Why Is Market Research Important: We Give You 7 Reasons
Planning and conducting market research is a critical component of any business. It provides decision-makers with important information to decide the course of the company, launch a new product, or to keep a tab on what competitors are doing.
Data indicates that market research is a growing industry of 47.36bn USD, globally – and rightly so. For a business to succeed, all its resources – financial and otherwise – must be invested in areas where they are needed the most. Conducting market research helps you identify those areas. It also helps you discover and understand your customers’ needs so you can innovate better, expand when the time is right, and work with more focus.
In this article below, we will share a few pointers with you about why market research is important for every business – big and small. But first, let’s talk about the types of market research.
Types Of Market Research
Depending on the purpose of your research, you can choose either of the two main types of market research. These are primary research and secondary research.
– Primary Research
Primary research is direct research that you conduct yourself or hire someone else to do it for you. It involves reaching out to your target market, asking them questions, collecting data, and analyzing the information gathered. Based on the data, strategies are devised, decisions are made, and policies are created.
Primary research helps you explore issues, dig deeper, and ask specific questions that are relevant to what you are looking for. Because it takes more time and effort, it may also cost a bit more than secondary research but it is more effective and helps you gain a solid picture of what’s going on.
– Secondary Research
Secondary research is using somebody else’s primary research for your business purposes. Research that is already conducted, organized, and published is often used by small businesses to gauge market trends, current economies, and to devise plans.
A lot of government agencies conduct market research for various purposes. If you’re on a budget, going to one of those agencies may help you out a lot as most of that research is freely available to the public. If you want to access a private market research company’s report, you may have to pay a fee to access the complete file.
However, there are private companies that publish their reports publicly. Additionally, you can also go online and conduct Google searches looking for specific phrases relevant to your research purpose to find valuable data.
Why Is It Important?
Now that we know what market research is and what different kinds it has, it’s time to learn why it is important, and why you should invest in it if you want to become a successful entrepreneur.
1. It Helps You Identify The Problem Areas As Well As Strong Areas
Knowing what you are good at and what you’re not, help you take profitable risks in life. It’s true in business too. Accurate market research helps you identify business areas that are performing well, those that need more attention, and also those that you should perhaps give up.
Back in 2010, two young tech enthusiasts launched a location-based app – Burbn – that would allow consumers to check-in, make plans of hangouts with friends, share pictures, and more. Few weeks into the launch, they realized through internal discussions and reevaluation of the market, that Burbn is cluttered and their target market is more into Foursquare and they won’t be able to budge them.
They took a long, hard look at their app again – which had already been launched – and started working on it from scratch, removing all the features and only letting the photo-sharing, liking, and commenting options intact. And thus, Instagram was born.
Had they not reevaluated the market and not listened to their consumers or failed to identify where they were going wrong, the current social media landscape would have been very different now.
2. It Helps You Understand Your Customers’ Needs
It is not enough that you know your business; you got to know what your customers are saying about you – and about your competitors. If you have got your pulse on what your customer is thinking, you’d create products that solve their issues, reach out to them when they are most ready to listen, and help them become your loyal ambassadors.
A huge part of business market research is always dedicated to gauging customer satisfaction rates, their reactions to a new product, and what they are looking for next.
In 2005, when YouTube initially launched, it was for a very different purpose: dating. Pretty soon into launch, however, and by investing in robust market research (a part of which they conducted themselves) the founders realized that their video dating app is not what their customers are looking for. Analyzing the data, they discovered that there is no app or platform in the market for video sharing. The websites that were offering this service were patchy at best and not intuitive at all.
Being attuned to their customers’ needs and spotting a wide space in the market, they tweaked their video platform and launched YouTube.
Following what your customers are talking about, listening to them, and then delivering on their needs is an important task that you can fulfill with timely customer-centered market research.
3. Helps You Conduct Your Marketing Based On Informed Decisions
Launching and running a business means making decisions every day – about products, services, expansions, HR, and so much more. Without solid market research backing your decisions, all you are doing is guess-work, hoping the results will be in your favor.
With research helping your business, you are better informed about areas to invest in, gauge the potential success of new products, test new markets to expand into, and to determine what kinds of products/services will be most favored by your customers.
This is certainly what Starbucks does. The company has a whole dedicated platform ‘My Starbucks Idea’ where employees and customers and anyone who wants can pitch in and share what they think the company should do next, the flavors it should try, the new products it should launch, bring back some old favorites, and more.
The platform helps them remain informed on all important aspects of business investment and propels them towards ventures and venues that hold the most potential.
If you aren’t a humungous company like Starbucks and cannot afford to host dedicated platforms to gain important information, invest in market research whenever you have a big decision coming up. It isn’t as expensive as you think and doesn’t take that much time. Plus the results can be relevant for a lot of related areas that you may want information on.
4. Helps You Keep An Eye On Your Competitors
As a startup founder, you may think being original is all about being focused on what you’re doing and not worry about what everyone else may be up to. This approach spells long-term disaster. While you should certainly keep your focus on your own efforts, it is critical – and smart – to keep tabs on your rivals and know what they are thinking or planning.
With sound market research on your side, you can better prepare for what your competitor may be about to do next and make sure they aren’t able to put a dent in your market share. With regular research, you can not only learn to anticipate their next move but be in a better position to avert any possible damage from their end.
In addition to conducting market research, you can pair it up with regularly monitoring their social media, blog posts, and seeing what is trending in your market. Here is a great resource on how you can go about it.
5. Helps You Expand And Innovate
Market research can help you identify markets and geographical areas where you can expand to. It can also help you to invest in ideas that have the most potential to succeed based on what customers are looking for and what the market is lacking.
For example, if you are a retail company, conducting market research can help you identify locations where your store can profit the most. If you are planning to buy a business to increase your market share, market research can help you point towards businesses that may be ripe for acquiring. Not only that, conducting market research before you launch your business can help you figure out ways to put your best foot forward.
It guides you towards opportunities where you have the most room to innovate and take risks with the highest return potential.
6. Helps You Set Business Goals
Goal-setting is one of the major parts of running a business – big and small. Goals give you directions, help you remain in sight of the bigger picture, and set you on the path of continued success. Goals can be of different kinds: short-term, long-term, department-oriented, over-arching, and such.
To set all these kinds of goals and get ready to meet them, businesses need to have a thorough and complete knowledge of their strengths and weaknesses. They need to be aware of how the market is behaving and predict what may come next.
All of this is only possible after conducting market research. With the help of focused market research, you can set achievable business goals and not follow some vague notions of instant success. These often include how to improve productivity, customer satisfaction, and business’ financial health. You can also use market research to learn ways you can reduce expenses without hurting the business, find out how to amplify your digital marketing or introduce a new employee incentive program.
7. Helps You Know Which Risks To Take And Increases Earning Potential
Risk-taking is an important component of the business. Without it, you can become stagnant and a sitting-duck for a more ambitious rival. But risk-taking cannot be a shot in the dark. To know which risks to take and when to take the plunge are attributes of successful innovators. From Dropbox’s Drew Houston who refused Steve Jobs to Google’s buying of YouTube when it was a fledgling startup, the history of business success and innovating is packed full of stories of ambitious – but informed – risk-taking.
Using market research, you can also join the ranks of informed-decision makers who do not shy away from taking risks. It prevents you from making costly mistakes that could have been avoided and take steps that result in massive profits.
Take the example of Frito-Lay. When the potato chip maker wanted to introduce a new brand, it launched online market research conducted through Facebook to ask its customer-base which flavor they would like the best. The results showed that beer-battered onion-ring flavor is a hit in California and Ohio, while New Yorkers preferred the Churros flavor idea.
The research helped the company come up with different flavors and market them strategically to different states. If the research would not have been done, the company would have come up with a new flavor that could have been a hit – or a miss.
Popular Instruments Of Market Research
As technology keeps advancing, market research keeps evolving. Where before you had to rely on face-to-face interviews, telephone surveys, or lengthy online questionnaires, now it’s all about short online surveys, instant case studies aided by technologies, and focused groups that are already available on your social media channels.
Below we talk about 4 popular instruments of market research that are frequently used by companies worldwide with excellent results.
The survey is a quantitative method of research which means it gives you numerical scores. These scores pertain to specific answers and don’t leave much room for multiple interpretations. Because they are precise, provide specific answers, and immediate interpretation, quantitative methods are popular to conduct research when you are looking for exact information: to find out how to solve a particular problem, etc.
According to a study conducted by Statista.com, 26% of all market research is conducted through online quantitative methods, with online surveys accounting for a major share of 79%.
If you know how to create an easy survey online for your company, here is a great resource to get you started.
– Case Studies
Case studies are usually qualitative research methods; however, you can incorporate a mixed approach with a quantitative questionnaire thrown in for additional information. Using case studies, you focus on a single individual or single entity to research them thoroughly. The purpose of using case studies in business market research is usually to test theories of what went wrong in a particular situation or what went right.
Case studies are time-taking but provide extremely valuable information, detailed data, and in-depth analysis opportunities.
– Focus Groups
Focus groups are another popular instrument to conduct market research in business. A focus group consists of a small portion of your target audience that you can study in detail. It is a qualitative method of research and allows you to bring together a group of individuals that can take part in a guided form of discussion.
You can give them one or more focus questions that the group can talk about and share their views on. Focus groups are great to use when you’re creating a new product, researching a particular market segment, or want to know what your customers are thinking about you or your market.
Similar to case studies, focus groups give you a comprehensive view of a situation and allow you to conduct an in-depth analysis of different business elements.
The Future Of Market Research
The future of market research is bright. As a budding and burgeoning industry, it shows all the trends of continued growth. But as technology becomes more accessible and mobile devices more popular than desktops, market research is also evolving to fulfill the shifting customer needs.
The surveys are becoming shorter as nobody has got the time or interest to fill out a 10-page questionnaire. Artificial Intelligence is making the data collection process quicker and more intuitive. And as time passes, you’ll see more and more market surveys being optimized for mobile.
So use all that modern market research has to offer you and use it to propel your business for the success you’d always dreamed of.
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