Would you like to know the answers to the following questions?
- What are my customers thinking?
- What are my competitors doing?
- In what direction is my industry is headed?
Market research can provide the answers to these questions. Large and successful corporations know that market research is vital to their success, and therefore, they spend millions of dollars on market research. You too can use market research to make much more informed business decisions — without the million-dollar expenditures.
It is important to approach market research carefully. Unfocused market research can waste resources and result in useless information; however, it doesn't have to be that way. The time that you invest in planning your market research now can save you time and money in the future, and yield you better results.
What is market research?
Market research is the process of gathering information to help you make better, more profitable business decisions.
There are two sources of market research data:
- Primary market research is the collection of information that's tailored to your specific needs. You can gather it yourself or hire a third-party company to gather it. Examples of primary research include monitoring traffic through your store, surveying customers, or conducting focus groups.
- Secondary market research is information previously gathered by a third-party company. It's available for use by you and any other company, including your competition. Some examples of secondary market research are government statistics, reports by industry associations, and analyses prepared by professional market research firms.
Regardless of whether market research information was gathered from primary or secondary sources, it typically comes in one of three categories:
- Customer data, including customer attitudes about your existing products, your products in development, and your long-range ideas.
- Competitive data, including profiles of your competitors, their products and services, their near-term plans, and their reputations in the marketplace.
- Industry or market data, including broad economic trends, existing and pending government regulations, and customer demographics.
Primary market research is typically used to gather customer data and sometimes competitive data. Secondary market research is typically used to gather data for all three categories: customer, competitive, and industry or market.
Market research strategies
The most common error that novice market researchers make is collecting unneeded, unfocused, and unrelated information. To avoid making these costly research mistakes, you can use a market research information questionnaire.
Decide what you want to accomplish
A bit of preparation can help you get the information that you need without wasting time and money. Before you start any market research, be very clear about what you want to accomplish. Take the time to determine your:
Your original objectives lead to the decisions that need to be made. The decisions that are made then lead to the questions that need to be answered by your market research.
For example, if your objective is to maintain profit margins while the prices in your industry are falling, you might need to make the following decisions, which lead in turn to some questions that need to be answered.
Decision #1: Do we need to add a particular feature to our product?
- Question: Will customers pay more money for a product if a feature or features are added? How much more will they pay?
- Question: Who are our five closest competitors, and how do their product features, benefits, and prices compare to ours?
Decision #2: How can we improve customer loyalty?
- Question: What is our reputation in the marketplace? Are we underpriced? Is our service record spotty? How can we improve?
- Question: What aspects of our service do our customers value the most? How well do we perform in terms of that value?
Decision #3: Do we need to invest in our existing manufacturing process?
- Question: Is our industry growing or shrinking?
- Question: What new regulations or technologies might affect the way that we do business?
Gather existing information
In addition to clarifying your objectives, decisions, and questions, it is important to gather any existing information (no matter how fragmentary) from within your organization. The following tools and data are especially valuable:
- Target Audience Profile (TAP) templates
- Marketing strategy plans
- Product requirements definitions
- Sales and financial records
For more information about target audience profiles and the target audience profile templates, see "Profiling your target audience" in the More information section of this article.
Market research techniques
To get the best information you can for the least amount of money, the following methods are among the best to use.
Start with free secondary sources
Free sources include articles on the Web and at the library. White papers posted on other companies' Web sites can be excellent, and the white papers often quote market research that the other companies paid for (so you don't have to). Also, don't forget about the customer data that your company has already collected — this is arguably a primary source, but it's free nonetheless.
Look for fee-based secondary sources
A lot of good information is available for prices that range from inexpensive to thousands of dollars. Sometimes, all you have to do is join an organization; at other times, you have to pay for individual reports prepared by research companies. Always keep in mind how useful the information will be and how much it will cost to gather the information yourself before you decide whether to buy it.
For more information about secondary market research sources, see "Secondary market research: getting the most for the least" in the More information section of this article.
Conduct primary research as needed
Primary research can be expensive in terms of staff or consultant time, but not always. Whereas customer surveys can be done fairly inexpensively, focus groups typically cost a lot. However, don't be put off by the price because primary research often yields the most valuable information as it focuses on your specific needs.
For more information about primary sources, see "Conducting primary market research" in the More information section of this article.
Monitor your budget and schedule
With so many sources of market research to choose from, each requiring a different cost and time commitment, it's important to forecast and monitor your budget and schedule. By forecasting and monitoring your budget and schedule, you can set expectations about when the market research will be available and how much it will cost.
About the author Cindy Kennaugh is President of On The Mark, a Silicon Valley–based consulting firm specializing in all aspects of business-to-business marketing in the high-technology industry.