What Is Market Research & How To Do IT Like a Pro

What is market research?

Market research is the process of collecting and analyzing information about a specific target market to better understand the existing or potential customers’ behavior, needs, and preferences. A company can use market research in various situations:

• Market research for a new product or service helps to identify potential customers and know how interested they are in the new launch in advance. 
• Market research is a way to create marketing personas for an existing or new product or service. Having research-based personas helps businesses to reach customers more effectively and make their product more attractive.
• Market research for competitive analysis is aimed at understanding competitors’ strengths, weaknesses, and market positioning of your own business. 
• Market research for customer satisfaction and loyalty allows you to measure how satisfied customers are with the products and services offered. The research also allows you to gain an insight into the overall customer experience.
• Market research for brand recognition aims to measure how aware the consumers are of your brand. 

• Market research allows you to evaluate a past marketing campaign to optimize future campaigns.

To understand the popularity of a research type, take a look at the spending chart showing the share each research has in total market research spend in the U.S.:

Market research can be done internally or outsourced to dedicated companies or market researchers. It can involve various methods and techniques such as surveys, interviews, focus groups, observations, and data analysis.

Why is it important to conduct market research?

There are several reasons why market research is important for your business: 

Understanding сustomers

The success of your product (and your company, by extension) depends on how well you know your audience. Market research is the only way businesses can be sure about their customers’ needs, preferences, and behaviors. The information received through the research can then be used to tailor products and services to better meet those needs.

Let’s look at the example of Starbucks, a global coffee company known for its customer-focused approach. Starbucks relies on market research to understand its customers’ preferences and tailor its products and services accordingly. It continuously improves its product lineup by analyzing industry reports, asking the baristas for their insights, and allowing customers to share their ideas on a special website. One key example of this is the introduction of plant-based milk options. 

Market research helped the company to identify a demand for plant-based milk options among its customers. As a result of research findings, Starbucks decided to introduce a variety of plant-based milk alternatives such as almond milk and coconut milk. This decision helped the company to stay up-to-date with the preferences of their customers. 

Identifying opportunities

By learning more about your target market and trends in the economy through market research, you can discover new opportunities to use. For example, you may discover a customer need that is yet to be realized by other businesses and then introduce a new product specifically for it. Or, you may discover a feature that would make it easier for people to use your service and increase adoption. This can also potentially lead to new revenue streams and business growth. It can also lead to a big change of strategy, for example, from a vertical marketing system to a horizontal one. 

Assessing competition

Analyzing competitors’ strengths, weaknesses, and strategies, can help to improve your product positioning in the market and identify areas where your business can gain a competitive advantage. For example, you may survey your customers to learn what other brands they prefer and find out what makes your product unique in their eyes. 

Mitigating risks

Market research is your safety net when it comes to business strategy and new ideas. It allows you to assess possible risks and challenges related to entering new markets, launching new products, or implementing new marketing strategies, helping to minimize mistakes.

For example, two of the sectors that spend the most on market research are pharma (roughly 17%) and media and entertainment (almost 16%). And it’s no wonder these businesses invest significant money in research. The cost of rushed decisions for both industries could probably be much more than what they spend on market assessment. 

Supporting decision-making

Conducting market research can provide valuable information that supports strategic decision-making across all areas of your business, from product development and pricing to distribution and growth strategies.

Types of market research

Market research has two main types based on the source of information. 

Primary research

Primary market research means you (or a company you hired) collect original data directly from your customers or competitors to target particular research goals. It provides insights into consumer preferences and market trends which allows you to make informed decisions about your product or service. Primary research can be exploratory or specific.

Exploratory research often takes place during the first stages of market research. The process involves interviews or surveys with open-ended questions.

It helps to identify an issue for further research or gain a deeper understanding of a problem or market opportunity. Exploratory research is a way to work through complex issues and discover the main motivations behind certain consumer preferences or behaviors. 

Specific primary market research usually follows the exploratory one and examines one particular issue discovered in the previous stage. It can also be used to test a theory identified in earlier stages of research. Unlike exploratory research, specific research aims to provide precise and conclusive findings to guide decision-making. 

One of the companies that successfully uses primary research is Nike. The company uses data from its apps to analyze customer experience and likes. Analyzing the insights from Invincible model wearers, It released a new more comfortable running shoe. Recently Nike polled one of its app’s users in Japan to collaborate on a special release. 

Secondary research

Secondary market research means that you or a company you hired gathers and analyzes existing information collected by others. You can use the data from governmental surveys, industry reports, and other previously conducted research. For email marketing, you can check out Selzy’s reports on the role of AI and emojis in email marketing.

Let’s imagine your company wants to understand consumer preferences for electric vehicles (EVs). You can start by reviewing industry reports from research firms that provide insights into EV market trends, consumer adoption rates, and factors influencing purchase decisions.

Additionally, you can analyze analytics from social media platforms, automotive forums, and EV enthusiast websites to gauge public sentiment and engagement with EV-related content. This might involve tracking hashtags, monitoring discussions, and analyzing user reviews to identify common themes and concerns among prospective EV buyers.

You might wonder which research type is better for you. Both primary and secondary market research are important and have their use cases. Primary research is significantly more expensive, however, it provides the most relevant information. Secondary research can give you a broad understanding of the issue and is more affordable to conduct. In most cases, it’s better to use them both.

Most common methods of market research

There are two main types of data collection for market research.

Quantitative market research involves collecting numerical data to reveal important statistics about your business and market. Multiple-choice questionnaires are a quantitative research method that can help to measure customers’ interest in your company and its products.  

Qualitative market research, on the other hand, focuses on the opinions and beliefs people have about your business or product. This type of research helps to learn why customers choose to buy certain products. It also offers insights into how customers feel about your products and services. Focus groups and interviews are popular qualitative market research examples.

Let’s now consider the most popular methods used to conduct market research:

Surveys

Survey is one of the most popular methods of market research. It allows you to collect the information directly from the customers through structured questionnaires. Surveys can be conducted online, via telephone, direct mail, or in person.

The flexibility of surveys allows you to tailor questions to your specific research objectives, be it understanding customer needs or gathering demographic information. Surveys can cover quantitative data with multiple-choice questions and qualitative data with open-ended questions.

Surveys can also be conducted via emails you send to your customers. It is a good way to find out how customers rate the products and services you provide.  

This approach is also convenient for respondents as they can leave their feedback at their own pace. 

Here’s an example of how to embed a survey in an email:

Personal interviews

Personal interviews involve one-on-one conversations between a researcher and a participant. Unlike surveys with fixed questions, interviews allow you to ask more and get richer responses. You can really dig into why someone feels a certain way or does something.

Another big plus is that personal interviews build trust. When people talk directly to someone, they feel more comfortable sharing their thoughts and experiences. This honesty gives insights you might miss with other methods.

Focus groups

Focus groups bring together a small group of selected participants from the company’s target market so that they can leave their feedback on the products or services. Focus groups typically require the assistance of research professionals. A trained moderator leads a discussion with the group about the product and their user experience.

Focus groups provide an opportunity for people to actively participate in dynamic discussions, exchange ideas, and share insights that may not appear in formal surveys or individual interviews. At the same time, focus groups can put pressure on some people to agree with the rest of the group or stay silent. So, it’s important to take human psychology into account when using focus groups as a research method.

Competitive analysis

Competitive analysis is the process that involves researching your major competitors to learn more about their products, services, and marketing strategies. The analysis involves gathering data on competitors’ products, pricing strategies, and customer demographics. 

Analyzing your competitors’ strengths and weaknesses helps to assess the level of competition your business has and identify opportunities for business growth and development. For example, if you discover that a competitor excels in customer service, but lacks in product innovation, you can use this opportunity to focus on developing innovative products while also providing excellent customer service to set your business apart on the market.

Internal data analysis

This method involves analyzing the data collected within the company to gain insights into the performance and efficiency of the business processes. By analyzing internal data such as sales figures, customer demographics, and website traffic, you can better understand your operations and identify areas for improvement or optimization.

One of the ways you can use internal data analysis is to measure the effectiveness of your email marketing. You can analyze open rates, click-through rates, conversion rates, and unsubscribe rates to compare your campaigns and come up with new tactics.

Here’s an example of a campaign report you can get in Selzy: 

Market segmentation

Market segmentation is a popular technique to divide the target market into smaller groups based on shared characteristics or behaviors. The segmentation can be based on various factors such as demographics, psychographics, geographic location, or behavioral traits. Market segmentation allows companies to tailor their marketing strategies and offer options to meet the needs of each segment.

For example, a skincare brand might use segmentation to target customers with sensitive skin who are seeking gentle, hypoallergenic products. By developing a product line specifically designed for this segment, with features such as formulas without fragrance and dermatologist-recommended ingredients, the brand can meet the exact needs of these customers more efficiently.

Just like account-based marketing, segmentation also allows businesses to target specific customer groups more effectively. In email marketing, for example, segmentation can be used to make campaigns more personalized and customer-specific. 

How to conduct market research

Let’s see how you can conduct effective market research. We’ll explain the steps using a made-up small business called “FreshBite Catering.” Let’s say it specializes in providing gourmet catering services for corporate events, weddings, and private parties. 

1. Define your problem and goals

The first step to start your market research is to define goals and problems relevant to the research. At this point, you need to identify specific challenges, obstacles, or areas of concern that your business aims to address through the research process. Your problem may lie in product positioning. Then your goals can include understanding consumer preferences, identifying competitors, or assessing market trends. 

In our example, FreshBite wants to conduct research to improve its services. The goal then is to identify areas for improvement by effectively gathering comprehensive feedback from a range of customers.

2. Identify your target audience and research method

Next, clearly define who your ideal customers are. Consider demographic factors such as age, gender, income level, education, occupation, location, and household size. Also, think about psychographic characteristics like interests, values, lifestyle, attitudes, and purchasing behavior. Once you know who you’re trying to reach, you can tailor your research methods to gather the most relevant information. 

As FreshBite Catering is conducting research to identify how to improve its services, its target audience would include its current customers, potential customers, and industry experts.

Let’s say the company will use surveys to conduct the research. It will help FreshBite to gain a comprehensive understanding of its customers’ needs and preferences, as well as identify actionable opportunities to improve its services and strengthen its competitive position in the market.

3. Collect data

Once the previous two steps are complete, it’s time to collect the data using the research methods you chose. Besides primary research methods, you can also use secondary research. 

To ensure the quality and reliability of data collection, you need to check that the research is carried out consistently and according to plan.

In our example, FreshBite would design a survey that covers key areas of interest, such as menu selection, food quality, customer service, pricing, and overall customer experience. The survey can include a mix of multiple-choice questions and open-ended questions (such as comment boxes) to allow respondents to provide detailed feedback. The company can collect the data via email or a form on their website.

4. Analyze the data

The next step is to analyze the data gathered from the research. This is where raw information is transformed into actionable insights that drive strategic decision-making. In the vast amount of information collected, you should look for trends, behavioral patterns, and other tendencies.

5. Draw conclusions

After the data analysis, you need to summarize the key findings — the most important things you learned. These findings help to better understand the topic, guide the decision-making, and suggest ideas for future studies.

Here is an example of a market research report showing the main findings of a brand awareness study:

As for FreshBite’s research conclusions, analysis of survey responses may find a significant demand for vegetarian and vegan options among the customer base. Adding vegetarian and vegan dishes to the menu will help FreshBite attract a broader range of customers and enhance overall satisfaction levels.

Tips for conducting market research

Let’s consider some tips that will be helpful in conducting effective market research. 

Stay flexible and adapt

Market research is an ongoing process, so be prepared to adapt and refine your approach based on new information and changing market conditions. For example, if a new competitor or a product type enters the market, you might need to adjust your research focus to understand their offerings and market strategy. Additionally, if customer feedback indicates a shift in preferences towards eco-friendly products, you could modify your research to explore sustainable options for your future products. 

Use online tools and resources

Take advantage of online tools and resources to streamline your research process. For example, you could use platforms like SurveyMonkey or Google Forms to conduct surveys for your research. You can also utilize social media analytics tools to track audience engagement and explore market research databases and reports for industry insights.

By using these online tools, you can automate data collection, easily analyze results, and access valuable industry information promptly. Using online resources will help you save time and resources.

Pilot studies

Consider conducting pilot studies of your research methods before fully implementing them. Conducting pilot studies involves testing smaller-scale versions of your research methods to identify any challenges before doing full-scale marketing research.

For example, before launching a large-scale survey, you could test it with a small sample group to assess response rates and identify any ambiguities in the questions.

Final thoughts

To conclude, market research is a powerful tool that can help your business increase sales and attract more customers thanks to valuable insights into their preferences and market trends.  

When conducting market research it’s important to follow these steps: 

1. Define your problem and goals.
2. Identify your target audience and research method.
3. Collect research data. 
4. Analyze it.
5. Draw conclusions from research findings.

Following these steps will make your research effective and help reach successful decisions for your business operations based on the information you got.