We live in a hypercompetitive business world. This makes reaching any level of success, let alone sustaining it, incredibly difficult. One key thing that sets successful companies apart from those that failed is their regular commitment to investing in market research.
This is because market research is a critical component of any successful business strategy. As a process that involves gathering information about the market, competitive activities, customer behavior, and industry trends, it affords organizations access to critical intel that helps guide strategic decisions. In this blog post, we’ll review the importance of market research, the different types of market research any business should consider, and the key ways that research guides business strategy.
Why Is Market Research Important
Market research is a critical input needed for businesses tho thrive today. This is largely because failure to use market research means companies are instead using the assumptions or perspectives of internal personnel, individual anecdotes, or recent actions taken by competitors to guide their decisions. Said another way, it means incomplete or incorrect background is used to drive business strategy and resourcing.
In contrast, when businesses use market research to guide their overall strategy, they are using data about customer behaviors, market dynamics, and industry trends. This information can be used to objectively create products and services that meet customer demands, differentiate from customers, and develop strong brand images.
Additionally, market research ensures that organizations use their resources wisely. Without research, companies would likely allocate time and money to developing products that customers won’t want. Additionally, they would likely spend money on advertising and other marketing to gain new customers. In doing so, they would not just spend money poorly but they would lose valuable time they could be spending on developing products customers actually want.
However, by investing in research upfront, organizations mitigate this resource mis-management. They would be equipped with data to show them what products to develop and how to bring them to market correctly. As a result, they would be far more likely to launch products that would drive new customer acquisition.
What Kind Of Information Can You Collect Via Market Research
What makes market research so valuable in guiding business strategy is the wealth of data you can collect across the two different types of research: primary and secondary research.
Primary research involves collecting original data and then spending time analyzing and reporting on the raw data. Primary research is performed using a variety of methods. Qualitative approaches use methods like interviews or focus groups to look at patterns in conversations and broader discussions. They could also include observational studies to assess how individuals behave in natural settings. In contrast, quantitative methods tend to use surveys and statistical analysis to draw concrete conclusions. By using large sample sizes, quantitative methods let organizations build greater confidence in the research findings.
On the opposite end is secondary research. Secondary research involves assessing pre-existing data that comes from a wide variety of sources. This includes everything from government reports, the census, trade publications, academic studies, or competitor websites and collateral. It tends to be less expensive than primary research. However, because you are not collecting the data from scratch, it may be more limited in addressing your core strategy questions.
How Market Research Guides Business Strategy
The robust nature of data collected across different types of market research methods means businesses can thoughtfully make decisions when they have the information in-hand. Let’s look at the major strategy areas that market research can help guide.
Product Or Service Development
A major way that companies continue to retain their customers and attract new ones is by expanding on their product or service offering, or launching completely new products or services. However, this requires them to launch products or services customers actually want.
Organizations that invest in product concept tests, a market research approach that lets them gauge the appeal for different products or services, is a key way to guide new product strategy. These types of studies share new product ideas with a set of research respondents, either via qualitative or quantitative methods. By asking respondents to rate the products on a variety of dimensions like relevance, appeal, and likeability, businesses can determine which products they should move forward with. This is a strategic, data-centric approach to new product development that makes product launches more successful.
Entering Into New Markets
A common way that organizations expand and grow is by entering into new markets. This often means targeting a new set of customers to expand the group of individuals that can represent their customer set. It’s a risky move that can make or break a company, and has a high chance of failure if not done carefully.
New market studies, however, help mitigate that risk. Businesses can do research to understand competitive dynamics in that market. This includes everything from better understanding customers’ needs, and especially the needs of a new customer segment, to understanding the specific market segments owned by existing customers as well as the resources needed to successfully enter that market. While it represents a lot of information to capture, this type of research ensures that organizations define the right market strategy and customer targets, and allocate the correct resources to be successful.
How To Execute Market Research
While many organizations are bought into the idea of performing research, they rarely have the internal personnel with the skills or bandwidth to tackle these projects. It’s a core reason a market research firm is often engaged.
Market research firms are organizations that are adept at performing research across wide ranges of industries. From B2C consumer studies to specialized B2B studies, market research firms have expertise to know how to structure research projects, collect the necessary data to launch those projects, and then analyze the data to isolate important findings. They are a valuable resource organizations big and small can turn to to ensure that they are making data-informed decisions to drive their short- and long-term business strategy.
