Market research is an important and necessary step to help business owners understand the competitive landscape, profitability, and consumer behaviour in any given market. Despite being the foundation of any business’ value proposition and competitive positioning in the market, many entrepreneurs skip this step. This article will highlight what market research is, and why market research is an important and essential step in the ideation process.
Why is Market Research important?
Prior to writing a business plan, it is important to know your product or service’s value proposition, messaging, and positioning in the market. Without market research, a business can enter the market without a clear idea of who their customers are, what they are willing to pay, or a clear idea of how to best position the product or service for profitability, market share, and success.
Market research is about being curious, gathering data, and coming to concrete conclusions about your target market. It helps to define your market, who your customer segments are within that market, and to understand underlying factors of the market such as competitiveness, profitability, and distribution channels. The main questions an entrepreneur should aim to uncover from the market research process include:
1) What unmet need is my product fulfilling, and where are the gaps in the market? The start of any ideation process begins with identifying a problem or unmet need which your business could solve. Seek to define a problem, unmet need, or gap in the market and validate your findings with qualitative and quantitative information. This step in the market research process will help you define your product’s value proposition and competitive positioning in the market.
2) What is/are the buyer persona(s)? When writing a business plan, it is important to have a clear and defined target market. To do so, gather information on the sector at a macro level to understand the various customer segments that exist within a market, and define 1-3 target segments within the market. Seek to understand the key drivers that influence purchasing habits, brand loyalty, and spending habits to uncover insights as to how to best structure your product or service to satisfy these unmet needs, paying close attention to emotive qualities such as goals, risk aversion, and preferences. Defining a target market and specific customer segments within that market is an essential step in the market research process to ensure positive customer reception.
3) Who are my competitors? It is important for any venture, regardless of type, to understand the competitive landscape. Look at the competition’s selling techniques, marketing campaigns, and allocation of resources and human capital to gain insight on overall industry trends. Through your market research, use interviews and user feedback to assess brand loyalty, memorable points of difference between brands and pocket share of the market to understand how loyal customers are, and how receptive they are to trying alternatives and change. Ultimately, this step in the market research process will provide valuable insight into your venture’s communications and marketing strategy.
4) What is my competitive positioning? Creating a compelling value proposition is perhaps the most important aspect of market research, as it directly relates to customers’ value of your product and willingness to pay. Using feedback gathered during your market research process can help uncover key points in marketing campaigns, pitching to investors, engaging with partners, and finding values-aligned employees to help scale your business.
How to conduct market research:
The data collection aspect of market research is very important, and it is essential to get a comprehensive, unbiased view of your target market. Therefore, market research should involve analysis of a variety of types of information and data, including primary and secondary sources. Examples of each data type are described below:
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Primary research is the first-hand collection of information and data. Your main goal in primary research is to gather insights, attitudes, and interests from your target market and customers. Primary research is essential when trying to pinpoint what unmet need exists in the market, and what segment of the market is likely to be most receptive to your product or service. Some primary research methods include:
1) Interviews: This is perhaps the most important aspect of market research; speaking to your customers. Interviews should include a variety of questions, dependent on the stage of your market research process. When conducting interviews, aim to have several exploratory, open-ended questions, as well as specific questions that will help you collect quantifiable data. Aim to interview both ‘choosers’ (those who regularly use a similar product or service) and ‘non-choosers’ (those who don’t regularly use a similar product or service). Even those who may not be your target customer can provide valuable insight into your market research process.
2) Focus Groups: Focus groups are another common way to gather primary research. Similar to interviews, you should aim to ask a number of specific and open-ended questions. However, focus groups will provide insight as to how easily your customer is influenced by others choices and perceptions, providing insight into brand loyalty, level of customer interest, or attitudinal differences within a group.
3) Pricing strategies: To properly map your competitive positioning in the market, it is essential to understand your target segment’s willingness to pay. Asking customers how much they regularly pay for substitute or complementary services can help uncover key insights on how to price your product. Pricing strategies also include the use of promotional campaigns offering discounts to specific segments or setting different prices on your website depending on location. Once you have gathered enough data on pricing levels and willingness to pay, you can forecast a break-even point and required market share to achieve profitability.
4) Validation Campaigns: Validation campaigns can help you gauge initial customer interest without a comprehensive business plan and marketing campaign. Creating a simple landing page or pre-sale purchases can help gauge the level of initial interest in your business, and provide insight into allocating marketing budget and ad-spend.
Secondary research includes any sort of data that you have not collected yourself. While primary research is generally the first step in your market research process, secondary research can help validate findings, create industry benchmarks, and utilize existing market research that may be applicable to your business. Some secondary research materials include census data, white papers, analyst reports, and any existing customer interviews that are relevant to your research.
Market research can help you save money and make better-informed business decisions, and well-designed market research has a place in any business plan. After conducting market research, you will have a better idea of your value proposition, positioning in the market, competitive pricing, and segments to target with a marketing strategy. Market research will also help your ideation process, as you will be able to modify, update, and refine your offering in response to additional knowledge on the market.
It is important to note that market research is an iterative process. As your business evolves, grows, and achieves scale, it is important to consistently reassess the market and your business’s positioning within the market, remaining agile and flexible to change in response to shifting consumer demands.
As you now know, if you are thinking about starting a business, market research should be your next step. Click here to speak to a marketing research professional today to put your best foot forward.