What is market research in entrepreneurship? A question that has been asked by a lot of aspiring entrepreneurs. Market research defines a set of studies undertaken to gather information about a target market or niche to help the success of the product or service. And it’s important for any successful business venture.

If you are planning to create a new business, then you will need to perform market research. Market research is the first step that any entrepreneur would take to test the viability of their business idea before venturing into it. It could also help you discover potential opportunities that you could strike with.

What Is Market Research?

Market research is the process of determining the viability of a new service or product through research conducted directly with potential customers. Market research allows a company to discover the target market and get opinions and other feedback from consumers about their interest in the product or service.

This type of research can be conducted in-house, by the company itself, or by a third-party company that specializes in market research. It can be done through surveys, product testing, and focus groups. Test subjects are usually compensated with product samples or paid a small stipend for their time. Market research is a critical component in the research and development (R&D) of a new product or service.

Understanding Market Research

The purpose of market research is to look at the market associated with a particular good or service to ascertain how the audience will receive it. This can include information gathering for the purpose of market segmentation and product differentiation, which can be used to tailor advertising efforts or determine which features are seen as a priority to the consumer.

A business must engage in a variety of tasks to complete the market research process. It needs to gather information based on the market sector being examined. The business needs to analyze and interpret the resulting data to determine the presence of any patterns or relevant data points that it can use in the decision-making process.

Market research helps you to:

  •  Communicate effectively to your target markets through advertising and promotions. By researching your customers and their spending and buying habits, you can create marketing campaigns to meet their specific interests and needs.
  •  Identify and understand opportunities that exist in the marketplace. For example, through preliminary market research, you might find an opportunity to start your business in a geographic location you had not considered before, where little or no competition exists for your product or service.
  •  Pinpoint potential obstacles or problems with your business concept. Through research, you may uncover direct or indirect competitors you had not considered before who may inhibit your ability to gain a competitive advantage in the market. You might also discover future development plans that could include big-box retailers in your target market location. This information is important to discover because it can help to minimize your short-term and long-term financial risks.
  •  Benchmark and evaluate your success. By knowing the size of your market, how your competitors are doing and who their customers are, you can set goals to reach your market, grow your customer base, and track how you are doing in relation to the competition.

The key steps of successful market research

There are four important steps to any successful market research study:

  • Investigate whether similar research has previously been carried out
  • If so, analyse the existing relevant data that meets your objectives – providing it meets your budget
  • How will the existing data be used and by whom?
  • Do you need to conduct your own primary market research too? If so, with whom?

Understanding the types of customer you’ll encounter

Most new businesses will encounter three different types of customer; market research gives you the ability to understand how your target customers think and adapt to their needs in order to turn them into regular customers and brand advocates.

The ‘savvy’ purchaser
This type of customer is someone that’s not necessarily concerned with the quality or effectiveness of a product or service, but is intent on getting the best possible value. A ‘savvy’ customer is someone that’s likely to be aware of all the prices offered by your major competitors, so you’ll need to carry out secondary market research to understand whether your products or services will be priced competitively.

If it transpires that your products or services will not be the cheapest it’s best to know now in order to provide compelling evidence to potential purchasers why they should continue to buy through you; perhaps based on quality and reliability.

The industry influencer
An industry expert or influencer is someone that is not only highly knowledgeable about your target market, they can influence other prospective customers that trust their opinion.

An industry expert will not be fixated on the price of a product or service, they are often more concerned with the value and quality. Industry influencers make for ideal candidates to use for primary market research, allowing them to use your products or services, garnering their opinion on them and the market as a whole.

The end-user
An end-user is a customer that will actually use your products or services on a day-to-day basis. End users also make for excellent candidates for primary market research, allowing you to understand their frustrations and limitations – ideal if you’re still in the process of developing and designing new products, giving you the edge over the competition.

How Market Research Gathers Information

Market research consists of a combination of primary information, or what has been gathered by the company or by a person hired by the company, and secondary information, or what has been gathered by an outside source.

Primary Information

Primary information is the data that the company has collected directly or that has been collected by a person or business hired to conduct the research. This type of information generally falls into two categories: exploratory and specific research.

Exploratory research is a less structured option and functions via more open-ended questions, and it results in questions or issues being presented that the company may need to address. Specific research finds answers to previously identified issues that are often brought to attention through exploratory research.

Secondary Information

Secondary information is data that an outside entity has already gathered. This can include population information from government census data, trade association research reports, or presented research from another business operating within the same market sector.

Example of Market Research

Many companies use market research to test out new products or to get information from consumers about what kinds of products or services they need and don’t currently have.

For example, a company that was considering going into business might conduct market research to test the viability of its product or service. If the market research confirms consumer interest, the business can proceed confidently with the business plan. If not, the company should use the results of the market research to make adjustments to the product to bring it in line with customer desires.

What Are the Main Types of Market Research?

The main types of market research are primary research, which includes focus groups, polls, and surveys, secondary market research, which includes articles, infographics, and white papers, qualitative research, which gives insights into how customers feel and think, and quantitative research, which uses data and statistics, such as website views, social media engagement, and subscribers.

What Is Online Market Research?

Online market research is market research that is conducted over the Internet. Online market research can be either qualitative or quantitative and follow the same format as primary and secondary market research methods.

What Are Paid Market Research Surveys?

Paid market research involves a group of individuals that are paid to partake in a research study. This can involve filling out surveys, partaking in group studies, research panels, and more. The individuals are usually pre-selected and monetarily rewarded for their time and effort.

What Is a Market Study?

A market study is the proactive analysis of market demand for a product or service. A market study looks at all of the factors involved in the market that influence the demand for that product or service. This includes price, location, competition, substitutes, and general economic activity.

The value of market research reports

Aside from talking to target customers, there is significant value in published market reports. Many of these are freely available in libraries, business groups and trade associations.

At the Business & IP Centre you can get access to more than £5m worth of current market reports from leading publishers such as Mintel, Frost & Sullivan, Passport and many, many more. They’re all exceptionally useful for keeping abreast of changing trends and investigating new markets.

However, it’s important to interpret these market research reports in isolation. Some of the more generalised industry research may not be wholly applicable to your target market; nor is it a guarantee of consumer demand in your area. Be sure to take note of the date of publication too. In fast-changing industries such as technology, a report that’s even a year or two old could already be outdated.

If you think you’ve developed a great business idea, it’s vital that you test it against what’s already available on the market. Product placement is everything to get maximum exposure.

Conclusion

Oftentimes I see early stage companies do market research and it’s NOT what they think it is. They think talking with others about their idea is doing market research, but really the idea behind market research is to understand supply and demand drivers.

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