What is Market Research?
Market Research is an organized effort to gather information about target markets or customers. It is a very important component of business strategy. It provides relevant data to help solve marketing challenges that a business will most likely face an integral part of the business planning process.
Market research is one of the main factors used in maintaining competitiveness over competitors. Market research provides important information which helps to identify and analyze the needs of the market, the market size and the competition. Market-research techniques encompass both qualitative techniques such as focus groups, in-depth interviews, and ethnography, as well as quantitative techniques such as customer surveys, and analysis of secondary data.
The process of gathering, analyzing and interpreting information about a market, about a product or service to be offered for sale in that market, and about the past, present and potential customers for the product or service; research into the characteristics, spending habits, location and needs of your business’s target market, the industry as a whole, and the particular competitors you face is called Market Research.
Features of Market Research:
- The geographical location: local, regional, national, European or international market
- The type of product/service: a product group (i.e. cosmetics), a type of product (i.e. perfume), a branch of the product type (women’s perfume) or a specified product (a particular brand of perfume)
- Chronological/time-oriented: past, present or future market
- The buyers’ profile: sex, age, socio-economical classification, level of education, etc.
- The intermediates or the end user profiles: stockists, retailers, wholesalers, manufacturers, mothers, children, etc.
Market research provides relevant data to help solve marketing challenges that a business will most likely face–an integral part of the business planning process. In fact, strategies such as market segmentation (identifying specific groups within a market) and product differentiation (creating an identity for a product or service that separates it from those of the competitors) are impossible to develop without market research.
There are two types of data:
1. Primary Data:
- This is research you compile yourself or hire someone to gather for you. When conducting primary research, you can gather two basic types of information: exploratory or specific. Exploratory research is open-ended, helps you define a specific problem, and usually involves detailed, unstructured interviews in which lengthy answers are solicited from a small group of respondents. Specific research, on the other hand, is precise in scope and is used to solve a problem that exploratory research has identified. Interviews are structured and formal in approach. Of the two, specific research is the more expensive.When conducting primary research using your own resources, first decide how you’ll question your targeted group: by direct mail, telephone, or personal interviews.
If you choose a direct-mail questionnaire, the following guidelines will increase your response rate:
- Questions that are short and to the point
- A questionnaire that is addressed to specific individuals and is of interest to the respondent
- A questionnaire of no more than two pages
- A professionally-prepared cover letter that adequately explains why you’re doing this questionnaire
- A postage-paid, self-addressed envelope to return the questionnaire in. Postage-paid envelopes are available from the post office
- An incentive, such as “10 percent off your next purchase,” to complete the questionnaire
Even following these guidelines, mail response is typically low. A return rate of 3 percent is typical; 5 percent is considered very good. Phone surveys are generally the most cost-effective. Here are some telephone survey guidelines:
- Have a script and memorize it–don’t read it.
- Confirm the name of the respondent at the beginning of the conversation.
- Avoid pauses because respondent interest can quickly drop.
- Ask if a follow-up call is possible in case you require additional information.
In addition to being cost-effective, speed is another advantage of telephone interviews. A rate of five or six interviews per hour is typical, but experienced interviewers may be able to conduct more. Phone interviews also can cover a wide geographic range relatively inexpensively. Phone costs can be reduced by taking advantage of less expensive rates during certain hours.
One of the most effective forms of marketing research is the personal interview. They can be either of these types:
- The in-depth interview. These one-on-one interviews are either focused or non directive. Focused interviews are based on questions selected ahead of time, while non directive interviews encourage respondents to address certain topics with minimal questioning.
- A group survey. Used mostly by big business, group interviews or focus groups are useful brainstorming tools for getting information on product ideas, buying preferences, and purchasing decisions among certain populations.
2. Secondary Data:
- Secondary research uses outside information assembled by government agencies, industry and trade associations, labor unions, media sources, chambers of commerce, and so on. It’s usually published in pamphlets, newsletters, trade publications, magazines, and newspapers. Secondary sources include the following:
- Public sources. These are usually free, often offer a lot of good information, and include government departments, business departments of public libraries, and so on.
- Commercial sources. These are valuable, but usually involve cost factors such as subscription and association fees. Commercial sources include research and trade associations, such as Dun & Bradstreet and Robert Morris & Associates, banks and other financial institutions, and publicly traded corporations.
- Educational institutions. These are frequently overlooked as valuable information sources even though more research is conducted in colleges, universities, and technical institutes than virtually any sector of the business community.
- Public Information Sources
Government statistics are among the most plentiful and wide-ranging public sources. Helpful government publications include the following.
- The State and Metropolitan Area Data Book provides a wide variety of statistical information on states and metropolitan areas in the United States. Published by the U.S. Census Bureau, it’s available online for $31 through the S. Government Printing Office and at larger libraries.
- The Statistical Abstract of the United States provides tables and graphs of statistics on the social, political and economic conditions in the United States. Published by the Census Bureau, it’s available online for $48 through the S. Government Printing Office and at larger libraries.
- S. Industry and Trade Outlook presents recent financial performances of U.S. manufacturers and identifies emerging trends. Published by the Commerce Department in cooperation with McGraw-Hill, it’s available online for $76 through the U.S. Government Printing Office and at larger libraries.
- The U.S. government online bookstore at the S. Government Printing Office has an abundance wealth of publications on topics ranging from agriculture, aviation, and electronics, to insurance, telecommunications, forest management, and workers’ compensation.
- The S. Census Bureau website also contains valuable information relevant to marketing. The Bureau’s business publications cover many topics and trades–such as sales volume at furniture stores and payrolls for toy wholesalers–and are useful for small businesses as well as large corporations in retail, wholesale trade, and service industries. Also available are census maps, reports on company statistics regarding different ethnic groups, and reports on county business patterns.
- One of the most important information resources you’ll find is the SBA. The SBA was created by Congress in 1953 to help American entrepreneurs start, run, and grow successful small enterprises. Today there are SBA offices in every state, the District of Columbia, the U.S. Virgin Islands, Puerto Rico, and Guam. Among the services offered by the SBA are financial assistance, counseling services through Small Business Development Centers (SBDCs), management assistance through programs like SCORE, and low-cost publications. The counselors at SCORE can provide you with free consultation on what type of research you need to gather and where you can obtain that information. They may also be able to suggest other means of gathering the information from primary sources. SBDCs generally have extensive business libraries with lots of secondary sources for you to review.
- One of the best public sources is the business section of your public, or local college or university, library. The services provided vary from library to library but usually include a wide range of government publications with market statistics, a large collection of directories with information on domestic and foreign businesses, and a wide selection of magazines, newspapers and newsletters.
- Almost every county government publishes population density and distribution figures in accessible census tracts. These show the number of people living in specific areas, such as precincts, water districts or even ten-block neighborhoods. Some counties publish reports that show the population ten years ago, five years ago, and currently, thus indicating population trends.
- Other public information resources include local chambers of commerce and their business development departments, which encourage new businesses to locate in their communities. They will supply you (usually for free) information on population trends, community income characteristics, payrolls, industrial development and so on.
- Don’t overlook your bank as a resource. Bankers have a wealth of information at their fingertips and are eager to help their small business customers get ahead. All you have to do is ask.
- Commercial Information Sources
Among the best commercial sources of information are research and trade associations. Information gathered by trade associations is usually limited to that particular industry and available only to association members, who have typically paid a membership fee. However, the research gathered by the larger associations is usually thorough, accurate, and worth the cost of membership. Two excellent resources to help you locate a trade association that reports on the business you are researching include the Encyclopedia of Associations(Gale Research), and the Encyclopedia of Business Information Sources (Gale Group).
- Local newspapers, journals, magazines, and radio and TV stations are some of the most useful commercial information outlets. Not only do they maintain demographic profiles of their audiences (their income, age, gender, amount of disposable income, and types of products and services purchased, what they read, and so on), but many also have information about economic trends in their local areas that could be significant to your business. Contact the sales departments of these businesses and ask them to send you their media kit, since you’re working on a marketing plan for a new product and need information about advertising rates and audience demographics. Not only will you learn more about your prospective customers, you’ll also learn more about possible advertising outlets for your product or service.
- Dun & Bradstreet is another commercial source of market research that offers an abundance of information for making marketing decisions. It operates the world’s largest business database and tracks more than 62 million companies around the world, including 11 million in the United States. For more information, visit the Dun & Bradstreet Small Business Solutions website.
- Finally, there are educational institutions that conduct research in various ways, ranging from faculty-based projects often published under professors’ bylines, to student projects, theses, and assignments. You may be able to enlist the aid of students involved in business classes, especially if they’re enrolled in an entrepreneurship program. This can be an excellent way of generating research at little or no cost, by engaging students who welcome the professional experience either as interns or for special credit. Contact the university administration and marketing or management studies departments for further information.
Market Research for Business/Planning:
Market research is a way of getting an overview of consumers’ wants, needs and beliefs. It can also involve discovering how they act. The research can be used to determine how a product could be marketed. Peter Drucker believed market research to be the quintessence of marketing. Market research is a way that producers and the marketplace study the consumer and gather information about the consumers’ needs. There are two major types of market research: primary research, which is sub-divided into quantitative and qualitative research, and secondary research.
Factors that can be investigated through market research include:
- Market information: Through market information one can know the prices of different commodities in the market, as well as the supply and demand situation. Market researchers have a wider role than previously recognized by helping their clients to understand social, technical, and even legal aspects of markets.
- Market segmentation: Market segmentation is the division of the market or population into subgroups with similar motivations. It is widely used for segmenting on geographic differences, demographic differences (age, gender, ethnicity, etc.), technographic differences, psychographic differences, and differences in product use. For B2B segmentation firmographics is commonly used.
- Market trends: Market trends are the upward or downward movement of a market, during a period of time. Determining the market size may be more difficult if one is starting with a new innovation. In this case, you will have to derive the figures from the number of potential customers, or customer segments.
- SWOT analysis: SWOT is a written analysis of the Strengths, Weaknesses, Opportunities and Threats to a business entity. A SWOT may also be written up for the competition to understand how to develop the marketing and product mixes. SWOT method helps to determine and also reassess strategies and analyze business process
- PEST analysis: PEST is an analysis about external environment . It includes a complete examine of a firm’s Political, Economical, Social and Technological external factors. which may impact firms objective or profitability. They may become a benefit for the firm or harm its productivity.
- Brand health tracker: Brand tracking is way of continuously measuring the health of a brand, both in terms of consumers’ usage of it (i.e. Brand Funnel) and what they think about it. Brand health can be measured in a number of ways, such as brand awareness, brand equity, brand usage and brand loyalty.
Another factor that can be measured is marketing effectiveness. This includes:
- Customer analysis (Segmentation of target customers)
- Choice modelling
- Competitor analysis
- Risk analysis
- Product research
- Advertisement research
- Marketing mix modeling
- Simulated test marketing
Why is Market Research so valuable?
Without research, it’s impossible to understand your users. Sure, you might have a general idea of who they are and what they need, but you have to dig deep if you want to win their loyalty.
- Obsessing over your users is the only way to win. If you don’t care deeply about improving user experience, you’ll lose potential customers to someone who does.
“Whoever gets closer to the customer wins.”
- Analytics give you the ’what,’ but research gives the ‘why.’Big data, user analytics, and dashboards can tell you what people do at scale, but only research can tell you what they’re thinking and why they do what they do. For example, analytics can tell you that customers leave when they reach your pricing page, but only research can explain why.
- Research beats assumptions, trends, and so-called best practices.Have you ever watched your colleagues rally behind a terrible decision? Bad ideas are often the result of guesswork, emotional reasoning, death by best practices, and defaulting to the Highest Paid Person’s Opinion (HiPPO). By listening to your users and focusing on their customer experience, you’re less likely to get pulled in the wrong direction.
- Research keeps you from planning in a vacuum.Your team might be amazing, but you and your colleagues simply can’t experience your product the way your customers do. Customers might use your product in a way that surprises you, and features that seem obvious to you might confuse them. Over planning and refusing to test your assumptions is a waste of time, money, and effort because you will likely need to make changes once your untested plan gets put into practice.
5 Common Market Research Questions:
The following questions will help you get to know your users on a deeper level when you interview them. They’re general questions, of course, so don’t be afraid to make them your own.
1. Who are you and what do you do?
How you ask this question, and what you want to know, will vary depending on your business model (e.g., business-to-business marketing is usually more focused on someone’s profession than business-to-consumer marketing).
It’s a great question to start with, and it’ll help you understand whatever is relevant about your user demographics (age, race, gender, profession, education, etc.), but it’s not the be-all-end-all of market research. The meatier and more specific questions come later.
2. What does your day look like?
This question helps you understand their day-to-day life and the challenges they face. It will help you gain empathy for them, and you may stumble across something relevant to their buying habits.
3. Do you ever purchase [product/service type]?
This is a ‘yes or no’ question. A ‘yes’ will lead you into the next question.
4. What problem were you trying to solve or what goal were you trying to achieve?
This question strikes to the core of what they’re trying to accomplish and why they might be willing to pay for your solution.
5. Take me back to the day when you first decided you needed to solve this kind of problem or achieve this goal.
This is the golden question, and it comes from Adele Revella, CEO of Buyer Persona Institute. It helps you get in the heads of your users and figure out what they were thinking the day they decided to spend money to solve a problem.
If you take your time with this question, digging deeper where it makes sense, you should be able to answer all the relevant information you need to understand their perspective.
“The only scripted question I want you to ask them is this one: take me back to the day when you first decided that you needed to solve this kind of problem or achieve this kind of a goal. Not to buy my product, that’s not the day. We want to go back to the day that when you thought it was urgent and compelling to go spend money to solve a particular problem or achieve a goal. Just tell me what happened.”