What is Market Research?
Market research consists of systematically gathering data about people or companies – a market – and then analyzing it to better understand what that group of people needs. The results of market research, which are usually summarized in a report, are then used to help business owners make more informed decisions about the company’s strategies, operations, and potential customer base.
Understanding industry shifts, changing consumer needs and preferences, and legislative trends, among other things, can shape where a business chooses to focus its efforts and resources. That’s the value of market research.
Meaning, if your research told you that scientists had recently created a new kind of fabric that helped the wearer lose weight just by putting it on, for example, your retail clothing store might want to adjust its buying plan to test designs using this new fabric. Or if you uncovered that shoppers in your area rely heavily on coupons in making a purchase decision, you might decide to test sending your mailing list a promotional coupon.
Market research can help businesses run more efficiently and market more effectively.
Types of Market Research
While there are a number of market research tools you can use, there are really only two types of market research data:
- Primary. Primary data is first-hand information you gather yourself, or with the help of a market research firm. You control it.
- Secondary. Secondary data is pre-existing public information, such as the data shared in magazines and newspapers, government or industry reports. You can analyze the data in new ways, but the information is available to a large number of people.
Using primary or secondary data, there are two types of research studies:
- Exploratory. Exploratory market research gathers lots of open-ended data from many people to better understand a problem or opportunity. The goal is to gather perceptions and opinions regarding an issue, so your company can decide how to address it. But first you have to understand how your market sees the issue.
- Specific. Once you understand the larger market issues, or opportunities, you can use specific questions to gather information that could lead to a new product or service. Market research firms often use specific questions to gather feedback on a new advertising campaign, or to refine a planned new product.
Primary Market Research Tools
While primary research is more time-consuming and expensive, sometimes it’s the only way to get the information you need. The most common primary research tools are:
- Surveys. Asking customers a series of questions to better understand how they feel about a product’s features, or about the experience they had during their hotel stay, for example, are two possible uses of a survey. Surveys consist of a list of questions that can be shared with an individual by phone, in person, on a card or paper, or online using a survey software.
- Focus groups. Bringing together groups of people with a common characteristic, such as age, hobby, or buying habits, to better understanding their likes and dislikes is a focus group. Focus groups typically consist of 8-12 people with a moderator who poses questions for the group to discuss. They are a useful way of getting feedback on a new product, new features, or new ad campaign.
- Observation. When the researcher gathers information simply by watching how a subject interacts with a product, the technique is observation. This is often used in comparing preferences for several types of products.
- In-depth interviews. Another market research technique is the one-on-one interview with an individual, during which probing questions are posed to better understand that person’s product preferences.
Sources of Secondary Data
When conducting market research to better understand industry trends and broader shifts, secondary research is often a good place to start. Some of the most useful sources include:
- Industry associations and trade groups – most associations publish annual outlooks
- Trade journals specific to your industry
- Government reports – such as the Census or annual federal procurement results
- Industry analysts – these individuals monitor the performance of public companies in your space
- University faculty members – see what research reports they may have published
- Websites – while Wikipedia isn’t a reliable source, there may be others that lead you to reputable sources and reports
- Competitor websites and materials – to convince potential customers to buy from them, they may share useful statistics and reports
The purpose of market research is to provide information that will assist you in making better decisions, to help your company be more successful.