Proper market research is at the core of any successful business. Unfortunately, many small-business owners are intimidated by the process, believe it’s too expensive or don’t know enough to get started.
In this article, we’ll outline how to do market research. We’ll cover what market research is and why you should include it in your business plan. By the end of this article, you should be motivated to craft a specific marketing plan for research.
What is market research, and what is its purpose?
Market research, broadly speaking, is the action of collecting information about a consumer’s needs. This can be found by examining the consumer’s location, demographics, and shopping preferences.
The purpose of marketing research is to uncover the wants, needs, desires, wishes, and emotions of customers and prospects. Doing so will not only allow you to enter new markets, but also allow you to keep customers in existing markets and sell them goods or services.
What decisions can market research influence?
Market research can influence nearly anything. The most thorough research will show business owners how to use their resources most efficiently, helping their business to grow and succeed. More specifically, market research can:
- Help you determine which products and services should be most strongly marketed and which have secondary importance to the growth of the business.
- Prioritize the types of marketing and operational issues that are critical to finding and keeping customers.
- Guide you to the most reliable and most compelling advertising and promotional content.
- Identify the messaging that will most effectively build the company brand and image.
- Focus your employees, sales force, and operations on your company’s most important reasons for being.
Can a new business conduct inexpensive market research that remains effective?
You don’t need to break the bank on a market research process. However, if you’re looking for cost-effective market research, you will need to:
- Devote more time to the process
- Practice patience and flexibility
Finding potential customers is an ongoing process, and data collection is time-consuming. You must ask specific questions and dig deep for answers. To do so, you’ll need to ask primary and secondary questions. Primary questions are the initial questions that you may ask when conducting research, while secondary questions are your follow-ups.
Learning the fundamentals of proper research also takes time. Gathering results from primary and secondary research won’t happen overnight. You’re certainly not going to find all the answers you need from one online survey.
Lastly, you should understand your research methods and actionable items will probably need to change over time. You should be ready to take action when needed.
How can market research add to a small business’s bottom line?
As a small business owner, you’re always making decisions. Some decisions are successful, earning revenue for your company. Others aren’t successful, proving to be a total waste of money.
When a business fails and you don’t understand why, it can be most frustrating. How can owners expect to take their business to the next level without a sound understanding of what brings customers into and out of their doors?
If you already have the answers to these questions, you’re in great shape. You have your business figured out. But, if you don’t understand consumer behavior and the ideal customer you’re targeting, your business is going to flounder. That’s where market research comes in.
Market research allows you to identify your target market and target audience. Although you may use these words synonymously, they are different. Understanding basic market segmentation helps outline the difference. Market segmentation is the process of dividing a group of customers into small subgroups of target customers. Your research can help you divide customers into these groups.
Why is it so crucial for businesses to conduct primary research on customers?
Conducting primary research on customers is vital, as it’s the foundation of any research program. Attracting new customers to a business is not only challenging, but can also be quite costly. Generally, it’s five times more expensive to acquire a new customer than it is to retain an existing one.
One thing you can do is conduct a monthly customer satisfaction tracking study. Doing so will allow you to quickly identify the strengths and weaknesses of your marketing research and make immediate changes.
What types of market research questions can you ask the customer during these studies? Ask them to rate you on:
- Their satisfaction with the aspects of your customer service.
- The extent to which your products or services continue to meet their needs and desires.
- What new products, services, marketing, or pricing approaches do customers wish you would provide? What would render them more loyal to you?
What possible changes should come from such research?
Much like how there’s no point in making a business decision if you don’t understand why it’s going to work, there’s no point in conducting market research if you don’t have a purpose for doing so.
A general goal of your market research program should be to make changes within your company. Examples of changes that you could implement as a result of market research include:
- Changing the way your sales team recruits customers
- Improving the products that you offer customers
- Upgrading or changing service, warranties, or other policies that could steer customers away.
- Uncovering unmet wishes and desires your customers don’t even know they have
A solid understanding of your customer base will put you in the best possible position to make these changes.
How can understanding the competition help business owners increase profits?
Not only does market research involve understanding your customers, but it also consists of understanding the competition. If you don’t understand the strengths and weaknesses of your competition, you’re eventually going to fall behind.
How to do market research
If you’re ready to begin market research, there are a few steps to take.
1. Build simple buyer personas
The first step in market research is building buyer personas. Personas are fictional, fact-based profiles of your potential customers. These personas involve a consumer’s psychological and demographic data. This step allows you to understand what type of people buy your products.
You can use various websites to help gather this information:
- Small Business Administration’s Office of Entrepreneurial Development
- U.S. Census
- Google Surveys
- Pew Research Center
Use these websites to research changes in your industry, new products coming to your market and your competing company’s developments.
There is no cost involved other than time, and this research will give you so many new ideas for growing your business, you won’t know what to do first.
Consider both qualitative and quantitative research factors when conducting market research. The more information you have, the more complete the persona you can build. The more complete persona you have, the more efficient you can be with your funds.
2. Conduct observational research
Once you have an understanding of your buyer personas, you will need to conduct observational research. You can either do this yourself or outsource it to a trusted research firm.
Start by doing a couple of face-to-face focus groups. You should do so in small groups of six to eight people. Try to include a variety of people in your focus groups. For instance, you may have one group of people who are not buying from you yet. Ask them open-ended questions about why they have yet to purchase your product.
Similarly, you can compile another group of people who you know buys your product. Ask them open-ended questions about what makes your product so appealing. Compare this survey data to the buyer personas to identify which groups like your product and which don’t.
Another technique is a customer satisfaction survey. Use the issues you uncover in your focus groups to write a questionnaire that, when answered by at least 75 customers, will tell you what drives and repels sales.
3. Analyze your data
Now that you have your market research data, you can analyze it and apply it to your business. You may want to think about using a flow model, which creates a visual representation to help track the flow of information. A flow model will show how your customers interact with your product so you can identify the product’s deficiencies.
Another tool you can use is an affinity diagram. An affinity diagram is useful for organizing large portions of information so you can notice patterns and trends in data.
Lastly, you’ll want to put together a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis for your industry. A SWOT analysis allows you to summarize what your company does well and what it needs to improve. Once you have a SWOT analysis, you can start building an action plan.
Knowing how to do market research can set your business apart
If you’re ready to conduct market research, the most important thing to remember is you need to leave your ego at the door. The point of running market research is you realize that you don’t have all of the answers so you’re trying to seek them out.
If you humble yourself, listen to your customers and implement changes, you’ll find market research can have a lasting impact on your business.