Market research examines consumer behavior and trends in the economy to help a business develop and fine-tune its business idea and strategy. It helps a business understand its target market by gathering and analyzing data.
Market research is the process of evaluating the viability of a new service or product through research conducted directly with potential customers. It allows a company to define its target market and get opinions and other feedback from consumers about their interest in a product or service.
Research may be conducted in-house or by a third party that specializes in market research. It can be done through surveys and focus groups, among other ways. Test subjects are usually compensated with product samples or a small stipend for their time.
How Market Research Works
Market research is used to determine the viability of a new product or service. The results may be used to revise the product design and fine-tune the strategy for introducing it to the public. This can include information gathered for the purpose of determining market segmentation. It also informs product differentiation, which is used to tailor advertising.
A business engages in various tasks to complete the market research process. It gathers information based on the market sector being targeted by the product. This information is then analyzed and relevant data points are interpreted to draw conclusions about how the product may be optimally designed and marketed to the market segment for which it is intended.
It is a critical component in the research and development (R&D) phase of a new product or service introduction. Market research can be conducted in many different ways, including surveys, product testing, interviews, and focus groups.
Primary Market Research vs. Secondary Market Research
Primary Market Research
Primary research generally falls into two categories: exploratory and specific research.
- Exploratory research is less structured and functions via open-ended questions. The questions may be posed in a focus group setting, telephone interviews, or questionnaires. It results in questions or issues that the company needs to address about a product that it has under development.
- Specific research delves more deeply into the problems or issues identified in exploratory research.
Secondary Market Research
All market research is informed by the findings of other researchers about the needs and wants of consumers. Today, much of this research can be found online.
Secondary research can include population information from government census data, trade association research reports, polling results, and research from other businesses operating in the same market sector.
Benefits of Market Research
Market research is essential for developing brand loyalty and customer satisfaction. Since it is unlikely for a product to appeal equally to every consumer, a strong market research program can help identify the key demographics and market segments that are most likely to use a given product.
Market research is also important for developing a company’s advertising efforts. For example, if a company’s market research determines that its consumers are more likely to use Facebook than X (formerly Twitter), it can then target its advertisements to one platform instead of another. Or, if they determine that their target market is value-sensitive rather than price-sensitive, they can work on improving the product rather than reducing their prices.
FAQs
What Is Online Market Research?
Online market research uses the same strategies and techniques as traditional primary and secondary market research, but it is conducted on the Internet. Potential customers may be asked to participate in a survey or give feedback on a product. The responses may help the researchers create a profile of the likely customer for a new product.
What Are Paid Market Research Surveys?
Paid market research involves rewarding individuals who agree to participate in a study. They may be offered a small payment for their time or a discount coupon in return for filling out a questionnaire or participating in a focus group.