A Quick Guide to Market Research

What is market research?

Let's get the first major point across before we move any further: market research provides valuable insights, but they cannot replace managerial decision-making.

Okay. Now read that again.

Done? Good. We can move forward now.

You can think of market research as something like this: a hammer can't drive a nail without someone wielding it, and a computer can't generate a report without user input. Similarly, market research serves as a supportive tool rather than a decision-maker. It offers one of many factors to consider when making strategic decisions.

Market research typically aligns with one or more of the following characteristics:

1. It can be conducted quickly.
2. It can deliver highly accurate results.
3. It can be cost-effective.

The caveat? achieving all three simultaneously is almost impossible. If research is both fast and accurate, it won't be cheap. If it's accurate and affordable, it can't be completed quickly. And if it's quick and budget-friendly, the findings are less likely to be reliable (at least from my experience).

Utilising research for problem identification and resolution

Market research typically falls into two primary categories:

1. Problem-identification research
2. Problem-solving research

Accurately identifying the problem is essential before attempting to resolve it. Without this first step, your efforts may be directed toward addressing the wrong issue.

Now let's dive into the distinctions between these two areas, along with real world examples so we can distinctively differentiate the two.

🐦Problem-identification research

Problem-identification research focuses on evaluating factors such as market potential, market share, brand perception, market characteristics, sales trends, and overall business development.

This type of research typically helps businesses identify challenges and uncover new opportunities.

Some use cases of problem-identification research include:

Assessing market potential

Before launching a new product or improving an existing one, businesses need to gauge market demand. I mean, this is common sense, right?

A reliable sales forecast helps predict consumer responses to pricing, preferred buying channels, and effective advertising approaches.

For example, if someone develops a study app, they must determine how likely the students are going to purchase it over other alternative study methods such as offline classes, tutorials, and the like. Focus groups and surveys can help assess consumer interest and forecast initial sales before investing heavily in inventory and advertising.

Understanding market share

In simple terms, market share reflects the proportion of total sales a business captures relative to competitors. One common formula for calculating market share is:

Market Share (%) = (Your Sales) + (Your Sales + Competitors' Sales)

For example, a restaurant owner wanting to estimate their future share of the dining-out market could:

1. Review online trade reports on total dining expenditures in the area
2. Determine the percentage of dining revenue spent at similar establishments
3. Survey customers about their future dining habits and spending expectations

But keep this in mind: market share alone doesn't indicate profitability because it excludes cost factors. It only provides insights into your business' competitive position and growth potential.

Measuring brand image

A company's brand perception influences customer loyalty, product appeal, and overall competitiveness. Brand image research helps businesses adjust their marketing strategies to align with consumer expectations.

For example, a long-established retailer experiencing declining sales may find that while its product range and pricing remain competitive, customers perceive the store as outdated.

Now be honest.

What's the first store that pops in your mind when you read that last sentence? :)

To modernise its image, the retailer may consider promoting community engagement initiatives. Before executing this strategy, a survey can help determine which social causes resonate most with customers.

Surveys and focus groups can additionally reveal the most effective advertising techniques to strengthen brand image and assist businesses to craft campaigns that positively influence consumer perception.

Examining market characteristics

Every market has distinct attributes shaped by geographic, demographic, and cultural factors. Your business must tailor its marketing strategies accordingly. A one-size-fits-all approach often fails because consumer preferences vary significantly across regions and cultures.

To see this in action, go to your nearest McDonald's chain, and observe its headline menu.

Now buy that plane ticket (seriously, buy it.) to another country in another continent, and go to a McDonald's chain there.

You'll see a different set of menu that is localised to the taste preferences of the local people. That is why local expertise is extremely important in market research.

Now here comes a promotional excerpt.

At Ravenry, all of our research projects are backed by our vetted network of local, freelance experts.

That means when you need to do a research in, say, Thailand, we will deploy our team in Thailand to assist us with the research project.

As of now, we have 350+ experts across the globe.

That's it. I appreciate your 30 seconds. Now lets get back to the content.

If a company notices declining sales and suspects that its brand no longer resonates with a specific demographic, experimenting with culturally relevant advertising elements such as incorporating specific colours or language cues can provide insights into improving brand appeal.

Tracking business trends

Long-term business success depends on staying ahead of industry trends. Companies must monitor social, economic, and regulatory shifts that could impact consumer behaviour and market dynamics.

For instance, the growth of social media has changed the way brand interact with consumers (think UGCs).

A company targeting young adults may discover that social media recommendations carry more weight than traditional, offline advertising. Conducting focus groups and interviews can help you develop strategies to leverage digital platforms effectively and stay ahead of your competitors.

Now let's look at problem-solving research.

🐦Problem-solving research

Once a problem is identified, the next step is researching potential solutions. Problem-solving research focuses on key market decisions, including the marketing mix (the infamous 4Ps) and customer segmentation (grouping customers into relevant subcategories). Let's see how this type of research supports decision-making in these areas.

Customer segmentation

This type of research divides customers into groups based on shared characteristics or preferences. Research in this area helps businesses identify the most relevant segmentation criteria, predict sales potential for different customer groups, and adjust marketing strategies accordingly.

For example, a store owner looking to revamp their branding and advertising strategy can analyse consumer influences, such as cultural and peer effects, to determine the most appealing store theme and promotional approach.

You can now do this quite easily on social media poll.

By using both qualitative and quantitative data, you can refine your customer targeting strategies.

Product research

Product-related research focuses on developing new products, modifying existing ones, and testing their performance. And please note that this can also be in the form of launching a new feature for your app.

A retailer selecting a new store location has to consider factors like space utilisation, right?

That's a 'feature' of the retail business.

Observing customer behaviour in similar stores can provide insights into whether a smaller or larger retail space would be more effective, for example.

Pricing research

This one's pretty self-explanatory, but this type of research can answer the following key questions:

• Should a new product launch with a high price to maximise initial profits or a lower price to attract more customers?
• How will changes in price affect customer loyalty and overall sales?
• Can increasing the price of a premium product boost overall profitability?

Promotional research

You already know that effective advertising and promotions require data-driven decision-making. Promotional research helps businesses evaluate:

• Whether their advertising budget is being spent efficiently.
• The impact of temporary price reductions on customer acquisition and retention.
• The effectiveness of traditional versus digital advertising.

A store struggling with excess inventory due to an economic downturn may experiment with product bundling to encourage higher sales. Testing different bundling and pricing strategies (AB testing in modern days) can reveal the most effective approach for clearing inventory while maintaining profitability.

Distribution research

Getting products into customers' hands efficiently is vital for success. Distribution research helps businesses optimise supply chains, select the right partners, and set competitive pricing.

If high distribution costs force a company to increase prices, the business may consider selling directly to customers online or through home shopping channels (e-commerce).

Surveys can assess customer willingness to purchase through these alternative channels, because remember, not all products are preferred to be purchased online!

That's all for now. Market research isn't rocket science.

Trust me. My career is divided in these two fields; engineering and market research.

Let's stop here before I bore you to sleep.