Why is market research important to businesses?
As a business owner, it can be tempting to overlooking market research. It can be so incredibly dull and data based, you’d rather be driving around in Bentleys and sipping cocktails but unfortunately, it’s all part of the leg work in running a successful business. I can’t promise Bentleys, I’m not a genie but I can promise you’ll understand the reasons why and how you might be able to go about researching your market.
Other areas of your business, products and services tend be a little bit more appealing but the truth is, research is the listening part of your marketing strategy. It’s too important to be ignored. As the foundation of targeting and product development, it helps you to identify your most logical business opportunities and build banks of prospects for products that haven’t even been launched yet.
When you build a detailed research plan and carefully consider the best market research activity. You’ll usually divide it up into two sets of sources, which complement one another. These are primary and secondary sources, both are important to creating a complete picture of your research.
Your business idea is much less likely to fail if you’ve identified your ideal customer, built your product or services around them, their feedback and then place the product where they’re likely to look for it.
See, this is the side of marketing that gives you a distinct advantage, it’s not glamourous or pretty, it’s never a topic to impress your pals but it’s the results that matter and it adds fire to your marketing communications. The good kind of fire in the form of carefully crafted strategy. It’s common sense but it’s always overlooked.
You’ll be engaging with a much deeper understanding of your potential customers, their profiles, including gender, age ranges, income, activities and trends within that market segment and as a bonus you’ll end up with intelligence on your competition too. How much more informed could you be? Only experience and more research could take it further.
Your marketing hypothesis
I wanted to leave that word at school, along with my grunge phase but it’s been a big part of my adult life and remains as relevant as ever as I’m embark on a journey to a PhD in cognitive neuroscience. It shouldn’t be a question, that’s a big mistake as questions have straightforward answers and often lead towards opinions and biases.
You’d be looking for a pre-decided outcome rather testing a reality and creating a clear picture to make informed decisions. We need a statement that you’re going to prove or disprove instead of something you’ve already decided the answer to.
It can be helpful to start with a simple idea, something along the lines of ‘we need a set of marketing email templates.’
In that instance, your hypothesis could be that ‘short email templates with basic personalisation lead to more responses,’ or ‘that middle class, females are your ideal target customers for your new product set.’ It doesn’t matter if these things are true, what matters is that you find out the answer and use it to guide your strategy.
What is primary market research?
This is where you contact the individuals or companies directly yourself with a solid idea of what you want from them. There are two main methods, qualitative and quantitative.
Qualitative – these usually take the form of interviews or long, open ended questions. You’d ideally need to turn it into something qualitive if you were to build a big picture. The trouble with qualitive approaches is people sometimes fall victim to speaking for the sake of it and don’t say what they necessarily want to say.
For example, if you’re sat in front of the people taking part in your research and you ask ‘so what do you think of these brownies then?’ They’re quite likely to respond with ‘they’re good, taste great!’ In those circumstances, they’re in front of you, care what you think and would 9 times out of 10 be conscious of upsetting you, the creator of this product.
Remove influence and barriers and let the feedback flow, openly and honestly. There are options, you could run open questionnaires over time or focus groups at different stages of development. I’d always encourage you to pay people for their time though.
You can hire specialist agencies to run tests on your behalf, removing these possibilities, we get asked to do this a lot for software companies especially. When it comes to testing your product, you want the brutal truth, whether it’s positive or negative as it’s going to benefit you for the longer term.
The other type is quantitative – these tend to have fixed answers that you can quite easily quantify. Examples include multiple choice questions or ratings.
Often, primary market research makes use of incentivised surveys, questionnaires and forms. Every company should have a constant cycle of customer and employee feedback. When this information comes in you need to make it clear that it’s being acted upon, not by saying so but by doing so otherwise you run the risk of upsetting your customers or employees by ignoring their views.
A good approach to these is incentivising them and running ads and viral campaigns. I use a tool called ‘Prefinery‘ which is one of the best tools out there for viral and referral campaigns. I’d recommend adding surveys as an option to referral campaigns, it could form the basis of a full product or business launch.
Incentivising your target market
You can be smart with incentives. You don’t have to use an iPad or a holiday as an incentive but it could be a good idea if that’s what you’re selling. Analyse your products, offer something related as a reward and then you’ll narrow down the competition entries to people who actually want your products or services. When you do this, you create an opportunity for follow-ups.
The smartest research leads to sales and that’s how you can build an intial bank of potential customers, understand your weaknesses, their preferences and mould something that people would actually buy.
Existing internal data sources
You might be surprised to know that you may already have a mass of data at your disposal that we call ‘existing internal sources.’ These internal resources can include customer conversations, previous customers and historical feedback, analyses of usage, success and churn and so much more.
You don’t have to involve surveys or interviews. In the email marketing example above, you could test the results yourself through analytics. How many people responded to shorter emails compared to the longer sets of emails? How many people clicked, purchased or enquired at your business from each group? It’s wise to create a variety of groups each with a substantial amount of participants to get a clear picture.
Testing on 5 contacts wouldn’t be enough, if 1 responded and enquired you’re setting an unhappy precedent for whoever runs your email marketing strategies as they’ll be aiming for a 20% hit rate. It’s a better approach to look at groups of 100s of prospective customers at a time.
What is secondary market research?
Secondary market research is the other main categrory and serves to support or dispute the data you found in your primary research. It exists already, that’s the difference, primary is what you’ve done, secondary is already available.
Potential secondary sources:
Trade associations often release questionnaires to businesses on a large scale and this is sometimes publicly available as stats at a minimum.
Public libraries contain information and records of publications. They’re great for text books, public records and on occasions, historical local news records too!
Not only do the education sector run constant research, university or college/ public libraries can be packed with articles and invaluable information of studies on exactly what you’re trying to find out. You can compare your tests to theirs or even base yours on existing research to take it one step further.
The government publishes research on a regular basis. The census is a good example of this information, mostly for data on consumers but you could also analyse Companies House by Sic codes or pull data with their API, if you’re tech savvy enough.
This could create a great set of data that considers market size, the types of markets and some of the directors or persons of significant control in your target audiences. Use this information for insights into individuals and the companies they’re involved with. For any more detail on this, you’ll need to contact me.
Product reviews and popular products in the marketplace can be good indivcators of what works for your competitors.
Industry journals are invaluable too. You could find diamonds in their research and it’s peer reviewed so of an incredibly high standard. Examples of journals that I’ve used, in the past, include:
These are fairly niche and due to my involvement in neuroscience and consumer psychology but whatever subject you’re looking for, search Google for journals on the subject matter and see if you can find a way to assess their credibility avoiding biases. I’ve found software vendors often release some of the most biased statistics out there, which aren’t worth taking notice of, they’re just trying to sell you something. Ridiculous stats could include:
‘95% of consumers click ads on social media before purchasing.’
Here we’ve reframed a stat to sell a service, which is very common in content and on social media or website pages too. This is the opposite of an honest picture, you’d be lying, not only to your audience but to yourself too.
Building a market research report
Businesses that are on the ball with data analysis tend to be the ones that have a deep understanding of themselves and their prospects. Once you’ve completed your research, it needs to be displayed in a way that makes clear business sense and gives you the answers to your hypethesis.
Were you right? Are single women between the ages of 35-55, in working class locations the best customers for your new product? Is there a huge opportunity in the construction sector for you business? If so, how big is the market and how can you engage with them?
Statistics can problematic because they’re often reframed and taken out of context. When you’re really looking at statistical analysis, you need to remove any efforts to pursuade and rely instead on cold, hard facts.
‘95% of stats on the internet are made up by people desperate to sell products.’
Once you’ve built a clear picture, you can assign a budget based on the size of the opportunity. How valuable is this to your business? What are people willing to pay and how should you price your offering?
Ideally, you’ll have data that can be sliced by many factors such as age, location, job, family size, industry and you’ll chop it up in a way that makes sense to your business and types of products.
Why Market research is important for startups:
This is a process that I’ve used successfully in the past. Prior to launching a business we need to analyse the opportunity that exists. It’s no good launching a business with no idea about the realities or the potential.
We want the hard answers to save you money and time. Do people actually want your product? Everyone says yes but if you ask the market it might be a maybe or a ‘no.’ Your opinion doesn’t matter, the data tells the truth.
A huge proportion of startups make the grave mistake of deciding that they’re innovative and disruptive based on nothing but that it’s a fashionable label to attach. A bettter approach would be to find out the answer and drop the nonsense.
Imagine you’ve decided to launch a recruitment company but you want to find out what companies really want from your services so you can model it and deliver something with demand. Obviously, you know they want candidates but what bad experiences have they had with recruiters in the past? What positive experiences have they had? What did they pay and what would they pay for the better version?
Do you see how this could guide your strategy? You’re creating a service that answers the problems and models the successes of others while speaking directly to the people that you would hope to purchase your services.
At the same time as developing an effective business model, you’re building the top of your sales funnel too and becoming familiar with potential prospects. If you can’t see the gold, it’s probably because you’re looking at the minerals and don’t realise they’re the same thing.
Why market research is important for product development:
You already have an existing customer base, which means you’ve got access to an absolute ton of internal sources of data, both qualititive and quantitive. If you don’t you can always start to build it.
If you own a software company and you want to build a product around evolving needs, you’d be wise to include a roadmap in that strategy, where customers can vote for features they’d like to see. On top of that, you could build short surveys that appear on login, these could form the basis of a larger survey that you’re gradually dripping to users over a longer period of time.
You could also look for untapped market segments in your competition. Is there something they’re doing that you aren’t in an industry you’ve not yet explored?
There are tools out there than can actively monitor competitors and their product strategies. I use a tool called ‘Hexowatch’ which will send me notifications of price changes or updated features. It’s more complicated than I’d like to explain but in the most basic sense, what Hexowatch monitors website for changes and you determine the changes that it pays attention to.
You can focus in on individual elements on service pages to trigger a notification when they update their pricing, feature sets or even their descriptions. It’s part of a service I can offer but you can also take a look for yourself here.
Why is market research important to a business?
It’s insightful, can guide your strategy and give you a huge advantage. You can often count on competitors to overlook research because they’re usually more focused on areas of business more associated with glory, involving immediate revenue or saving cash.
Research might seem like a cost in terms of labour and budget but the reality is, it will save you money in the long run and keep your business moving in the right direction.
The more you understand your audience, the more you can fit their needs and communicate with them in a way that they understand and relate to. If you’re curious about exploring this further, you can book in a call with me today with the button below.