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The Importance of Market Research - why is market research important


The Importance of Market Research-why is market research important

The Importance of Market Research
1. What is market research?
Successful businesses have extensive knowledge of their customers and their competitors. Market research is the
process of gathering information which will make you more aware of how the people you hope to sell to will react to your
current or potential products or services.
Whether you are aware of it or not, as a business owner you conduct market research all the time. When you talk to
customers about your business or check out the prices of your competitors you are conducting market research.
Formalizing the process can produce a wealth of information about your products and services, your customers and the
marketplace you operate in.
The level of complexity used in your market research campaign is up to you, as market research can cover a broad
spectrum of activities. You can undertake simple activities that can be done on your own, such as creating a short
customer satisfaction questionnaire or studying demographic data for your area, or undertake complex ones that require
assistance from a professional market research firm. Regardless of the size of your market research budget, the time you
have available or your level of experience, some form of market research is possible and it can help you to improve your
business decisions.
2. Why conduct market research?
The goal of doing market research is to equip yourself with the information you need to make informed business decisions
about start-up, innovation, growth and the 4 `Ps': product, price, place and promotion.
Product -- Improve your product or service based on findings about what your customers really want and need. Focus on
things like function, appearance and customer service or warranties.
Price -- Set a price based on popular profit margins, competitors' prices, financing options, or the price a customer is
willing to pay.
Placement -- Decide where to set up and how to distribute a product. Compare the characteristics of different locations
and the value of points of sale (retail, wholesale, and online).
Promotion -- Figure out how to best reach particular market segments (teens, families, students, professionals, etc.) in
areas of advertising and publicity, social media, and branding.
Part of being prepared with market research is avoiding unpleasant surprises. Intuition and experience can be helpful at
times, but research and facts often paint a more accurate picture of your market.
By conducting research on a regular basis, you can keep up with the dynamics of the economy and demography. You can
also adjust to new regulations and technological breakthroughs.
Market research can help you:
Understand your customers and their preferences (4 Ps)
o Profile your customers (location, age, gender, income level, etc.)
o Create more effective marketing campaigns
o Find the best business location
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Identify opportunities to grow and increase profits
o Recognize changes in demand
o Offer new products or services for the new demand
o Find new markets within and outside of Canada
Recognize and plan for industry and economic shifts
o Shift inventory, price and staff levels as needed
Monitor the competition in your market
o Identify competitors
o Get information on how your competitors operate
o Learn how customers compare you with your competitors
Mitigate risk in your business decisions
o Use information, not just intuition, to drive your business decisions
3. When to conduct market research
Market research is widely viewed as a component of the planning stage of a business. Indeed, market research is critical
for new start-ups and should be a key element of any entrepreneur's business plan. Market research data feeds into a
number of areas of the business plan, contributing to sections on:
Determining the sales potential of your products and services
o Identifying the demographic characteristics of your customers
o Selecting the appropriate business location
o Setting the price for your products and services
Attracting customers to your business
o Establishing your company image
o Setting prices for your products and services
o Ensuring advertising is on target
Selling to customers and earning repeat business
Business plans and market research are not solely for new businesses. Accurate assessment of the market and
development of an effective plan is critical to the success of both new and existing businesses.
Businesses contemplating significant changes, such as business expansion and relocation, are also wise to use market
research to support their decisions. Examples of situations that might call for market research include:
New advertising campaigns
Opening a new location or changing business locations
Increasing production levels
Introducing new lines of products or services
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The kind of information gathered through marketing research during the planning and growth stages of your business can
also be very useful in its day-to-day operation. A regular flow of market research information can help you to maximize the
potential of your current business activities and help you to create a roadmap for future growth.
4. How to conduct market research
First, it is important to establish clear goals for the market research activity you will undertake. You need to make sure you
have defined what you need to know and why.
Once you have established your goals, it is important develop a strategy and select techniques you will use to gather
data. The two broad types of research you can use are primary and secondary research.
Primary research
Primary research is original information gathered through your own efforts (or on your behalf by a hired research firm) to
respond to a specific question or set of questions. This information is normally gathered through surveys, observation, or
experimentation.
The following are examples of questions that can be addressed through primary research:
Who are my customers and how can I reach them?
o Customer profiles
o Prospective business locations
o Marketing strategies
Which products and services do buyers need or want?
What factors influence the buying decisions of my customers?
o Price, service, convenience, branding, etc.
What prices should I set for my products and services?
o Customer expectations
Who are my competitors, how do they operate and what are their strengths and weaknesses?
Some drawbacks of primary research are that it can be time consuming and expensive if not performed yourself, and the
results are not available immediately.
The benefits of this type of research are that you can specifically target desired groups (such as your customers or the
geographic market for your business) and can tailor your research instrument to answer specific questions. In addition to
keeping the costs down, an added benefit of doing the research on your own is that you will get to know the market for
your business better.
Surveys are the most common way to gather primary research. Surveys can be conducted:
Through direct mail
o Hand out at the place of business or mail out with survey returned in person or via mail
o Questionable effectiveness; follow-up reminders necessary
Over the telephone
o Cost-effective
Courtesy of Business Development Bank of Canada (BDC)

What are the benefits of conducting market research?Benefits of conducting market research Conducting market research is important to provide the venture with customer information, competitor information and industry trends. Moreover, market research can help the venture understand threats and opportunities facing the business. The information from this type of research is important in formulating and evaluating the venture's marketing strategies.