What is Market Research and How Does it Work?

Understanding market research will drastically boost your chance of success in business. Here is all you need to know.

What is Market Research?

There are two main types of market research, which are known as primary and secondary research:

1. Primary Research

This involves collecting data directly related to your business, such as that concerning your current customers or competition. Primary research often involves surveys, questionnaires, interviews or focus groups and is a fantastic way to judge the current state of your business. Establishing information systems within your business can help streamline your primary research, which could be as simple as asking an extra question during a sale or taking note of the age or gender of your customers. This type of research is regarded as qualitative data gathering.

2. Secondary Research

This involves analysing data that is related to your industry rather than just your business, such as average price ranges, business practices and general demographics. Secondary research often involves broad studies and can be extremely useful information for new businesses. You can do your own secondary research by visiting trade organizations, researching online or looking through the media; alternately you can hire market research firms to conduct secondary research for you. Secondary research is regarded as quantitative data gathering.

Why Does Market Research Work?

Market research lets you to know what is happening with all of the most important aspects of your business, and the more informed you are the greater your chances of success. Here are a few of the many ways that market research can help.

Build Trust

Asking your customers what they think about your products, services and overall business practices will show that you care about their opinion. Having open lines of communication will not only make your customers feel respected, it will also help to build trust in your business and brand. With business being so competitive these days, establishing a level of trust between you and your customers is absolutely invaluable.

Understand Your Customers

The better you get to know your customers, the easier it will be to provide products or services that they will want to buy. Knowing details such as their age, background, interests and even their favourite times to shop can make your business decision making a whole lot easier. The best way to get to know your customers is by engaging them, so whether you encourage your staff to be more social at work or you run a survey that offers decent prizes, do whatever you can to get to know your customers better.

Know Your Competition

Chances are good that your business has a few strong competitors, and it is wise to get to know who they are, what they do and how they do it. You don’t need to be on bad terms with them, but the fact of the matter is that potential customers will be forced to choose between you. If your competitors have lower prices or provide an extra service that you don’t, this information is crucial to know, as your business may need to make a few changes if you hope to be competitive.

Pinpoint Problems

Every business needs to deal with problems occasionally and the sooner you know what is wrong the sooner you can find a solution. By making it easy for your customers to lodge complaints or for your staff to give feedback no problem will go unnoticed for very long. Small problems can quickly grow into larger and more expensive ones; so conducting regular market research may save your business a lot of money.

Evaluate Your Success

While it is important to understand why a business is struggling, it is just as crucial to know what is happening when things are going well. Knowing what is working will make it easier for you to capitalize on your success and good market research will let you know exactly what is working and why.

Minimize Risks

There is an element of risk involved in running any type of business, such as knowing whether a new product will be popular, if a new location will draw customers or if your business will even get off the ground. Smart businesses are able to minimize their risks by knowing more about their customers, competitors and the market conditions. Market research is particularly important for new businesses looking for financial support, as being able to show that there is a market for your business will vastly increase your prospects.

Build Confidence

Market research can help to build the confidence of your staff by providing constructive and positive feedback. This can be as simple as making it easy for customers to let you know who helped them and how. It is amazing the difference positive feedback can make, so be sure that you find out about the great job your staff are doing and let them know all about it.

Set Realistic Targets

To succeed in business it is crucial that you can set realistic targets, as this will impact everything from production rates and stock levels to profit margins and staffing. Market research can make it easier to predict what will sell, when and how, so you will have a far better idea of what to expect. Some of this information can be gained from secondary research, as industry sales will often follow certain trends; however, primary research is also vital if you hope to set accurate targets for your business.

Identify Opportunities

One of the biggest benefits of market research is that it can help your business identify opportunities. This could mean recognizing an untapped market, hearing about a community initiative, spotting a new trend early or even learning about new technology. The sooner you can identify a new opportunity the bigger advantage your business will have over its competitors.

Market Research Problems to Avoid

Beware of Bias

To be effective, market research needs to be honest, so be sure you are getting your information from the most objective sources possible. Family members or favourite customers may be unlikely to tell you about problems they have noticed, which can mean you get an inaccurate view of what is happening. Your business will be better off knowing about any problems, so conduct as much primary research as you can and seek out the most unbiased opinions you can find.

Use a Diversity of Sources

Never rely on only one source of market research information, as this can leave your business vulnerable if the data is out-dated or inaccurate. Data can be found in a wide variety of places, ranging from your local business association to private research services. The greater your diversity of information sources the more comprehensive a picture you will get.