Market research is the process of collecting, analyzing and interpreting information about a particular market. It takes into account geographic, demographic, and psychographic data about past, current, and potential customers, as well as competitive analysis data, to assess the viability of a product offering.
In other words, it is the process of understanding who your business is targeting, which helps you better position your marketing strategy.
In this guide, you will learn:
- The Role of Market Research in Marketing Strategy
- When to do market research
- Market Research Types
- Market research methods and their benefits
- How to conduct market research (example attached)
- Market Research Tools and Resources
- What is the role of market research in marketing strategy?
- A marketing strategy is a company’s overall program of action to attract consumers and turn them into customers.
The key word in the above definition is “a program of action”. Going to market with a product is like starting a new game. Since you are new to this game, you don’t know the rules and you don’t know who you are playing against.
This is where market research comes in. Market research allows you to learn the rules of the marketing game by understanding your target audience. It also allows you to understand who your opponent is by assessing the strengths and weaknesses of your competitors.
Research is what marketers do to plan their moves and outperform their competitors. It is also what marketers use to determine the strengths and weaknesses of their own marketing strategy.
But is market research an absolute business prophecy? Unfortunately no. This is recognized even by companies specializing in market research – here is a quote from one of them:
(…) it cannot be argued that market research is an exact science, since it would be unrealistic and unreasonable to expect market researchers to predict the exact demand for a new concept, given that there are many variables that can affect demand outside the purview of market researchers.
This is why market research, for all its importance, is “only” part of marketing and “only” an experiment. It is up to you to decide whether you will conduct the experiment and when to end it.
For example, Crystal Pepsi seemed very promising during the market research phase, but failed when it entered the market (the same thing happened with New Coke). Xerox’s idea of a commercial copier did not sit well with research analysts. Xerox did it anyway, and the rest doesn’t matter.
When to conduct market research?
Paul N. Hauge and Peter Jackson, in their book Do Your Own Market Research, point out three specific situations where market research is really useful:
Goal setting. Knowing things like the size of the market or the description of potential customers can help you set sales targets.
Solution of problems. Low sales? Bad ROI? Market research will help you understand if your problems are internal, such as a poor quality product, or external, such as aggressive competition.
Support for company growth. Understanding how and why consumers choose products will help you decide which products to bring to market.
Another answer to the “when” question is the importance of the decision you need to make. The more important the marketing problem you are solving, the more market research you will need.
For example, launching a new car on the market is a big event, right? So maybe Ford could have avoided losing $350 million on the Ford Edsel if they had done their research right. I mean, using the right methods, it’s not hard to predict that consumers will find a car too expensive and ugly.
Market research does not always have to be a large and complex project. The relatively new trend of agile market research allows you to research the market regularly and economically. With this approach, you use small, iterative, and evolutionary methods to respond to rapidly changing circumstances and adapt to unknown market territories.
Also, if you’re in a startup environment, especially if you’re developing an innovative product, you may be interested in customer development. In this methodology, market research is the most “flexible” and is closely related to the product development process.
Take Ahrefs for example. We follow agile market research techniques that anyone can use. As you’ll see later in the article, we use simple (but effective!) things like social media surveys, crowdsourcing, in-house competitive analysis, or just tracking our competitors’ prices.
Market Research Types
Just because someone does market research a certain way doesn’t mean you have to copy it. You need to know what options you have and they start with different types of market research.
Whenever research is done by you or on your behalf and you need to generate data to solve a specific problem, it is called primary market research.
Examples: Focus groups, interviews, surveys (more on them later in the article).
Key Benefits: This research is tailor-made for your brand, products or services, and you can control the quality of the data.
When you use data that already exists, such as those collected by other companies and organizations, you are doing secondary market research.
Examples: Third party sources such as articles, white papers, reports, industry statistics, previously collected internal data.
Key Benefits: You get a macro view of your market because secondary research includes other market participants and is likely to use a larger dataset than your primary sources.
Primary study or secondary study
Primary and secondary market research are different, but by no means opposite. In fact, it is recommended to use both types.
While primary sources will give you an overview of the market focused on your business, secondary research will tell you how other businesses are doing and how your research results compare to a larger sample size.
Market research subtypes
A little more theory for you marketers. Professional market researchers distinguish between the following subtypes of primary and secondary market research:
Qualitative research. For example interviews or open-ended questions, results are expressed in words rather than numbers and graphs. This type of research is used to understand the underlying causes, opinions, and motives.
Quantitative research. For example, polls, polls and closed questions, the results are expressed in numbers and statistics. This type of research is used to test or validate hypotheses or assumptions by quantifying certain variables (such as opinions or behaviors) and summarizing the results from larger data samples.