Market Research: What It Is and How to Conduct It To boost your competitive advantage, you may want to do market research. Entrepreneur is here with a guide on market research and how to conduct it.
Whether you're a new business owner or a seasoned entrepreneur, market research is essential for ensuring your business stays at the top of its game. Stay tuned for more on what market research is and how to conduct it effectively.
What is market research?
Market research is a practice that tracks consumer behavior, market trends, and economic trends. It is the process by which you gather information on your potential customers to evaluate and improve how you meet customer needs.
You can also complete market research to gather data on your competitors to assess where you stand and how you can improve your business plan and operations.
In all your business decisions, not just related to marketing campaigns and profitability calculations but also customer satisfaction in face-to-face interactions, quantitative research about specific markets you target can be a great way to guide you to success.
Key questions
When you begin building a template for your research, there are some key questions you should address. They can help you gather a better feel for what is going on in your target market.
Key questions can include:
- Is there a demand for the product or service you're providing?
- Is there a market or interest in your product or service?
- Does the income range of your target audience match the price point of your product or service?
- Does your product make sense for its location? Can you broaden your locale by providing country-wide or international shipping?
- Is the market saturated with similar products and services? If so, how can you distinguish what your business offers?
- What is the price point of your competitors?
Key demographics
As you complete market research, there are certain demographics you should use to guide your process. Sticking to these critical areas can help streamline your process while still constructing a thorough assessment.
Key demographics often include:
- Age
- Gender
- Income
- Interests
Related: What to Do When Your Ideal Customer Isn't Who You Expected
Types of market research
You can conduct a few different types of market research to find the answers you need. Each has advantages and disadvantages, so it's ideal to complete your research using a combination.
Primary research
This is research you conduct yourself and gather first-hand. If your budget permits, consider hiring a market research firm specializing in primary market research.
Primary types of market research methods include:
- Focus groups: Using a small group from a specific demographic to give reviews and feedback on particular products and services
- Surveys: Asking customers a set list of questions to record their opinions on new products
- Interviews: Asking customers conversational, open-ended questions in a one-on-one virtual or in-person setting to gather opinions and preferences
- Observations: Watching how customers interact with specific products for mannerisms and ease-of-use
- Market segmentation: Dividing your consumers into demographics and analyzing data through that lens to better meet their respective needs
Secondary research
Secondary research is data that already exists. You can find secondary research in credible newspapers, government statistics, and industry reports. While some scholarly research may be behind a paywall, there are numerous credible sources that you can access for free.
Exploratory research
This is a type of research study you can use to conduct your market research. Depending on your stage, you can gather people's opinions on products or topics. This can give you an idea of perception and provide more open-ended data.
Specific research
After you've completed some exploratory research, you can narrow your questions and sample audience to be more specific. Use this to capitalize on opportunities to alleviate pain points in the market and elevate your company over the competition.
Related: The Ultimate Guide to Competitive Research for Small Businesses
How to conduct market research
Market research can be time-consuming, but it's well worth the effort. The more information you can gather about your customer base's needs and buying habits, the greater your chance of securing a competitive advantage in your industry.
Take a look at a step-by-step guide on how to conduct market research.
1. Identify buyer persona
To connect with your target customers, you need to understand who they are.
You might be marketing to more than one demographic, and that's okay, but you still need to create profiles for the buyers you want to reach to keep track of their likes, how they interact with your product, and their buying habits.
Buyer personas are based on demographics like age, gender, locale, income, interests, and needs.
2. Find a sample
After creating buyer personas, you'll need to find the right people to participate in your market research process.
Your interviewees can be people who:
- Have recently purchased your product
- Have purchased from a competitor or abandoned cart at checkout
- Follow or interact with your social media accounts
It can be challenging to find willing participants. If your budget allows for it, feel free to offer incentives for feedback, whether it's a free gift, a nice discount, or even free shipping on their next order.
If you cannot afford to provide incentives, you can also offer participants access to exclusive content. No matter what, make sure you thank your respondents for their time at the end of the process.
Related: The How-To: Market Research On A Tight Budget
3. Create research questions
As you create your market research questions, try to ensure they are open-ended. You do not want to lead your consumer toward the answer that works best for you — you want to get the real answer that can identify strengths and help improve weaknesses.
Research question topics include:
- Customer background information: Try to go beyond age and job title. Keep the conversation going by asking more in-depth questions about their job responsibilities, challenges, and how they tackle them. The more people reveal about themselves, the better.
- Brand awareness: Learn why customers looked for a product like yours and how they came across your business.
- Consideration process: Push the brand awareness conversation further by having the customer take you through their product research. What other brands did they research? How easy or difficult was the research process?
- Decision making: What did they like or dislike about their experience with other businesses? What did they like or dislike about the different products themselves? Were they using any type of criteria for driving their decision-making? What factors ultimately made them choose your product over another?
- Closing the interview: Drive the focus back to your product by asking the consumer what improvements they'd like to see if any. Before the interview closes, open the floor for customer questions. Make sure to thank them for their time and send them a follow-up thank you after the interview.
4. Assess your competition
At this point in the process, you've probably got a decent idea of who your competitors are from when you interviewed customers about other products they considered.
However, that is not thorough enough — you need to dig deeper. You should start with a broad search and narrow it down throughout your process.
You can identify competition by:
- Utilizing industry search tools using sites like G2 and Capterra that can gather user ratings and compare other companies in your field.
- Find and download free market reports, like those provided by the U.S. Census Bureau or private firms, highlighting leading vendors in your industry.
- Use social media as a search engine directory to find other competitors with high-level content.
Related: 3 Reasons Why I Gladly Welcome Competition
5. Create a market research summary
When you finish your market research, you will be left with an excess of information.
While this information is beneficial, it doesn't do any good if it isn't organized enough for you to analyze it. Creating a summary report can help you organize your thoughts and more easily identify critical takeaways.
A streamlined research outline should consist of the following:
- Background information on your motivation for conducting the study
- A breakdown of participant demographics to identify customer personas
- Powerful quotes from participants that can serve as guiding reminders
- Common themes and details reasonings for customers considering your product
- The driving factor that pushed consumers to purchase your product over the competition
- Notes on the most interesting bits you learned and how you can drive those forward
- An action plan for how to capitalize on the research results
Valuable templates for your market research
With a long road ahead, market research might sound daunting. However, the more organized you are with your strategy, the more smoothly the task may go. There are several free templates out there that can serve as a roadmap for your research journey.
No template is better than another — it simply depends on your preference. Take a look at the template options below.
Porter's five forces analysis template
This template is centered around competitive rivalry, with four factors pointing toward it. Those factors are:
- The threat of new entrants
- Buying power
- Threat of substitution
- Supplier power
SWOT analysis template
You may have heard of SWOT before, as it is one of the more common analysis practices. It is a straightforward way of identifying focus areas for you and your competitors. SWOT stands for:
- Strengths
- Weaknesses
- Opportunities
- Threats
Related: Start 2022 With a SWOT Analysis
Market survey and focus grouptemplate
Both templates are a bit less structured, as you can create your questions based on what you'd like to focus on.
Both strategies focus on qualitative research data to discover information on buyer persona. The most significant difference is that market surveys focus on short-answer questions, and focus groups ask questions that promote in-depth answers.
What market research can mean for you
Market research is an essential practice that can help you track consumer behavior and market and economic trends. Collecting this information to learn about your target demographics and how you can improve your marketing strategy, products, and services to meet their needs is vital.
Now you know how to conduct effective market research, choose a template that resonates with you, and begin your research plan.
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