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What is market research?
Market research is a systematic process of collecting, analyzing, and interpreting information about a target market, consumers, competitors, and the industry as a whole. It's a critical tool that businesses use to understand the dynamics of their market and make informed decisions.
In practice, this involves a deep dive into the target market, understanding its size, demographics, and buying patterns. Market researchers seek to understand consumers by grasping their needs, preferences, and behaviors; while also dissecting competitor strategies to stay abreast of broader industry trends and regulations.
How does market research work?
Market research is not a one-time activity, but an ongoing process that companies engage in at various stages of their business cycle to keep up with market dynamics. Businesses use market research to understand potential demand, identify the target audience, and shape their offerings when planning a new product, service, or business expansion.
The strategies used in market research can vary widely depending on the company's goals, the nature of the market, and the resources available. Some common strategies include surveys, focus groups, interviews, observation, and market experiments. Surveys and focus groups are often used to gather quantitative data about customer preferences and behaviors, while interviews and observation provide qualitative insights into why customers behave the way they do.
In the digital age, companies also leverage online tools and platforms for market research. Social media, online surveys, web analytics, and digital marketing tools provide a wealth of data about customer behaviors, preferences, and trends.
Regardless of the strategies used, the goal of market research is always to inform decision-making, reduce risk, and maximize the chances of success in the market.
Types of market research
Market research employs a combination of two broad categories: primary and secondary. These categories are based on whether the information is collected firsthand (primary) or has been gathered and compiled by others (secondary).
Primary market research
Primary market research involves gathering new, firsthand data directly from the source—your customers or potential customers. It's used to understand customer needs and preferences, test new product concepts, gauge customer satisfaction, and understand market trends.
Methods of primary market research are meant to provide businesses with direct and specific feedback about their products or services, and might include:
- Surveys: These are structured questionnaires given to a sample of a population, and are designed to gather responses on specific topics.
- Interviews: These are more in-depth than surveys and involve one-on-one conversations between the researcher and the respondent.
- Focus groups: These are moderated discussions with a small group of individuals. They can reveal valuable insights into customer perceptions and attitudes.
- Observation: This involves watching and recording the behavior of consumers in a natural or controlled setting. For example, a retailer might observe how customers move through a store to inform the layout and product placement.
- Market experiments: These involve changing variables in a marketplace and analyzing the results. A company might run an experiment to see how a small price increase affects sales of a product, for example.
Secondary market research
Secondary market research involves using existing data that others have collected. It's used to gain a broad understanding of the market, identify ecommerce trends, understand competitors, and inform strategic business planning.
Secondary market research sources can provide businesses with a wealth of information that can help shape their strategies and decisions. Examples of secondary market research might include:
- Industry reports: These provide a comprehensive overview of industry trends, market size, customer behavior, and competitive analysis.
- Government statistics: These provide publicly available data on demographics, economics, and geography. A company might use government statistics to understand the demographic makeup of a potential market or the economic conditions in a specific region.
- Academic studies: Research conducted by educational institutions can provide in-depth insights into various aspects of the market. A company might use an academic study to understand the psychological factors that influence consumer purchasing decisions.
- Media content: Articles, news reports, and broadcasts can provide valuable information about market trends, customer preferences, and competitive activities.
- Data from online sources and databases: These include social media, online publications, and specialized data repositories. A company might analyze social media posts to understand what customers are saying about their brand.
How is market research conducted?
When a company faces a business challenge or identifies an opportunity for growth, market research often becomes a key tool to gain the insights needed to make informed decisions.
While the specific approach to market research can vary greatly depending on the unique needs and goals of each business, the process typically includes a few key steps:
- Define the goal of the study: This involves identifying a business problem or opportunity and determining what information is needed to address it. The goal of the study will guide the rest of the research process.
- Choose the type of market research: The company must consider the type of information they need. Are they looking for statistical data or seeking to understand customer opinions? Do they need up-to-date information from their customers, or are they looking for broader industry trends? The answers to these questions will help determine whether to focus on primary research, secondary research, or a combination of both.
- Collect the data: This step involves selecting the appropriate research methods and carrying out the research. It could involve designing and conducting surveys or interviews, setting up observations or experiments, or sourcing and reviewing relevant secondary data.
- Analyze the data: Once the data has been collected, it needs to be analyzed. This involves interpreting the data, looking for patterns and trends, and drawing conclusions.
- Use the findings to inform decisions: Business decisions should be informed by the insights gained from the market research. This could involve developing a new product, entering a new market, adjusting pricing, changing a marketing strategy, or even redefining the company's target audience. The specific actions will depend on the findings of the research.