Market research is a practical necessity for entrepreneurs planning to start and build a profitable business. It provides business owners with a wealth of information about their customers, competitors, trends, and other vital aspects, enabling them to make informed business decisions, develop a unique value proposition, and create a practical marketing strategy. In this guide, you’ll learn what market research is, when to conduct one, the types of market research, and the various means of collecting data.
What is market research?
Market research is collecting, analyzing, and interpreting information about your customers, competitors, and industry to gain insights into customers’ needs and preferences and assess the possibility of the product or service succeeding in the market and meeting business goals.
With market research, businesses can identify their target market and develop an accurate business plan and marketing strategy. Look at it like this: when you have a product to introduce, you want to understand the market first, learn the rules, and identify your competitors. The aim is to know your target audience, assess the strengths and weaknesses of your opponents, and create a strategy to outperform them. Some of the areas to investigate in market research include:
- Brand awareness and perception
- Market trends
- Competitors
- Growth opportunities
- Product performance
- Customers needs, behaviour and preference
- Customer feedback
When to conduct market research
When is market research necessary? Here are three specific situations:
- To solve a problem: Market research can help identify low sales, low-quality products, overpricing, and an oversaturated market.
- To plan: You can develop a better plan for your business when you know the market size for your products and services and where to find available customers.
- Adjusting strategies: Market research helps you keep up with market trends and ensure you’re competing. Businesses can continually modify their approach based on the insight they get from the research.
Why is market research important?
Market research provides valuable insights that help businesses make informed decisions. Some of the importance of market research includes:
- Understanding your market
- Identifying opportunities
- Benchmarking against competitors
- Developing a marketing strategy
- Improving your product or service
- Informing decision-making
- Validating your market opportunity
- Optimize Products and Services
- Develop an optimized pricing strategy.
- Identify any sales and service gaps or unmet customer needs
Types of market research
Understanding types of market research and how to use them enables you to make informed decisions that align with your business needs. The two main types are primary and secondary market research.
Primary market research
Businesses can perform primary market research when they need specific information about their brand or customer perceptions of their products or services. This market research allows companies to maintain control over the data quality. Some valuable sources of information in primary market research are surveys, interviews, and focus groups.
Primary research methods
Some of the data collection methods in primary research include the following:
Interviews
Interviews are great for in-depth discussion, response clarification and detailed insights. You can conduct structured and unstructured interviews to get insights about the market. Structured interviews involve listing detailed questions to ask the interviewee and ensuring you ask everything on the list. The unstructured approach offers a more flexible approach. It involves an informal conversation with the participant about different topics relevant to the research. There is also the semi-structured interview, which combines detailed questions and open-ended discussions. Finding a balance is key to this type.
Conducting a test interview helps refine the process and ensures a smooth and practical experience during the actual interviews. Stay neutral, listen actively, and maintain objectivity during interviews to avoid bias. If you’re going to record, let the participant know why it’s necessary and how you’ll use it. Assure the participants that the recording is confidential so that they will be comfortable answering questions. Keeping the recorder out of sight and focusing more on the conversation than the recording device can help them feel at ease. If they are not comfortable with recording, consider note-taking.
Focus groups
Focus groups involve getting about five to ten people with shared interests and a moderator to participate in a discussion. The aim is to get feedback on a product or service. For example, if a business thinks of adding a new feature to a product, a focus group can tell them if it’s necessary. Focus groups help to get in-depth and diverse opinions from a group of people, which is not achievable through surveys.
Surveys
Businesses can gather data by creating a set of relevant questions and distributing them to a group of people for their opinions or feedback. Surveys can help companies understand customer satisfaction, identify friction in your customer journey, product feature desirability, views about a recent change or reasons to cancel your service.
There are online, paper, and mail surveys, but online surveys are popular because they are cost-effective, quickly distributed, and can reach large audiences. Statista’s research shows that 85% of market research professionals use this method regularly. You can design your survey questions to get quantifiable data and qualitative feedback from your target audience. Some online survey tools to consider are Google Forms and Survey Monkey.
Observation
The observation method involves watching and recording people’s actions, interactions and behaviours in a natural or controlled setting without directly interacting with them. A natural setting, for example, can be going to a supermarket and watching what people buy and the situations that compel them to purchase certain products. This method helps to understand how customers interact with products or services in real time or identify high-traffic areas in stores. A controlled setting can observe participants test a gym management app to track which app features they engage with the most.
This data collection method provides a real-world understanding of people’s decision-making process when not influenced by questioning. However, it takes significant time to observe people’s behaviours, and most of the time, you cannot figure out the real reasons behind them without other methods, such as interviews.
Pilot testing
Pilot testing is a market research approach where researchers test a product or service on a small scale before implementing it on a full scale to test user acceptance, feasibility and effectiveness. For example, a company can launch its product in a city to test its acceptance before launching it nationwide. Another example is setting up a controlled testing environment to test two product versions to see which results in higher user engagement.
Pilot testing helps businesses analyze results, improve, and test again if necessary. Although this method can be expensive and require careful planning, doing it helps identify issues before a full-scale implementation.
Difference between pilot testing and Minimum Viable Product (MVP)
Pilot testing and MVP may seem similar, but they are different concepts. Pilot testing involves testing a product with full or near-full features with a small group of targeted users to get reviews before launching full-scale. MVP is a basic product version with only the essential features developed quickly to validate a business idea and identify if there’s a market demand for the product.
Pilot testing aims to test a product’s acceptance, functionality and usability in the real world or a controlled environment. For example, testing a gym management app with a few gyms to get feedback or running a beta version of software for some customers. MVP is a version of a product with only the essential functions. The developers then release it to a broader target market to see if it solves a real problem, for example, a hotel management app with only booking and payment features.
Secondary market research
Secondary market research involves using existing data from research companies or other businesses to get a comprehensive view of the market. You can use it to examine different businesses’ performance rather than focusing on individual companies. Existing internal data, industry statistics, reports, and whitepapers are some data sources in secondary market research.
Secondary research methods
Some of the data collection methods in secondary research include the following:
Internal data analysis
Using data already available in the company can help you gain insights about customers or business performance. Some internal data sources include employee interviews, employee feedback, sales records, website data, financial reports, CRM data and marketing metrics such as email campaigns, web analytics and social media performance. Leveraging existing resources is cost-effective, provides immediate access to relevant information, and is specific to the business needs.
You can use internal data to identify customer behaviour preferences, assess product or service performance in the market, identify growth or improvement opportunities, and forecast future market conditions by tracking patterns. For example, businesses can improve customer satisfaction by analyzing customer feedback in the database.
Commercial data analysis
Commercial data include market reports, industry reports, white papers, and other data sources specific to your market. Industry reports offer detailed insights into market trends, forecasts and levels of competition within a particular market. You can find data such as market size, emerging trends, demographics, growth rates and customer preferences. For example, a gym app developer can review an industry report on fitness technology to understand how gyms adopt software solutions to improve operational efficiency. Although comprehensive and reliable, industry reports can be expensive. Ensure you have the funds to purchase them.
Another commercial data source is white papers, which explain problems or opportunities within an industry. They help propose solutions, highlight innovations or trends, or share expert insights. White papers are published by trade organizations, industry leaders or consulting firms. You have to be careful using white papers as they can be a tool for promoting products or services, making them biased. Commercial data helps with benchmarking, identifying opportunities and understanding market conditions. Sites like IBISWorld, McKinsey & Company Statista, Forrester, Trust Pilot and Pew are some of the credible sources to use.
Competitive analysis
Competitor analysis researches the competitors’ products or services, pricing, market positioning, customer feedback and marketing strategies to understand their strengths and weaknesses. Performing a competitor analysis helps understand a competitor’s unique selling proposition positioning strategies, and identifying market gaps. You can discover the unique feature or quality that sets a product or service apart from its competitors and attract loyal customers.
To conduct a competitor analysis, you can use analytical tools to identify top competitors in your market and then compare their product features, USPs and pricing models. For example, a gym management app company can analyze a competitor to determine the features missing in their software and how to proffer better solutions. To learn what their customers think about them, look at the user feedback on platforms such as G2 or Capterra. You can also use reports to evaluate competitors’ market share and growth. Customer reviews, public company reports, product reviews, and websites are sources for competitive analysis. Some tools to use are Google and SEMrush.
Public data sources
These sources provide general information about economic trends, consumer behaviour, and demographics of broad markets, industry growth, and employment. You can find such information from research publications, trade associations, government or non-profit databases such as Statistics Canada, World Bank and government reports.
The government database provides market statistics and trends. For example, “CHASS Data on the food industry’s economic contributions.” The trade associations offer reports and updates on market performance. For example, “Canadian Federation of Agriculture on global agriculture trends.” The downside of this data collection method is that it can be outdated and doesn’t provide information on specific markets.
Online data and analytics
This method involves using tools such as Google Trends, social media listening tools and SEO analytics to collect pre-existing public digital information to gain market insights. You can collect information such as competitor activity, user behaviour and trends to understand consumer preferences, competitors and industry trends. It can replace or enhance the survey or interview market research methods.
Google Trends helps track search interests for specific keywords, while SEO analytics tools like Ahrefs can help study competitors’ high-performing keywords, website traffic and backlinks. Social media listening tools like Hootsuite or Brandwatch can help to monitor mentions, discussions and hashtags related to the product or service you’re researching. Use tools like Google Analytics or Facebook Audience Insights to understand the geographic and demographic distribution of interested users in your specific market.
Using online data provides access to comprehensive pre-existing data from search behaviour to current trends and social media activity at little to no cost. Compared to public sources, the information is up-to-date.
Nenye Writes is not affiliated with the companies mentioned in this post.
Whether entering a new market, improving your business strategies or launching a new product, understanding the market landscape and target audience is crucial to succeeding. However, choosing the best research and data collection method can be overwhelming. That’s why Nenye Writes is here to help. We specialize in helping you select the best research method for your business concept and perform comprehensive market research to provide actionable insights to make data-driven decisions that drive growth and outperform competition. Send us a message today to get started!
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