“Undertaking market research” is basically a fancy way to say, “asking your potential customers what they want.”
More officially, market research is a systematic gathering of information about a target market or group of consumers to determine their opinion about a product or service.
When and How To Do Market Research
Businesses conduct market research to determine the viability of a new business venture of some kind by asking potential customers what they think about a hypothetical product, service, or company.
When to Do Market Research
Businesses and entrepreneurs typically undertake market research before launching a new product, offering a new feature, or expanding into a new demographic or location.
Market research gives companies insight into how their market may react to these changes without the risk and expense of implementing them. Oftentimes market research reveals serious flaws in a business plan that must be corrected before launch; other times it confirms existing assumptions.
You should undertake a new market research study when new competitors enter your market, or any other significant external event takes place that affects your product or market.
If you make running shoes, for example, and someone wins a gold medal at the Olympics prominently wearing a competitor’s shoe, you should definitely conduct some market research to see how dramatically your product’s position in the market was affected.
It may seem like a huge problem, but a well thought out study might reveal that your target demographics were actually unimpressed by the win.
How to Do Market Research Effectively
Don’t just rush into a market research study without a clear objective. Just asking people “What running shoes are your favorite and why?” is probably not going to give you actionable results.
Consider these four categories when designing your studies:
Market information: The larger your market the more it will cost to reach it, so you want to try and narrow yours down as much as is reasonable to keep your marketing budget in check. You may have assumed that parents of young kids would be your best market, but your market research may show that they don’t need what you’re selling.
Market segmentation: These questions allow you to segment your target market into different groups, each with its own traits, and then adjust your messaging to each segment. Market research might reveal that men and women have very different purchasing patterns for your product, and that’s something you could exploit or try to fix.
Market trends: Understanding the direction your consumers’ behavior is taking can be invaluable in helping you get and stay ahead of the competition. For example, knowing that your best customers have stopped buying from brick and mortar stores but are shopping online constantly helps you adjust your advertising channels and make the most of your budget.
SWOT analysis: SWOT, Strengths, Weaknesses, Opportunities, and Threats, helps you decide where you are succeeding in comparison to others in your market and where your opportunities and vulnerabilities are. Comparison questions like, “Would you consider Product A or Product B to be more reliable?” can help you target your future messages to address weaknesses and opportunities or respond to emerging threats to your brand.
Two Kinds of Market Research
There are two distinct types of market research, both of which should be part of your overall strategy. Primary market research comes from data you gather directly from your customers, while secondary market research is pulled from existing third-party data sources.
Primary Market Research: Contact Customers Directly
This kind of research requires access to your customers in some way. It can be done via phone or mail, in person, or with online surveys.
The fastest way to get your primary research done is to pay a market research firm to do it for you, but this is also by far the most expensive route. These firms charge tens or even hundreds of thousands of dollars to put their expertise to work for you; these prices are typically out of reach of all but the biggest businesses.
Instead you can opt to conduct the primary market research yourself, which will be much more time consuming but considerably less costly. This Entrepreneur.com guide to Inexpensive Market Research Methods is a good place to start, as is the software provided by our sister company SurveyGizmo.
Not to toot our own horn, but the data you can get with SurveyGizmo’s reporting tools rivals what market research companies produce at a tiny fraction of the cost. Sales pitch over.
Secondary Market Research: Use Existing Data
This kind of research most businesses are willing and able to handle themselves, because it’s just a matter of finding the right sources and processing their data.
Online research has made this phase infinitely simpler, especially since many educational and government institutions post their findings online.
In addition to these kinds of academic studies, public data like census results can provide good insight into your customer base and its typical behavior.
Finally, quite a few larger research firms will provide you with their data for a yearly membership fee, and even more will let you download a particular white paper for just the “cost” of an email address.
Other Articles You Might Be Interested In:
- From SurveyGizmo How to Develop a Market Research Plan
- From SurveyGizmo 6 Types of Market Research Surveys That Smart Marketers Use