Market research is an important step when it comes to the success of your small business marketing strategies. It can provide you with the information you need to make better business decisions. Use it before investing in new product development or expanding into new markets. Market research can also benefit your customer relations.
What Is Market Research
The idea of market research may seem challenging, especially if you’ve never done it before. But conducting market research simply means collecting and analyzing information about your customers. It helps you better understand your target market, including:
- Customer interests
- Spending habits
Doing market research helps you to:
- Explore how your customers make their buying decisions
- Uncover your target market’s needs for your product or service
- Find solutions to help your market meet its needs
- See what your successful competitors are doing
Why Is Market Research Valuable?
Market research lets you focus on improving the user experience for your product or service. It can also give you an edge over your competition. By getting to know your target market, you can develop strategies to encourage loyalty from customers.
While your research won’t explain consumers’ behaviors perfectly, it will let you do a deep dive into the “why” behind customer decisions. For example, you might have data that tells you how often customers abandon their shopping carts online. But it’s your market research that will help you explain why.
Benefits of Market Research for a Small Business
Market research offers small businesses many benefits, such as increasing efficiency and improving your ability to compete against other businesses. But market research can also help you to:
- See if a new business idea is workable. For example, you might discover that your customers aren’t willing to spend money to solve the problem you’re addressing.
- Expand into new markets. Research helps you “look before you leap” and prevents costly, unsuccessful efforts.
- Take advantage of market trends. By the time you notice a trend exists, it’s often too late. With a service like Google Trends, you can discover new trends in a timely manner.
Check the demand for improvements. Adding new features without first researching demand can result in expensive “wrong turns.”
Product placement strategies. While product placement can put your brand in front of a large audience, it’s expensive. Market research can help you see if it’s right for your target market.
New product/service development. Doing the required research before you sink too much money into a new product idea can improve your bottom line.
Develop marketing campaigns. Research can help you develop robust personas, boost your email list and craft effective advertisements.
How to Do Market Research
How should you go about gathering information for the market research process? There are two basic approaches: you can do it yourself, or you can hire a third party. But if you’re on a limited budget, conducting your own research may be the better choice.
During the research process, your data will fall into two categories:
Qualitative information. Qualitative data helps you understand how people feel about specific topics. Common research methods include focus groups and personal interviews. You get qualitative data by asking people what they think and how and why they make their purchase decisions.
Quantitative information. Quantitative data is statistical data collected through research techniques such as questionnaires, surveys and observation. While it’s more accurate, it’s often more costly.
How to Do Market Research Using Primary Information
Primary information is made up of first-hand data — facts, figures, and opinions — gathered from original sources. Examples include customer surveys about attitudes towards various pricing options, and questionnaires that ask consumers about new product ideas.
Whether you’re collecting it yourself or have hired a third party, you should be aware of the disadvantages of primary research:
- Accuracy. It can be difficult to get accurate information from consumers, especially about personal topics. Your customers need to be able to answer honestly and without embarrassment.
- Costs. Because you’re going to original sources, primary research tends to be more costly and time-consuming than secondary research.
- No leading questions. You need to draft your questions carefully. Leading questions will give you what you want to hear, rather than what people really think.
Sources of Primary Market Research
The following are some main sources of primary research data:
Customer surveys. Surveys are convenient because they can be done by phone, in person, by mail or online. One disadvantage is that not everyone will fill out your survey or answer all the questions.
Personal interviews. While interviews are more expensive than surveys, they have certain advantages. For example, during an interview, you can see people’s reactions. You can also fine-tune your questions to gather a deeper level of information.
Focus groups. This research is conducted by bringing together a group of six to eight people who share common characteristics, such as age or buying habits. One drawback is the tendency of participants to be influenced by others’ opinions.
Observation. Observation involves watching and/or recording your customers in a natural setting, like a retail environment. With observation, you can get rich details, such as whether customers notice where coupons are placed.
Social listening. It can be time-consuming to track social mentions and real-time conversations on social media sites. But it can provide invaluable information, such as why your product is — or is not — well-liked.
How to Do Market Research Using Secondary Information
Secondary research (or “desk research”) can be an important starting point for your market research process. For example, you might begin exploratory research for a new product idea by downloading demographic data from the U.S. Census Bureau to see if a market exists for your idea.
While secondary information has the advantage of being less expensive than primary data, it also has some disadvantages:
- The data collected may be outdated or may not meet your needs
- You have no control over the data collection methods used
- Everyone has access to the same information
Because of these disadvantages, you normally cannot rely solely on secondary research data.
Sources of Secondary Market Research
Secondary research is often easier to conduct because the data has already been collected. It’s particularly helpful for tasks such as looking into market trends and doing competitive analysis.
The following are popular sources of secondary research data:
- Government reports and studies. Government departments and agencies, such as the U.S. Department of Agriculture, will often provide access to special reports and studies.
- Trade or industry-specific journals, magazines, newspapers and websites. The American Hotel and Lodging Association, for example, houses their research and report library online.
- Reviews. Reading through user reviews on retailing sites like Amazon can be a rich mine of information.
- White papers and case studies. You can find these through your favorite search engine by using your topic and the search terms “case studies” or “white papers.”
- Television and radio. Companies like Nielsen provide media consumption data from audiences around the globe.
- Academic papers and educational resources. Most colleges and universities offer access to studies conducted by their academic staff.
- Internal sources. Examples of internal sources include your sales reports, inventory data and accounting spreadsheets.
Before Conducting Market Research, Prepare
If you decide to do your own market research, the following pre-research steps may help you save both time and money:
Define your question(s). In other words, know what your research goals are. For example, new product development research will be different from market expansion research.
Know your buyer. Developing buyer personas will help guide your process. Buyer personas are fictional representations of your ideal customers. Because you will often have multiple ideal customers, you may need to put together more than one persona.
Developing buyer personas will help you to:
- Visualize your target audience
- Fine-tune your marketing communications
- Develop the right marketing strategies
How to Identify a Buyer Persona
One way to develop a buyer persona is to begin with the demographic characteristics of your ideal customer, such as:
- Age and generational cohort
- Marital status
- Family size
Once this is done, it’s time to conduct some primary research to fill out the rest of your buyer persona. It’s important to draw your data from a mix of consumers. For example, you can:
- Pull together a list of customers who have recently purchased from you.
- Pull together a list of customers who recently interacted with your business but did not make a purchase. This list will include people who decided to purchase from a competitor.
- Go to your social media platforms and ask for participants.
- Let your personal social network know you’re conducting research on the ideal buyer for your product or service.
- Offer participants an incentive; this shows that you respect and value their time.
During this process, focus on topics such as participants’ buying behavior and spending habits, the problems they want to fix, how they research potential solutions, where and how they shop, and why they do what they do. When you pull this information together, you’ll get a clearer idea of your ideal customer.
Market Research Tools
There are many market research tools out there. It can be easy to feel overwhelmed by all the choices available. Consider the following as you assess possible research tools:
Your market research budget. Cost-wise, there are two types of market research tools: free or paid. Knowing how much you’ve budgeted for your market research will help you choose the tools that will work best for your budget.
Your market research goals. Being clear about what you want to accomplish with your market research will help you identify which tools will be effective.
Software and service reviews. Find and read reviews from other businesses that have purchased the product or service you’re considering. They will flag issues that may turn out to be relevant to your own research needs.
Less may be more. Feature-rich products that do more than what you need have a few disadvantages. You’ll be paying for features you won’t use, and there might be a steeper learning curve.
No matter what your business goals are, the time and cost of conducting market research is a worthy investment. Whether you do a deep dive into the research yourself or hire a third party to do the work, the market research process will provide you with the information necessary to make smart, informed decisions to drive your business forward.
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