How to conduct market research and turn the table of a losing competition
“If I asked people what they needed, they would ask for a faster horse.”
– Henry Ford
Somewhere I read this quote, by the name of Henry Ford.
But it really doesn’t matter, who said this. This is 100% correct in today’s business scenario as well.
The point is true: the buyer does not know what he wants until you show it to him.
Following the precepts of Henry Ford and Steve Jobs, they downplay the client’s opinion – especially when they do new things.
This kind of decisions only can be taken after a deep market analysis and well versed with the human psychology. In this article you’ll get to know the step-by-step method of a deep market research.
How to conduct a Market Research: Step-by-Step Method
“What is research but a blind date with knowledge?”
– Will Harvey
What is Market Research?
According to Investopedia “A market is a place where two parties can gather to facilitate the exchange of goods and services. The parties involved are usually buyers and sellers. The market may be physical like a retail outlet, where people meet face-to-face, or virtual like an online market, where there is no direct physical contact between buyers and sellers.”
It has the following indicators necessary for analysis:
- Capacity – the volume of goods or services that a particular market segment offers.
- Customer needs – based on it, market demand, is formed.
- Geographical location – the place where the market applies. According to the situation, the market can be of three types:
- World (all countries of the world),
- Regional (territory of one state) and
- Local (one or several regions of the country).
In short, it is the collection, processing and analysis of market information.
Here are the variables included in the concept of “market research”:
1. Setting goals and objectives, identifying specific business problems.
2. Identification of information sources.
3. Data collection.
4. Analysis of information.
5. The final result.
The purpose of market research is to identify the capabilities of the company and evaluate the competitive environment.
To know what exactly needs to be investigated, it is necessary to divide the market into types.
Types of market
- Consumer market – consists of everyone who buys goods for personal use.
- Market of manufacturers – this includes legal entities that purchase goods and services for use in production.
- The market for government institutions is a collection of state enterprises, that buy goods and services for use in their work.
- The intermediary market is people and companies that buy products and then resell them.
- International market – includes all intermediaries, as well as legal entities and individuals who are abroad.
Why market research is necessary?
Market research is essential for any business on uniform time interval. It helps and performs a lot of tasks. Here are the tasks it performs:
- Analyze consumer behavior to understand what products people are now interested in. This will help to find out whether the goods or services that the company offers are in demand.
- Assess the level of competition, find the strengths and weaknesses of competitors. This is necessary to understand in which direction the business should move.
- To study competitors’ products or services , pricing policies and ways to promote products.
- Assess the competitiveness of the company and products. Determine their strengths and weaknesses compared to competitors .
- Identify a profitable distribution channel.
- Find unoccupied market niches.
- Identify market capacity and company share in it.
- Assess the prospects of the market and the current distribution channel.
- To form the basis of a further strategy for promoting the company and products on the market.
Types of Research
For the analysis of the market using different types of research. Each of them has its own methods of collecting and processing information, but they are all divided into two main types.
These are hypotheses that are compiled based on the opinions of analysts and marketers , as well as data on competitors and consumers. The results of such studies are subjective, they do not have a clear structure.
Using qualitative research, they determine the motives of consumer behavior, their perception of the company and specific products. This allows you to find innovative and creative solutions for the tasks of the company.
These include statistics: numbers, indicators, calculations. They are visual and can be compared with each other.
Such information is considered more reliable. It allows you to track the effectiveness of the company in different periods of time.
Also, market research will be divided into subspecies. Before you start searching for information, decide which one the company needs to avoid unnecessary work.
Look at this list, here are the types of research on the subject and purpose.
- Market structure research. The analysis of market trends, capacity and market conditions.
- Product research. We study the share of company products in a particular segment.
- Target segment research. To select the most suitable market segment for the enterprise, a general analysis is carried out.
- Consumer behaviour research. It is required to find out the needs of customers, pains and interests, to understand how people relate to the company and its products.
- Market price research. Comparison of company and competitor prices .
- The study of free niches. Search and selection of possible niches, selection of the most suitable and profitable.
- Competitor research. The goal is to find out the strengths and weaknesses of rivals.
To understand what kind of analysis a company needs, ask a simple question: “What exactly needs to be learned?”. Take a piece of paper and write in a column the areas in which you feel the lack of information. Then under each write the questions you want answers to. Based on these data, a further research plan is drawn up.
It also happens that a firm needs a complete market analysis on all counts. This is a very voluminous work, but quite feasible if you use proven methods and act in stages.
The overall plan will consist of just the types of research that the company needs. For some, this list will be short, for someone long.
Market Research Methods
The primary collection of information for analysis is carried out using several methods.
This method helps to gather information by observing the object. You do not need to act on it.
Observation takes place in the field or laboratory conditions. Field is a natural environment. For example, monitoring the behaviour of buyers and sellers in a store.
And laboratory ones are artificially created situations.
The effectiveness of this method is quite high, although it is costly and can greatly depend on the opinion of the observer.
This is the way information is received from specific respondents. This is a popular method used by up to 90% of marketers.
Surveys can be done orally (interviews) or in writing (questionnaires), depending on the situation.
This method allows you to know the opinion of consumers about goods and services, the company and its services.
Using it, you can track some factors to understand how they affect the activities of the company. The experiment requires the active participation of the organizer. It can be carried out in laboratory and field conditions.
This is a method of creating a marketing model that recreates the overall picture of individual factors on a computer, rather than in life. To accomplish this, the computer program introduces the controlled and uncontrolled factors faced by the firm. After that, possible outcomes of events are calculated. In the end, you need to calculate the probability of these events.
Thanks to the panel method, you can understand how certain situations will affect the business.
The method is complicated, it is laborious to carry out, but it’s worth it.
Expert Assessment Method
Using formulas and calculations, it is not always possible to obtain the necessary information in a business. To solve a problem, sometimes it requires the opinion of someone who is well versed in it – an expert.
This method is simple to organize and has many advantages, but the results may turn out to be subjective or incorrect due to the human factor.
This is an analysis of company data in comparison with competitors. This method compares not the results of work, but the business processes that occur in companies. It is often used to evaluate a competitive environment. An analysis of the internal environment of the company is also possible to determine the effectiveness of different departments.
Studies with their use are carried out when detailed information is required from customers and a simple questionnaire will not be enough. Then a group of clients of the company is selected (6-12 people). For more accurate and versatile results, several groups can be distinguished according to different variables (gender, age, place of residence, income level).
The focus group is explained their purpose, then they are asked questions of interest, and on the basis of their answers they form a report.
Market research stages
To make the analysis effective and not cause unnecessary difficulties and problems, divide it into separate steps. Let’s look at each of them in more detail.
Follow this sequence in market research:
1. Definition of purpose
First of all, you need to understand why the company needs this study. If there is no goal, the result will be difficult to evaluate.
Decide what exactly you would like to consider: competitors, company products, business promotion, market structure, consumer behavior, market niches, target segment.
A clear understanding of the goal will help you make the right action plan.
2. The study of goods or services
At this stage, identify the needs of customers . For example, with the help of a survey and observation, you can find out which goods and services are most in demand and why. Here it is possible to identify individual characteristics that consumers like or, on the contrary, do not like.
In the course of the study, the company will determine what of its products most of all meets the expectations of customers, and that they are not interested.
To identify this, you need:
- Interview consumers.
- Compare the characteristics of their own products.
- Compare the same products with competitors’ products.
3. Determination of market capacity
Market capacity is the number of customer requests that a company and its competitors can expect from potential customers. Capacity is calculated only for specific regions and for one product. That is, it is impossible to calculate the capacity for all goods and regions at once. You can select any length of time for which this indicator will be calculated. For example, year, quarter, month.
During this study, the company will understand which products are falling and which are increasing. This will allow you to take action and even out indicators. In order to regulate the situation in the future, one must also understand what factors influence the demand in this business.
4. Market segmentation
The market is divided into segments – groups of people according to certain criteria. When we segment the market, we find the part of consumers that is most interested in the company’s products.
This stage of the study will determine:
- The most effective promotion methods.
- Marketing tactics of the company in the market.
- Profitable points of sale.
- Properties of the goods that need to be changed in order to interest buyers.
5. Analysis of consumer behaviour
Now it’s time to find out the wishes of the segments that are most loyal to the company. At the same stage, a portrait of a potential buyer looms. The analysis will include: the attitude of customers to specific products, market behaviour, habits, inclinations, preferences.
Surveys will help to conduct research – interviews and questionnaires.
This will help to identify the weaknesses of the company and products, to predict the reaction of consumers.
6. The study of distribution channels
We have decided on the target audience, now you need to understand how best to sell the product. The aim of this phase of the study will be to find the most profitable sales channel for the company.
In the process of analysis, you need to collect information about the work of outlets, determine which of them cope better with tasks and which are worse. To solve the problems of lagging points, you also need to know the factors that affect sales. For example, a distribution channel may not generate revenue for various reasons: due to location, due to sloppy work of employees, lack of advertising, etc. Another detail is distribution channel costs. To understand how beneficial it is, they also need to be taken into account.
The result of the analysis will be the screening of unprofitable sales channels or reorganization.
7. Analysis of the effectiveness of advertising
Now we will evaluate the promotion of the company and goods or services in the market. The evaluation criteria are as follows: as the advertising firm and its competitors operating on the consumer, what methods of promotion bring the best results, and which simply do not work, what relation to the Company generates advertising.
For the start of sales of goods or services to be successful, promotion is absolutely necessary. Without it, the process stalls. This item needs to be given special attention, it largely affects the company’s sales and profits, as well as its image.
The result of the work will be the definition of:
- The best tools and promotion methods.
- Advertising triggers.
- Audience preferences and reactions regarding advertising.
- Economic indicators dependent on advertising campaigns.
When all these variables are available, the company can identify and eliminate weaknesses in advertising, and this will directly affect sales.
8. The study of competitors
Another very significant stage of the study. It helps to understand exactly what the company is doing wrong, why competitors sell similar products or services better. You can evaluate the advertising of competitors, their promotion strategy, characteristics of goods and services, target audience and distribution channels.
Before conducting this analysis, identify direct and indirect competitors.
To make the research as effective as possible, you need to find out the following information about your opponents:
- Features of the advertising strategy and its costs.
- Price policy and price-quality ratio.
- Which distribution channels competitors rely on. Which of them are the largest.
- How these companies relate to customers: what privileges they provide, which promotions, what attract new customers.
- What are the intermediaries of competing firms.
Getting information about opponents is not always easy. But you can do it this way: interview the company’s customers or introduce a mystery shopper. It happens that an employee even temporarily gets a job with competitors. This, of course, is effective, but very laborious.
9. The formation of a pricing strategy based on the data
We determined the preferences of customers, market segments, distribution channels and promotion method. Now you need to carefully analyze the information, compare it and determine the pricing policy of the company. At the same time, it is important to consider the policies of competitors.
10. Sales forecasting
To plan further production and marketing work of the enterprise, you need a sales forecast. This is the total potential sales of goods or services of the company.
The forecast gives an understanding: what resources are required by the company, what distribution channels need to be used, how to expand production and what innovations will be needed.
Of course, the forecast does not give accurate results, only an approximate picture. However, companies cannot do without it.
Information Collection Methods
Now let’s look at where and how to get the data we need for research.
Here are the sources of information:
- Buyers Surveys or questionnaires are conducted, as a result of which you can find out the opinions of customers – held or potential.
- Social networks. The opinion of people about goods or services can be found on the Internet. If you have your own company communities in social networks, just invite subscribers to write an honest review. For some already popular products, people can make detailed reviews on various recalls. So there you can search for information about competitors’ products.
- Workers. You can also ask your own staff for opinions about the work of the company. Who, if not they, knows most about the work of the company. It is best to do an anonymous questionnaire so that no one is afraid to tell the truth.
- Own experience. Take your products and competitors’ products. Rate them in action. Just try to be impartial and intentionally not to underestimate or overstate, otherwise this experiment will not work. If you want to get a more accurate result, connect employees, let them also compare.
- Behavior Monitoring. You can independently come to the sales points of competitors or send other employees to monitor the progress of sales.
How to organize a study
There are 3 ways to do market analysis.
You can do it yourself if the business is small and there is simply no money for professional research. Well, or if you need only one type of analysis.
This option will cost less, but it will take a lot of time and effort. Doing everything yourself is energy-intensive, it is better to delegate such tasks, if possible. Especially if you are not too good at conducting market research. There is a good chance of a mistake.
With the help of the marketing department
If the company has its own marketing department, it would be logical for him to delegate the collection of information and research. Just do not forget to pre-agree the plan, this will help to avoid unnecessary work.
With the help of a marketing agency
Perhaps this is the best option. Especially if complex research is required. Yes, you have to allocate a budget to hire specialists. But in return, get quality work and unload your own schedule.
To carry out such a voluminous work on their own is quite difficult, and the agency will work on the analysis at once several employees who will be able to assess the problem from all sides.
5 tips for organizing market research
- Structure the information you collect. Sort by blocks, divide into parts, sign. Do not forget to draw conclusions and constantly analyze this array. Otherwise, the information will accumulate and at the end will fall on you like an avalanche. It’s much easier to understand them gradually than at the end to scoop up a bunch of diverse information.
- Do not do analysis for show. If you read the article and decide that you need to do the research, but don’t understand how it will come in handy in your work, don’t do it better. Research should have a clear goal. The analysis is carried out for the sake of the result, not the process itself.
- Do not forget about people. Some make the following mistake: they conduct research based solely on statistical indicators. Of course, they are more objective than someone else’s opinion. But you will be surprised how much you can learn about the market if you ask customers, company employees and marketers.
- Do not start work without a clear plan. It is not necessary to describe in detail each step of the analysis. But a plan is still needed, otherwise you risk scattering yourself on unnecessary actions. In the toga, the study may drag on, overgrown with unnecessary information, and some of the really important information will be lost – without a plan it is easy to forget about it.
- Do small research if there is no budget for the in-depth. Sometimes this is enough. Sitting in the unknown and waiting for the company to have more money is often unjustified.
Conclusions on Market Research
Now let’s summarize, briefly outline the most important thing to remember.
- Market research is one of the types of marketing analysis, which consists of the collection and processing of data from various sources.
- With the help of the study, the strengths and weaknesses of the company, the market position, the level of competition are identified, they find a suitable niche and distribution channels. In general, this is an excellent solution for those who do not understand why the business does not generate income.
- There are several methods for finding information for analysis. Use the ones that suit your business. Do not forget that not only statistics and figures are important, but also the opinions of customers, employees and experts.
- A complete study includes 10 stages. But it is not necessary to do everything. If analysis is needed only in a specific area, exclude the rest.
- If possible, contact a marketing agency. So you get a better result.
This was from our side on conducting the market research. We’re really hoping to hear some great questions or response from your side. Please do not hesitate to put your thoughts, below in comment box.