Market research is an important part of a business plan and should serve to guide your business as it grows.
Market research is important when testing the viability of new business ideas, as well as when developing new products, services and features.
Market research requires a combination of primary and secondary research, with both quantitative data points and qualitative insights.
Follow the steps included in this article, and use some of the free and low-cost tools mentioned, to conduct market research for your small business.
This article is for business owners who want to test the viability of new business ideas, products, services and features using market research.
Market research is essential when launching a new business or refining your existing products and services. Market research provides insight into what your target audience expects from your business, including customers' likes, dislikes, needs, wants and pain points. If you are thinking about starting a new business or releasing new updates to your products or services, you need to conduct market research to test the viability of your ideas. Otherwise, you could find yourself wasting time and resources on a solution nobody wants or needs.
What is market research?
Market research is an important element of a business plan. It is the process of engaging your audience about the products, features and services they want or need through the use of polls, surveys, focus groups, social media monitoring and other methods. Market research serves as an important guide to developing your business model and meaningfully growing your business in a way that meets your target audience's needs.
"Market research is simply a process to find out what your audience needs and what they want," said John Cho, founder of online pet owner resource My Pet Child. "It helps a company understand the people they want to serve and what the competition has over them in the mind of potential customers."
Once market research has been performed, decision-makers in your organization can use it to inform product development and marketing strategies, decide what new products and services to add to your offerings, and more. Market research is essential to keeping your finger on the pulse of what your customers expect from your business, iterating on what already works and improving what doesn't.
Why is market research important?
It is absolutely essential to conduct market research prior to launching a new product or service. When you are developing something new, you might not be plugged into consumers' needs. Testing the waters with market research first is a good way to make sure you are developing your new product or service with the real-world needs of your target market in mind.
"Market research is a way to increase your probability of success in launching a new product," said Bruce Harpham, founder of Steam Press Media. "For example, I recently used PickFu to test five business book title ideas with 200 people. The results surprised me: Over 40% of people voted for one title."
Market research can also help you understand what your customers like and don't like about your current products and services. You can leverage these insights to improve your existing products, building on their strengths and limiting their weaknesses.
"It's often stated that over 60 percent of new businesses fail within their first year of trading," said Helen White, co-founder of Houseof. "The majority of these failures boil down to the fact that often, their value proposition is no better than existing market incumbents and, as a result, fail to win market share and gain traction.
"Conducting extensive market research not only puts new businesses in a position to analyze the market for opportunities, but it also significantly decreases the risk of launching a product or service that nobody cares for," White added. "Market research is not only relevant for startups and aspiring business owners but is also a fundamental strategic practice of established firms who are exploring launching new products or services, as the same rules apply."
Key takeaway: Market research helps you better understand your target audience's needs and wants when you are launching a new business or developing a new product, service or feature.
What are the different types of market research?
Understanding the different types of research that make up market research can help you ensure you are considering your target audience's feedback from multiple angles. Important elements of market research include primary and secondary research, as well as analysis of quantitative and qualitative information.
Primary research vs. secondary research
The difference between primary research and secondary research has to do with how the market research is performed and who owns the data. According to Cho, primary research is generally conducted directly by your business, while secondary research is generally outsourced or found in existing online databases.
Because primary research is conducted by your company, you own the data, Cho said. Secondary research, by contrast, is done by someone else to support your primary research, but you don't own the data, he added.
It's important to do both types of market research because they have different purposes: Primary research yields direct results about your audience, while secondary research serves to back up the insights gleaned from your primary research.
An example of primary research would be if your business were to conduct a survey of 1,000 existing customers to understand their experience with your products and services. The survey might include questions about which features customers liked, which features they disliked, what they found confusing and whether they would use your products or services again.
An example of secondary research would be if your business were to use the results of an industry focus group that explored what customers are looking for in the products and services in your industry, as well as what they feel is currently lacking in the space. While you might not have commissioned this focus group directly, its results could grant you insight into the competitive landscape of your industry, as well as support your own primary research, such as the example described above.
Quantitative research vs. qualitative research
Market research can be quantitative or qualitative. Quantitative research is based on numbers and objective facts, whereas qualitative research is "subjective, based on feelings and immeasurable qualities," Cho said. "Both are important when researching the reception of your brand or product. How does it make the customer feel (qualitative), and how many would recommend your product over the competition (quantitative)?"
In the examples above, the survey of 1,000 customers would yield some quantitative results, expressed as a percentage of respondents. It also would include some qualitative insights about the way your customers feel. The example of the industry focus group would largely contain qualitative statements by customers; however, these could be grouped into similar statements to develop some quasi-quantitative data as well.
Understanding the qualitative perspectives of your target audience is essential to meaningfully speaking to the heart of what your customers want and need. Putting those qualitative insights into quantitative data helps you to understand where the largest opportunities lie.
Key takeaway: Incorporate both primary and secondary research that includes a combination of quantitative and qualitative findings to make the most of your market research.
Steps on how to do market research
Follow these four simple steps to conduct market research for your small business.
1. Define buyer personas.
Create fictional buyer personas to represent members of your target audiences. These personas should be detailed and include information such as the following:
Number of family members (if applicable)
Buyer personas should look and feel like a complete person with complicated wants and needs, and while these personas don't have to be representative of every member of your target audience, they should reflect the commonalities of key demographic segments. [Read related article: Everyone Is Not Your Customer: That's OK]
2. Design research questions.
Design specific research questions with your buyer personas in mind. You might craft specific questions for each persona, or you might consider which questions are relevant to all of your buyer personas.
"Once you have fleshed out your buyer personas, it's important to map out their individual characteristics, jobs to be done, pains, gains and buying habits," White said. "Individual customer preferences vary; however, it's important that businesses get a sense of their prospective customer priorities."
Keep all of this in mind while you craft your research questions. Be sure to avoid bias, and challenge your own assumptions about your target audience before finalizing your questions.
3. Engage market research participants.
Once you are prepared with buyer personas and research questions, it's time to bring them into the real world. Through polls, surveys, focus groups and social posts, engage the participants to gather feedback, which will be essential in informing your decision making.
"Once you have mapped out your initial assumptions, it's important to validate them," White said. "For example, consider creating focus groups that you can interview to test your assumptions and gather real feedback on their actual characteristics, jobs to be done, pains and gains."
4. Summarize your research findings.
According to White, an effective summary of research findings includes the following information:
Goal and hypothesis: State what you hope to achieve and what you expect to find.
Participants: Describe the group you are researching.
Executive summary: Explain the key findings of the research.
Key insights: Outline any unexpected and valuable commonalities among the participants.
Consideration: Note the main themes that emerged from the research.
Action plan: Think of how these insights can be utilized to create products or services that deliver tangible value for your prospective customers.
Key takeaway: Begin by identifying buyer personas and understanding who your audience is. Then, engage that audience and summarize your findings, which you can use to inform decision making around your business idea or product development.
Ways to conduct market research
According to Amazon's Alexa Blog, there are several ways to conduct market research, each being identified as a primary or secondary method of research. Primary research methods involve first-party collection of data: The business is collecting the data directly for in-house analysis. In comparison, secondary research involves the use of previously established data sets to make business decisions. Primary research is generally preferable, since you'll be getting information directly from your customers.
These are some ways to conduct market research without relying on secondary data:
Interviews are one-on-one interaction between a customer and a company (the business owner or a designated employee). You can conduct interviews in person or over video conferencing. The great thing about using personal interviews to conduct market research is that there's flexibility for the customer to give in-depth responses, and you can ask follow-up questions. Another advantage of an interview is that you can pick up on visual cues as well as verbal ones.
This is the most common primary research method. A market research survey entails sending your target customers or other consumers a series of open-ended or multiple-choice questions by email or direct mail. This is a low-cost method, and you can give respondents room to explain their answers if you want more context.
You might want to gather a group of consumers from your target market to give feedback on your company in person. The advantage of focus groups is that you get multiple opinions about your products and services at the same time and can observe real-time discussion about your company.
For this tactic, a market researcher watches a target customer interact with your products and services. The researcher takes notes on the person's positive and negative reactions. The benefit of customer observation is that the data is collected in a natural setting without exterior influences.
To come up with a buyer persona, you collect data from customers through surveys to create a semi-fictional person. With buyer persona research, you're trying to find out what your ideal customer looks like in terms of demographics and needs. What are they feeling? What drives their purchases? You then use this "ideal customer" data to design your ad campaigns.
In this case, a company tests a new product or service at select locations or with a small group of buyers. Based on sales and customer feedback, you could make product or service adjustments before a wider launch. To choose where to try out the new product or service, you can look at the different segments of your market. Market segmentation means breaking down key customer features such as geography, needs, interests and demographics to better focus your customer research and communications. [Read related article: How to Segment Your Email List for Better Engagement]
10 tools to help conduct market research
There are many tools that can help you perform market research effectively and easily. Many also include reporting tools that make it easy to reference the data you gathered.
"Budget may act as the most significant barrier for small businesses; however, from SurveyMonkey to SurveyGizmo, there are many low-point-of-entry DIY tools available," said Susan Scarlet, vice president of strategic branding at Gongos Inc.
Here's a look at some free or low-cost market research tools your small business can use to gather insights about your target audience:
Facebook Audience Insights: This tool allows you to tap into information about users who engage with your social media advertising efforts on Facebook. Use Facebook Audience Insights to gather demographic data and behavioral information about how your audience engages with your brand on Facebook. You can also use it to compare your performance with your competitors' pages.
Google Trends: Google Trends offers real-time insight into what users are searching for online. By entering key words and phrases associated with your business, you can see if users are looking for your business, querying specific features and using certain terminology. Google Trends breaks down this information by geographic location and frequency of queries over time.
GutCheck: GutCheck is a market research outsourcing company that offers companies a way to secure secondary research on their target audience in a quick, easy-to-read format. The company conducts both quantitative and qualitative research and then helps businesses make decisions accordingly based on the market research results.
Hootsuite: Hootsuite is a popular social media management tool, but it also includes information about how users engage with your brand across all of your social media channels. This data can help you understand what type of content engages your audience, as well as what people are thinking and saying online about your business.
Online review sites: Online review sites such as Yelp offer direct insight into what your audience is saying about your business and your competitors. Examine these reviews to identify common qualitative themes in what your audience likes, dislikes and wishes were available. While these tools aren't usually enough on their own, they offer a free way to get a sense of what your audience is thinking.
PickFu: PickFu allows businesses to generate audience feedback on marketing copy and phrasing around products and services. Essentially a polling tool, PickFu can help you refine the way you approach your target customers in a way that makes sense to them and is most effective for driving conversions. It also allows you to track responses by demographic segments.
SurveyGizmo: SurveyGizmo offers both free and paid survey generation tools to help small businesses craft targeted questionnaires designed to gather insights about what their target audiences want and need from their business. It includes an easy-to-use dashboard to display an overview of survey results at a glance.
SurveyMonkey: SurveyMonkey is a popular survey generation tool that allows users to craft a survey and deploy it to their audience. This can be a powerful tool for businesses that are seeking both qualitative and quantitative insights from their target audience.
Think with Google – Marketer's Almanac: This tool is essentially Google Trends targeted toward business market research. Think with Google – Marketer's Almanac tracks consumer trends in a given industry, helping businesses get a better sense of what their target audience is already looking for and the ability to tailor their ideas accordingly.
Zoho Survey: Zoho Survey offers a free version that allows businesses to create surveys with up to 10 questions and deploy them to their target audience. Paid plans offer more robust survey-creation options for businesses that really want to dig deeper into their target audience's wants and needs.
While these tools are indeed helpful, Scarlet said, it is important to use them with the proper market research process to yield the most effective results.
"The problem is, the tool is just the beginning," she said. The "advanced survey design, analysis and consultative input is where the value lies."
Indeed, these digital tools are never a full replacement for the human element of market research.
"Additionally, when it comes to qualitative research, a seasoned moderator is often necessary to bring the right level of probing and non-bias to the table," Scarlet said. "Market research tools, design and findings are best infused with human expertise and analysis."
Key takeaway: There are many free or low-cost market research tools available to small businesses, but they require human expertise to make the most of their features.
Source: Business News Daily