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How Does Market Research Help Businesses and How Can You do it Cost-Effectively?

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The success of a product or a service depends, if one is to distill it into two factors, on: first, meeting consumers’ needs, and second, delivering it in a way they want. They seem simple; they are anything but easy. For one, finding out what consumers want is difficult because they do not themselves know. And for another, even if consumers know what they want, how can you, a businessperson, know?

Market research is what helps understand what consumers want or may want and how to address their needs and wants effectively, efficiently, and exceptionally. It plays an instrumental role in all stages of the product life cycle—conception of ideas and viability, development, launch, adaptation, and evolution. It helps you do extraordinary things or do ordinary things extraordinarily—which is what brings success.

How to conduct market research: The do’s and don’ts

Before we proceed further, it is perhaps germane to understand what precisely is meant by market research. It is a process, one might say an organized effort, by which we systematically gather and analyze information about customers and companies to gain insight into the market—the needs, size, competition, and viability. It provides crucial answers to questions about customers and competitors. It helps in identifying market opportunities, understanding customer sentiments and satisfaction, and assessing market shares.

Whether you are launching a new product, entering a new market, or marketing an existing product, market research has a role to play. It forms and informs the four key pillars of marketing, the four Ps: product, price, place, and promotion. 

Source: Market Research in Practice: A Guide to the Basics

Market research must not be done haphazardly. Lay out the primary purpose of the research. And conduct the research methodologically. Start by identifying and formulating the problem, which may be about a decline in market share, an increase in the number of complaints, or why a new product has failed. The problem may even be an opportunity—exploring new markets, potential benefits of a new product, etc.

And based on these problems—and how well- or ill-defined they are—different research approaches may be designed. Then collect data accordingly and analyze them. This may be either done internally or externally by a specialized company that provides customized services or it may provide web research services and supply syndicated data.

Research types and their uses | Source

Timely and rigorous market research is vital to the understanding of customers, competitors, and the market generally. But it can also be a wasteful exercise. It must be undertaken only if you know what information you need and you have a definite objective. The decision to conduct market research would be ill-conceived if the expected costs outweigh the benefits, especially if the research issue is a trivial one.

Market research should not be conducted to support a decision already made. If it is done to reinforce a decision, then it is of little value. Moreover, the research may be biased toward supporting the decision; and if it doesn’t affirm the decision, then the insight may be discarded rendering the research futile and wasteful.

Market research would also not be helpful in cases where decisions need to be taken quickly. Collecting data and analyzing them and interpreting the result take time. The research may only be completed after the decisions have been made. Or, perhaps worse, it may delay decision-making and hinder actions when they are most apposite.

How market research helps businesses

Market research is a key element of all business operations—not just large multinational corporations but small local groceries, too. A farmer selling vegetables at a stall studies the prices of those around him, listens to customers’ comments on his or others’ products, and surveys the weather, and uses the information gathered to make decisions accordingly. This is low-level market research and makes him stay in tune with the market and run his business optimally and profitably. 

All businesses require market data—more so the bigger the business. Market research is thus essential in most frameworks that help understand business and the market, and is a vital component of numerous marketing paradigms. Zeroing in into some ways market research helps businesses will help make this clearer.

It gives an accurate view of your business and the market

How does your business fare in comparison to competitors? How familiar are consumers with your brand and how do customers perceive your brand, singly or in relation to similar brands? What is the market size, what are the growth trends, and what factors are driving the industry? These are critical questions that market research helps answer, giving you a better picture of your business as well as the market.

Market research gives a comprehensive view of how your business is positioned and how it is perceived. It can give you information on the value of the market, the key consumers, competition and its intensity, and if you are entering a new market the viable route to it. Moreover, it provides insights into your product offerings and helps you identify their strengths and weaknesses and how they perform in relation to those of competitors’. It also casts light on external factors and market dynamics affecting your business. This enables you to craft unique value propositions and take proactive measures to mitigate risks.

An understanding of your brand’s perception and products’ reception by customers provides useful insights into its strengths and weaknesses. This helps in improving existing offerings and leveraging the strengths to reinvent and adapt as necessary.

It helps you identify new customers

Market research involves gathering and studying customer demographics. The demographic data may be customers’ age, wealth and family status, interests and values, or anything that is relevant for your business and helps you better identify the opportunities and challenges for acquiring customers.

Businesses often have a narrow and segmented target audience, thus missing out on a significant customer base. Market research helps in identifying the disparate customer segments that could benefit from your products. It can also reveal how prospects view your products and cast light on what features you could incorporate to meet their needs while at the same time enhancing the experience of existing customers.

The demographic information, even if it is not immediately relevant, may be useful in the future for optimizing online presence and strategizing marketing, and thus reaching new audiences.

It helps understand existing customers

Winning the minds of customers is the penultimate reward; to win their hearts too is the ultimate reward. This requires that you understand them well with all their idiosyncrasies. And that you keep them at the center of your business.

There are many ways to achieve this. One is to just ask them. But how?

Effective market research with suitable methods can help you gain deeper insights into your customers—their satisfaction, preferences, behavior, and needs. It can help you better understand their pain points, tailor your products and services, and engage with them on a more personal level. It gives insight into, for example, their purchasing motivation and price sensitivity.

Market research can give you insight into how your customers use your products, the problems they face, and ways to improve them. This will enable you to tweak your offerings and also give you an opportunity to upsell.

It helps stay relevant and competitive

Market research helps you stay ahead of competitors—or in any case, stay in the game. To stay ahead, you need to stay abreast of the latest trends in the industry and incorporate relevant elements into your products or services. And to stay relevant, you need to constantly re-invent and out-invent—in tune with time and in the way customers want. Change or perish—that is the mantra.

Market research provides you with crucial information about the market and the competitive landscape. This can help you confront changes prudentially and put products and services that are apt and relevant.

Market research can also help you identify threats, immediate or impending. It provides you with insights into competitors’ strategies and offerings. This can be beneficial in identifying gaps in the industry, enabling you to one-up your competitors or differentiate your brand.

It helps identify opportunities for growth

Opportunities are not scarce but they are often sneaky—and they are slippery and don’t stick for long. Market research is a handy tool for spotting them. Whether it is expanding where you are or venturing to a new location, market research can help you identify growth opportunities by providing insights into the market dynamics, customer needs, and industry trends.

Market research can help you explore diversification opportunities and understand related or complementary markets. It may also help you discover business partnership opportunities, to work in concert with businesses that already have a presence and connection with your target audience. 

And it can also unearth certain vulnerabilities or shortcomings that you may have, that you may otherwise overlook. It may also bring to the surface signs of danger ahead and help you avoid jumping the gun at seeming opportunities.

It helps mitigate and manage risks—of failure

Risks and failures are endemic in the business world. Indeed, failure may be said to be a defining characteristic of survival: for every successful product, more than nine go belly up—95 percent, more precisely, according to Clayton Christensen, a professor at Harvard Business School. No product is immune but this extinctive fate can be mitigated. 

You may have an ingenious concept but that alone is not enough. You need to assess and ensure that there is demand for it. Otherwise, the product is more likely to join the nine-five-percent cohort. Market research enables you to determine if customers would be interested in the product. This you can do by assessing customers’ attitudes to the new concept and their likelihood of purchasing it.

Market research also helps you identify trends and customer sentiments and behavior. This can help you evaluate the suitability of the introduction of new products. It can also help you anticipate changes in demand and allow you to adjust your strategies accordingly.

Cost-effective ways to conduct market research

The cost of forgoing market research, as may now be apparent, is high. But conducting market research is not without cost, of course—and it’s not just the expenses incurred in doing the research. There is a cost of lost sales and ceding competitive advantage to rivals caused by delays in decisions as research results didn’t come soon enough. The research may also not yield any positive insights—or even worse, faulty insights—making it a white elephant, and one that destroys the farm at that.

Be that as it may, market research is indispensable. And there are cost-effective ways to do it, and do it effectively.

  • Engage with and listen to your current customers: Your customers are an important source of truth. Ask for their feedback, preferences, and concerns. Ask them open-ended as well as close-ended questions. By this, you can gather enough information that, while possibly biased, can shed valuable insights.
  • Leverage secondary research and archival sources: Instead of conducting primary research yourself, which often costs dearly in time and money, you can resort to publicly available data. Data related to your industry or venture are often found in industry, government, and academic reports; and ample data about advertising strategies and pricing, for example, archival sources. Leverage them.
  • Join hands with another company: A single research can yield disparate insights that benefit different companies differently. Conduct joint market research with another company that serves similar demographics but different and non-competitive (or complementary) products. 
  • Conduct online surveys and engage focus groups: Online surveys are a quick way to collect primary data. The survey can be distributed via various media such as email, social media, or embedded over the website. This is a relatively easy and inexpensive method to gather quantitative data. Focus groups, on the other hand, can provide qualitative data. The web offers a quick, easy, and cheap (comparatively at least) way to engage with focus groups.
  • Observe and listen: Social media offers an easy means to listen to customers and gauge their sentiments and perceptions of your brand or products. Valuable information can also be gleaned by merely observing customers’ reactions, questions, and comments. Security camera footage is a good source for this.
  • Outsource to specialized third parties: Another pragmatic and sensible option is to outsource the task to specialized companies. They can provide you with high-quality research services at reasonable costs.

Conclusion

The success or failure of a venture is determined, to a large extent, by the depth of understanding of customers and competitors. Knowing and giving what customers want is but one pillar of success. You need to also know the competitors’ offerings and strategies; otherwise, you’d be squeezed and your piece of the pie eaten. Market research ensures you keep a close tap on your customers and competitors; and though it doesn’t guarantee, it maximizes your chances of success and survival.

Starbucks is a company worth emulating. It deftly uses market research to stay informed about customers and the market. It is thus able to stay in the market—indeed ahead of the market, not just giving customers what they want but creating what they’d want.

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