What Is Market Research?  

Market research is the process of collecting information about the environment in which a business operates. It can be designed to assess the target audience, competitors, consumer preferences, product development trends, the most effective communication channels, and other important details. 

If you work in a narrow niche, well-organized research will give you a comprehensive outlook that will help you understand all the details and effectively predict the results of each action. But usually, businesses deal with a very large and diverse market environment. In this case, the research only highlights a fragment of the big picture, allowing you to understand whether it is worth moving in this direction. 

To fully understand a broad field of activity, two components are required: continuous marketing research and expertise. Large, successful companies spend up to $45 billion annually on studying their environment and up to $10-15 billion on finding qualified employees with extensive experience in a particular field.  

What Is the Importance of Market Research?

To understand this, it’s worth comparing two competing businesses to people walking in unfamiliar terrain in the dark. One has a flashlight, and the other is moving by feel. Guess who will get more bumps and bruises, and who will be the first to reach their destination?

Market research is a metaphorical flashlight. It gives you a significant competitive benefit: while others learn from mistakes, you predict the results of your actions, reducing costs and increasing profits. Examples of such advantages:

• Optimization of warehouse logistics. You sell exactly as much as you can, without shortages and surpluses. The company doesn’t lose money because of missed opportunities or renting additional space.
• Satisfaction of consumer needs. Existing products meet basic customer expectations, but they always want more. By creating the best multifunctional product at a reasonable price, you will become a market leader.
• Being ahead of trends. By carefully researching the prospects for your industry, you can be the first in a new segment. An exclusive presence in a non-competitive environment will allow you to quickly make a big profit.
• Avoiding mistakes. If you discover a decline in market size or a change in trends during your research, you can cancel your planned decision in time. As a result, you will be able to avoid unnecessary losses and choose a more productive investment area. 

When to Conduct Research?

Before making a decision, during its implementation, and after the activity is completed. It is never too early or too late to conduct research. You have to keep your finger on the pulse of the market to stay on top of the trend. And yet, there are events that necessarily require a thorough study of your business environment. 

Launching a new business or business line

Let’s say you have a great idea. But it requires investment and, therefore, implies material risk. To minimize it, you need to answer a few questions:

1. Is there a demand for your future product? If so, what is its volume?
2. Who is your target audience? What are their demographic characteristics?
3. Do you have any competitors? To what extent do they meet the demand and needs of consumers?
4. What kind of market do you plan to enter — growing, stagnant, or declining?
5. What communication channels are effective for your target audience?

Updating a product line  

Smartphones are updated every year — the demand for older models is rapidly declining. But when Coca-Cola decided to change the classic drink recipe for the first time in decades, it suffered the largest losses in the company’s history. Which option is right for your industry? The market research process will give the answer:

1. How is your new product different? What are its advantages over the old one?
2. Does it satisfy other needs? Does it have more or less functionality? 
3. How prone to change is your target audience? Is it ready to accept major updates?
4. How often and how extensively do competitors update their products? 
5. What is the potential economic impact of your decision?

Drastic changes in the company’s position

Obviously, growth is better than decline. But in both cases, you need to know what exactly caused the change in your financial position. If you neglect the causes and remain complacent, you may be surprised by a sharp reversal of dynamics. Therefore, you should look for answers to the following questions:

1. What factors caused the changes? What is the significance of each of them?
2. How stable are the dynamics? Can they be taken into account in the company’s development plans?
3. What is your position compared to your competitors? Is this a unique phenomenon or a general trend?
4. What recent events and management decisions could have affected the growth dynamics?
5. Is there an urgent need to change the marketing strategy?

How Is Marketing Research Conducted?  

A company can use different sources of information when it wants to learn about its business environment and its position in it. Its decisions will affect the types of market research, the costs involved, and the scope of the results obtained. Let’s look at how the choice of methodology depends on the origin and form of data organization.

Primary information 

Primary research is when a marketer collects information independently. This means that the data they need is missing or unavailable for some reason. For example, no one has studied a particular market segment yet or a competitor has done it and kept the results secret. 

During primary research, a company directly contacts its target audience. It can collect two types of information:

1. Quantitative. Anything that can be described by numbers or “Yes” or “No” variables. For example, consumer expenses for refueling a car. 
2. Qualitative. Anything that cannot be quantified. For example, a favorite yogurt flavor. Statistical methods can also be used to study such data, although the approach will be different. 

Primary research usually consists of two stages. The first is exploratory. In this stage, consumers are asked open-ended questions with no specific response options. For example, “What will you spend the extra thousand dollars you have at the end of the month?” The exploratory stage helps to identify problems and needs. It is vital for businesses in the early stages of development. 

The second stage is specific. Having primary market data, you can refine it to optimize your marketing strategy. In this case, you need to ask closed questions, having determined the response options in advance. For example, “Which beverage brand do you prefer — Coca-Cola or Pepsi?” A specific stage leads you to certain actions and management decisions. There is almost no uncertainty in it. 

Secondary information

Secondary research uses ready-made data sets that someone else has already collected and organized before you. All you have to do is conduct an in-depth analysis, draw conclusions, and turn them into specific business decisions. 

The most valuable source of information is commercial agencies that conduct various market research types and sell the materials they obtain. Such data are expensive, but they are always reliable and easy to use. If you have serious financial limitations, you can try to use public sources, such as government statistics, compilations, and news data. But in this case, you will have to systematize the information yourself and sometimes even verify its accuracy. 

An example of secondary research is the analysis of the construction materials market based on general sales statistics and accounting reports of public companies. When it comes to commercial sources, an example would be buying a report on the main trends in the Internet of Things (IoT). 

Basic methods and tools of marketing research 

The research scheme is built according to the features of your product and its target audience. For example, high-level managers are more likely to agree to answer a few questions over the phone than to come to your office in person. The best background for a survey about food is a tasting, and when it comes to cars, it can be a car exhibition. 

Personal surveys

It is the best way to do a market research to collect qualitative information. A free-flowing conversation with the consumer allows you to get honest answers to open questions. The marketer can also evaluate non-verbal cues, such as facial expressions, body language, and speech tone. 

Personal surveys are suitable for in-depth research on a particular topic. However, you should remember that their results cannot be generalized to the entire audience. You need to conduct many interviews to grasp the general trend.  

Focus groups

By gathering a certain number of people whose characteristics match the portrait of your consumer, you will get much more information quickly. Such a study requires serious preparation — careful selection of candidates and a scientifically sound survey algorithm. 

Focus groups are often gathered to conduct beta testing of a product. Participants are given access to the first samples and asked to describe their impressions. This allows you to improve the quality of a product or service before it goes to market. 

Phone surveys

It is a great market research example for collecting large amounts of data. It allows you to interview a lot of people in a short time, especially if you use a qualified call center. 

Phone surveys have their advantages and disadvantages. It is difficult to determine the characteristics of respondents with whom you communicate over a long distance, so the collected information must be re-sorted, processed, and analyzed. In addition, people are suspicious of calls from unfamiliar numbers — they may not pick up the phone or be reluctant to answer. 

Questionnaires

This method is more convenient for both the company and the consumers, which is why it has become the most popular. By taking the questionnaire with them and thinking about the answers to its questions, the respondent can pay enough attention to your research. Thus, you get a large amount of reliable information. 

Creating questionnaires for surveys is a separate branch of science at the intersection of sociology, statistics, and psychology. Even the slightest mistakes in the wording of questions or even in the quality of printing can give you biased results. Therefore, it is better to delegate such work to real professionals.  

Online research

A relatively new methodology with great potential and no fewer caveats to its use. The advantage is the possibility to collect an incredible amount of statistics automatically with minimal effort, time, and money. The downside is the probability of distortion due to the activities of hackers, bots, or coordinated user groups. 

There are many market research examples on the Internet:

1. Gathering statistics by search engines and social networks. 
2. Conducting surveys on dedicated platforms and regular websites. 
3. Selecting focus groups based on the results of a preliminary survey. 

Another interesting technique is hidden research. By providing users with useful content, you motivate them to share personal information and give the necessary answers. For example, it is exactly what Couchbase did, which created very detailed profiles of potential customers by organizing free workshops.

Step-by-step Guide to Conducting Market Research

Remember that your research has a purpose. So, it should be systematic. Optimal coverage of the target audience will allow you to obtain reliable information at a minimal cost. And the proper organization of the results will help to draw conclusions and make appropriate management decisions. So, let’s take a look at how is market research conducted. 

Step 1. Define the problem

What exactly prompted you to collect information? Are you planning to launch a new product or do you want to know how your business is doing compared to your competitors? The ultimate goal sets the boundaries and structure of the research. 

For example, if you’re not sure about the demographics of your product, you can gather a very diverse focus group to determine consumer preferences. If you are interested in the reasons for the demand decline, it will be advisable to study the psychological portrait of customers in more depth to determine current trends. 

Step 2. Create a research plan 

So, you know what kind of result you need. Now, you need to decide how to achieve it. The easiest way is to buy a ready-made order, i.e. use a commercial source of secondary information. However, no one can guarantee that a similar example of market research already exists and meets your needs. 

So, in most cases, you will have to decide on primary survey methods. To choose the best way to collect information, you need to answer a few questions:

1. What is more important to you — an in-depth analysis of qualitative characteristics or a large array of quantitative data?
2. Can you provide a product for testing? 
3. What resources are you ready to involve in your research?
4. What are the demographic characteristics of your audience?

For example, you want to estimate the potential size of your market segment. You will need accurate statistical (quantitative) data. It is impossible to provide a product for testing to hundreds of people. You can allocate a certain amount from your marketing budget, but it will be limited. The audience consists mainly of young people who are interested in high technology. Therefore, online research will be the best methodology. 

Step 3. Collect the necessary data 

It is better to entrust this stage to professionals. There are two key points that require special attention:

1. Determining the sample size. The minimum required number of respondents is determined individually. It will depend on the size of the target audience, the number of questions in the questionnaire, response options, and other parameters. 
2. Correctness of information collection. The market research definition implies the use of scientific methods. To avoid data distortion and reduce the margin of error, you need to develop standardized protocols and follow them during the survey. 

Step 4. Analyze the results

At this stage, the choice is yours. You can order a comprehensive information analysis or do it yourself. Remember that the methods will depend on the type of data collected:

1. Classical mathematical methods are used for quantitative information. For example, you can determine the market capacity by multiplying the average expenditure of a person by the size of the target audience. Correlation and regression methods can be used to establish the relationship between consumer income and food expenditures. A lot of interesting insights can also be obtained from a simple calculation of competitors’ market shares. 
2. Qualitative information requires preliminary processing. You need to sort the questions by topic and then by the answers you receive. By grouping the same or similar results, you can translate them into a quantitative form. Some experts suggest dividing the answers into groups that correspond to your company’s strengths, weaknesses, opportunities, and doubts. 

Step 5. Summarize and draw conclusions  

Market researches are important because they give you the opportunity to change your company’s development strategy according to current market conditions. For example, if the trend for hiking changes to city jogging and gym sessions, you need to adjust the range of shoes and clothing in your catalog. 

If your task is to present the research results to a managerial decision-maker, it is very important to structure the information correctly and make it understandable. Use a simple presentation scheme:

• Outline the problem;
• Describe the methods as briefly as possible;
• Present the key results of the study;
• Tell what conclusions you have drawn;
• Suggest the necessary measures to achieve the goal. 

The last two points should account for 40 to 60% of the presentation. Don’t bore your audience with large amounts of scientific methods and raw quantitative data. Focus on the cause-and-effect relationships in your work. 

Market Research: A Few Words Before You Start 

Always remember that any action you take must have an economic justification. If you are conducting a market research, make sure that it will bring you profit. Choose clear goals and follow the principles of reasonable necessity — do the amount of work required to achieve the desired result. There’s no point in putting in extra effort and inflating marketing budgets if the result won’t change significantly. 

You should also understand that the research process can be very complicated. Therefore, sometimes, it is worth entrusting it to professionals — this will increase costs but will guarantee well-structured, reliable results. In the offline world, these will be specialized agencies, and in the online world, they will be commercial analytical services.

FAQ 

What is marketing research? 

Marketing research is the process of collecting information about the environment in which a business operates. It allows you to choose a priority direction and adjust the company’s development strategy accordingly. 

How is marketing research conducted?

The stages of the process include defining the problem, selecting methods, collecting information, analyzing, drawing conclusions, and making management decisions. 

What are the main types of marketing research?

The most common techniques are personal and phone surveys, questionnaires, focus groups, and online research. The choice of a specific method of obtaining information depends on the characteristics of the company, product, and target audience.