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Market Research Definition
Market research refers to the procedure businesses use to gather opinions from customers in order to know whether or not the new service or product will perform well in the targeted market. It also focuses on the type of changes that are required in order to adapt well to the market. In other words, market research forms the basis of any company’s success.
A Little More on What is Market Research
Generally, market research is the means through which a company can interact with its target customers. It focuses on gathering information about:
- A market
- Product or service being offered in the market
- Potential and current customers for a given product or service
- Customers’ spending habits
- Location and expectations of a company’s target market
- Specific competitors
- The overall industry
The market research results are used by the owners of the business to arrive at decisions regarding the operations, strategies, and potential customer base of the business. If the results are well implemented, it improves the experiences of customers which in the process lead to increased profits.
How Market Research Is Conducted
There are different ways in which a business can carry out market research. This includes:
- Customer surveys: This includes conducting research by meeting with customers face-to-face and do the interview online or through phone calls. Business usually provides a short simple questionnaire about a product or service which customers are supposed to respond to.
- Web-savvy businesses: They use their online channels to conduct market research. The most common online channel is websites and social media where customers are encouraged to give feedback about their products and services. A simple and short questionnaire is provided on the website for customers to respond. To ensure the effectiveness of using online research, it needs to be mobile-friendly (usable on mobile devices). Social media may include Facebook, Twitter, LinkedIn, and so on.
Products Trials: This is where a company decides to provide a few samples of their new products to customers in real settings. Then from customers’ feedback, you are able to gauge the effectiveness of the products. Based on the results, you can either change or improve on the product or service to increase value to customers.
Focus groups: This is where group sessions are organized and people are mobilized so that they can participate in question and answer or a topic on specific service or product. However, the focus group method may be expensive, especially for businesses that are just starting over (small businesses).
Direct Observation: This method involves recording video on customer behavior or purchase patterns or directly watching customers. It is important to note that privacy requires that you conduct in a public setting if not, the person being recorded need to be informed about the recording. Although it gives you the exact customers’ behavior, it is, on the other hand, consumes a lot of time.
How Market Research Works
Many business owners make use of market research to get customers’ opinion about their product or services. Whether the product or service is good or there are some concerns that they need to be addressed.
Let’s assume that Company XYZ is planning to enter into business. This may prompt them to first conduct market research to determine their product or service’s variability. From the results, it will be able to know if consumers like their product or service. If so, then they can go ahead with the business plan, if not, then the company may use the results to adjust the product or service to that it can match consumers’ expectations.
Types of Market Research
Basically, there are two types of market research tools as discussed below:
This refers to the information you either collect yourself or with the support of a firm that deals with research. In other words, primary data refers to first-hand information. Note that in this kind of research, you are able to control it. Tools used in primary market research include:
- Focus group
- Product trials
- In-depth interview
Secondary data refers to information which already exists to the public. You can use this data to do your analysis in your own way. However, the information is accessible to the larger population. Sources of secondary data include the following:
- Government reports
- Your industry’s trade journals/reports
- Industry analysts
- Industry association and trade groups
- University faculty members.
Generally, when you are using either primary or secondary to collect data, you will have to conduct two types of research studies as explained below:
Explanatory: Through this market research, businesses are able to collect first-hand information from a large population for a better understanding of a product or service’s problem.
Specific: After understanding issues in the overall market, you can then focus on specific questions to collect information that can aid in coming up with a new service or a new product.
How useful is Market Research to Businesses?
Market research aid entrepreneurs in making informed decisions that aid them in channeling their resources to projects that have the potential to make the business grow in terms of expansion and profits. Companies engage in market research for different reasons. Some of them are as explained below:
- To identify and be able to develop prospective new markets.
- For the purpose of improving and innovating their businesses.
- To determine the possibility of establishing a new business.
- To enable businesses to monitor new market trends as well as develop strategies that will aid in ensuring that they easily adapt to market changes, and always be ahead of their competitors.
- For the purpose of determining the appropriate means, place, and time to place a product.
- For the purpose of testing new products.
Generally, the major purpose of carrying out research is so that it can give out information that will assist businesses to make informed decisions. This boosts the companies’ success.