To grow your business and increase profits, you need a strategic approach. Rather than weighing opportunities based on business instinct or personal preference, it’s important to use data to drive your decisions. With market research, you can gather and analyze audience and industry data so you can develop a smarter approach for your company and achieve major business goals. Nearly 70% of companies rely on market research studies to increase sales, according to Hanover Research.
But how does this process work and what can you learn from the data? This guide will walk you through everything you need to know about market research so you can minimize investment risks, reduce your chances of errors and uncertainty, and position your business for growth.
Market Research
1. What is market research?
Market research is the process of gathering and evaluating information related to your business dealings. You can use this data to study many aspects of your company, including your target audience or customers, your industry or niche, and your peers and competitors.
Because this type of analysis can benefit your company at many different stages, there’s no one right time to do a research study. Many companies undergo this process continually or at regular intervals, such as when they launch and before expanding their offerings.
Researching your market can help your business accomplish tasks like:
- Assessing the viability of a business: Your new business idea may sound like it has potential. By collecting and analyzing market data, you can see how feasible the business is and decide whether to move forward.
- Seeking out new markets: Once you’ve reached a large percentage of your target audience, expanding into new markets could be a smart way to grow. With effective research, you can identify new markets that are likely to offer generous growth opportunities.
- Planning a new product launch: Launching a new product or service line can significantly increase your company’s revenue. By analyzing demand for your new line, you can increase the chance of success for any launch.
- Developing marketing campaigns: You need promotional campaigns to reach your audience effectively. By studying your audience and how they perceive your brand, you can create marketing campaigns that make a bigger impact.
- Identifying business improvements: If your company isn’t quite reaching the business goals you’ve set, you may need to make some changes. A market analysis can help you pinpoint problems that have the most significant effect on your business.
2. How does marketing research help businesses?
When you devote time and resources to market analysis, you can make more informed decisions for your business. From strengthening your brand’s positioning to measuring the competition, this process offers several important perks. Here are the key benefits of marketing research for your business:
- Reinforces your company’s positioning. As a business owner, you probably have a good idea of how you want your target audience to view your company. For example, you might want to be known as the lowest-priced brand or company that takes the best care of its customers. With market analysis, you can gauge how customers really see your business. As a result, you may realize that you need to invest more in educating your audience about your company’s unique selling points (USP).
- Provides benchmarks for measuring success. Every company has its own way of determining success, but they all start with establishing benchmarks and setting goals. Market research can help you with each step of the process:
- Identifying benchmarks: Looking at the competition can help you set performance requirements for your company, such as reaching the same market saturation as another major brand in your space.
- Agreeing on success: Once you’ve established benchmarks, you can decide what success looks like to your business and agree on milestones that can help you achieve that vision for your company.
- Measuring progress: With regular evaluations, your team can keep an eye on progress toward milestones and assess whether you’re moving along at the right pace or if you need to adjust tactics.
- Clarifies your target audience. If you don’t know your target audience, it’s nearly impossible to build a successful business. With research and analysis, you can assess:
- How large your target audience is, which can help you calculate the maximum potential for your business
- Where your customers are located, including countries, regions, cities, and even neighborhoods
- Who your customers are, including their demographics, interests, and behaviors as well as the problems your products and services can help them solve
- Simplifies revenue projections. Before you get clear on your target audience, it’s difficult to make precise revenue projections. Once you research your customer base, you can prepare market forecasts and calculate potential revenue with much greater accuracy. Using the collected data, you can separate customers into groups based on shared characteristics. Then you can see which has the potential to drive the most revenue, which can help you focus your promotional efforts.
- Improves promotional outcomes. Gaining a clearer understanding of your target audience also allows you to get more out of your promotional campaigns. With strong research, you can:
- Connect with customers on the right channels, including social media, email, radio, TV, and newspaper
- Feature images that appeal to your target audience by depicting people they can identify with or environments they know well
- Include messaging that speaks to your customers’ needs, desires, and challenges in a language or dialect they understand
- Allows you to see emerging trends. If you read industry publications, then you might think you do enough to keep an eye on emerging trends. Yet when your business does its own in-depth analyses, you can pinpoint trends way before your competitors hear about them. Research studies allow you to collect data about changing consumer preferences and develop new products before other companies in your space can even begin to take action.
- Identifies opportunities for growth. Along with revealing emerging trends, consumer research can highlight avenues for expansion that you wouldn’t have found otherwise. Once you learn what your target audience truly wants or you identify a new market for your products and services, you can identify and act upon growth opportunities before your competitors have entered the space.
- Streamlines strategic planning. Every business needs direction to grow, or else wasted efforts and misguided attempts could result. You can use consumer data to create an effective strategy by:
- Allocating research and development resources to customer segments and product lines with the greatest growth potential
- Hiring additional team members to address areas of weakness
- Setting and achieving major long-term goals
- Minimizes investment risk. Any long-term goals or business expansions come with at least some risk. If the risk seems too high, you might decide not to move forward, eliminating a potentially lucrative path for your business. If you think the risk seems minimal, you might go for it and unintentionally encounter an expensive problem that you could have avoided. With comprehensive market analysis, you can do a better job at minimizing your company’s exposure to negative effects like cash flow problems, revenue loss, or brand reputation concerns.
- Discovers critical weaknesses. Although many companies use consumer analysis to identify areas for growth, this process is just as useful for finding areas of weakness. For example, a research study may prove that your company hasn’t positioned itself as effectively as you’d hoped or highlight low demand for a product line you’d planned to develop in the coming year. In many cases, you can identify and address critical weaknesses before they cause significant negative effects. For example, recalibrating your promotional efforts to perform better with your target audience may lead to a better brand reputation and substantial market growth.
- Pinpoints potential organizational threats. In addition to finding critical weaknesses, good market research can also help your company identify hidden threats: You might discover deep-rooted supply chain issues, decreasing demand, or rising competitors. With targeted market research, you can uncover and take steps to combat potential threats before they start to affect your bottom line. For example, a study may reveal that another company’s new product line is quickly gaining market share, and you may need to launch a competitive product to regain your position.
- Helps you stay ahead of the competition. Many businesses focus their analyses inward, but it’s just as important to examine competitors instead. As you examine your market, you can collect data that clarifies your competitors’ strengths and weaknesses, too. Naturally, when you understand your competitors’ position, you have a better chance of surpassing them.
3. How to do market research?
To get started with analyzing your market, you have to understand the basic elements that make up the process. Take a closer look at how to do market research by looking at the data types and sources that frame an effective research study.
The two types of market research data
When you study your market, you can gather two kinds of market research data:
- Primary information: This data comes from original sources, such as customers. When your business creates this type of data, you get complete control over the collection and analysis. The biggest benefit is that your company owns it and doesn’t have to share it with others. The downside is that depending on the methods you use, it can be expensive or time-consuming to collect.
- Secondary information: This data comes from other outlets, which collect the information and make it available to the public. For example, you might retrieve secondary information from a federal database or a newspaper article. The biggest perk is that because another party collects it, you don’t have to invest time or resources into that part of the process. The main drawback of this type of data is that it’s publicly available.
All of the data you collect during the research process fits into one of two categories, which affects how you can analyze it:
- Qualitative data: You can compare examples of this type of information, which gives you an idea of how your audience feels about something. Qualitative data can help you understand why your audience prefers certain products or makes particular choices.
- Quantitative data: You can measure this type of information, which typically focuses on numbers and figures. Quantitative data can help you determine percentages and statistics.
Sources of primary market research
- Interviews: When you talk directly with customers, you can ask specific questions that help you assess behaviors and preferences. You can conduct interviews in person, over the phone, via video, or through chat or email. Because interviews are interactive, they have the added benefit of allowing you to clarify answers or ask follow-up questions.
- Focus groups: While interviews tend to be one-on-one, focus groups let you talk with several people simultaneously. Most focus groups include people with similar characteristics, which may be demographics, problems, or needs. A research analyst typically moderates the discussion, which generally features guided questions about your company, product line, or industry.
- Surveys: With customer surveys, you can ask more questions to an even larger group of people. Like interviews, surveys can pose questions that provide insight into purchasing decisions. You can set up phone, online, or in-person surveys that your target audience can complete independently, allowing your team to work more efficiently.
- Observation: While most primary sources require direct input from your target audience, observation lets you watch how customers interact with your products, services, or marketing materials. After your team observes customers interacting naturally with these elements, you can draw conclusions about their problems or preferences.
Sources of secondary market research
- Trade publications and academic studies: Industry journals and university reviews often publish in-depth studies of audiences or niches relevant to your company.
- Case studies: Other companies in your industry may publish reviews that include statistics and qualitative findings related to your own research.
- Government reports and databases: Agencies like the United States Census Bureau and Bureau of Labor Statistics publish statistics and analyses for the public every month, quarter, or year.
- Literature reviews: For a comprehensive analysis of the existing data in your niche, look for literature reviews, which consolidate information that’s publicly available.
Conclusion
Whether you want to expand into a new market, launch a new product line, or develop more effective marketing campaigns, a research-first strategy can help you set the right goals and make smarter choices. As you collect and analyze data, you can leverage additional benefits like improving your positioning, identifying emerging trends, and completing competitive analyses.
If designing a research plan seems too advanced or requires too many resources for your in-house team, knowledgeable freelance market research analysts can help. With an experienced contractor on your side, you can ask the right questions, collect critical data, and produce insights that can guide more informed business decisions.
