In order to turn a small business into a success story, you need to understand your customers, your competitors, and your industry. What do your customers want? What do your competitors have that you don’t? Where is your industry headed? Those are the questions you need to know the answers to, and that’s where market research comes in.
What is Market Research?
Market research is the process of gathering and analyzing data to help you understand which products and services are in demand so you can be competitive within your industry.
If you’re just starting out with your business, market research can help you refine your offering to fulfill a specific need or hole in the market. If your goods are already out in the marketplace, you can collect and analyze data to determine whether or not you’re meeting your customers’ needs.
Types of Market Research
In order to get the full picture when it comes to market research, it’s important to conduct both primary and secondary research. Here’s what that means:
- Primary Research: Primary research is gathering information for your own purposes by directly posing specific questions to your target customer demographic. Face-to-face interviews, telephone surveys, online questionnaires, and in-person focus groups are all examples of primary research.
- Secondary Research: Secondary research relies on information collected by others. It includes reports and studies by government agencies, trade associations, or other businesses within your industry.
Types of Data
When collecting and compiling market research, there are two types of data you’re likely to come across, and a couple of good reasons why both are important.
- Qualitative data is data based on what people think, feel, or do and, why. It’s what you typically collect from interviews and focus groups, where there’s a small sample size and feedback is collected through a discussion. It doesn’t usually yield statistically significant data, but is important for understanding what’s going on in the minds of your customers.
- Quantitative data comes into play if you want to know how many people think, feel or do a certain thing, and why. It’s based mainly on questionnaires with multiple choice or rating options.
Though it would seem that quantitative data yields the most robust statistics, it won’t if you don’t ask the right questions. Qualitative data can help to shape those questions within a small group, and then quantify it with a larger sample size.
Market Research: The 5 Steps
Market research can be simple or complicated; budget-friendly or expensive; general or in-depth. It all depends on your resources and areas of interest. Here are the basics, with examples for each.
Step 1: Set your research objectives. What do you want to know? Make a list of questions that you want answers to. The questions can be narrow or wide in focus, but they should be structured in a way that will create meaningful data.
Example: A company that offers social media measurement tools might have the following questions:
- Which social networks are growing in popularity? Which ones are declining?
- How do our tools compare to similar products on the market?
- Why do 75% of our website visitors not sign up for our product suite?
Step 2: Do your secondary research. Find out what data already exists. Look for studies on topics like consumer behavior, current trends for your industry, and financial forecasts for your product category. Always see what’s already available before spending time and money to conduct your own research.
Example: Let’s say the social media measurement tools company was able to find a study stating that three little-known social networks have experienced tremendous growth over the past six months, and one of the currently most popular ones was starting to lose steam.
Step 3: Do your primary research. Some of the questions you posed in step 1 were likely answered by your secondary research. For everything that wasn’t, it’s time to roll up your sleeves and get in there! How you conduct your primary research will likely depend on your budget. On the low end, you could send out a customer satisfaction survey to your email subscribers. If you have the financial resources, you could hire a firm to run focus groups around your questions.
Example: The social media measurement tools company sends a survey to their email subscribers asking them to weigh in on their tools vs. those of their competitors. They also ask what visitors to the website are experiencing as they move through the sign-up and purchase process.
Step 4: Analyze the data. Compile the results of your primary and secondary research. What patterns do you notice? Are any results statistically significant? Do your results match industry trends? Do a thorough analysis, and highlight any major findings.
Example: The social media measurement tools company analyzed the results of their primary research and found that current customers rate their products more favorably than those of their competitors, but non-customers rate them as less so. Digging deeper into the data, they discovered that website visitors were confused by how the product itself and the sign-up process worked.
Step 5: Optimize based on your results. What did you learn from your data analysis? How can you apply it to your business? Refine your marketing or production strategy based on your learnings.
Example: The social media measurement tools company used their findings to expand their product messaging and add a Frequently Asked Questions (FAQ) section to their website to make signing up easier for potential customers. Further, they added the rising social networks to their product offering to stay ahead of the curve, and moved the declining networks from featured promotion.
In the example of the social media measurement tools company, they were able to define their goals, collect and conduct research, analyze the data, and make smart business decisions based on what they learned. Market research is a powerful tool for understanding your customers, competitors and industry-and ultimately, growing your small business.