potential of an opportunity that exploratory research has uncovered. Primary research can be conducted via email, social media, telephone, or personal interviews.
- Secondary information. This is information that has already been compiled and can often be accessed through online research. Research conducted via internet browsers or public sources is free and is a good place to start; however, you may have to access studies done by commercial associations and educational institutions to get the right information, which may involve a cost.
Market research may sound like a lot of work, but it is essential to enable you to get an accurate portrayal of your market. In this guide, we discuss the types of marketing research that can be used and the resources that marketers can employ for this process.
Types of Marketing Research
There are several methods that can be used to conduct market research, depending on the company’s objectives and marketing strategy. They can be used in isolation for a specific purpose or in combination to build up a more comprehensive picture of the market:
- Competitor analysis
- Focus groups
Types of Marketing Research
No business can operate in a vacuum. To reap success, a business has to deal and interact with all sorts of people, including customers, suppliers, and competitors within its market sector. Competitors are defined as companies that meet at least one of the following criteria:
- Offer the same product or service
- Offer a similar product or service
- Have the potential to offer the same or similar product or service in the future
- Have the potential to develop a product or service that poses a considerable threat to the survival of your offering
Conducting competitor analysis to know your competitors’ good and bad points will enable you to exploit their weaknesses, undermine their strengths, and anticipate their next moves. In analyzing each of your competitors, you need to gather the following information:
- The needs and preferences of customers you are competing to meet
- The similarities between the competitor’s products and services and yours
- The strengths and weaknesses of each of the competitor’s products and services
- How the competitor’s prices compare with yours
- The competitor’s market performance
- The level of customer satisfaction with the competitor’s products and services
Having gathered this information, you need to formulate a plan that outlines how you intend to compete with each competitor. Do you offer…
- Lower prices?
- Better support?
- Better service quality?
- Easier access to services?
Competitor analysis will enable you to identify your unique value proposition (UVP). This is generally a unique aspect of your product or service offering that sets you apart from your competitors. A UVP can be a powerful tool in future marketing campaigns, especially if it meets a customer need that you may have identified through other marketing research endeavors.
Competitor analysis forms a critical part of the competitive intelligence process, which uses the information gathered during analysis to strategize and formulate long-term plans for the business. Management can also use competitor analysis to decide how to counter a competitor’s ascendancy, head off perceived threats to the company’s market share, and develop strategies to achieve a greater competitive advantage in the future.
Interviews are classified as a qualitative method of market research involving a one-on-one interaction between an interviewer and a participant. Interviews are used for exploratory research, and there are a wide range of interviewing formats that can be used, depending on what you want to achieve.
Interviews are a form of primary research to learn more about customer needs and opinions. They are particularly useful for the following tasks:
- Developing a new product
- Getting feedback after a product launch
- Evaluating a new market segment
- Updating customer needs and opinions
- Finding out the reason for the loss in market share
Interviews can be conducted telephonically, online, or face-to-face. They can be entirely open-ended or structured with specific questions to elicit responses that help you to determine opinions and market trends. Interviews can also provide a picture of how market needs change according to demographics or location. Face-to-face interviews generally produce the most accurate results, but they are time consuming, and the cost may be prohibitive.
The goal of a focus group is to get participants to interact and bounce ideas off each other or discuss a topic. This can be costly, as you need to hire a neutral venue to host the group, and participants are usually rewarded in some way for taking part in the session.
A focus group moderator, in collaboration with marketing staff, should prepare for the event by taking the following actions:
- Identify the main objective of the session
- Develop specific questions to ask the group
- Determine the demographics required of the group
- Identify relevant members of the focus group
- Send out an agenda to focus group members
During the session, the moderator should encourage participation from everyone in the group and control the meeting so that the process doesn’t stall. It is often a good idea to have a roundtable meeting, which usually prevents one person from trying to dominate proceedings.
Surveys are probably one of the easiest ways to generate information for market research. They can benefit a business by enabling you to accomplish the following goals:
- Reach a specific audience
- Understand your customers better
- Research and analyze a target market
- Measure brand awareness
- Gauge opinions about an existing or future product
- Assess where you stand compared with your competitors
- Devise social media strategies and build marketing campaigns
- Delve deeper into customer demographics
- Conduct market segmentation
- Decide which creative assets to employ in future campaigns
- Test branding and positioning
- Use customer feedback for marketing testimonials
Surveys can be conducted by telephone or by mail. Whichever avenue is chosen, a survey needs to be correctly designed to generate enough interest to ensure participation and to elicit responses that are in line with the survey objectives.
Market Research Analytics
Data analysis in market research can be a daunting task, depending on the amount of information gathered. Data organization and data reduction are two techniques that are often necessary to enable meaningful interpretation of the information. There are several statistical methods that are used by marketers to interpret research results:
- Multidimensional Scaling. This is an array of techniques used to provide perceptual maps of competing brands or products. This method produces a visual display of competing items in which the distance between two items represents either similarity or dissimilarity; the closer they are to each other, the more similar they are.
- Multiple Regression. This procedure works on the “best fit” principle and analyzes how the value of a dependent variable changes according to changes in various independent variables. An example would be how sales revenue of a product changes in relation to demographics, location, and season.
- Discriminant Analysis. This statistical technique classifies products, people, or other variables into categories. For instance, it can be used to determine the demographics of customers for different products.
- Cluster Analysis. This method separates items into a specified number of groups that are similar yet mutually exclusive. This technique approximates what occurs in market segmentation, where a market researcher is able to see the similarities between different segments of consumers while observing the attributes that make each segment distinct.
- Factor Analysis. Factor analysis enables a researcher to identify the strongest relations among many variables. It therefore enables the researcher to eliminate from consideration the variables that are of least interest to the consumer and concentrate on those aspects that have the most consumer appeal.
- Conjoint Analysis. This technique is most often used to analyze the results of different marketing offers. For example, it can be used to analyze the usefulness of each product attribute and grade the relative importance of these attributes to consumers.
Target Audience and Segmentation
In marketing, it is essential to understand your target audience; otherwise, you don’t know which channels to use for your advertising campaigns. You need to know how to reach and resonate with your audience by targeting the demographic that is most likely to be attracted by your product or service.
The best way to find a target audience is to analyze the specific needs that your product or service caters to. The more generally used your product would be, the easier it is to advertise and formulate a marketing campaign. It is essential to evaluate the success of any marketing campaign by monitoring the following aspects:
- New customers
- Phone inquiries
- Requests for information
- Web traffic
If these results are not satisfactory, you need to alter your advertising message or amend your marketing campaign to target other channels.
Every company should be striving to gain an edge over its competitors by providing a better level of service. In this way, it can gain a competitive advantage and target new customers. Market segmentation is all about identifying different segments of your market that cater to different types of customers and then tailoring your marketing campaign to each segment accordingly.
Good market segmentation will result in the identification of segments where each one contains similar customers but is as different from the next segment as possible. There are different types of segmentation, based on different elements:
- Psychographic —based on social class, lifestyle, and personality
- Industrial market
Each of these types can be divided further into segments.
Consumer Behavior in the Marketing Research Process
Consumer behavior is the study of customers and organizations to determine how they select and use products and services:
- How consumers choose from various alternatives
- What customers think about different alternatives
- What mechanism consumers use to select from different options
- How consumers behave when shopping and researching
An understanding of these aspects will enable a company to adapt its marketing campaign in a bid to increase its influence over the consumer. Consideration is also given to three kinds of factors:
- Personal factors. These include demographics such as age, gender, profession, culture, and background. A consumer’s personal interests and opinions also play a major part.
- Psychological factors. These include a consumer’s perceptions and attitudes.
- Social factors. The influence of family, friends, peer groups, and social media has to be taken into account. Social class, education level, and income also play a part.
This is all very well in theory, but how do you go about collecting data on consumer behavior? The following channels are the most useful:
- Focus groups
- Customer reviews
- Google Analytics
- Competitor analysis
- Blog comments
- Q&A sites
- Social media
Resources for Marketers to Conduct Market Research
For startup companies and entrepreneurs about to launch a new business, it is vital that you source as much information as possible about your market. This will enable you to get a handle on your target market, as well as collect information about geographical locations and recent business trends.
It would be very costly to resort to market research companies to do the work for you; however, there are a number of resources that are either free to use or reasonably priced to access.
List of Resources for Marketing Research
1. Census.gov. The U.S. government collects census data every 10 years and targets the general population. A database search will yield information on:
- Population numbers and trends
- Household information, including the average number of people per household, income, and dwelling type
- Health insurance coverage
- Economic indicators, by state and county
2. USA.gov. This is another government website that is free to use. It also links to various trade and industry organizations where you can get information on the type of business you intend to start. On USA.gov, you can access information on:
- Labor statistics and earnings data
- Wages by area and occupation
- Employment data by state and metro area
- Economic indicators by state
3. SBA.gov. This is the Small Business Administration website, which contains great information and advice on starting your own business, including:
- Licensing information
- Loans and financing
- Interest rates
4. FedStats.gov. This federal government site provides access to information on a wide range of topics:
- Population trends
- Economic trends
- Crime statistics
- Health care
- Aviation safety
- Energy use
- Agricultural production
5. ExonomicIndicators.gov. This site updates its information daily, sourced from the Bureau of Economic Analysis and the Census Bureau. You can access information on:
- Retail sales
- Durable goods
- New home sales
6. SurveyMonkey.com. SurveyMonkey enables you to set up your own survey, which is very user friendly for both the facilitator and the participant. It allows you to include multiple-choice, true/false and essay-type questions, and it enables you to include ratings scales. The responses can be formatted in a number of ways, including graphs and charts. SurveyMonkey also sells target audiences if you don’t have your own email target list.
7. Think with Google. This free website enables you to access its Shopping Insights, Google Trends, and Consumer Barometer to gather information on consumer behavior and product trends.
8. Amazon. This is a great place to access information by filtering data on markets, new products, competitors, and pricing.
9. Social Mention. This platform provides a free service to search and analyze social media content across a wide range of social media platforms, including Facebook, Twitter, YouTube, and Google. You can track what consumers are saying about your company, a new product, or any other topic.
10. Facebook Audience Insights. This tool enables you to learn what matters to Facebook followers through information about their locations, interests, and behaviors.
11. BizStats. BizStats provides all kinds of information on small businesses in the United States.
12. Up Close & Persona. This free tool enables you to create an image of customer types and what motivates them to buy.
These are some of the free resources that are available to marketers to conduct market research. There are many others, such as Followerwonk, Proved, UsabilityTools, and Typeform that provide free basic services but charge a premium to use upgraded service plans.