Market Research: The Basics
Customers are the foundation of your business. In order for your company to succeed, you need to understand them and their relationship to your products and services. That is where market research comes into play.
According to the Small Business Administration, market research is “the process of analyzing data to help you understand which products and services are in demand, and how to be competitive.” That data can include valuable intelligence about your marketplace, your industry, your competition — but especially and most importantly, about your customers and how they feel about your company and its offerings.
In short, market research helps you understand three things: your industry, your competition, and your target market. You can use it to:
Identify customers’ (and potential customers’) habits, trends, plans, opinions, needs and wants
Determine if your company and/or its offerings meets customer needs
Find potential new customers based on demographic traits such as age, gender, income, education level, and even geography
Determine the best ways to market and advertise to different types of customers
With the above insights, market research can yield numerous business benefits, including:
Reducing business risks
Spotting current and upcoming problems in your industry
Identifying new sales and profit opportunities
Why Do Market Research?
Market research provides critical information about your market and your business landscape. It can tell you how your company is perceived by the target customers and clients you want to reach. It can help you understand how to connect with them, show how you stack up against the competition, and inform how you plan your next steps.
Market research can help you:
Gain an accurate view of your business and your marketplace. For example, you can see how you are perceived in comparison to your competitors, and evaluate what your competitors are doing to attract customers.
Determine who and where your customers are, and which customers are most likely to do business with you.
Discover how customers and prospects view your existing business and products, and show you if you are or are not meeting your customers’ needs.
Decide whether a new idea for a business or product will fly—that is, will customers find it appealing—based on gaps in or how similar products have performed in the marketplace.
Make wise product packaging and promotional decisions, as well as effective marketing messages.
For many businesses, market research is a key component in developing their marketing strategy and providing a fact-based foundation for estimating sales and profitability. In fact, it can be the difference between making wise decisions that drive your business forward and poor decisions that can damage your business.
Types of Research: Primary vs Secondary
Market research generally involves two types of research techniques:
Primary research involves going directly to a source — usually customers and prospective customers in your target market — to ask questions and gather information. Examples of primary research are:
- Interviews (telephone or face-to-face)
- Surveys (online or mail)
- Questionnaires (online or mail)
- Focus groups
- Visits to competitors' locations
Secondary research is research that has already been compiled, gathered, organized and published by others. It includes reports and studies by government agencies, trade associations or other businesses in your industry. Typically, small businesses due to limited budgets rely more heavily on secondary research.
A lot of secondary research is available on the Web, simply by entering key words and phrases for the type of information you’re looking for. You can also obtain secondary research in from magazine articles, trade journals and industry publications, by visiting a reference library, and by contacting industry associations or trade organizations.Read More
Quantitative vs. Qualitative Business Research
There are two major types of data you can collect in market research. Both can be valuable for different purposes.
Quantitative research is all about numbers. It uses mathematical and data analysis to shed light on important statistics about your business and market. This type of data, gathered from sources such as multiple-choice questionnaires, can help you gauge the level of interest in your company and its offerings.
Most importantly, because quantitative research is mathematically based, a properly constructed test is assumed statistically valid. This means you can use the findings to make predictions about where your business is headed.
Qualitative research isn’t so much about numbers as it is about people—and their opinions and perceptions of your business. Typically conducted by asking questions either one-on-one or to groups of people, qualitative research can help you define problems and learn about customers' opinions, values and beliefs.
Because qualitative research generally involves smaller sample sizes than quantitative research, it’s not meant to be used to predict future performance; rather, it gives you an anecdotal look into your business.
There are a variety of ways to collect data. The method you choose depends upon how geographically dispersed your target customers or clients are. Are you a business in a local community, or do you sell to or serve customers nationally? It also depends on your budget, and the resources you have to run the research — whether you’re doing it yourself or hiring a research agency.
The major types of data collection include:
Interviews, a qualitative research technique, simply mean asking customers and prospects one-on-one about your business and its products. Among the most prevalent is the telephone interview.
Focus Groups are a type of interview conducted with a group of people assembled in a room to discuss specific topics related to your business.
Surveys are the most popular quantitative data collection techniques used by small businesses. You collect specific, statistical information by interacting with members of a target audience via telephone, mail or online.
Questionnaires are critically important tools used in conducting surveys. A well-crafted questionnaire can give you the valuable information you seek; a bad questionnaire can scuttle your entire research initiative.Read More