If you're running a small business or startup, chances are there are a few buzzwords you've heard or read about that don't always seem clear, or at least actionable. Market research may be one of them and you may find yourself asking "What is market research?"
In simplest terms, market research is about asking the buyers in your industry "who are you, and what do you want?"
But what does that actually mean? Here's a simple definition of market research:
Market research is a set of techniques and processes whereby a business examines the types of buyers in a particular industry, what types of products these buyers want, where they're currently getting their supply and what value they place on having it. Through analysing data, a business can position itself in the market effectively and make informed predictions for market trends.
Market research can be an expensive, long drawn out process, taking weeks or even months - so what is it that makes it so important for business owners?
While it's true that market research isn't exactly a crystal ball that you can rely on for insights into your customers behaviour - done right, it can help paint an accurate picture of the wider business landscape in which you operate.
As a small business owner, you may be feeling like market research is too big an undertaking - I've been in that position, and the idea of taking time to prepare the right questions and find the right methodology, just to tell you what you already know can seem fruitless.
Chances are you already have a fair amount of experience in your industry and have a good understanding of your customers' pains, wants and opinions on your product. And if you only survey your existing customers, it will probably confirm those assumptions and you will indeed label it a waste of time.
And this is where most small business owners go wrong with market research. The obvious source of data is your existing slice of the market - but stopping there will tell you nothing about the customers you aren't getting.
Market research offer benefits beyond confirming what you already know, consider this:
Market research opens up information about your wider target market. It eliminates bias and the assumptions that come from only knowing about your existing customers. The result is the ability to make better business decisions aimed at tapping into a new area of the potential market.
Researching the wider market in which you operate can deliver real actionable insights and help your business tap into new revenue streams. Here are just some of the areas you could gain insight when you conduct market research:
Learning whether there is a demand for a particular product or service is key if you're planning a startup or considering a new line of business. Checking market viability is crucial before you start investing.
You probably know that the most in-demand products and services solve a particular problem, or 'pain', for a customer. Knowing what pains exist in your market that isn't currently being addressed can open up new selling opportunities.
Finding out what's important to your target market is can help when choosing how to portray your brand. When you have a strong sense of brand you can avoid making decisions that will negatively impact how your potential buyers see you. Instead, you can continue to endear yourself and cultivate brand advocates.
Knowing where your potential market spends their time, both physically and digitally, can lead to better marketing and advertising decisions. When you know where your buyers hang out you can focus all your efforts on getting in front of them.
How much value your potential buyer places on products and services is vital when it comes to pricing. When you look at different buying personas (more on that below) and what they're each willing to pay to fulfil their needs you can match up your products, packages and marketing accordingly.
Gathering these insights based on real data leads to sound business decisions with minimal risk.
You already know how wide-ranging market research can get - but most strategies can be defined as either qualitative or quantitative in nature.
Qualitative market research centres around public opinion, exploring how the market perceives products and services currently available.
Quantitative market research is all about data and looking for relevant trends and relational patterns in the data.
By briefly looking at four market research strategies (two of each) we can illustrate this a bit better:
Exactly what they sound like, interviews are one-to-one conversations with a buyer from your target market. These can be done in person or over the phone.
By asking the buyer questions about their self you can build up pretty accurate buyer personas. These questions include the typical demographical stuff (age, profession, budget) but also questions about their lifestyle, the challenges they face and their opinions on specific topics. By establishing clear buyer personas that align with your products and services you have a clear target for not just your marketing strategy but your product development roadmap.
Similar to interviews, focus groups gather a large group of people for one shared interview. Usually, members of a focus group have at least one strong element of your buyer persona in commons - age, profession or personal interests, for example.
This type of qualitative market research can give you an idea of the qualities of your product or service that set it apart in the wider marketplace. By asking your focus group questions about your products or service you can hone in on ways to improve your offering for this particular buyer persona.
Probably the form of market research the average person is most familiar with - surveys are a form of quantitative research commonly distributed via email, post or through an online form.
Different surveys can cater to specific subsets of your market - those who have interacted with you in some way or attended a particular event, for example.
Often conducted on a larger scale, some surveys run indefinitely showing how opinions and trends can change over time. A customer satisfaction survey would be a good example of this, enabling you to spot downward trends in how your buyers feel about your brand early on can be crucial to the longevity of your business.
Interviews, focus groups and surveys conducted by your business are all sources of primary data - as in, it was collected by you. Secondary data, therefore is any public information that helps to characterise your industry.
In this instance, 'data' is a wide term for any and all information that you can discover. Think about your competitors' website, social media pages and groups and how much information can be gathered from these to better inform your decisions. Your competitors' public reviews are a great source of information when analysing their perceived strengths and weaknesses.
You can also consult trade magazines, market reports and even government census data to gain valuable insight into large scale trends that may impact your business.
When you examine enough secondary data, you can build a pretty good picture of your industry, but more importantly where your business fits into it.
Ok, so you understand the importance of market research and how basing your business decisions on actual data can minimise risk and maximise the potential for greater market penetration - but as a small business owner, where do you start?
If you're light on resources in your business the best place to start might be with the freely available secondary data. Familiarise yourself with what industry commentators are saying - they usually have figures to back it up. But also, take advantage of the free information your competitors are publishing every day. Have a process for monitoring and comparing your competitors in place, analyse their prices as well as strengths and weaknesses and look for patterns in their behaviour.
If you want to take it up a notch, consider surveying your own customers regularly. By knowing what slice of the market you currently have (their buyer persona), and why they buy from you, you can identify the ones that you're missing out on. Then, you can put a strategy in place to go get them.
There are loads of free resources and tools out there to help build your own surveys and get real actionable data. By incorporating market research into your existing marketing strategy it's possible to give your business a real edge over the competition and increase your market share.
If you need help with any aspect of your digital marketing strategy, including market research, we can help. Our experienced team of business professionals are always available to talk you through your options. Just get in touch.