What is market research?
Market research is a study of the market, specifically how something is sold, who buys it and why, and how competitors behave. It is an organized effort to collect data about target markets.
We often use the term marketing research with the same meaning as marketing research. However, marketing research concentrates on the marketing processes, while market research is about the market in general.
Market research – marketing
Market research is one of the many areas that make up marketing – studying the market, finding out what consumers want, producing it, and then selling it to them at the right price.
Companies across the world spend billions of dollars every year on market research. They spend the money so that they can maintain competitiveness over rivals by giving customers what they want.
It provides vital information on the needs of the market, its size, and the features of the competition.
Market research improves the likelihood of success
Market research can help entrepreneurs determine whether there is a market for their proposed product or service.
The key to a successful business is understanding what customers want, giving it to them, and doing so while making a profit at the same time.
One of the biggest and most expensive mistakes some business people make is to think they know what their target customers want without ever asking them.
Given the growing complexity of the business environment, it is not advisable today to make important decisions using just a ‘gut-feel’ approach.
You must back up your decision with data, which you obtained via market research.
Market research is important
No matter how small your business is, you should include market research on your agenda.
Market research involves gathering and analyzing data on consumers, competitors, and market trends. It enables companies to assess more accurately the level of demand for their products.
It also helps management decide on capital investment strategies that will offer the best return.
According to marketresearchworld.net:
“Market Research is a systematic, objective collection and analysis of data about a particular target market, competition, and/or environment. It always incorporates some form of data collection whether it be secondary research (often referred to as desk research) or primary research which is collected directly from a respondent.”
Market Research Process
Organizations may choose to undertake the market research project themselves or commission a consultancy or research agency to do it.
Before undertaking any research project, it is important to define the objectives beforehand. For example, what is the aim of the project, what are you trying to achieve, what do you need to know?
After determining what the objectives are, market researchers use several types of research techniques and methodologies to gather the required data.
The study will collect either quantitative or qualitative data or both.
Quantitative research
This looks at numbers and typically involves statistical analysis. It asks people to respond to a set of fixed questions and produces reports from a statistical and numerical point of view.
For example, a vehicle maker may ask its customers to rate its sports cars as either excellent, good, poor, or very poor.
After collecting a large number of responses, it can provide a metric on what a representative sample of the population thinks.
Quantitative research involves a large number of questionnaires or interviews.
Qualitative Research
We generally use qualitative research as exploratory research to gain an understanding of underlying opinions, motivations, and reasons.
In this type of study, there are open questions, rather than closed ones, i.e., Yes/No answers. Closed questions are more common in quantitative research.
For example, a market researcher may ask people who have just bought a sports car why they bought it.
In qualitative research, the discussions between interviewer and respondent contain more of the respondent’s own feelings and thoughts.
Sometimes the study is done on focus groups with a moderator. The moderator asks questions and tries to get the group talking. People usually video the study and analyze it later in more depth.
Analyzing research results
As soon as you have completed the study, it is time to analyze the responses. It is also time to get the answers to the questions you initially asked.
It is crucial that you keep an open mind. Do not let your preconceived ideas influence how you interpret the data.
According to the Small Business Development Corporation, part of the Government of Western Australia, you should remember these golden rules when interpreting the results of your research:
- flawed questions will result in flawed results,
- be aware of your own biases and don’t let them cloud your judgement,
- do not kid yourself (be honest with yourself),
- informed decisions are only possible if the research is of good quality.
What to do with your findings
What if the findings suggest that your proposed business venture is likely to fail? You should seriously consider abandoning it unless you have compelling additional data that says otherwise.
Keep a record of the people who responded to the survey. If you decide to proceed with your plans, some of them (the supportive ones) could be potential customers.
The Small Business Development Corporation adds:
“If you are in business already, use the information you have obtained to develop your strengths, eliminate your weaknesses and create new opportunities. Above all, remember that market research, like any tool, must be used correctly to achieve a satisfactory result.”
Market research tools
There are many tools you can use when carrying out market research. There are many tools that leverage raw data to provide valuable information, such as heat maps. Using these tools allows you to see where you need to be focusing your efforts if a strategy isn’t working.
Video explanation
This MBN video explanation goes over what market research is in a way that’s simple and easy to understand.