8 Benefits of Market Research for Small Business and Why it's Important

Market research involves gathering data to learn more about target demographics and consumers so a business can market itself more effectively and, ultimately, succeed in the market. Market research is a vital part of any business strategy, whether that business is B2B or B2C, big or small, new or old. It provides the answers companies need to make decisions that will move them forward instead of back by empowering them to base decisions on data.

Market research is available as a service to help any company, service provider, individual or organisation make better, more informed decisions. The more research is embedded in the strategic plans of a firm, the better equipped it is to deal with the changing environment within which it operates.

Most companies know what market research is and acknowledge its importance in a general sense, but they may not realize just how crucial market research is to the success of their business. When you need to identify market trends, understand your core customer better, or achieve a long list of other important goals, market research is the answer.

Types of Market Research

Market research is a broad category. In fact, there are many varieties of market research that you can use to meet the specific goals of your business. Below, we’ll explore the different benefits of each type of market research.

Brand research: Brand research is focused on creating or refining your company brand to make a bold and favorable impression on your target market. You could look into the level of brand awareness among your target audience, how loyal customers are to your brand, what sorts of qualities people associate with your brand, and other aspects of customers’ relationship with your brand.

Marketing campaign evaluation: Some market research focuses specifically on marketing campaign effectiveness. You can evaluate how many people have seen your online ads and what the click-through rate has been, for example.

This type of information can help you make adjustments if needed and inform future campaigns so you reach consumers effectively and keep customer-acquisition costs down.

Competitor research: Competitor research focuses on the competition to help you gain insights into how your company can pull ahead. Looking into a competitor’s marketing campaigns, brand reputation, revenue or sales volume, and other important data points can help you learn from their strengths and weaknesses.

Customer segmentation research: An important type of market research, especially for new businesses, is customer segmentation. These studies divide your larger consumer base into different groups or personas. Understanding the different types of consumers you want to connect with can help you create individualized campaigns tailored for each group.

Consumer research: Nearly all market research involves the consumer in some fashion, but some research is focused specifically on understanding consumers within a certain segment better. You may want to learn about their purchasing habits, interests, motivations, and more. The better you understand your consumers, the more effectively you can appeal to them.

Product development: Developing products calls for market research first to ensure the concept has value and then to refine the product over time. For example, you may see sales dipping on a flagship product and discover that customers’ needs have shifted and this product should offer a new feature to be more useful or convenient.

Usability testing: Similar to product development research, usability testing is focused on products. However, the focus here is on how consumers use your product. You may release a beta version of your mobile app, for example, and get feedback from users to find out if there are any bugs or other problems you need to work out.

The Benefits of Market Research

It helps businesses strengthen their position. Knowledge is power. Use market research to gain a better perspective and understanding of your market or target audience and ensure that your firm stays ahead of the competition.

It minimizes any investment risk.

Market research helps to identify customer needs and wants. Having insights into customers’ preferences can substantially reduce the risk of new products failing. It is because products have been designed and produced according to market research information.

By identifying those exact needs and wants provided by existing and potential customers, the business will be able to evaluate whether satisfactory sales results can be achieved. Test marketing on a small group of customers can help prevent any future losses in situations when the product is unsuccessfully launched to the whole market.

This is a simple but vitally important and often business critical consideration. Spending what is often only a small proportion of your investment on researching and testing the market, product, concept or idea makes sound business sense.

It identifies potential threats and opportunities.

Both primary research (fieldwork) and secondary research (desk research) can be utilised as an insurance policy against both obvious dangers on the road ahead. Coupling this with some qualitative research for deeper probing can highlight certain opportunities or warning signs that may otherwise have been missed.

Risk is a necessary part of any business venture. If businesses didn’t take on risks, they would also limit the potential for reward. However, successful businesses tend to mitigate their risks in strategic ways. The way to avoid risk is not to avoid doing anything. Instead, businesses should use market research to minimize risks and maximize rewards.

A major way you can minimize risks is by ensuring there’s demand for a product. The reality is that many products fail. Some experts place the failure rate as high as 95%. While that estimate is likely too high, it remains true that many new products fail to connect with consumers and end up in clearance bins. One study found that, of the 9,000 new products that were broadly distributed at a national retailer, 60% were no longer sold within three years.

Because of the high risk involved, you should never create a product based on a mere hunch. Use thorough market research to predict whether a product concept has real potential for success. Will your product meet a need or desire your customers have, and will it do so more effectively than your competitors are doing? When you have proof of concept, you can be more confident in your efforts and more effectively attract investors.

After you’ve created your product, whether it’s a prototype or a limited run, you can employ market research again to help you refine your strategy before an official product launch. For example, you could give samples of a new food product to passersby in exchange for their feedback. You can also use market research to test reactions to a new logo, new packaging, or any number of other business decisions.

It helps to discover your’s and your competitor’s strengths and weaknesses.

It’s vitally important to adopt an ‘eye’s wide open’ approach to any market research project which is why it’s often advised to work with a market research agency to ensure completely unbiased reporting. Use research findings to adapt and learn from your own weaknesses whilst capitalising on your new-found knowledge from competitor analysis to take advantage and forge ahead of the pack.

When you understand your target customers better, that means you’ll be able to more effectively reach them. When it comes to your marketing campaign, you don’t want to waste time and money on trial and error — you want to have an informed marketing strategy. There are two main elements of effectively connecting with your audience: the marketing channels you use and the content you share.

Choosing the right marketing channels is an important first step to reach your audience, but to truly connect with them, you also need to tailor the content of your marketing materials. Everything from the features of your product you advertise to the tone and visuals you use should be crafted to speak to your target audience. When customers feel you’re “speaking their language,” they’re more likely to pay attention to what you have to say.

It facilitates strategic planning.

What is the foundation of your business strategy? If it’s evidence based and you’ve taken the time to invest in your own (and hopefully ongoing) research, you can be confident that you’ve given yourself the best chance to achieve your business goals.

Predicts future demand changes and market trends

Market research enables the company to predict any changes in consumer tastes and fashion. And, it explains how these trends may impact future demand for products.

For example, Fast Retailing Group also plans to accelerate new store openings in fiscal 2023. The group forecasts it will operate a total of 3,747 stores by the end of August 2023 across all of its brands. From this, Uniqlo International will have 1,740 stores.
Understanding any future demand changes will help the firm to predict what is likely to happen and react accordingly. This will minimize any future sales losses and maximize on potential opportunities of rising demand for a certain product.

To summarize, benefits of market research include reducing risk of launching new products, aiding marketing decision making, providing a connection between the firm and the external environment, finding out the size of the market, making the company look good, etc.

It Helps Stay on Top of Trends

Market research isn’t just important for new businesses. As consumers evolve, companies must also evolve to optimize the way they connect with customers. Market research is a valuable means of staying up on relevant trends. Researching trends can often be done through secondary research. Industry reports or research from your competitors, for example, can reveal what new product features consumers are interested in.

Today’s culture changes rapidly, and market research is essential if you want to keep up. You need to stay aware of trends regarding your consumers’ purchasing behavior, the most popular advertising channels, packaging preferences, product features, relevant messaging, and much more. Mimicking what your competitor did last year isn’t a good strategy.

Trends are especially important and cycle more frequently in some industries, such as fashion and design. If your company sells light fixtures, for example, you need to conduct research frequently to see what styles appeal to modern interior designers and homeowners. You also need to be aware of any new technology you can incorporate into your product to help you stay at the cutting edge and deliver the latest and greatest products to your consumers.

It Provides insights about customer demand and the market

Market research gives the business the most up-to-date data and information about customer tastes and preferences. It helps managers to find out what consumers like about the products and dislike the most. As well as assess which preferences are the most important to enable the business to implement any proposed changes that consumers rate most highly in order to incorporate them into the final product.

When products meet the exact needs and wants of customers, it will live longer on the market generating more sales and profits in the long-term. Market research can also help the firm to discover information about current market size as well as future market size for the product.

How the product is perceived by people, its strengths and weaknesses, etc. Also, details about competitors, their actions, strengths and weaknesses of competitor products, and any Unique Selling Points (USP) they might have. Last but not least, consumers’ preferences towards product packaging.

How to Conduct Market Research

Companies can conduct market research through various means. First, it’s helpful to understand the difference between two main categories of sourcing market research data — primary and secondary research:

Primary research is the data a company collects or an expert collects on the company’s behalf for their market research purposes. In other words, it’s field research. Some primary research is exploratory, meaning it’s more open-ended, and other forms of primary research aim to provide insight into specific questions or issues.

Secondary research involves using data that already exists and is at your disposal for market research purposes. For example, you could consult government census data, industry data reports or statistics on market trends. This type of research can provide a good starting point for understanding the market more broadly and learning about the competition.

Secondary research tends to be a starting point before conducting primary research.

There are several methods of primary research companies use to learn from consumers. Some of the most popular methods include:

Surveys: Surveys involve asking consumers questions they can quickly answer. 

Survey questions can be multiple choice or more open-ended. Surveys can be conducted in-person, over the phone, through the mail or online. They provide a fast and simple way of reaching a large audience and getting their feedback.

Focus groups:
Focus groups tend not to involve as many participants as a survey. Instead, a market researcher leads a small group of consumers in a discussion to get a window into consumers’ thoughts. Because the groups are small, most companies will assemble multiple focus groups and take all the results into account. 

They may observe through a one-way mirror or watch a recording.
Interviews: Interviews are similar to focus groups but may involve even fewer people. A one-on-one interview can be a valuable way of gaining detailed insight from one customer. These insights can be helpful, but they don’t provide statistically reliable data as you can get with a large survey.

Observation: Market observation involves watching consumers to see how they behave under natural conditions, such as a retail store. These consumers may or may not know they are being observed. For example, researchers may watch security footage taken from a store to see which departments customers tend to go to first and whether they stop to look at point-of-purchase displays.

Field trials: Field trials involve making a business move but doing so on a smaller scale and observing the results. For example, a restaurant chain may try a new menu item at a handful of locations and see how popular it is. If it’s a success, the company can feel more confident about adding the item to their menus throughout the region.

Companies can conduct their own market research in-house, but many choose to share their goals with a third-party expert who can create a market research strategy and execute it. By outsourcing your market research, you can streamline the process, focus on your core competencies, and receive valuable data from the experts that you can then leverage to drive your business forward.
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