Market Research: Meaning, Types, Methods and Examples
Today's entrepreneurship landscape is very fast-paced. Consumer demands and market conditions change frequently, often predetermining the product's chances for success or failure. And although following your intuition can sometimes help, when it comes to business where a lot is at stake, making factless calls is almost equal to using a Magic 8 ball.
What should business owners do to withstand the competition and stay afloat among all the unpredictability? Repeatedly conducting market research could be the answer. Like a skilled detective, teams must take a magnifying glass, gather evidence, and look into the data and recent findings to find clues and invaluable insights to unravel fundamental mysteries.
The bottom line here is that thorough investigation can lead to a deeper consumer understanding and more informed decisions. So, if you're ready to put on your detective trench coat, keep browsing the page, as we'll give the definition of market research, provide answers to questions like what is market research necessary for, go over the various types of market research, common methods, and provide examples.
What Is Market Research?
Giving the market research definition, it refers to the process of investigating customer behavior, client preferences, market trends, industry intricacies, and various competitive landscapes. This is a systematic and methodical process, which can help bring valuable insights to light. By navigating through the labyrinth of data and analyzing the findings, teams may gather and piece together the clues to base their decisions on.
What else does the meaning of market research imply? This approach is used to omit guesswork and raises the lid on multiple things like:
- customer preferences;
- product appeal;
- existing market trends;
- current competitors, their strengths or weak spots.
To obtain such information, teams apply various techniques, including surveys, interviews, competitor analysis, among others. In the end, it empowers organizations by revealing answers to many questions, regardless of whether the team is only going through proof of concept, moving toward project planning and the discovery phase, or upgrading or modifying the product.
Why Is Market Research Important?
As you see, it's sort of a detective-like quest to solve a confusing case that requires clue allocation, studying the "suspect" behavior, and deciphering the obtained information. It isn't an easy process, and it requires a lot of time and effort. So what is market research needed for, and which business gains does it bring? Here are several notable points.
1. Getting to Know the Target Audience
Market research makes it possible to gain a comprehensive understanding of the target audience. After all, you need to clearly identify who can find your offering useful and know all the ins and outs of whom you're building your product for. This includes their behavior, desires, expectations, needs, pain points, aspirations, and buying habits.
2. Improving the Product or Offering
When you're aware of which customer needs are unmet, it becomes much easier to address them. Hence, market research becomes leverage for tailoring products to better meet specific client demands, needs, and desires.
This certainly strengthens the creation process at all stages of the product development life cycle. Plus, it helps reinforce the sales and marketing strategies and the product itself (from packaging and positioning to pricing, monetization paths, etc.).
3. Informed and Strategic Decision-Making
As follows from the above, making calculated, data-driven decisions that are backed by facts (instead of your gut feeling) can accelerate other vital business processes that don't necessarily have to deal with the product directly. Because market research implies in-depth analysis, not surface-like observations, data unveils various patterns and possibly hidden opportunities, which can define the entire business trajectory.
4. Shaping the Business Plan
Surely, market research can be considered one of the pillars of business strategy creation. Such data provides a sturdy foundation for planning business development steps and crafting an optimal product development roadmap. It also allows for making more accurate project estimations and reduces the chances of making non-precise assumptions that will be completely off the mark.
5. Reducing Risks
Like a guiding compass, market research may enable team members to avoid uncalled-for risks. For starters, it often helps uncover possible pitfalls, allocate potentially hazardous areas, or identify sketchy moves.
Moreover, it can minimize risks related to an ineffective product or MVP launch. For example, it could signal an untimely release or, even more importantly, the threat of launching something people don't need or that doesn't resonate with their expectations. Certainly, this saves invested resources like time, effort, and money from being put to waste.
6. Helping Teams Learn
Undoubtedly, market research is a versatile source of knowledge. It flags what you're doing right or wrong and illuminates the paths that can be taken. Gathering feedback and measuring customer satisfaction can assist in evaluating how effective a promotional campaign is, what to improve in the product, or how to spend the budget more optimally.
7. Becoming More Flexible and Adaptable
Agility is an essential component of a successful business, and market research can also expose the necessity for a strategic adjustment or business pivot. Such data grants teams the chance to anticipate shifts and adapt to the changes in due time. This can not only ensure that you're staying ahead of market trends but also that the product and offering remain relevant.
8. Gaining a Competitive Advantage
Of course, businesses strive to obtain a competitive edge, and that won't be possible if you don't understand the competitive landscape. Who are your competitors? What are they doing? How are they getting on? Do they have any visible strong sides or weaknesses?
Market research definitely lends a helping hand in identifying market gaps. It hints at untapped opportunities to try seizing and how to amend the strategy to differentiate your product in the market and put your best foot forward to help it win over clients and stand out.
Types of Market Research
Just as detectives, business owners have to use fragments of the data puzzle to see the full picture and perspective. What are the three types of market research? In a broad sense, we can actually distinguish four. Below, we describe a few main categories or approaches to how research can be conducted based on its data source, focus, or purpose.
There are different types of market research, but primary research deals with gathering original data from firsthand sources to obtain new, tailored, and business-specific insights. For instance, teams can collect information from:
- their target audience directly via observations, interviews, surveys, personal one-on-one contact;
- controlled experiments (held for hypothesis testing or data gathering purposes or to get an answer to a specific question or objective).
What’s for secondary research, such types of market research rely on your own historical data and previous findings or on data that was collected by someone else. It implies analyzing and even synthesizing data that already exists, shortening the time and the required resources to gather the information and offering a broader perspective. Here are some things that may serve as sources for analysis:
- your own previous research results;
- industry reports;
- research publications;
- data analysis and statistics by government agencies;
- public records;
- online databases;
- statistical repositories;
- market studies.
However, it is crucial to keep in mind that the data may have originally been collected for a different purpose. It can be handy if you want to explore trends or validate what you've discovered from your own primary research.
The market research types can also be distinguished by being either quantitative or qualitative. The former places an emphasis on quantity, that is, it's exploratory market research that involves the collection and analysis of numerical data and objective measurements. Data can be collected from:
- surveys or polls with predetermined responses;
- questionnaires with closed-ended questions;
- experiments, regression or correlation analysis;
- and other sources.
As a result, teams get statistical insights that make it possible to compare, generalize, or make conclusions using a rather large sample size.
Mentioning qualitative types of market research, they place emphasis on digging deep to find answers to specific questions based on non-numerical data, such as the points of view of select individuals. In this case, subjective experiences are under analysis with the aim of allocating patterns, getting extensive insights, and generating hypotheses.
For instance, to get descriptive insights and obtain business-specific answers to many "whys", teams can:
- hold in-depth interviews with open-ended questions;
- run detailed opinion polls in focus groups to understand the users' motivation, behavior, or attitude toward something.
Now that we've shed light on the question of "what are the types of market research", as an additional tidbit, it is worth noting that both primary and secondary research could be quantitative and qualitative. It depends on which analysis methods are chosen and the data sources.
Market Research Methods
Businesses can use various techniques for collecting data and gathering insights about their competitors, target market, and industry. But how exactly do teams approach the matter? Let's take a closer look at the most common methods of market research that can help teams "crack the case".
Surveys and Polls
Surveying or asking people to give answers to a poll are quite cost-effective research options. They are best applicable for getting information from a large number of respondents. The extensiveness and depth of the questions depend on the aims.
Polls or surveys can be run in person, but the more popular online channels of distribution are email send-outs, social media, or specialized platforms. Luckily, there are lots of MVP tools that can visibly simplify the process of creating polls, questionnaires, etc.
Interviews and Focus Groups
Leveraging data from customer interviews with individuals is a first-hand source of truth that teams often turn to (as long as it's not an interrogation, right?). Just as with surveys, the size and level of detail of the interviews will vary. They can be held via video chats, phone calls, face-to-face meetings, or even in written Q&A chat format.
Focus groups, however, entail gathering a petite group of people who match the company's target customer profile or market segments. They can watch a demo, provide feedback on something, or test the product. This is also a qualitative method but assumes questioning more than one person at a time in the course of a discussion.
Observations and Usability Tests
The observation method implies taking out your detective binoculars and studying the target audience or even competitors and how they act in their natural environment. This silent tactic is generally unintrusive but can provide a pretty realistic picture of how users interact with the product and their behavior. Such methods of market research as usability testing, scrollmapping, heatmaps, clickmaps, or shop camera footage may be the "footprints" or "fingerprints" of observational research, offering in-depth insights.
Certainly, market research may be a challenge if you have an incomplete product or lack one on the whole. Nevertheless, there exist very simple MVP types like smoke tests, fake doors, or email campaigns. They apply simple solutions like landing pages to test user interest or collect data, contact details, and feedback. If you do have a new service or product to show, you can assess its quality and how happy people are with it by running usability tests.
Competing with other players on the market is tough if you don't know who they are and their strengths and weaknesses. That's why competitive analysis plays an important role in the market research process and benchmarking your offering. Teams overview various business aspects of direct and close competitors, including their used marketing strategy, product advantages, pricing, and brand positioning. Then, they may apply these findings to differentiate their own product.
Social Media Listening
Social media platforms and forums can become a great source of data, too, if you want to reveal the latest trends or customer sentiment and desires. After choosing the most appropriate channels, teams can monitor, track, and analyze information such as comments, threads, mentions, and often discussed topics. Moreover, social media may serve as a tool for obtaining feedback, discovering opportunities, or learning about issues.
Such research revolves around brand positioning, i.e., user interaction with it, awareness, perception, etc. Teams do their best to measure customer satisfaction and brand loyalty (for instance, by studying client reviews, ratings, feedback forms, and complaints submitted to customer service, as well as metrics like the customer retention rate, repeat purchases, customer lifetime value, and others obtained from Google Analytics, Mixpanel or Amplitude). They can then amend the product and the marketing and sales strategies correspondingly.
This approach highlights the analysis of big datasets to uncover vital business learnings such as prominent behavioral patterns. Multiple things can act as sources, e.g., social media, site analytics, or product performance metrics. Nonetheless, in this case, the larger the volume of assessed data, the better.
Interestingly, neuroscience has made its way into the field of research, too. It focuses on the subconscious and helps teams understand crucial things, such as how people make choices. The techniques applied include brain imaging and eye tracking to assess reactions to marketing stimuli.
Additionally, teams can run various controlled experiments to test their ideas and assumptions. For instance, A/B testing, split or multivariate tests may be of great help if you want to ensure which option to select. Say, you'd like to know which landing page color scheme or CTA phrase to choose, then you randomly direct traffic to each version and, after a while, make conclusions based on user clicks and engagement.
How to Do Market Research
Now that we've overviewed the possible types of market research and the often applied methods, it's time to figure out the sequence of steps teams generally take throughout the process.
Step 1: Determine the Objective
Begin by clearly defining the purpose of why you're planning to invest time and effort into research. What reason led you to the need to conduct this market research? Who is in focus (e.g., market trends, competitors, a customer segment, or a specific buyer persona group)? What are you planning to achieve?
The "why" can be determined by lots of things like initial research to learn whether it's worth taking a shot at starting a startup or building a product, a market shift, a sudden drop in sales, or your team's overall KPIs and OKRs. The "what" should specify who is the focus of the study. Jotting it all down can be a good start.
Step 2: Select the Best-Fit Research Strategy and Plan It
What kind of research type is best applicable to help you find answers? Which specific market research methods can be of use? What do you have enough resources for? At this point, you have to line out the plan and strategy:
- put your research hypotheses on paper;
- mark the expected results and the success/failure indicators;
- pick the ways to collect data;
- choose the best-fit types of market research and channels;
- select the groups of participants, test subjects, or respondents;
- indicate the duration of the procedure;
- possibly note the incitive or reward for participation;
- make a research plan noting the activities;
- assign responsible people;
- decide on the budget if necessary.
Step 3: Start the Work
Next, you have to prepare the actual instruments of research. For instance, you can:
- spend time making a logical and consistent list of questions for the focus group interview;
- think though the survey and poll content (you can use Typeform or Google Forms to speed things up);
- or put together several versions of the landing page that you'll run split tests for (e.g., using VWO).
Then, set up the tools or organize the processes that'll help you track the results and collect data.
Step 4: Analyze Collected Data
When the execution stage is complete, move on to analyzing the gathered data and interpreting the findings. Carefully study the results to try to find patterns, identify trends, and set aside repetitive insights. The evaluation process can entail:
- analyzing statistical information;
- going through interviews or survey replies one by one;
- using data visualization;
- and other methods.
On another note, organizing a separate space to store the knowledge you've obtained thanks to market research, hypothesis tests, and other used methods is considered a best practice. Having all your data analysis reports at hand with a quick overview of what you were searching for, when, why, and the results can help keep the whole team on track, share the findings, and have a single source to return to later.
Step 5: Make Conclusions and Act on the Findings
Which key findings did you get? Draw conclusions on the outcomes and note the results to help you make data-backed business decisions. Then, continue by taking after-research steps related to fine-tuning the strategies, going through feature prioritization once again, refining the offering, and other actions.
Once these changes are implemented, make sure to keep monitoring the results. If relevant, return to the research data after some time or repeat the process.
Examples of Market Research
Here are a few hypothetical market research examples that can better illustrate cases of how teams can utilize this approach.
Startup W is thinking about working on a product in a highly competitive market. To understand how to position the product and what to emphasize, they spent time on a detailed competitor analysis. First, they singled out their potential direct industry competitors and then took a deep dive into their pricing, features, marketing, and available client feedback. The results illuminated a market gap and the possibility of formulating a unique value proposition that could make their product stand out.
Let's assume that the founders of Startup X have a great product idea. They want to ensure there is market demand for it and that people will be willing to pay for such a product. They wish to find this out at the early stages of startup development before investing significant resources into its creation. To test demand, they put together a fake door landing page, showcasing a video with a mini demo of the to-be product. Tracking the number of CTA clicks and filled-out forms gave them a primary understanding of customer interest.
Startup Y isn't certain about the problem their product should solve and which user needs to address. Hence, to learn about the target audience's challenges and pain points, the team created user stories and target audience profiles. Then, they conducted detailed interviews with a focus group to determine the customer preferences, what is expected from the product, and which feature set to focus on first. Afterward, the team also ran a survey via email and social media channels.
Startup Z is currently working on the MVP design for their early product version. They made a clickable prototype and decided to present it to potential customers to see whether it's usable and gets what people want done. They analyzed the recorded user sessions and feedback, which allowed them to spot inefficiencies in the user flow and make the product better before release.
Concluding Thoughts on the Types of Market Research
In this article, we've answered the question of "what is market research", overviewed which types of market research exist, and found out why it is integral for business development. By utilizing various techniques, teams can make important discoveries and gain invaluable insights into various areas.
Like detectives, they analyze data instead of relying on the sixth sense to learn about the market state, the competitive landscape, and important factors related to the customers to make informed calls and enhance business strategies. Plus, this comprehensive approach allows us to avoid many costly mistakes down the line and make better, data-backed decisions.
Being a product studio, Upsilon knows how integral market research is for product success. So, if you need a hand with product development, don't be shy to turn to us for MVP development services for startups or to reach out and book a consultation!