A consumer sees an ad for a product that seems perfect for them and rejoices over their luck, but this scenario likely didn’t (and shouldn’t) come down to luck. Companies make these scenarios possible through strategic market research. Equipped with valuable information about its target market, a company can develop products and create marketing campaigns that appeal directly to consumers. And the benefits don’t stop there. You can leverage the data procured through market research to propel your company to success in a variety of ways.
We’ll break down the basics of market research below to show how companies use it and explore some of the key benefits. If you’re not taking full advantage of market research to make data-driven decisions, you should start considering the ways it could help your company grow.
What Is Market Research in Business?
Market research involves gathering data to learn more about target demographics and consumers so a business can market itself more effectively and, ultimately, succeed in the market. Market research is a vital part of any business strategy, whether that business is B2B or B2C, big or small, new or old. It provides the answers companies need to make decisions that will move them forward instead of back by empowering them to base decisions on data.
Most companies know what market research is and acknowledge its importance in a general sense, but they may not realize just how crucial market research is to the success of their business. When you need to identify market trends, understand your core customer better, or achieve a long list of other important goals, market research is the answer.
Types of Market Research
Market research is a broad category. In fact, there are many varieties of market research that you can use to meet the specific goals of your business. Below, we’ll explore the different benefits of each type of market research.
- Brand research: Brand research is focused on creating or refining your company brand to make a bold and favorable impression on your target market. You could look into the level of brand awareness among your target audience, how loyal customers are to your brand, what sorts of qualities people associate with your brand, and other aspects of customers’ relationship with your brand.
- Marketing campaign evaluation: Some market research focuses specifically on marketing campaign effectiveness. You can evaluate how many people have seen your online ads and what the click-through rate has been, for example. This type of information can help you make adjustments if needed and inform future campaigns so you reach consumers effectively and keep customer-acquisition costs down.
- Competitor research: Competitor research focuses on the competition to help you gain insights into how your company can pull ahead. Looking into a competitor’s marketing campaigns, brand reputation, revenue or sales volume, and other important data points can help you learn from their strengths and weaknesses.
- Customer segmentation research: An important type of market research, especially for new businesses, is customer segmentation. These studies divide your larger consumer base into different groups or personas. Understanding the different types of consumers you want to connect with can help you create individualized campaigns tailored for each group.
- Consumer research: Nearly all market research involves the consumer in some fashion, but some research is focused specifically on understanding consumers within a certain segment better. You may want to learn about their purchasing habits, interests, motivations, and more. The better you understand your consumers, the more effectively you can appeal to them.
- Product development: Developing products calls for market research first to ensure the concept has value and then to refine the product over time. For example, you may see sales dipping on a flagship product and discover that customers’ needs have shifted and this product should offer a new feature to be more useful or convenient.
- Usability testing: Similar to product development research, usability testing is focused on products. However, the focus here is on how consumers use your product. You may release a beta version of your mobile app, for example, and get feedback from users to find out if there are any bugs or other problems you need to work out.
The Benefits of Market Research
Market research can deliver valuable benefits to companies like yours. Let’s look at some of the most impactful ways market research can empower your company to succeed.
1. Maintain a Customer-Centric Approach
Market research is all about understanding your consumer base better, and that is an essential step to creating a customer-centric business. Customer-centric companies keep the customer experience at the forefront of all they do. Research has shown that customer-centric businesses are 60% more profitable. It’s easy to see why prioritizing the customer’s needs and desires is a recipe for success.
Market research is how you come to understand those needs and desires in the first place, along with other important aspects of your target customers. You can’t effectively build a customer-centric business unless you understand your customers. Conducting market research allows you to appeal more specifically to your customers’ pain points and preferences. It’s a win-win for your customers and your business.
One of the most effective ways to be customer-centric in your market research is by using a segmentation-targeting-positioning (STP) model. This marketing model involves:
- Segmentation: Brainstorm the possible segments your product or service may appeal to. These segments can be defined geographically, demographically, or otherwise.
- Targeting: Determine which segment or segments offer the most profitable opportunities for your company so you can focus on marketing to these segments.
- Positioning: Develop a strategy for addressing your target segment’s needs and do it better than your competitors. You can also consider the best way to promote your solution to the target segment.
2. Connect With Your Audience More Effectively
When you understand your target customers better, that means you’ll be able to more effectively reach them. When it comes to your marketing campaign, you don’t want to waste time and money on trial and error — you want to have an informed marketing strategy. There are two main elements of effectively connecting with your audience: the marketing channels you use and the content you share.
Using a one-size-fits-all approach, regardless of your audience, can be a costly mistake when it comes to marketing channels. The print publications your audience reads, the television shows they watch, and the websites they spend time on can dramatically differ from those of the target audience for your last product.
For instance, you can reach close to half of the urban population by advertising or marketing on Instagram, but you’ll only reach approximately a fifth of the rural population this way. So advertising your farm equipment on Instagram is likely a poor choice.
Choosing the right marketing channels is an important first step to reach your audience, but to truly connect with them, you also need to tailor the content of your marketing materials. Everything from the features of your product you advertise to the tone and visuals you use should be crafted to speak to your target audience. When customers feel you’re “speaking their language,” they’re more likely to pay attention to what you have to say.
3. Identify Opportunities for Growth
Market research isn’t just an important step for new companies or companies launching new products. Conducting market research periodically can help you discover new opportunities to improve and grow. For example, you may discover:
- Unreached segments: You may come across unreached segments that, like your current customers, could benefit from your products or services. Perhaps they just don’t know about your brand yet, or they think your products are intended for someone else. This segment could be consumers of a different age, gender, income level, or geographical region, for example. A simple modification in your product or marketing strategy may be all it takes to unlock a whole new customer base.
- Business partnerships: Through market research, you may also discover opportunities to partner with other businesses that already have an established connection with your target audience. Joint promotions can be mutually beneficial for you and the partner company. Essentially, you can combine the power of both your brands to expand and strengthen your reach.
- Product improvements: Market research can reveal possible shortcomings in your product or services that, if remedied, would allow you to appeal to more customers and improve customer satisfaction. You may also discover opportunities for add-ons, product bundles, or other upsells that appeal to customers’ preferences and help you increase profits.
4. Reduce Risks by Testing Concepts
Risk is a necessary part of any business venture. If businesses didn’t take on risks, they would also limit the potential for reward. However, successful businesses tend to mitigate their risks in strategic ways. The way to avoid risk is not to avoid doing anything. Instead, businesses should use market research to minimize risks and maximize rewards.
A major way you can minimize risks is by ensuring there’s demand for a product. The reality is that many products fail. Some experts place the failure rate as high as 95%. While that estimate is likely too high, it remains true that many new products fail to connect with consumers and end up in clearance bins. One study found that, of the 9,000 new products that were broadly distributed at a national retailer, 60% were no longer sold within three years.
Because of the high risk involved, you should never create a product based on a mere hunch. Use thorough market research to predict whether a product concept has real potential for success. Will your product meet a need or desire your customers have, and will it do so more effectively than your competitors are doing? When you have proof of concept, you can be more confident in your efforts and more effectively attract investors.
After you’ve created your product, whether it’s a prototype or a limited run, you can employ market research again to help you refine your strategy before an official product launch. For example, you could give samples of a new food product to passersby in exchange for their feedback. You can also use market research to test reactions to a new logo, new packaging, or any number of other business decisions.
5. Make More Informed Decisions
Market research empowers companies to make more informed decisions that are backed by data. Gut feelings are not reliable means of making decisions. For instance, you may think releasing a luxury version of your product at a higher price point is a great business idea, but consumers willing to pay that price may associate your brand with budget-friendly products and opt for luxury products from luxury brands instead. The only way to know for sure is to conduct market research.
Market research data can serve as a compass, steering each choice a company makes to take them one step closer to their goal of successfully converting and retaining their target customers.
Here are some examples of decisions you can make more accurately with the help of market research:
- Choosing a different consumer base to target through a new marketing campaign
- Determining which channels to include in your advertising campaign
- Selecting design and personality elements to form a brand persona that will connect with your audience
- Choosing whether to open a new retail location
- Deciding whether a product should be discontinued or modified
- Pricing products in a way that maintains margins and appeals to customers
Through market research, you can make these and other decisions based on data rather than guesses and, as a result, boost your chances of getting it right the first time.
6. Compete More Effectively
Solid market research can be the difference that gives you a competitive edge in the marketplace. For one, by understanding your customers better, you may be able to engage them more effectively than your competitor is doing. Additionally, competitor research can give you direct insight into your competitors so you can understand how you fit into the marketplace.
If you’re a newcomer and want to know the best ways to draw customers away from legacy brands, market research can help you find out where consumers are dissatisfied with these brands and their offerings. By pinpointing these gaps, you can appeal directly to consumers’ desires and market yourself as a disruptive company with a superior solution.
You can also use market research to help you discover underserved segments of the market. By targeting these underserved consumers, you can carve out a place in the market for yourself where you’ll excel. For example, the founder of War Paint, a cosmetic company marketed to men, said, “Growing up, I never felt there was a brand for me, that spoke to me.” War Paint and some other emerging cosmetic brands target male consumers who were previously not part of the equation in the makeup market.
7. Stay on Top of Trends
Market research isn’t just important for new businesses. As consumers evolve, companies must also evolve to optimize the way they connect with customers. Market research is a valuable means of staying up on relevant trends. Researching trends can often be done through secondary research. Industry reports or research from your competitors, for example, can reveal what new product features consumers are interested in.
Today’s culture changes rapidly, and market research is essential if you want to keep up. You need to stay aware of trends regarding your consumers’ purchasing behavior, the most popular advertising channels, packaging preferences, product features, relevant messaging, and much more. Mimicking what your competitor did last year isn’t a good strategy.
Trends are especially important and cycle more frequently in some industries, such as fashion and design. If your company sells light fixtures, for example, you need to conduct research frequently to see what styles appeal to modern interior designers and homeowners. You also need to be aware of any new technology you can incorporate into your product to help you stay at the cutting edge and deliver the latest and greatest products to your consumers.
How to Conduct Market Research
Companies can conduct market research through various means. First, it’s helpful to understand the difference between two main categories of sourcing market research data — primary and secondary research:
- Primary research is the data a company collects or an expert collects on the company’s behalf for their market research purposes. In other words, it’s field research. Some primary research is exploratory, meaning it’s more open-ended, and other forms of primary research aim to provide insight into specific questions or issues.
- Secondary research involves using data that already exists and is at your disposal for market research purposes. For example, you could consult government census data, industry data reports or statistics on market trends. This type of research can provide a good starting point for understanding the market more broadly and learning about the competition.
Secondary research tends to be a starting point before conducting primary research.
There are several methods of primary research companies use to learn from consumers. Some of the most popular methods include:
- Surveys: Surveys involve asking consumers questions they can quickly answer. Survey questions can be multiple choice or more open-ended. Surveys can be conducted in-person, over the phone, through the mail or online. They provide a fast and simple way of reaching a large audience and getting their feedback.
- Focus groups: Focus groups tend not to involve as many participants as a survey. Instead, a market researcher leads a small group of consumers in a discussion to get a window into consumers’ thoughts. Because the groups are small, most companies will assemble multiple focus groups and take all the results into account. They may observe through a one-way mirror or watch a recording.
- Interviews: Interviews are similar to focus groups but may involve even fewer people. A one-on-one interview can be a valuable way of gaining detailed insight from one customer. These insights can be helpful, but they don’t provide statistically reliable data as you can get with a large survey.
- Observation: Market observation involves watching consumers to see how they behave under natural conditions, such as a retail store. These consumers may or may not know they are being observed. For example, researchers may watch security footage taken from a store to see which departments customers tend to go to first and whether they stop to look at point-of-purchase displays.
- Field trials: Field trials involve making a business move but doing so on a smaller scale and observing the results. For example, a restaurant chain may try a new menu item at a handful of locations and see how popular it is. If it’s a success, the company can feel more confident about adding the item to their menus throughout the region.
Companies can conduct their own market research in-house, but many choose to share their goals with a third-party expert who can create a market research strategy and execute it. By outsourcing your market research, you can streamline the process, focus on your core competencies, and receive valuable data from the experts that you can then leverage to drive your business forward.
Does Market Research Work?
Market research takes time, effort, and finances to complete, so it makes sense to spend these resources only if you’re going to get a positive return. The reality is that market research remains a crucial part of running a successful business because it is indeed worth the investment. Of course, market research alone won’t cause your business to succeed — but it will give you the information you need to make strategic decisions that will steer your company to success.
We looked at several benefits of market research but consider the inverse reality. Without market research, you could fail to connect with customers, miss out on growth opportunities, be vulnerable to risks, make poor business decisions, and ultimately lose your customers to your competitors. Some businesses get lucky without doing their research, but these instances are rare. Market research can help you avoid common pitfalls and grow your business.
Learn More About Our Market Research Tools
Market research should be a key part of your company’s recipe for success. Surveys are one of the most popular and effective means of reaching consumers and gaining insight into their values, preferences, opinions, and more. At Lucid, we help brands and agencies conduct online studies that can empower them with the market research data they need. We can connect your company with millions of consumers, deliver fast results, and ensure those results are accurate through robust quality checks.
Lucid can help you produce the primary data you need on a tight timetable so you can make informed decisions to help you connect with customers and grow your business. To learn more about our market research tools, contact our team today.