Market Research 101

So, you’ve just launched your product or service. That’s great – we’re happy for you! Not everyone gets that far.

Unfortunately, that’s only half the battle. If it were as easy as sitting back, sending out an offering into the world, and waiting to watch the dollars roll in, we’d all be marketing pros.

Whatever your business offers, whether physical products, services, software, or mobile applications, you’re going to have to do some marketing. And that goes hand in hand with market research. Actually, market research probably should have already begun before getting to launch phase. Maybe your product or service has failed and that’s why you’re here. Don’t worry about that, you are not alone. One of the most common reasons for any business failure is because they didn’t have a clear understanding of what its target market demanded or needed.

But even if you have already launched your product or service, it’s never too late to get started.

Market research will: assess demand for a product or service; paint a picture of your customer base; tell you what kinds of features people want most, and so much more.

Market research will also help with defining a unique selling proposition for your business – what makes you stand out from similar businesses. You could even start offering a specific service– something that other businesses like yours don’t — based on this research. For instance, if you’re a plumber in a town with 20 others, market research can help you narrow down what you do better or differently.

To small businesses, this can sound especially tough and a lot of work, particularly if your marketing team is small, or if you yourself are taking on several roles.

However, it doesn’t have to be a massive undertaking. Whether you go down the outsourcing route or decide to do it yourself, knowing what information you’d like to acquire is half the battle. Read on to learn more about market research and how to conduct it.

If there’s a particular area of market research you’re dying to know about, click on one of the headings in the jump-down menu below. Otherwise, scroll on to keep reading. So you have an idea of what to expect, in What is market research? We give a concise summary of the definition of market research and what it involves.

In our market research process section, we explore research methods (how you gather data) and the different types of market research (analyzing data correctly). We talk about primary vs. secondary research methods and cover the ins and outs of focus groups, interviews, surveys, and observational research. We also include a wealth of secondary sources at your disposal if you know where to look. The types of market research we discuss are market segmentation, product testing, customer satisfaction, advertising testing, pricing, brand reach, buyer personas, and the buyer’s journey. We then cover qualitative research vs. quantitative research and knowing which one is right for you by writing a research brief outlining your goals.

In the final section, Knowing when to conduct market research in-house or hire professionals, we talk about how to go about market research if you decide to go down the DIY route.

What is market research?

Market research is the organized gathering of data concerning a target “market” (people, customers, companies, and overall industry) to gain a comprehensive understanding of the needs and wants of that market.

An integral part of any business strategy, market research helps companies to make informed business decisions, from branding and marketing to general operations. It is vital for understanding your target market, your company’s position within the said market, and your customer base.

Without doing market research, your business is more or less making wild guesses about what will work and hoping for the best. This guesswork is not a great strategy if you’re hoping for success.

Now that you’re up to speed with what exactly market research is, let’s talk about what it involves and how you can go about doing it.

How to perform market research

his article will mostly deal with market research methods and types of market research. To the untrained eye, they might seem like the same thing, but actually, they’re not. Research methods refer to the processes used for gathering data, while the type of market research you do is the approach you take to analyzing that data.

The type of market research you want to do will influence your market research methods.

The process of gathering data for market research includes two methods:

• Primary research

• Secondary research

Primary research

With primary research, organizations execute original studies to gather new, specific, first-hand information about their target market. These studies can be in-house or carried out by third-party research agencies or consultants. Primary research methods include focus groups, interviews, and surveys. The information gleaned from these methods is highly targeted, but the process can be time consuming and expensive.

Secondary research

Secondary market research involves the exploration of pre-existing data sources, such as industry reports and sales data. It is less targeted as this information is usually more general and available to everyone, whether free or for a fee. However, gathering data from secondary sources is generally a faster and cheaper option than conducting primary research.

Businesses often opt to explore secondary sources prior to conducting primary research, as it will give an overall picture of a market for less cost and legwork. By doing this, they gain a better understanding of the kind of data they need to find out from primary research, or if they need to do primary research at all.

A combination of researching both primary and secondary sources will paint a more clear picture of a market.

Primary market research methods

Primary market research can take on a variety of forms. The following are the most common:

• Focus groups

• Personal interviews

• Surveys

• Observational research/field trials

Focus groups

Focus groups are facilitated group meetings, generally of about 10 to 12 individuals who represent a segment of a company’s target market. Participants go through a discussion about a subject the company wants to learn more about. Conversations may include opinions about different aspects of a product or service, or their reaction to a possible advertising or marketing campaign.

Trained facilitators ask specific questions that will help the company gain insight into the mentality of its customer base. One advantage of focus groups is that they allow consumers to interact in a relaxed environment. They can provide more perspective and insights than a specific research method with closed-ended questions which doesn’t allow for open interaction and the exploration of varying viewpoints.

Focus groups can take place in person or online, with the latter being the more cost-effective option.

Personal interviews

Personal interviews are similar to focus groups, except conducted on a one-to-one basis. While focus groups tend to lead to a broad, generalized discussion of a topic, person-to-person interviews can be both more targeted and specific, depending on how open-ended the questions are.

A closed-ended question is generally a question that requires only a simple “yes” or “no” answer, while an open-ended question allows a person to provide more of their thoughts on a subject. For example:

• Closed-ended questions: “Would you use this product again?”

• Open-ended question: “Why would you use this product again?”

More open-ended questions lend themselves better to personal interviews, as they allow for moments of empathy and connection between interviewer and interviewee. These conversations will, in turn, lead to more honest answers.

Personal interviews can be conducted in person or online, as well as over the phone.

Surveys

Surveys can be a great way of narrowing down information previously gotten from focus groups and/or personal interviews. Findings can be more accurately tested with surveys that have more closed-ended questions with specific options or yes or no answers. Surveys can also take place face to face, online, or over the phone. Online survey services you could use include SurveyMonkey and Google Forms.

Observational research/field trials

Observational market research involves observing how participants interact with a company’s offering in a comfortable environment, either their own or a planned one. There are many ways to conduct observational research.

In person, it can be done in a focus group setting, where participants know they are being observed, either by someone in the room or through a two-way mirror, or both. If you own a brick-and-mortar store, it can involve seeing different aspects of customer behavior when they come into the store.

In an online setting, there is a wealth of digital information consumers leave behind every day as they surf the Web. Many businesses try to utilize this data for marketing purposes. Such data is considered more accurate, as you can observe actual behavior rather than claimed behavior given in an interview or survey setting.

On a website, this can be something like “eye tracking,” which produces a heatmap of where users look most or click most. Crazy Egg and Zoho both offer heatmap software for analyzing customer behavior. Another source of information for business is cookies, which are small files that give companies information about their website users’ other Internet activity.

In the wake of various Internet privacy scandals, it’s important to tread carefully when utilizing user data. Transparency is key if you want customers to trust you. With the recent EU General Data Protection Regulation, clear consent must be gotten from website visitors before cookies are set. It must be explained clearly what cookie consent means.

Common secondary sources for conducting market research

Before throwing yourself into the deep end of primary market research, there are a wealth of secondary sources at everybody’s disposal that will give you a broad knowledge of the overall market you wish to compete in.

Competitor benchmarks

If you haven’t already done so, you should make a list of your main competitors so that you can get started with competitive benchmarking. It might seem obvious enough who your competitors are, but you should try to get as specific as possible. Starting with similar-sized businesses to yours is the safest bet. You should also remember that your competitor might not always be a whole company, but a specific division of a company.

For example, if you’re a small business producing beauty products, your top competitor might be the beauty section of a department store’s website. Your website’s blog content could be in direct competition with women’s magazine websites.

With competitor benchmarking, you measure your business in various key performance indicators (metrics that illustrate how well your business is doing) against those of competitor companies. These KPIs could be operational – sales and profit margins, for example – or online performance-based metrics, such as page views or social media likes and shares.

Information about the size, revenue, and market position of various companies can be gotten from Owler, while consulting companies like Gartner can provide you with benchmark analytics reports. To keep an eye on the content performance of your competitors, services like Moz and Brandwatch are helpful choices.

Government publications and reports

As they are free and publicly accessible, government data sources are essential for any business research. In the US, the Bureau of Labor and Statistics, the U.S. Small Business Administration, and the Census Bureau are great places to start. They provide public market and industry data, as well as national demographic statistics.

On the UK side of things, the Office for National Statistics, the National Federation of Self Employed & Small Businesses, and the British Chambers of Commerce will point you in the right direction.

Industry publications and commercial reports

These can range from monthly and annual outlooks to trade journals from your industry, as well as general market reports from research agencies and organizations like Pew Research Center, Data.gov, and the World Bank. Commercial data can also be purchased from research firms like Mintel and the previously mentioned Gartner.

Internal sales data

If you’re already an established company, much can be learned from historical sales data, such as customer trends, retention rates, and profitability of certain products or services. You may be able to discover your customers’ wants and needs without having to look much further. It will also help with identifying problem areas and customer pain points. For instance, if renewals are dropping or a specific product is selling poorly, your market research can focus on finding out why and what you can do to change it.

Social media

With more people than ever using social media, it would be silly not to tap into the wealth of market information that can be gleaned if you get a little creative with “social listening.” By keeping tabs on what people are saying about you and your competitors, you’ll be able to gain an overview of the general market opinion straight from the source.

There are a number of ways you can do this. Scope out groups on Facebook and LinkedIn. Set up Google Alerts for mentions of your company and rival companies. Sites like Reddit and Quora will also provide great insights into the kind of questions your target market are asking about products and services like yours, as well as the industry as a whole.

Online tools like Hootsuite and Sprout Social are platforms that make keeping track of social listening easy.

Competitor websites

Sometimes you won’t have to look too far to deduce how your competitors are doing – many companies publish white papers and other reports on their websites for the sake of transparency. Take advantage of their own efforts to drive new business! Don’t forget to scope out competitors’ websites before you go purchasing data from research firms.

Google search

It might seem a little obvious, but search engines are becoming a more and more powerful tool every day. You never know what you might find if you use the right keywords and search terms, particularly from news articles.

Types of market research

So now you’ve collected your data. What now? Next, you need to decide what type of market research you’ll be doing. This might seem a little confusing, but while the last section dealt with methods of collecting data, this section is concerned with how you are going to analyze this data and what methodology is best for doing so.

Market Segmentation

Market segmentation is the division of a market into smaller or segments or sub-groups based on certain characteristics and criteria. By segmenting your customer base, a more efficient and targeted approach can be taken.

Segments can be based on criteria such as:

• Age

• Gender

• Income

• Profession

• Education level

And any other features relevant to your target market. This information can be gleaned from surveys sent to your customer base or potential customer base.

This information will help focus your marketing efforts. For example, if you have a tendency toward a younger demographic, ads can be focused on social media sites that younger people use. If a certain demographic tends to be situated in a particular geographical or IP address location, advertising campaigns can be targeted at these places.

When conducting focus groups and interviews, segmenting your customers will help you with defining the kind of people you need to participate.

This is why it’s a good idea to segment your customer base as early as possible to avoid aiming for the wrong market.

The information you find can also be used to create buyer personas.

Buyer personas

A buyer persona is a fictionalized depiction of your ideal customer. You can have more than one buyer persona, depending on the size of your customer base. This persona/personas will serve as a touchstone to refer to every time you make a marketing decision, from content production to ad placements.

For example, if your business sells hiking boots and accessories locally, and market segmentation has shown you that your main customer tends to be married, middle-income, male 30-49-year-olds, you would create a buyer persona to reflect that.

You could call him Harry, a middle-aged father of three who wants to start enjoying the great outdoors on the weekends. With Harry in mind, you might decide to produce content on great hiking trails in your local area, place ads where people like Harry are likely to see them, and you’ll be able to ensure that your store stock reflects your main demographic.

Product Testing

Product testing is the continual testing of a product with its target audience during the creation stage, as well as before and after launching. If you discover that a certain product is selling poorly after analyzing internal sales data, you can use product testing to find out why that might be and how it can be improved.

Product creation can be a laborious and painstaking process. Once you’ve identified an opportunity in the market, focus groups, interviews, and surveys can be utilized to test whether or not people would be interested.

After that comes the production of a prototype, and then testing of that product prototype, where data is collected about consumers’ reactions, behavior and preferences when using your product. Following testing, you’ll likely make more changes to the prototype based on your findings. This process can be repeated for as many times as is necessary. It might seem like a lot of work, but it’s preferable to mass producing a product nobody wants.

By testing your product you’ll be better able to understand what people want from your product and those similar to it.

Product testing can take place in a controlled centralized location or the product can be sent out to a potential consumer to use at home, where they can provide feedback during and after use.

For example, if you sent out a test pair of hiking boots to Harry, the buyer persona we imagined earlier, example questions you could ask include:

• Do you like how the boots look?

• Are they easy to put on/ do they fit well/ are they comfortable?

• How often did you wear the boots?

• What activities did you partake in while wearing the boots?

• How would you rate these boots?

You could also send the boots to a more experienced hiker, and ask questions about how they fare in comparison to similar products in the market.

You can use feedback about its pitfalls and positive points to improve upon your offering, as well as deciding what aspects of your offering should be focused on in marketing and advertising messages. If you have more than one offering, you can use product testing to find out which is more likely to sell well, and focus your efforts on that.

Customer satisfaction

You’re treading dangerous waters if you assume that just because someone bought something from you one time that they’re a happy customer. Aim to constantly improve all aspects of your business by continually doing customer satisfaction research.

The best way of doing this is by conducting a survey.

Example questions for customer satisfaction survey:

• Ask their likes/dislikes about the process

• Customer service experience

• What they liked/disliked about the product

• Would they purchase from you again?

These surveys should be kept short and to the point so that people will be more likely to take the time to answer them. For this reason, it’s probably better to have more multiple questions with multiple choice answers, rather than single response questions where they have to elaborate their thoughts every single time.

Scales and ratings will also help with this, as ticking a box requires far less effort than writing detailed answers to elaborate open-ended questions.

For example, if you asked your customer, “How would you rate your experience here today?”

You could give them an option to rate on a numeric scale of 1-5 or 1-10, or words like "Loved / Liked / Neutral / Disliked / Hated."

In multiple choice answer options, an “other” option is often included, where the customer is given a chance to elaborate on their answer if they wish. Limiting the answer options in multiple-choice questions will also encourage people to open up more in the “Other” box.

These types of questions will help you keep abreast of what’s working and what isn’t with your product or service offering. It will help guide what you should focus on in all areas, from product marketing and website user experience to product development.

Making customer satisfaction a priority is a surefire way of retaining customers, as well as gaining more.

Advertising Testing

Advertising testing can take place during numerous stages of ad development, from concept stage to pre-launch, to post-launch. If testing of a concept is done when it’s still in the creative development stage, copywriters can determine the direction they should take. When testing is done in the pre-launch stage, advertising testing can be used to gauge how successful an ad campaign might be.

Examples of questions to ask:

• What do you like/dislike about the ad/ad concept?

• What meaning did you take from this ad/ad concept?

• What would you change about it?

• Would this ad affect your behavior? How?

Post-launch, online ad testing is often done via A/B testing. A/B testing tests two or more versions of an ad against each other to determine which performs better by looking at different metrics, such as click-through-rate and conversions. This will help with future ad development and knowing what works and what doesn’t.

Pricing

Similar to product testing, researching product pricing will help you determine how much customers will pay (or won’t pay) for your product and other products with similar features. You should be able to get a good idea of this from researching secondary sources and your competition. For further insight, you can conduct surveys and focus groups with segments of your target market.

Determining the optimal price point for your product/service/offering can be a tricky exercise. Companies want to ensure return on investment and to maximize profitability, while also setting a price that consumers are willing to pay. Striking a balance between a price that is fair while also growing market share is the ultimate goal of pricing research.

• Conjoint analysis

• Van Westendorp

• Gabor Gabor

Conjoint analysis

Conjoint analysis is widely considered to be the most efficient pricing research method. It examines how consumers make pricing decisions by determining how much they are willing to pay for certain product features. In conjoint analysis, the people surveyed are given two to five versions of a product with different attributes and price points and are asked to choose which one they would purchase. The respondents' choices help researchers determine what elements consumers value most in that kind of product or service and how much they are willing to pay.

Van Westendorp

A direct pricing method, Van Westendorp creates a price sensitivity meter that features a range of acceptable prices for a product. This meter is established by asking consumers questions like whether they think a product is too expensive, too cheap, or a bargain. This method assumes that its respondents have some market knowledge already to compare price points against.

Gabor Gabor

Another method of direct pricing, Gabor Gabor asks its respondents if they would buy a product/service/offering at a specific price. This price is then changed, and respondents are asked if they would be willing to pay the new amount. By using this technique, researchers can figure out product demand at specific price points.

Brand Reach

Measuring brand reach is another common type of market research. It explores how aware customers are about different elements of your company branding. Branding is basically how your company is perceived by the general public. It is your company’s personality.

Metrics for measuring brand reach can include how memorable your brand is compared to similar brands in that industry, whether your brand is considered trustworthy, and whether your aspired brand identity matches the image of your brand in the customers’ mind.

Surveys are an excellent way to measure brand reach, as well as tracking social media mentions.

Buyer personas and the buyer’s journey

The buyer’s journey is the research process of a potential customer purchasing your product or service and finally becoming a customer. Knowing your customer journey is integral to understanding your customer. By understanding the journey of how your customer came to purchase from you, you’ll understand their goals and motivations and why they did (or didn’t) buy from you.

Knowing this can help you with future marketing campaigns, user experience, website layout, and design, as well as website content. Anything that will boost your customers’ experience and encourage them to buy from you again, and to convert potential customers into actual customers.

The buyer’s journey can be broken down into three stages:

1. Awareness: The potential customer realizes they have a problem they must solve

2. Consideration: The potential customer has defined the problem and is doing research on how best to solve it

3. Decision: The customer has made a list of possible solutions and will soon decide on one

Figure out buyer journeys through surveys or in-person interviews, asking questions about how they came to purchase (or not purchase) your offering.

Example questions for the Awareness stage:

• What challenges were you facing when you decided to buy [your offering]?

• How did you educate yourself about these challenges and how you could resolve them?

• Were you familiar with [your offering] and options like it?

Example questions for the Consideration stage:

• What was the first source you researched for potential solutions?

• What search terms did you use in search engines?

• How helpful was this source?

• What was the least helpful source of information?

• How did you determine the pros and cons of similar offerings?

Example questions for the Decision stage:

• What was the most helpful source of information?

• What factors helped you make your purchasing decision?

• What made you choose this offering over similar offerings?

How to know which market research type you should use

The method and type of research you decide to go for is dependent on how in-depth you want your data to be. Generally, research is quantitative or qualitative, or a mixture of both.

Qualitative research vs Quantitative research

Qualitative research is exploratory and general. Data is typically gathered through focus groups, interviews etc with open-ended questions where people’s opinions about a product or service can be explored. The data gathered is typically unstructured and subjective.

For instance, if you conducted focus groups and interviews to find out what people want most from a hiking boot, you would come away with a general sense of people’s wants and needs rather than statistical data. You may have learned that people are most particular about comfort, size, style, and features, but you wouldn’t necessarily know which they valued most.

Quantitative research seeks more quantifiable facts, figures and statistics. It is often done via a survey, the results of which can be analyzed with statistical methods. Unlike qualitative data, quantitative data is more structured and objective. Quantitative research can be used to really pinpoint trends from information previously gained from qualitative research.

Using the results of the focus group about what people look for most from a hiking boot, you could give consumers a survey with multiple choice answers based on the most frequent discussion points. For example:

Q: What do you look for most in a hiking boot?

A: Comfort

B: Style

C: Water resistance

D: Durability

The results will give you specific percentages to refer to. Maybe 55% of people valuing comfort most, for example, while style is a lower concern for most, with only 10% of the vote. Future product development decisions can be made using such data.

Ultimately, which route you decide to go down will really depend on the specificity of your needs. Your market research needs can be assessed by writing a market research brief before you begin.

A market research brief should include:

• What is the product/service/offering you’re trying to sell? Describe in detail

• What you want to find out with this research

• The kind of audience you want to target?

• What is your budget

• What is your ideal turnaround time

• What is your ultimate goal/problem you’re trying to solve? Boosting brand awareness? Reaching the right target market? Gaining more customers? Customer retention?

Knowing when to conduct market research in-house or hire professionals

This will be dependent on the breadth and scope of research you want to conduct, as well as your budget and manpower. Can your in-house team handle it? Doing the research brief exercise will help enormously when it comes to deciding whether you should outsource or do it yourself. While hiring a third-party agency or consultant will be expensive, it could be worth it for you.

For those who need to outsource and don’t have a large budget, Fiverr may provide a more reasonably priced option.

Conducting market research yourself

Primary research methods can be expensive and time-consuming. That said, there are a growing number of applications for conducting primary research online, many of which will even analyze the data for you.

For conducting online surveys, some great options include SurveyMonkey, SurveyGizmo, and Google Forms. For focus groups and general consumer research, FocusGroupIt and Twentify.

Going the app route will lessen the expense and time consumption of conducting primary research considerably.

If you decide to do it yourself, there is also the matter of choosing participants. If your business is already launched, you can reach out to current customers. This information can be retrieved from your sales team or CRM system if you sue one. Otherwise, reaching out on social media can be effective.

If you’re only just starting out, reach out to your network, from friends and family to former co-workers. Someone is bound to know someone who fits into the market segment you want to research. You could also try post ads online, in local Facebook groups or Craigslist, for example.

It’s also a good idea to provide incentive, like a coupon or free product, so people will be more likely to take part.

Conclusion

It cannot be emphasized enough how important market research is for building a successful business and marketing strategy. By making it a priority to know your main competitors and your target market inside and out, you’ll have a firm foundation upon which to create products and marketing campaigns that will directly appeal to your niche.