Market Research definition
Any business that wants to understand how its customers behave and what they want and need from a product or service will need to conduct market research. Though it’s likely that you’ll have heard of this term, you may not have an understanding of what it entails in its entirety. Here, we take a more in-depth look at what market research is, why it’s useful, and how you can conduct it.
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What is market research?
Market research is the process of collecting, analysing, and interpreting data relating to a particular market and the behaviour of customers in that market. This data can pertain to a product or service for sale in a given market, the customers who are likely to use, are using, or have used a product or service in the past, and the characteristics, which define these customers. It is also likely to include information concerning the competition in a specific marketplace.
Generally, market research consists of two main types of data. These are primary information and secondary information. The first category consists of data that your organisation collects itself or that’s gathered by someone employed for this purpose. The second category includes data that is compiled by other organisations. These are likely to include government bodies, trade organisations, researchers, and other companies.
Though primary information is most useful, as individual organisations can tailor the data collection to meet their specific needs, it is generally more expensive to collect. Consequently, secondary information is used far more regularly for market research purposes.
Why market research matters
When businesses make business decisions concerning the way in which they’re going to invest their capital, they look for ways in which they can maximise reward while minimising risk. To do this, they need to gather as much information as possible regarding the markets, products, and services that they’re investing in and the customers who are likely to purchase these products and services.
Market research matters because it is one of the key ways in which businesses acquire the data required to make informed decisions and to mitigate risk. In other words, it allows businesses to navigate the commercial landscape and to make choices about investment opportunities that won’t imperil the company. In this sense, market research can be considered a business’ map and compass – it guides you through the challenges ahead and allows you to make sense of the immediate environment.
How market research helps businesses
More directly, market research helps firms in at least three different ways.
First, it allows you to focus entirely on the customer. Those with experience running a business will understand how surprisingly easy it is to lose track of the end goal - the customer. There are day-to-day management tasks, office politics, brand development, industry news, and competitors to worry about. In amongst all this, the customer can quickly retreat into the background. However, market research places them front and centre and ensures that you’re paying strict attention to their needs, habits, behaviours, and desires.
Second, it allows you to identify potential growth areas by keeping you aware of developments in the industry and the emergence of new trends and gaps in the market, ensuring you stay relevant. Without data informing you as to what’s likely to happen in the future, you’ll be sailing blind and potentially steering your business into dangerous waters.
Finally, market research presents you with a tried and tested system for prioritising goals and objectives. By recognising what’s happening in certain markets, you’re better able to understand what your priorities need to be in both the short-term and the long-term.
When to conduct market research?
Market research is an ongoing process that has no definite start and end date. Instead, business should be attempting to monitor the market’s pulse at all times and ensuring that they’re keeping up to date with the latest developments. However, there are certain times when market research needs to be carried out. For instance, if you’re considering launching a new product or breaking into a new market, market research will form an integral part of your preparations. Likewise, if you’re business begins posting poor performance results, market research may be able to help you identify the problem.
What are the limitations of market research?
Though market research has its advantages, it also has some limitations. For instance, a lack of resources and expertise can lead to inaccurate results and a business making poor decisions on the back of these findings. Errors are particularly common when carrying out customer surveys, as humans often accidentally or unconsciously report untruths when completing them.
Other limitations include the time consuming and expensive nature of carrying out market research, as well as the unpredictability of customers. Though consumers often behave in entirely predictable ways, the opposite is also occasionally true – consumers can be frustratingly unpredictable. This is one of the significant limitations of market research – it is not a science and can (and is) often proven wrong.
Market research methods
There are numerous market research methods and tools at the modern businessperson’s disposal. Many are industry-specific, and some require a great deal of expertise and experience to utilise efficiently. Below, we list three of the most common methods and tools.
- Surveys – businesses ask their customers or potential customers a series of questions to better understand how they feel about certain issues.
- Focus groups – organisations bring together a group of individuals (who typically share a common trait, such as age, shopping habits, or profession) and ask them to discuss certain themes in order to understand their feelings towards specific issues better.
- Buyer personas – a semi-fictional description of an individual who represents the core characteristics of a particular part of your target demographic. They are a kind of stereotyped “ideal” customer that allows you to think about the way in which consumers may respond to your products and services.
Market research jobs
The professional title for someone who carries out market research is a market researcher. There are numerous market researcher vacancies in the UK, and many businesses are looking for talented researchers who can collect, analyse, and effectively interpret data.