What is Market Research?
Market research is a process of evaluating the feasibility of a new product or service, through research conducted directly with consumers. This method allows organizations or businesses to discover their target market, collect and document opinions and make informed decisions. Market research can be conducted directly by organizations or companies or can be outsourced to agencies which have expertise in this process.
Primary purpose of conducting market research is to understand or examine the market associated with a particular product or service, to decide how the audience will react to a product or service. The information obtained from conducting market research can be used to tailor marketing/ advertising activities or to determine what are the feature priorities/service requirement (if any) of consumers.
Types of Market Research: Market Research Methods and Examples
There are different types of market research, that covers varied areas of study. Whether an organization or business wishes to know purchase behavior of consumers or the likelihood of consumers paying a certain cost for a product, market research helps in drawing meaningful conclusions.
Depending on the methods and tools required, following are the types:
1. Primary Market Research (A combination of both Qualitative and Quantitative Research): Primary market research is a process, where organizations or businesses get in touch with the end consumers or employ a third party to carry out relevant studies to collect data. The data collected can be qualitative data (non-numerical data) or quantitative data (numerical or statistical data).
While conducting primary market research, one can gather two types of information: Exploratory and Specific. Exploratory research is open ended, where a problem is explored by asking open ended questions in a detailed interview format usually with a small group of people also known as sample. Here the sample size is restricted to 6-10 members. Specific research, on the other hand, is more pinpointed and is used to solve the problems that are identified by exploratory research.
As mentioned earlier primary market research is a combination of qualitative market research and quantitative market research. Qualitative market research study involves semi-structured or unstructured data collected through some of the commonly used qualitative research methods like:
Focus groups: Focus group is one of the commonly used qualitative research methods. Focus group is a small group of people (6-10) who typically respond to online surveys sent to them. The best part about focus group is the information can be collected remotely, can be done without personally interacting with the group members. However, this is a more expensive method as it is used to collect complex information.
One-to-one interview: As the name suggests this method involves personal interaction in the form of an interview, where the researcher asks a series of questions to collect information or data from the respondents. The questions are mostly open ended questions and asked in a way to facilitate responses. This method is heavily dependent on the ability and experience of the interviewer to ask questions that evoke responses.
Ethnographic research: This type of in-depth research is conducted in the natural settings of the respondents. This method requires the interviewer to adapt himself/herself to the natural environment of the respondents which could be a city or a remote village. Geographical constraints can be a hindering factor in conducting this kind of research. Ethnographic research can last from a few days to a few years.
Learn More: Qualitative Research Methods
Qualitative research methods are used by organizations to conducted structured market research by using online surveys, questionnaires and polls to gain statistical insights to make informed decisions.
This method was once conducted using pen and paper. This has now evolved to sending structured online surveys to the respondents to gain actionable insights. Researchers tend to use modern and technology-oriented survey platforms to structure and design their survey to evoke maximum response from respondents.
Through a well-structured mechanism, data is easily collected and reported and necessary action can be taken with all the information that is made available first hand.
Learn more: How to conduct quantitative research
2. Secondary Market Research: Secondary research uses information that is organized by outside source like government agencies, media, chambers of commerce etc. This information is published in newspaper, magazines, books, company website, free government and nongovernment agencies and so on. Secondary source makes use of the following:
Public sources: Public sources like library are an awesome way of gathering free information. Government libraries usually offer services free of cost and a researcher can document available information.
Commercial sources: Commercial source although reliable are expensive. Local newspapers, magazines, journal, television media are great commercial sources to collect information.
Educational Institutions: Although not a very popular source of collecting information, most universities and educational institutions are a rich source of information as many research projects are carried out there than any business sector.
Learn more: Market Research Example with Types and Methods
Why is Market Research Important?
With economy being competitive with each passing day it is important for businesses to know and understand preferences of their consumers. Conducting market research is one of the best ways of achieving customer satisfaction, reduce customer churn and elevate business. Here are the reasons why market research is important and should not be ignored:
- It provides information and opportunities about the value of existing and new products, thus, helping businesses plan and strategize accordingly.
- It helps in determining what the customers need and want. Marketing is customer-centric and knowing the customers and their needs will help businesses design product or services that best suit them.
- By understanding the needs of customers, businesses can also forecast their production and sales. One of the most difficult aspects for a production manager is to keep inventory stacked. What is the requirement and how much should be produced to fulfill the needs of the customer? Market research helps determine that.
- To stay ahead of competitors market research is a vital tool to carry out comparative studies. Businesses can device business strategies that can help them stay ahead of their competitors.