Market research is the process of assessing market conditions. It reveals insights about the best ways to prepare your business, whether you’re starting a new business or taking a new direction in an existing business.
Market research is vital for small businesses; it helps them determine the viability of their business strategies based on the current state of the market before they make any big moves. Efficient market research can reveal whether a business idea is likely to sink or succeed. This article breaks down the ins and outs of market research and explains how small businesses use their findings to optimize their performance and profitability.
Key takeaways
- Market research can reveal insights into market trends and provide valuable information to help businesses make decisions regarding their offerings and strategies.
- There are various types of market research techniques; decide which to use based on your objectives, needs, and resources.
- The market research process involves determining a problem, developing a plan, and gathering and analyzing data.
How Market Research Works
Market research allows entrepreneurs to discover the best data-backed methods to prime their businesses for success. Essentially, market research helps you figure out:
- Who your customers are
- What those customers want
- What your competitors are doing to successfully reach those customers
This information helps you refine your business idea—whether a new business or adding a new product or strategy to an existing business—and make smart business decisions that can increase your chances of success.
To gather this information, you need a methodical approach to conducting market research, which we’ll cover later on.
Market research is a crucial part of creating a business plan. Learn more in our guide to writing a business plan.
Types of Market Research
All market research tactics fall under two categories: primary or secondary market research. Within each category, the data can be quantitative (meaning that it relies on measurable data) or qualitative (if it concerns subjective phenomena like personal accounts or other non-numerical data). So, which one is best for which situation? Let’s go over the basics.
Primary Market Research
Primary market research includes unique research conducted specifically for the organization and performed on consumers who would qualify as members of its target market.
For a study to be considered primary market research, it should have the following qualifiers:
- The research should be administered to meet the organization’s needs, although it can be carried out by the business itself or by its internal or external research team.
- All data should be gathered directly from the source of information, which would be the consumers who make up the business’s target market.
Primary research offers results that are sourced from original materials. There are two main forms of data collection for primary market research: exploratory and specific.
- Exploratory research aims to explore different methods to clearly define a specific problem that the business has and to determine its nature. Exploratory studies aim to gather large amounts of information and, therefore, tend to be more loosely organized, involving lengthy, unstructured interviews with open-ended questions.
- Specific research addresses the distinct objectives of the business’s market research. While exploratory research identifies the business’s problem, specific research aims to solve it through more structured methods. It is typically conducted on the outcome of the business’s exploratory research and consists of a more detailed data analysis of these findings.
Examples of Primary Market Research
Primary market resources use original materials as sources. These original materials should offer direct, first-hand findings from the conducted research. Some commonly used examples of primary market research include the following methods.
Surveys
Surveys can offer an easy, inexpensive method of conducting relevant market research. Modern surveys can be carried out in person or virtually through convenient methods like questionnaires accessed online, by phone, or through SMS. Businesses that choose the online method should make their surveys mobile-friendly, as greater accessibility will improve the likelihood of engagement.
Interviews
Businesses can gain rich data by conducting in-depth, question-and-answer interviews. These can take place in person, over the phone, or via video, but different methods can yield varied results. For example, in-person interviews allow researchers to assess body language, but phone interviews may feel like less pressure on respondents, yielding more honest responses. Therefore, it is beneficial to use multiple methods to produce comprehensive insights.
Focus Groups
This qualitative research method involves participants who are guided by moderators to discuss products and services. They are typically conducted by businesses to gather insights into consumer opinions and feedback. While focus groups may provide broader results than interviews, interactions between participants can offer valuable insights.
Field Research
Field trials or experiments are conducted to gain data on customer behavior, test variables, and gather insights. This method of research can be especially valuable for businesses aiming to improve their offerings to consumers by identifying customer frustrations with existing products or services.
Observational Research
Observational research is a more passive method to primary research, wherein trained observers monitor consumer reactions to business offerings. This research is conducted on them without any direct interaction, providing highly authentic insights into consumer behavior.
Secondary Market Research
Secondary market research differs from primary market research based on who conducted it and where the data came from. While primary market research is carried out on the business’s target audience for the business’s specific needs, secondary market research is conducted by external parties and can be performed for a wide variety of purposes.
There is a practically endless supply of secondary research that businesses can source, but not all will be useful for their needs. Secondary market research will offer value to a business if:
- The research is performed by vetted sources.
- The data gathered is relevant to the business’s goals, such as their target audience, proposed strategies, or future offerings.
Examples of Secondary Market Research
Secondary market research leverages information from data sources that are based on primary research. These sources should reference research on primary sources conducted by other people and describe their findings. The following techniques are popular methods of conducting secondary market research.
Literature Reviews
Literature reviews are a key form of secondary research and involve synthesizing multiple sources to gain and summarize information on a market’s trends and other relevant business topics. This method provides a comprehensive overview of existing knowledge and can help to guide the business’s primary research efforts.
Content Analysis
Content analysis is a strategy commonly applied to social sciences to examine communication mediums, using methods like coding and tallying themes or key phrases. Content analysis can help researchers reach conclusions from qualitative data, offering insights into public opinion. For businesses, this research can help them make decisions surrounding consumer relations and marketing methods, such as their communication strategies and media representation.
Data Mining
Data mining analyzes large data sets to uncover patterns and trends that can inform business decisions. A popular method of business data mining is to use software with machine learning and algorithms built-in, to extract insights from existing data. Many tools can even offer real-time recommendations on aspects like market opportunities or ways to improve business efficiency.
Data Analysis
Data analysis uses statistical techniques applied to large volumes of existing datasets to uncover business trends, relationships, and patterns. It can be cost-effective, as it provides valuable decision-making insights without requiring new data collection. Businesses typically conduct data analysis using software that can recognize and categorize natural language.
Meta-analysis
Through meta-analysis, researchers combine and systematically analyze results from multiple studies, for the purpose of gaining insights on a research question. By integrating the results of numerous findings, this technique offers strong evidence based on wider datasets, allowing for more informed business decisions.
Historical Research
Historical research analyzes past records and documents related to the business or market. It can provide insights into historical trends and help inform businesses about future predictions and the efficacy of potential strategies. This research technique is especially useful for revealing deeper meaning behind long-term changes in markets, industries, or consumer behaviors.
Primary vs Secondary Market Research
Primary and secondary market research techniques each come with their own benefits and disadvantages.
Primary Market Research Pros & Cons
| PROS | CONS |
|---|---|
| Provides data that is more relevant to the businesses unique needs | Higher costs associated with conducting research |
| Is specific to the organization and its needs | Requires more time and effort on the part of the organization |
| Results of research can be kept confidential | |
Secondary Market Research Pros & Cons
| PROS | CONS |
|---|---|
| Research requires less time and effort on the part of the organization | Resulting data is not specific to the organization |
| Lower costs associated with conducting research | Research is not tailored to the business’ needs |
| Research is not confidential, and can be accessed by competing organizations | |
When to Use Primary vs Secondary Market Research
There is no single method of market research that will yield the best results for every organization. Similarly, neither primary nor secondary market research can be considered most beneficial for every business. The value of primary vs secondary market research for a specific organization is largely dependent on its unique resources, business needs, and budgetary requirements.
Consider the following aspects when determining whether primary or secondary market research would be best for your business.
- Budget: Businesses with limited budgets may benefit more from conducting secondary research, as it is more affordable to obtain. This is often the case with new businesses.
- Time: As secondary research gathers data from existing sources, it is more likely to be obtainable in less time than it would take to conduct new studies.
- Resource Availability: Secondary research must be credible and relevant. If this does not exist or is inaccessible, organizations may need to carry out primary research.
- Exclusivity: Secondary research can be accessed by competitors. Alternatively, by conducting primary research, resulting data can be kept private.
How to Conduct Market Research
Fortunately for small business owners, market research doesn’t have to be overly expensive or time-consuming. Entrepreneurs of all backgrounds can conduct market research to prime their organization for success by carrying out the following steps.
Step 1: Specify the Problem
The initial step to any successful market research process is to identify the problem that you aim to solve or the opportunity that you wish to take advantage of. Coming up with a straightforward, well-defined problem or opportunity for your business will help you determine your market research objective.
For example, say, your business is having trouble attracting customers. Consider why this is, to reach a specific root issue. In this case, the specific problem may be that the business is having difficulty in identifying consumer preferences.
Step 2: Develop a Research Plan
Once you know your problem, you can begin to develop a plan to address it using market research. Consider the types of data that, when analyzed, could offer insights into addressing your problem. Using the example from step 1, your business may want to seek data on the behavior of your target consumer to reach insights about their preferences.
Once you know what data you would like to gather, you can develop your marketing research plan. This should involve making decisions regarding the following factors:
- An established budget
- A study hypothesis
- Method(s) of data collection
- Sample sizes and technique(s)
- Method(s) of data analysis
Once you have determined your budget and hypothesis, it will be easier to determine the best method for collecting your data. While primary market research methods can garner beneficial results, secondary market research may be a more economical choice for new or small businesses with limited means. Consider these factors when deciding on a market research method, as well as any external factors that may impact the results of your study.
Step 3: Determine the Sample
Decide who should be included in your market research sample. This should involve a process commonly referred to as defining your buyer persona. This is a fictional persona that serves as a generalized representation of your business’s ideal consumer. Consider aspects about your buyer persona, such as their age, gender, occupation, location, income, and other factors that may influence their buying habits.
Once you have determined your buyer persona(s), you can consider which tactics you can use to effectively reach real consumers who fit this description. These people make up your target market and are the individuals to whom your business offerings should be aimed. They are also the people who should be included in your business’s market research efforts.
From here, you can specify your research sample. If performing primary market research, engage with members of your target market. If utilizing secondary market research, look for research that was conducted on individuals that resemble your buyer personas.
Step 4: Gather Relevant Data
Next, you can use your specified samples to gather data that is relevant to your research objectives. Ensuring the relevance of your data is crucial to reaching useful insights.
If you decide to conduct your own study, consider how you can access data that relates to the overarching question of your research. For example, if you want to collect survey or interview data, develop questions that are specific to your business goals.
If you choose to leverage secondary data, you’ll need to source information that is not only relevant to your business and research objectives but that also comes from trustworthy sources.
Step 5: Analyze the Data
Now that you have gathered your data, you can analyze it. This should involve analyzing data to seek out trends, relationships, patterns, and insights that can offer insights to answer your research question from step one. Many organizations leverage advanced statistical analysis tools to reach deeper insights from their gathered data.
Step 6: Report Research Findings
Lastly, you can report your research findings and apply them to your business practices. It is important to develop a report that highlights the outcome of your research, as this information may be pertinent to your future business decision-making.
Benefits of Market Research
When performed successfully, market research can provide numerous advantages to enhancing an organization’s business strategies. It can offer insights into consumer opinions and preferences—supporting informed decision-making on marketing efforts—and aid in the development of new offerings.
By understanding consumer needs through market research, businesses can curate their offerings to enhance satisfaction and attract more business. Market research studies also allow companies to test potential business concepts and gain feedback to form strategies that minimize risks.
Using optimal market research tactics, insights reached through market research can aid in identifying businesses’ strengths and weaknesses. As a result, organizations can make informed decisions for capitalizing on opportunities, solving existing problems, or mitigating potential threats.
Market Research Challenges
Perhaps the most common market research challenge is getting quality data on a budget. For small business owners, conducting secondary market research may seem like the best low-cost plan for accessing data. Unless, of course, you have problems accessing relevant and accurate data sources.
Inaccurate and irrelevant data can be damaging when applied to business decision-making. Rather than testing your luck with low-quality secondary data, consider conducting primary market research inexpensively. For example, many online survey platforms offer low-cost or even free plan options, allowing users to gain the data they need without breaking the bank.
Data complexity can also challenge new businesses, as market research can produce large datasets. Rather than getting overwhelmed by the large amount of data collected, small business owners can simplify their analysis by concentrating on the ideal focus of their research.
If you are struggling with data complexity, consider the questions you addressed in step 1 of conducting your market research. What is the problem that you aim to solve? Is there a potential opportunity that you aim to take advantage of? Considering these questions should help you determine how the data at hand can be analyzed to answer them and help you identify key performance indicators that would reflect your marketing goals.
Finally, data analysis software may seem intimidating to new small business users. However, these technologies can revolutionize your market research, offering deeper insights and faster results. Practice makes perfect, so start by familiarizing yourself with low-cost solutions or open-source tools. As your business grows, you can scale up to more advanced software products that will help you stay competitive in your market.
Frequently Asked Questions (FAQs)
As you embark on your own business strategy journey, consider the following facts and questions about market research.
Market research is the process of sourcing data about consumers’ preferences, behaviors, and needs to reveal valuable insights that inform business decisions.
The four main methods of market research include primary research, secondary research, quantitative research, and qualitative research.
Market research involves the access and analysis of target market data for the purpose of understanding consumer preferences and guiding business strategies.
Market research is important because it enables businesses to understand their consumers and carry out actions that improve their offerings, reduce their risks, and remain competitive within their market.
Bottom Line
Market research can help small businesses gain a competitive edge and find success in a saturated market. Remember, specifying your research objectives can make it easier to conduct market research that offers valuable results.
While both primary and secondary market research can offer advantages to organizations, you should consider factors like your budget, time, resource availability, and data exclusivity when determining which form would be most advantageous for your business. Finally, it is best to reference data gathered through more than one primary market research method. Using multiple forms of research will garner more accurate data, resulting in more valuable insights for your business.
