What is market research?
By definition, market research is the process of gathering, analyzing, and interpreting any information about a product, service, or a market and its potential customer base. It delves into the psychology, characteristics, spending behaviors, location, needs, preferences, and context of the business’s target market, the industry, and the competitors to watch out for.
The development of market research
We can trace the origins of formal market research back to the 1920s in Germany. Parallelly around that time, US advertising companies were conducting market research to understand demographics during the Golden Era of the Radio.
By the 1950s, focus group interviews were first used in the 1950s to examine the effects of the US government’s propaganda efforts. Sociologists Robert Merton and Paul Lazarsfeld tried evaluating the responses from American radio listeners during World War II. They helped determine how people were compelled to think or behave when influenced by specific lines, phrases, and imagery.
The purpose of market research
At the core of good market research is the need to understand the viability, demand, and feasibility of the offering. Your audience drives the purpose. This may mean you gather information, conduct market segmentation, understand your differentiation and unique position in the market, drive advertising campaigns and branding efforts to determine what offerings do your customers like, and make sure it’s a win-win for both the business and your target audience. A few reasons why market research is a prerequisite to any venture:
- Secures crucial information.
- Ensures a customer-centric approach.
- Helps foresee events by studying patterns.
- Determines your competitive advantage.
The market research process comprises multiple functions and tasks. First, you gather information based on the market sector. Then you analyze, interpret, and draw meaningful information from the data. Any significant patterns and data points may be converted into actionable insights when your executives are making business decisions. Market research is crucial to identifying your competitive advantage in an increasingly complex digital world where every competitor can make magic.
The objectives of market research
Market research projects may usually be anchored by one or more of the following objectives.
Administrative objectives help a company through optimal planning, control of human and other resources, organizational needs, to ultimately fulfill a market need in good time.
Social objectives aim to satisfy customer needs through understanding their behavior and preferences toward a product or service in question.
Economical objectives determine the competitive advantage/disadvantage, the degree of success or failure of an idea, the viability of a product or service, etc.
Types of market research
How do you find out if your customers will like your product or service? There are two fundamental ways to gather data about your customers, their preferences, and the market. You may outsource a market research firm to do it, or hire industry experts to give you real-world insights, or you may use a secondary source of information that already exists.
It is the research that you compile for yourself or hire a firm or a professional to gather it for you. It is directly collected by a person or a business entity. For instance, focus groups, one-on-one interviews, and ethnographic research.
It is the data that is gathered from an outside source like white papers, reports, research theses, etc. For example, public sources, commercial sources, and educational sources. It may include population information from the government census data, trade organization reports, or research papers presented by other market research firms in the sector.
What is research design?
Research design is a systematic outline of research methods and techniques that a researcher determines before research begins. It allows research methods to be carried out in a manner that is relevant to the subject matter and makes sure the project is successful.
Elements of a good research design
- The purpose of statement
- Techniques for data collection and analysis
- Research methods for analyzing data
- Types of research methodology
- Possible objections for research
- Settings for the study
- Measurement of the analysis
A research design that is set up for success and impact usually creates a minimal bias in data and makes sure that there is both trust and accuracy of the collected data. The aim is to make allowance for the least margin of error. Key characteristics that are crucial for any good research design are:
Neutrality: While making an assumption may be the reference point of every research, the results reflected in the research design should be free from bias, objectivity, and neutral.
Reliability: Reliability implies the consistency of a measure in the research study. It indicates how well a method, technique, or test measures something.
Validity: Validity refers to the accuracy of a measure and the method used to find it. A high validity is implied when it also produces results that correspond to properties, characteristics, and variations in the real world.
Generalization: The outcome of any research design should not be restricted to a sample. It must reflect accuracy when the same research is conducted on any part of the population.
Types of research design
Different subjects, contexts, and fields of study need to be addressed differently. Research designs may be classified into six broad categories:
Explanatory research design
Explanatory research is a research design that seeks to explain various aspects of the study. While it is less structured, it attempts to prioritize, generates new functional definitions, and makes for an open-ended research model. Lengthy answers are solicited from a small group of participants. It lacks statistical strength and there are no conclusive points.
Descriptive research design
In this method of research, the intent is to describe a situation or case study under examination. You gather, analyze, and present compiled data and is mostly empirical. Researchers explore the why and how of the problem statement. In other words, what the explanatory research broached on, descriptive research helps better understand.
Experimental research design
Experimental research design seeks to observe the cause and effect relationship and the impact of an independent variable on a dependent variable. The independent variables are help monitor the change it has on a dependent variable. For instance, you may experiment with different prices for your product as you observe how they impact dependent variables like customer satisfaction or brand loyalty.
Correlational research design
Correlation is a non-experimental technique that allows researchers to establish a relationship between two connected variables. This research design needs two different groups. No assumption marks the beginning of the study and the correlation of the two variables is studied through statistical analysis.
Diagnostic research design
Diagnostic research design evaluates the underlying cause of an issue or phenomenon. It identifies the causes and factors that influence the problem to eventually troubleshoot them. And diagnostic research always has three stages:
- Cause of the issue
- Diagnosis of the issue
- Solution to the issue
Exploratory research design
It seeks to investigate a problem that has not been defined before, and better understand it without providing conclusive results. The starting idea is generic as it explores areas and issues that can be a future research focus. They are best carried out when the problem is at a preliminary stage and there is no need for an immediate solution. A key aspect of every exploratory research is the need to change course upon discovery of new data or insights. Furthermore, grounded theory and interpretive research are often answer questions like the why and how of a phenomenon or issue.
Market research applications
One-on-one discussions (either in-person or virtual) are great for a natural conversation that allows you to watch the respondent’s body language while you’re asking questions.
A handful of well-selected people sample your product or service, watch a demo, and provide feedback, and respond to specific questions that you may want to test.
Product/service use research
This kind of research delivers insights into what your target audience cares about your product or service, and what they think of specific features. Usability metrics are usually help interpret the data you collect.
Observation-based research helps you understand the customer’s product journey better as you identify the UX, roadblocks that might need to be addressed, and which aspects of your customer journey can be made simpler.
Buyer persona research
This mode of research offers unique insight into who your target audience is, their challenges, why they care about your brand, and what you could do more for them.
Market segmentation research
Market segmentation research helps classify your target audience into different market segments based on specific relevant characteristics that help you determine pain points, expectations, needs, and preferences.
Pricing research offers insights into what other similar brands in your market vertical sells for, what the target audience is likely to pay, and the fair prices for offerings.
Competitive analysis gives you a perspective into other market players, their share in the market, what’s working well for your target audience, and how you may set yourself apart from your competitors.
Customer satisfaction and loyalty research
Customer satisfaction and loyalty research give you insight into business churn rate, customer acquisition, and retention. It helps formulate effective tools and techniques like loyalty programs, rewards, remarkable customer service, etc. to motivate them.
Brand awareness research
Brand awareness research talks about how the reach of awareness your brand has, how the target audience perceives your brand, and why they care about you.
Campaign research involves looking into past campaigns and evaluating metrics that give insights into failures and wins, customer successes, and campaign elements that did the work for you. It helps you create future campaigns that matter to your target audiences.
Summing up market research
The market research process involves researching your customers, competitors, industry, and market environment. You may decide to do this on your own or hire someone else to do it. But each factor that influences your business needs to be researched separately. After which you can collaborate your findings to get a big picture view of your positioning in the market.