Whatever the size of your enterprise or where you are in your business journey, market research should be an oft-used tool in your repertoire. From the startup phase right through to every stage of your business’ growth, it can provide valuable insight that can be used to gauge the trends and patterns of the market and adjust your business strategy accordingly.
The purpose of market research
While businesses use market research data for many different purposes, it broadly falls into three camps:
To gain a detailed understanding of consumer needs- Before a product or service is launched, businesses need to understand consumer expectations. Decisions pertaining to pricing, packaging and the effectiveness of advertising campaigns are all based on this research. It’s imperative to identifying your target demographics and determining what influences their behavior.
To calculate the risk of failure- Once a product is launched, its success or failure hinges on its market appeal. Only be regularly trawling market data can one calculate the risk of business or product failure in time to reassess and adjust their strategy, thus minimizing the risk of heavy loss.
To forecast future trends- When Morgan Spurlock released his documentary Super Size Me, the fast food industry was forced to react. Prior to the film’s release, many franchises rapidly expanded their menus offering a greater selection of salads, fresh fruits and carrot sticks instead of fries to mitigate the damage to their business models. Any business needs to be able to pre-empt changes in consumer behavior and action them quickly and decisively.
If you have a small to medium sized enterprise (or are in the process of starting one) you’ve likely used some common market research methods such as surveys, interviews, focus groups and observation of the market. This is invaluable for your business to find its niche and determine its place within the market as well as giving you a feel for consumer trends. It’s probably emboldened you to go into business in the first place by demonstrating a quantifiable interest in your business’ field.
While this is a great introduction to the use of market research, it’s really just the tip of the iceberg.
360 degree feedback
The day-to-day operation of a business is extremely demanding of the entrepreneur’s time and resources, so often businesses will throw money and resources at gathering market data only to find that they’ve no idea how to use it meaningfully.
In order to be effective and meaningful, it needs to be conducted regularly and the data used to effect change. This keeps your business agile, which is especially important if you have a technology based product.
The process of continuously collecting and trawling data and then implementing change as a result of the emerging information is called 360 degree feedback. This is because it is cyclical in nature. Think of it as wheel with five spokes, each of which represents a phase in the process:
Survey design- A template for collecting the appropriate data is designed.
Sample selection- A cross section of respondents is selected within the parameters of the business’ target demographic.
Feedback collection- The confidential information is collected and collated.
Report generation- A report is created that demonstrates the thrust of the research data and implications that it has for consumer behaviour and emerging trends.
Feedback coaching- The business owner, manager, or even an outsourced research company draw up a plan for how to translate the data into actionable changes in business strategy.
This approach ensures that the market research data is used meaningfully and regularly rather than being stored in a vault and forgotten about. For a working example check out this Decisionwise sample survey. 360 degree feedback is a relatively simple and highly effective approach but only if it is incorporated as an intrinsic part of your business operations. In order to be effective, it needs to be treated as a necessity rather than a novelty.
Common Market Research Blunders
Whatever approach you choose to the implementation of market research it’s important to box clever. A box-checking approach to market research can be not only pointless, but enormously counterproductive. Here are some common mistakes which should be avoided at all costs.
Over-reliance on one set of data- For your research to mean anything you need to cast a wide net and pool your data from as broad a range of sources as possible. Over-reliance on one set of data can skew your findings and lull you into a potentially damaging false sense of security. Or it can just as easily cause you to catastrophize and completely overhaul your practices thereby throwing the baby out with the bathwater. It’s also a good idea to know exactly what sort of data you’re looking for or to approach your research with a specific problem e.g. “How much do my customers expect to pay for my product?”.
Indiscriminate sampling- The data you are sampling needs to come from the people whose business you are trying to garner. Focus groups need to include a broad spectrum of people but they still need to be within the parameters of your target demographic. Survey respondents need to be the kinds of people in the market for your product. It sounds glaringly obvious, but many businesses sink money and resources into collecting data without adequately checking who that data is coming from. Which brings us to…
Overspending- Many businesses throw money at the ‘problem’ of conducting market research, but if done right it really needn’t cost very much at all. By all means, allocate a budget but take your time to ascertain what is reasonable in relation for the kinds of returns you can expect and over what sort of time frame. If you’re outsourcing your market research to a third party company, take the time to shop around and see who will get you the best deal. Remember that value is more important than volume, so ensure that your data will be taken from the people and demographics that are of value to your business.