How You Can Use Market Research to Grow Your Business?
Whether you have just started a business, are expanding an existing enterprise or want to launch a new product range, market research is vital to your success. With the right market research techniques, you can gain crucial insights into your customers, your competitors and the overall state of the marketplace.
In this article, Mooncard has put together a quick guide to market research. We will provide a definition of market research, explain why it is so vital to a business, and look at how to go about conducting market research properly.
What is market research?
Often, new business owners make the mistake of believing that they already know what their customers want and how to fulfil their needs. Without conducting thorough market research, the assumption that you already know exactly what your customer base wants, or what is viable in the marketplace, can be costly.
Every business owner should realise the importance of market research and know how to conduct market research in an efficient and effective manner. The information gained via market research will help you to better understand the needs of your customers and enable you to meet those needs and expand your business.
Market research involves using certain types of methodologies to gather information on your target market and your customers. It is the process of ascertaining whether or not a product or service will be viable by conducting systematic research. Qualitative data and quantitative data are gathered, recorded and analysed in a deliberate, methodical manner. This data can then be used to make judgments about what products to launch or where to open a business. Market research also provides valuable feedback from potential and existing customers about a business’s goods or services.
Market research can provide useful insights into customers and the current state of your industry sector. However, it is important to realise that it takes time to conduct thorough market research. It may be some weeks or months before you have gathered what can be considered reliable data from a large enough sample group.
You can designate an employee to perform your market research, or you can enlist the services of a market research company. Since professional market researchers are experts in their field, many business owners prefer to use them rather than expend their own time and resources.
Why your business needs market research
When conducted and analysed properly, market research can be a powerful tool that can help you to increase brand awareness and profitability of your business. Market research can also provide you with data that can be used to develop effective marketing strategies for new products or services.
The main reasons why a business should conduct market research are as follows:
To identify your target customers
Market research can assist you in locating the perfect group of customers for your products or services. By ascertaining who is buying products similar to yours, you can then develop a clear picture of this group’s demographics, such as their age, where they live, their marital status and so on. This data can help you to develop a clearer picture of what the characteristics of your ideal customer might be. You will then be able to more precisely coordinate and direct your marketing strategies.
To better understand your competitors
Gathering information on your other businesses in your sector can help you to stay ahead of the competition. Market research can identify both already established key players and newcomers into the marketplace. You can also use market research to analyse the profits or losses your competitors are making and identify any businesses that may be duplicating your products unlawfully.
To locate new opportunities for your business
Successful business owners are constantly looking for gaps in the marketplace or ways in which they can innovate to drive profits. Market research can provide you with the information you need to develop your business and broaden your market share. You can use market research to test the viability of new products, to locate other areas where you may be able to operate, to identify suppliers and to pinpoint areas where customers’ needs are not being fulfilled.
To minimise risk and avoid losses
Knowing who your customers are and what they want can help you to better meet their needs and avoid loss from a failed product or marketing campaign. Market research will make it clear where any high-risk areas are and where lucrative opportunities may lie.
You can use the data gained from market research to better focus your product development and more tightly hone your advertising strategies.
To anticipate customer demand
Knowing how much demand there is for a product and when demand may spike will help you to organise the production and supply of your products. You can identify when your customers will be most likely to make purchases, for example, Christmastime or holidays such as Mother’s Day. This information will help you to avoid both shortfalls and overstock.
Primary and secondary market research
Market research focuses on two areas using two different methodologies. There is qualitative market research that is used to gather public opinion and how people feel about existing products. There is also quantitative research that focuses on data trends rather than how your target market feels about your products.
In general, there are two main methods of conducting market research: Primary market research and secondary market research.
Primary market research
Primary market research is utilised to gather raw information directly from sources. This type of market research is usually used for a particular project via interviews, in-person or online surveys and focus groups. There can be extensive costs associated with primary research and it can take quite a great deal of time to complete.
There are two types of data gained from primary research: Specific data and exploratory data. Exploratory research is used to identify problems by asking open-ended questions. Specific research is tightly focused and used to solve those issues. Primary research is generally used for qualitative purposes to ascertain how a market segment may feel about a product or service.
Secondary market research
Secondary market research gathers existing data on certain markets from a range of sources. Information that already exists is taken from reliable sources and analysed. This information can be gathered from official records, media reports, government agencies, reputable websites or books. Secondary research is usually used for quantitative purposes, where a business owner wishes to compare data sets instead of finding out how people feel about a product or service.
The most common types of market research methods
There are various ways in which a business can gather information for market research. Often, a business may use a variety of different methods to give them a complete picture of the market. The type of method you choose will depend on the type of business you operate and what your research goals are.
There are four common types of market research methods:
Surveys are the most common market research method and are usually used to obtain qualitative data. Usually, a market research survey will ask a short set of open-ended or closed questions. Surveys can be done online, or they can be sent via the post. Sometimes participants are asked to complete very short surveys on a one-to-one basis. Surveys are cost-effective, simple to conduct, can be analysed easily and provide a large amount of information in a short time.
Conducting face-to-face market research interviews can provide a wealth of insightful information. Interviews allow for non-verbal data to be collected as well as verbal information. The interviewer can deeply delve into an issue and shift focus if required.
Face-to-face interviews can also be conducted via video conferencing software. Conducting market research interviews over the phone is also a valid data gathering technique and has been used for many years by market research companies.
This type of market research is conducted by interviewing a small group of people who fit your target customer characteristics. Focus groups can provide insightful information but can be costly to organise. Focus groups often suffer from what is called ‘dominance bias’, where a more forceful group member imposes their opinions on others. Focus groups can also be impacted by the moderator’s own bias or interviewing style.
Observation market research is conducted by having a person who fits the target customer characteristics interact with a product while being observed by a researcher. Observation can provide good insights into how a customer feels about a product and it is not as expensive as focus groups, but it is also not as in-depth as a survey or an interview.
How to conduct market research
The first thing to do when planning a market research campaign is to identify your goals. Every research campaign should have a clearly defined issue that it aims to solve. A business may want to know how aware the public is of a new product, for example.
Next, you need to make decisions on who will be included in your research. That is, what types of consumers your research will target. Since market research can often be an expensive undertaking, making these decisions ahead of time will avoid the risk of wasting time and money by gathering irrelevant data.
Once you have identified the types of consumers you wish to research, then you will need to decide how you intend to collect information from them. For some customers, an online survey may be the best method to gather information from them, for example, for a software company that wants to gauge public reaction to a new game or application. For others, a face-to-face interview may work best. Take the nature of your intended research group’s characteristics into account when deciding on the market research method you will use.
When your research has been carried out, you must then analyse the data gained. Researchers should keep close track of the results of their studies, the participants’ demographics and other crucial information. A marketing report should be prepared based on this data.
The last step is for business executives to make decisions based on the outcome of the market research. This can include changes to pricing, marketing strategies or product features. Once the changes have been made, the effects can be measured by more market research.
Common market research questions
If you are considering conducting your own in-house market research, you can devise your own set of questions or use one of the many market research templates available online.
There are five questions that are typically included in market research interviews or surveys:
- Can you describe yourself and what you do?
- What does a normal day look like for you?
- Do you regularly or have you ever purchased the product or service?
- If yes, what goal did you want to achieve or what problem did you want to solve?
- Can you describe the time when you first decided you wanted to attain that goal or solve that problem?
The cost of market research
No matter what industry you are in, market research can assist you in getting to know your customer base better and developing your business. The cost of market research varies depending on whether you are conducting the research in-house yourself or using a market research company.
If you are using a third party market research company, rates are usually around £700 for a survey (online or via post), focus groups can be arranged for between £800 to £1,000, phone interviews can cost approximately £30 per call and face-to-face interviews can cost up to £1,500 per day of interviews.
Although market research can be expensive, it should be factored into your budget alongside normal operating or start-up costs such as labour costs or even registering a company. If they wish, a business owner can consider taking out a loan to cover the cost of market research.
Keeping track of your expenditures is crucial for anyone that runs a business. If you want to stay on top of how your business funds are being spent, then Mooncard can help you keep your accounts in order. Mooncard can provide your accounts department with digital records of all purchases. You can arrange a free, no-obligation Mooncard demo online today!