blog | 8min Read
Published on November 14, 2022
Tapping into the skill of Market Research!
There is no universal definition or understanding of the term market research. Many businesses, however, include it in their marketing strategy. It is commonly understood as the activity in which a company gathers information and then researches market acceptance of specific products or services. It can be done online or in person, and it can include various types of research about people and organizations using multiple methods and techniques to gain market insight.
According to the American Marketing Association:
“Marketing research is the function that links the consumer, customer, and public to the marketer through information–information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Marketing research specifies the information required to address these issues, designs the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications.”
Market research has existed in some form or another for centuries because there has always been an effort to understand target audiences and cater to their needs, whether they are customers, members of an association or group, and so on.
Many experts believe that the modern understanding of market research was born in the early 1900s, as a result of the convergence of two seminal events: the United States Census introduced punch cards to tabulate data, and Literary Digest published what is thought to be the first national U.S. survey (for the U.S. Presidential Election). Market research has evolved and transformed rapidly since then and has become an integral part of making startups grow!
Why is Market Research Important?
Market research can aid in the proper utilization of all aspects of an invention. It provides a thorough examination of the various markets associated with the invention, the patent environment, and existing and future products. Thus, market research can add value to research and development operations, advancing them. Here are a few reasons why market research is important!
1. Reduced Business Risks:
To ensure that your business survives for a longer period of time, ensure that you have a steady flow of sales and customers. Market research is required for this. Regular market research will allow you to check in with current and prospective customers to ensure that you are still meeting their needs. Here’s how you can use it:
a. Before releasing new designs and products, put them to the test. Before you go all-in on a dramatic change for your company, test it on a smaller subset of your audience to see if the change will be welcomed. For example, if you intend to redesign a popular product, show the new design to your most loyal customers. Test or ask them if they prefer the new design over an alternative new design or the old design.
b. Discover why customers do not return. Your small business should ideally have repeat customers. If they don’t return, you can conduct a survey of previous customers or hold a focus group to figure out why you’re not getting repeat business.
c. Gain insight into problem areas. If your most popular product experiences a significant drop in sales for three consecutive months, you must figure out how to fix it before it completely destroys your profits. Find out where the problem is by polling your most loyal customers about the product. It could be anything from a drop in product quality to an error on your online store. Unless you ask, you’ll never know.
2. Setting Better Goals:
When business owners set goals for their company, it is usually to increase sales or customers. However, without market research, you won’t know if your goal is attainable or how to achieve it in the first place.
Say you want to double your sales by the end of the next quarter. How can you tell if this goal is attainable if you don’t know if your target market is larger than twice the size of your current customer base? Setting arbitrary goals without knowing the current size of your potential market is pointless. Market research will help you determine the specific directions in which you want to expand your customer base.
3. Do Better Marketing:
If you have ever wanted to know what images or text to use on your fliers, website, or social media accounts, thorough market research will provide you with the answers. Because your target customers have already expressed their wants, needs, and frustrations to you, you’ll know exactly what to address and how to address it when you begin developing marketing materials.
4. Spotting Business Opportunities:
After conducting market research, you’ll know who you want to reach out to (your target customers), how to reach them (your marketing channels), and what they’re interested in. Once you’ve defined these, you’ll be able to spot business opportunities with ease.
Five Steps to Conduct the Perfect Market Research!
1. Determine your goals:
When stated clearly, research objectives can provide the information required to solve the problem identified (described in the next point). All of your objectives should be as specific as possible to what you want to study in your market research.
Here are a few points that should be included in each objective:
- Specify who will be gathered information from.
- Always specify the information required
- Rephrase the question in light of the responses.
2. Pinpoint the problem:
If you’ve decided to conduct marketing research, this is the most important step. If the problem is not correctly defined, all other efforts will be futile! Remember that the need to make a decision necessitates decision alternatives. There is no need to make a decision if there are no alternatives. For example, suppose your sales are down by 30%, causing a problem with your revenues. You could also compare how well ad #2 performs in terms of sales to ad #1. Use secondary data sources to expand on your research ideas.
Create a focus group for a powerful way to pinpoint important problems and receive information all at once! This is why:
- It sparks new ideas
- It permits customers to observe their participants
- Comprehend a wide range of issues
- 3. Determine your research design:
There are five research designs from which to obtain the information you require: descriptive, exploratory, causal, and diagnostic research. Market variables are described in descriptive research. Exploratory research allows you to gather data in an unstructured manner. The goal of causal studies is to determine what factor(s) cause an event to occur. The sources of satisfaction and dissatisfaction are the focus of diagnostic research.
3. Know your sample size and plan of action:
Your sample plan should specify how each sample element will be drawn from the entire population. The sample size specifies how many people should be included in the sample. In other words, the sample plan’s purpose is to provide representativeness, whereas the sample size provides accuracy!
Here’s a simple but important step to take to avoid or minimize nonsampling errors: Re-contact your participants to validate their participation!
4. Analyzing the Research Data:
It’s always a good idea to go back and run tests on the information you have to screen out any potential errors. Once you have everything you need for the research (pie charts, bar graphs, statistics, surveys, etc.), you should make a report of it. Present the research report to the client in a way that communicates the findings clearly and accurately.
Popular Market Research Frameworks!
Market Research Frameworks are tools used by businesses and entrepreneurs to research the market for their products or services. Companies gain an understanding of the competitive dynamics of the market in terms of demand and supply of products and services, external factors of the industry, state of competition and degree of competition within the industry, future aspects of the industry, and differences between their organization and the competitors by using market analysis frameworks in detail. The BRG has compiled the three most popular and widely used market research frameworks for you:
SWOT analysis is a strategic mapping tool used in market analysis frameworks to evaluate an organization and its industry. It is an acronym that stands for Strengths, Weaknesses, Threats, and Opportunities. Strengths and weaknesses are internal organizational factors, whereas opportunities and threats are external organizational factors. The SWOT model is especially useful in determining whether or not to embark on a specific project by analyzing its positives and negatives as well as how to move forward.
2. Porter’s Five Forces:
Porter’s Five Forces is a model that identifies and analyses five competitive forces that shape every industry and aids in determining an industry’s strengths and weaknesses. Five Forces analysis is frequently used to determine corporate strategy by identifying an industry’s structure.
Porter’s model can be applied to any sector of the economy to better understand industry competition and increase a company’s long-term profitability. Michael E. Porter, a Harvard Business School professor, inspired the Five Forces model.
Porter’s five forces are as follows:
- The industry’s competition
- Potential for new industry entrants
- Suppliers’ clout
- Customer Influence
- Substitute products pose a threat.
PEST Analysis, also known as Broad Factors Analysis, is a critical market analysis framework for analyzing an organization’s external environment. PEST analysis is an acronym that stands for Political, Economic, Social, and Technological analysis. PESTLE analysis considers legal and environmental factors. Political factors include specific rules and regulations pertaining to the business’s political environment, such as ease of doing business, political stability, labor laws, trade policies, and political stability. GDP growth rate, inflation rate, exchange rate, capital markets, and so on are all economic factors.
Social factors are those that are related to society and the people who live in it. It includes information on health, fashion trends, demographics, age groups, and gender ratios. Technological factors include advancements and recent technological developments.
Two Brands that Aced Market Research!
McDonald’s is one of the world’s largest fast-food corporations. McDonald’s frequently uses market research to make its customers happy in order to maintain its number one position in the fast-food industry.
In its market research approach, McDonald’s asks four key questions:
- What products are doing well?
- What are the most affordable prices for consumers?
- What are consumers reading and watching in order to effectively advertise?
- Which restaurants are the most popular, and why?
By answering these questions, McDonald’s can determine whether or not its customer base is growing. If not, it adjusts its strategy in order to satisfy customers and outperform competitors. For example, many McDonald’s customers were concerned about the lack of healthy and organic food options on the menu. So McDonald’s listened to customer feedback and added healthy options to the menu, such as apple slices. It even launched an advertisement campaign to demonstrate that its chicken nuggets and patties are made with real meat.
Starbucks is the world’s largest and most successful coffeehouse chain. However, it is no secret how it became the world’s leading coffee company. Starbucks became the world’s largest coffeehouse chain due to its market research value.
Starbucks’ market research strategy includes the following steps:
- Following cultural trends
- Social media monitoring
- Obtaining feedback from customers
- Product testing in-store
Starbucks has conducted market research over the last 12 years by soliciting consumer feedback through its My Starbucks Idea platform. This platform enables customers, potential customers, and employees to visit the website and submit any creative ideas they have. These suggestions can range from new products to minor changes to existing products.
Market research can be extremely beneficial to many different aspects of a business. Correct research can assist a business in developing products and services that the target market requires; developing marketing plans based on the information gathered in order to reach all potential customers in the most effective way. Well-executed market research can provide useful information that can help a business gain an advantage over competitors and ensure customer satisfaction.