Market research is the collection and analysis of information about consumers, competitors, and the effectiveness of marketing programs.
While market research is crucial for a business startup, it's also useful for established businesses to increase profits. It's accurate information about the marketplace, the target market (customers), and the competition that allows the development of a successful marketing plan.
Use Market Research Before Starting or Expanding
Business owners use market research to determine the feasibility of new business opportunities. Market research is an essential component of a business plan for any startup businesses. If market research does not indicate a demand for the product or service, the proposed business will not likely be viable. Businesses may also use results to expand into new markets.
Monitor Your Competition
You can use market research to monitor industry and economic trends. Use these results to develop strategies and adapt your business to any the changing environment.
By monitoring the competitions ads, websites, and social media campaigns you can see how they attempt to capture some of your market share. Use results to develop competitive strategies. For example, setting competitive pricing for products or services or determining how your products, services, and customer service compare to the competition.
Test Product or Service
You can test interest in new products or services you are bringing to the market to respond to customer needs. Use test results to determine the optimal product placement so your customer will always find you first. Results will also help you see the best times and places to distribute your product. It is also a great way to test your responsiveness to customer demand and improve your customer service. Market research will help you to develop optimal strategies for promotions you want to run. It will define how to get the message out to the target market via branding, traditional advertising, and social media.
Conduct Customer Market Surveys
Customer surveys are conducted in various ways, including online, one-on-one interviews, "Satisfaction Surveys," and phone calls. Traditional phone surveys are on the decline due to cost and the low rate of response (most people find them irritating). Many businesses provide a short customer feedback form in a prominent location on the premises (or include the form with invoices), so customers can record their comments.
Research With Your Web-Savvy Business
Use your online presence to conduct market research by encouraging customer feedback on business websites and social media. A short web-based questionnaire about your products and services is a simple, inexpensive, and effective way to survey customers. Make sure the survey is usable from mobile devices. Social media platforms, such as Facebook, Twitter, LinkedIn, and others provide a dialogue between you and your customers so that you can receive immediate feedback on product and service offerings and make your customers feel like you value their opinions. Unfortunately, social media campaigns can also backfire as people are statistically more likely to post negative comments or reviews than positive ones. Poor customer service and negative product reviews can lead to widespread criticism on social media and be disastrous for businesses.
Market Research with Product Trials
Providing samples of new products to customers in a live setting and gauging the response can be an effective market research tool. Direct customer feedback can be used to make changes to the product or determine optimal pricing. Product trials are ideally suited for businesses like food service establishments that wish to test new menu items.
Using Focus Groups
Focus groups are organized sessions with groups of people where a scripted topic or Q&A discussion with a moderator takes place. Focus groups can collect useful information but are difficult to organize. They are also an expensive method of market research for small businesses. Focus groups are increasingly conducted online.
Direct observation involves watching or video recording customers in a natural setting to see how they respond to displays of products or services. Note that for privacy reasons, direct observation by video can only be conducted in a public setting unless the person being surveyed is aware of being video recorded. Direct observation has advantages in that for the purposes of collecting information the customer is behaving naturally (rather than possibly responding in a contrived fashion as they might with another survey form), but it is a very time-consuming method of market research.
While it's common for businesses to hire market research companies to conduct market research for them, it is possible for small business owners to do their own.
McDonald's Market Research Changes
After several quarters of declining sales, McDonald's executives decided in 2015 that major changes were required to combat the public perception of McDonald's products as being unhealthy. Based on market research, the company made menu changes and no longer sells chicken products containing human antibiotics or other ingredients, such as phosphates and maltodextrin. Other changes include the addition of more salad choices and healthier desserts including apple slices.
Redefining Lego With Research
For years Lego was an enormously successful product with young boys but was popular with only 10% of female children. In response, Lego conducted a huge four-year market research campaign with over 3500 young girls, resulting in a new product line featuring vibrant colors and different figurines. The new products became a huge success and the share of female Lego users increased sharply.