What is market research? How to do it properly?
Almost all big international companies like Apple, Amazon, Microsoft invest a vast amount in market research. Why do they have to do it? Market research enables them to grasp every information in this changing environment to adapt and adjust instantly. As a result, they can succeed and stay ahead of their competitors.
If you are going to enter a new market, launching a new product, figuring out how to improve your offerings, you should carry out thorough market research to achieve your goals.
Table of contents
- What is market research?
- Types of market research
- Why is market research necessary?
- 6 Steps to do market research
- Common mistakes to avoid
- The bottom line
What is market research?
In short, market research is a process of gathering, analyzing, and interpreting data to better understand the target market associated with a specific product or service.
Market intelligence identifies the demands, characteristics, spending habits, purchasing behavior, etc. of existing and potential customers. These insights are used to determine the viability of the product or service among these people.
Market studies generate and examine data about competitors and the entire industry to ensure the successful launch of a new product or service and its stable growth.
Nowadays, we can witness that companies conduct various market research. Most popular ones include:
- Brand Research
- Campaign Effectiveness
- Competitive Analysis
- Consumer Insights
- Customer Satisfaction Research
- Customer Segmentation Research
- Product Development
- Usability Testing
Businesses carry out market analyses for different purposes. The results of these studies allow the company to make more insight-driven and well-informed decisions. Without proper market investigation, the firm cannot develop critical strategies such as market segmentation, product differentiation.
Superior information from market intelligence enables the enterprise to develop better offerings, enhance the user experience, and deliver appealing marketing messages to prospects. As a result, the business can increase its customer base, conversion rates, and revenue.
Understanding industry transformation, changing customer needs and preferences, and capturing trends in economic, social, legal, and regulatory factors can help the company to determine where to focus its resources and efforts.
In general, market research helps the business ensure effective and efficient operations, enjoy a competitive advantage over other providers, and maintain a sustainable growth rate.
The company can choose to conduct market research by itself or leverage a third-party organization that specializes in this type of research. The Nielsen Company, IQVA, Gartner Inc., are the top three leading market research companies worldwide.
Mageplaza, as a Magento 2 extension provider, we continuously do market research to come up with solutions to our customers’ challenges. In this digital age, the way people do business is always changing, especially in the e-commercial field, market investigation allows Mageplaza to both develop new beneficial extensions and improve the current ones to fit customer requirements and expectations.
Types of market research
Primary research tools
Primary research is a process of generating first-hand information. The company can compile itself or outsource a third party to do it. This type of analysis enables the business to control the process from A to Z.
Primary research generally starts with exploratory research and follows up with specific research. The business collects tons of open-ended data from unstructured interviews. The optimal goal is to identify a particular problem and opportunity. After understanding the more significant market issue, the business asks specific questions in the form of structured and formal surveys. This aims at finding solutions to the suspected problem. These solutions can come up with a new feature or a new product.
Even though it takes time, effort, and resources to carry out primary research, it is still the best or even the only way to get actionable insights and fresh information. When conducting primary research, you can use one or a combination of these following tools.
These are highly effective and relatively affordable methods to conduct primary research. Surveys come in various forms. It can range from a small feedback card to extensive surveys. Surveys can be sent directly to the mailbox of the respondents or can be filled out online in the form of web questionnaires.
To maximize the response rate, a survey should
- Be short, simple, and straight to the point
- Be addressed to specific individuals
- Be appealing to the respondent
- Be well-designed to fit all devices such as laptops, mobile phones, tablets, etc.
- Include a professionally-prepared cover letter to explain the reason behind the questionnaire
- Reward respondents by a discount or gift card.
You can make use of online survey software from MonkeySurvey, HubSpot, Typeform, etc. to create your survey or questionnaire.
Focus groups are often used to implement exploratory, qualitative research. This research technique is an excellent method to gain insights into customer preferences and market trends.
Focus groups involve gathering small groups of people who share common characteristics and fit a demographic target, then asking them open-ended questions toward the research objective. The group is usually restricted to 8-12 people.
The participants discuss a predefined topic. There is often a moderator who guides and stimulates the conversation among these members to get in-depth insights.
These types of group interviews can take place physically or virtually via video conferencing. The researchers take essential notes from the discussion without disturbing the participants.
Interviews seem to be one of the most cost-effective forms of market research. They can be conducted over the phone or in-person (face-to-face). In-depth interviews allow the respondents to address their preferable topics with limited questioning.
Interviews may consist of detailed questions or involve free-flowing conversations between the researcher and the respondent. This research approach helps to dig further into consumers’ problems, their psychological motivations, and underlying perceptions.
To carry out successful interviews, the researchers should have proper skills and experience. They should have an interview script and memorize it instead of reading it. It is critical to make the interviewees comfortable to share and avoid any pauses as their interest can quickly drop.
This is a process of gathering information by watching or video-recording the consumers’ interaction with a product or service in a natural context. This method is relatively time-consuming; however, it is useful to provide unbiased research.
There is typically no or very little direct communication between researchers and the observed people. Observational research can capture the actual behavior of the customers. Then the insights gained are more reliable and practical.
When applying an observational approach to market research, the business should follow the following steps:
- Identify the target participants and what aspect to observe
- Decide the mode of recording the data
- Develop the questionnaire, then take notes based on the questionnaire
- Analyze the behavior and draw inferential statistics
Secondary research sources
Secondary research, also referred to as “desk research,” is when you review, re-analyze, and re-interpret the existing information to apply to your current situation. The secondary information includes trend reports, market statistics, sales data, etc.
The secondary data is accessible both online and offline. These days, tons of studies are available on the internet. You need to type some keywords or phrases on the search engines. You can also obtain information from newspapers, trade journals, industry publications, etc. Some resources provided by private organizations may require permission or charge an extra fee.
Generally, secondary research is more affordable than primary research, as it takes less time and money to conduct. The drawback is that the results may not be specific to your needs, and you have no control over the investigation process.
Businesses should consider desk research as a starting point of the market research process. When you make use of already existing information, it is crucial to check its publication date to make sure the data is not outdated.
Secondary research sources fall into two main categories, which are internal and external sources.
Internal sources include business previous reports or studies such as balance sheets, profit and loss statements, inventory records, sales figures, etc.
These sources of information can be used to determine market trends, evaluate the company’s capacity and capabilities.
Internal sources provide a massive amount of practical information in the cheapest, most accessible, and most affordable way. Also, internal data is exclusive to the company. No other competitor can benefit from it.
External sources consist of data collected from people or organizations outside the business. External sources typically provide comprehensive data. You should take advantage of these sources if the internal data is not sufficient.
There are tons of external sources. You can collect unlimited data. When utilizing these sources, you should have a restricted and controlled approach to avoid collecting useless data.
Here are some most popular sources of external data.
- Government reports and studies
- Trade journals, magazines, newspapers
- Television and radio
- Academic papers and educational resources
- Literature reviews
- Online articles and case studies
- Competitor websites and materials
In the concept of market research, both primary and secondary approaches have their pros and cons. Primary research brings about fresh, precise, and need-specific data, but it is expensive and time-consuming. Secondary research, on the other hand, requires less time, money, effort, but the data may be outdated and not fit your needs.
Before determining which types of research, you should first examine your goals, budgets, resources available.
Why is market research necessary?
To ensure the success of your business, you have to find out what exactly your customers need, want, and prefer first. Then you need to investigate how to satisfy them better than your competitors in a profitable way.
You can hardly achieve this without carrying out some market research. Some people assume that market studies are highly sophisticated and expensive, but often useless and impractical. This assumption can cause costly mistakes later on.
Many startups fail right on their first step because they think they understand their customers without asking them.
Conducting thorough market research is critical to help businesses maintain their competitive edge in this continually changing environment. The more studies are implemented, the better the decisions the firm makes.
In this post, we would like to outline the main benefits of market studies.
Understand existing and potential customers
Market research helps you gain valuable insights from your customers. You can identify your potential customers as well as their key demographics to create effective marketing strategies to target them.
Also, through market studies, you can understand how your existing customers are using, interacting, and giving feedback on your products or services. This helps you improve your offers to get higher customer satisfaction as well as grasp upsell and cross-sell opportunities.
Competitive analysis helps you discover your competitor’s strengths and weaknesses. Understanding your rival’s strategies to capture customers is vital. Because you are in the same market as your competitors, if you don’t increase your market share, then they will do. Besides, if you know your competitor’s weaknesses, then you can utilize these gaps to gain more customers.
To investigate your rivals, you should examine their products, services, marketing strategies, marketing campaigns, etc. You can visit their stores both online and offline, notice their ads, read their blogs. Learning as much as you can, will gain you a competitive edge.
Identify new opportunities
Thorough market studies may help the business discover unmet or under-serviced markets that would be profitable to enter. Furthermore, you are not only aware of the current market state but also able to predict changes. Capturing market trends allows you to make appropriate adjustments and stay successful.
We can see how giants like Nokia or Blockbuster failed in catching up with changes and went bankrupt. Meanwhile, Netflix and Apple still succeed with proper market research right before any other competitors, which enables them to utilize every open gap.
Lower risk factors
Business risks are factors that can cause lower revenue and profits, then financial losses. Entrepreneurs face business risks every day. Market frustration, inflation, deflation, geopolitics, etc. are common business risks.
In today’s economy, business risk is a growing concern. Therefore, companies must assess and reduce the impact of this risk by using precise and up-to-date information. Investing a small amount of your budget in researching and testing the market helps to minimize the risk significantly.
Read more: Understanding factors that affect your business.
Ensure sustainable growth
Intensive market investigation helps you understand your customers, competitors, and your business operating environment comprehensively. It also enables you to explore more business opportunities and reduce business risk. All of these benefits maintain the sustainable growth of your business.
Whether you are starting a new business, launching a new product, bringing about a new feature, carrying out market research is essential to reaching your target customers.
Overall, market research is vital for not only small businesses but also big firms. All companies in different industries can take advantage of market research.
6 Steps to do market research
We all know that conducting market research is essential, doing it right is even more crucial. Here is a brief of important steps you should follow when carrying out market research.
Step 1: Define the problem
The first and foremost step of market research is defining the problem. Knowing what you are trying to investigate helps to determine what information to collect and how to manage it.
The problem may be how to increase market share, how to grow the customer base, how to launch a new product, etc. Research objectives should be described precisely to guide all of the following steps.
Step 2: Define the sample
It is obvious that you cannot handle your market surveys to everyone. Your surveys also become meaningless if you target the wrong participants. Therefore, as a researcher, you have to create a representative sample that can accurately reflect the characteristics of the larger group.
To create a relatively accurate sample, you have to [identify your buyer persona}(https://www.mageplaza.com/blog/define-your-customer-before-marketing.html). You should consider some essential characteristics such as
- Job titles
- Family size
- Major challenges
Step 3: Prepare research questions
The time respondents give you is limited. You must use this time wisely. Whether you do market research by an online survey, personal interview, or focus group, you should always design intelligent questions. You have to make sure your questions are clear enough, and they can cover all related masters.
Also, when it comes in the form of a focus group or an interview, researchers should always prepare a discussion guide to make the conversation smooth.
Step 4: Collect data
In market research, data collected can be quantitative or qualitative. Ideally, you should have a combination of two kinds of data. The important thing is to make sure this data is valid and unbiased.
Step 5: Analyze and interpret data
After collecting sufficient data, you should do an in-depth analysis. It is critical to look for a broader meaning rather than specific pieces of information. When you analyze the data, you have to avoid the following patterns based on your previous assumptions.
Data analysis is presented in a report. The report needs to be written clearly so that the recommended course of action can be made.
Step 6: Put research into action
Your completed research helps you to answer your defined problem. From the results derived, you can start developing your marketing strategies and campaigns.
These days, the business environment is continuously changing. You should do market research on a regular basis. The more you understand your customers and the entire market, the more success your business can gain.
Learn to optimize your data analytics here.
Common mistakes to avoid
Using only secondary research
If you rely on only secondary data, you cannot address your specific problems. Secondary research is an excellent point to start with, but it is not sufficient. Furthermore, the information from secondary research may be outdated.
It is worth investing your time and effort in carrying out your own surveys, interviews, observations to gain valuable insights.
Using unreliable sources
When you gather information from the Internet, there is a risk of getting inaccurate data. To perform better research within your budget, you can utilize more reliable resources from the library, college campus, or specialized research companies.
Surveying only the people you know
Researchers in small businesses sometimes conduct studies on their family members or colleagues. However, these people are not appropriate survey subjects. To gain beneficial and precise insights, you need to ask your real and ideal customers. Using a cross-section of respondents to prevent bias results.
The bottom line
All in all, market research is a critical component of a successful business. Market research provides you with essential insights to understand your customers, competitors, and the entire market. With these beneficial insights, you can make better decisions, then achieve your business growth.