What we’ll cover in this article: Introduction to market research, Market research methods, Market research reports – what they include and their limitations.
Market research is the process of collecting information about the target market to study them and tailor the company’s products and services to their needs.
What is market research?
Market research may be viewed as a strategy to stay a step ahead of the competition as it provides data in the form of market size, the activities of the competition and changing market needs.
By using analytical and statistical methods to collect and disseminate data, market research is an important business activity. In today’s complex and dynamic business environment, no business can afford to depend on instinct to drive its operations.
What does a Market Research Report contain?
Market research helps a business get information about the following:
- Historic and future market trends
- Market segments in relation to demographics, preferences, genders and personalities
- Pricing information
- SWOT analysis
- Information about the company’s marketing effectiveness
Benefits and advantages of market research
Some of the important benefits of market research are:
- Uncovering opportunities in different markets so that they can be tapped. If an existing product is not doing well in the market, market research helps the business find the right one.
- Understanding customers better by profiling their consumer behavior
- Shaping the marketing plan and strategy to align with customer wants and needs
- Promoting communication with consumers and connecting the business with its market.
- Minimizing and mitigating risks by taking timely action so that its products and services are successful in the market.
- Identifying likely issues through interaction with consumers, enabling the business fine tune its products before it reaches the market.
- Identifying and monitoring the competition and learn how customers compare
Market research can be complex or simple ranging from a basic questionnaire or survey to a professionally conducted campaign depending on the business’s activities and budget.
Whatever methods are used, the goal is to help the business make better decisions. From the many ways to conduct market research, most businesses use one or a combination of the following:
Primary market research
Used by the business to collect information to improve its products. Often called “field research” since it is done from scratch, it is focused, valuable and enables the collection of primary data through qualitative research and quantitative methods.
These include surveys, questionnaires, in-person or phone interviews, direct mail, email, observations and experiments.
- Qualitative market research digs deep into consumer perception and behaviour and the factors that influence it. It considers the feelings and opinions of consumers for the company’s products or services. Examples are focus groups and in depth interviews.
- Quantitative market research has to do with facts and numbers and quantifies data. It is useful in both primary and secondary market research. Examples are structured questionnaires usually with closed questions where respondents choose from a set of given responses, exit surveys, financial reports and research papers.
Tools and techniques for Primary market research process
The most common primary market research methods are:
These involve direct questionnaires targeted at a sample group in the business’s target audience and include:
- In person surveys, personal interviews where product samples are offered for feedback. The response rate is good but the method is expensive.
- Phone interviews. Here the response rate is lower although it method is less expensive compared to personal interviews
- Direct mail surveys, cost-effective for larger audiences, but low response rates
- Online surveys, inexpensive though usually unpredictable
2. Focus Groups
Groups of people are involved in a discussion with a moderator facilitating the sessions, usually in a neutral location.
These sessions may be filmed. More than one group is required to get results. Participants are from the same demographic profile and are often compensated for their time through coupons, gifts or cash.
3. Personal Interviews
Similar to focus groups, these also involve discussions and produce subjective results from a small segment of the market.
However, when respondents are carefully chosen, it can offer important insight into consumer attitude and product related issues.
This is a quantitative method where actual consumer behaviour is observed and filmed in stores, at the workplace or residence for information about their shopping habits and product use.
This may or may not involve interaction with the consumer.
5. Field Trials
This quantitative method is used mostly in product-testing after a new product is launched by placing them in chosen outlets to test consumer reaction in a real-life setting.
The results are used to finalize packaging, pricing and product improvement.
Secondary market research
Secondary market research works from existing information from internal and external resources. Internal resources are company records, financial statements, marketing data and files and its research studies and surveys.
External resources include government reports, publicly available records, the internet, industry data and books.
The information is used to address a particular question or issue. It is less time consuming and less targeted compared to primary market research; nevertheless, it offers important data.
The best time to conduct market research is during the planning stage for new start-ups when the business must estimate the sales potential for its products or plan a new product launch.
It is especially useful to assess the market for a new advertising campaign, expanding the business to a new location or market segment and increase production capacity.
Market research should be undertaken with specific goals and a plan of action choosing techniques that will bring the maximum results and return on investment. Some mistakes to avoid are:
- Sticking only to one type of research, either primary or secondary. A combination of methods yields the best results.
- Relying on internet data solely. Although the online space has a wealth of information, it may not always be reliable.
- Focusing on only one market segment when the business’s products are used by a variety of consumers. This can resulted in a restricted view of information.
- Doing market research randomly without identifying the target audience. Unless the business knows its audience, its marketing message cannot be effective.
- Taking consumers for granted. Businesses must reward their participants for their response.
Once market research is done, the next step is the generation of reports and their analysis. A typical market research report consists of the following:
- The title page with name and contact details of those conducting the market research, name of the client and the date
- Contents, listing various sections, tables, graphics with page numbers
- An executive summary that briefly sums up what the report is about, with recommendations and conclusion.
- An introduction to the report with key objectives, reasons for research, constraints, researcher profiles and responsibilities.
- Research methods outlining each one with information of sample source, discussion guides, questionnaires where applicable and updates about any changes made after the initial proposal
- Research findings and analysis, presenting solutions to the problem
- Appendices and index with supporting data in the form of tables, graphs, list of secondary sources, the actual questionnaires and other related documents.
Limitations of Market Research
Ideally, market research is a premeditated activity and is expected to produce accurate and valuable insights for the business, enabling it to plan its competitive edge and marketing strategy.
However, it has its limitations and often falls short of its goals. Here are some common reasons why:
1. A lack of adequate budget
Even though businesses are aware of what data they need and the methods involved, there may be budgetary constraints, preventing them from hiring the resources they need to get their data. This may result in inadequate information that falls short of their needs.
2. A lack of time
The organisation may not have enough time for decision making as a result of which market research becomes a rushed activity and skips important steps.
3. Data accuracy
The success of any market research activity depends on reliable data. The results obtained can be influenced by: the type of questions asked, selection of the wrong audience, the interviewers’ attitude could all influence the results.
Sometimes businesses try to cut costs by scrimping on these aspects.
4. The question of ethical data handling
Researchers must adhere to regulatory requirements in relation to data security and its use. They must be clear about the purpose of the data collection and have the participants consent. When these are not followed the results are compromised.
Market research offers critical information to a business about its target market, its buying habits, needs and preferences, besides uncovering valuable data about prospective markets. Avoiding likely limitations and mistakes can make it a powerful tool for business growth.
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