What Is Market Research?
The concept of market research encompasses the systematic examination and analysis of the commercial feasibility of a novel offering or merchandise, achieved through direct engagement with prospective clientele. This practice enables organizations to delineate their target audience and elicit indispensable insights and feedback from consumers regarding their inclination towards a particular product or service.
Market research may be conducted internally or outsourced to expert third-party entities specializing in this domain. It entails a variety of methodologies including surveys and focus groups, among other techniques, to procure pertinent data. In exchange for their valuable time, test subjects frequently receive remuneration in the form of product samples or nominal compensation.
How Market Research Works
Market research plays a vital role in assessing the potential success of a new product or service. Its findings serve as a basis for refining product design and developing an effective strategy for its launch. A key aspect of market research is identifying and understanding the target market through market segmentation. This insight is crucial for tailoring advertising and achieving product differentiation.
Conducting market research involves a series of tasks undertaken by businesses. They collect information specific to the market sector in which the product will operate. This data undergoes thorough analysis, enabling the extraction of relevant insights that inform optimal product design and marketing approaches tailored to the intended market segment.
Market research is an essential element of the research and development (R&D) phase when introducing a new product or service. It can be executed through various methods such as surveys, product testing, interviews, and focus groups. These techniques enable businesses to gather and interpret data that influences the strategic decisions made during the product development and marketing process.
Primary Market Research vs. Secondary Market Research
Market research usually consists of a combination of:
- Primary research, gathered by the company or by an outside company that it hires
- Secondary research, which draws on external sources of data
Primary Market Research
Primary research can be categorized into two main types: exploratory research and specific research.
- Exploratory research is characterized by a more flexible and open-ended approach, relying on a range of methodologies such as focus groups, telephone interviews, and questionnaires. Its primary goal is to identify and address pertinent questions or concerns surrounding a product currently in development.
- In-depth research endeavors to thoroughly investigate the problems or issues identified during exploratory research.
Secondary Market Research
The foundation of any market research lies in the insights garnered from previous studies that shed light on consumer preferences and requirements. In the digital era, a vast array of these research findings can now be accessed online.
Secondary research encompasses a wide range of sources, such as demographic data sourced from government census records, research reports generated by trade associations, survey outcomes, and investigations conducted by peer organizations operating within the same market segment.
History of Market Research
The formal practice of market research originated in Germany during the 1920s and gained momentum in the United States during the Golden Age of Radio. Advertisers for this emerging medium began to analyze the demographics of their audience, examining the specific listeners of various radio shows, music programs, and comedy segments. This marked a shift from a previous strategy that aimed to reach the largest possible audience through billboards or popular magazines. With radio programming, advertisers could now tailor their messages to different consumer groups, such as rural or urban demographics, teenagers or families. The success of these targeted campaigns could then be measured by the resulting sales figures.
Types of Market Research
Face-to-Face Interviews
Throughout its inception, market research companies have been employing the practice of conducting street interviews to glean insights about individuals’ preferred newspapers and magazines, as well as their recollection of advertised brands within these publications. This data would subsequently be juxtaposed against the circulation figures of the respective publications, enabling an evaluation of the efficacy of the advertisements.
Subsequently, market research techniques have evolved and incorporated surveys, building upon these initial methodologies.
Focus Groups
A focus group comprises a carefully selected cohort of consumers who are tasked with evaluating a product or observing an advertisement. Following this, the group is solicited for their valuable insights regarding their perceptions of the product, the brand of the company, or even rival offerings. Subsequently, the company strategically leverages this gathered feedback to inform critical decisions regarding the product or service, including potential release, modifications, or even discontinuation.
Phone Research
The evolution of interview techniques from traditional man-on-the-street to telephone-based interviews has revolutionized the data collection process. The advent of telephone interviews has provided market researchers with a more efficient and cost-effective approach to gathering valuable information.
For a considerable duration, telephone research has been the favored tactic employed by market researchers. Its advantages in terms of efficiency and cost-effectiveness have been widely recognized. However, in recent years, the landscape of telephone research has faced significant challenges due to the declining use of landline phone services, which have been gradually replaced by mobile phones that are less accessible for research purposes.
Survey Research
Utilizing surveys as a substitute for focus groups presents a financially efficient approach to gauge consumer sentiments without necessitating in-person interviews. By dispatching surveys via postal services, often accompanied by coupons or vouchers, consumer participation is incentivized. This research methodology contributes to the comprehension of consumer perspectives regarding the product, brand, and pricing, thereby aiding in market analysis.