What is market research and why does it matter for new businesses?

Conducting market research is an essential step in establishing a successful business. Whether you’ve got a potential business idea or you’re in the process of getting your new business up and running, understanding your target market and current market trends can help with your next steps.

What is market research?

Market research is the process of gathering data to learn more about your target audience or other companies so that you can market your business more effectively.  

It can help you understand your customers’ needs and preferences so that you can better tailor your business’s products or services to them. You can use your market research to make more informed decisions about your company’s strategy and operations, and even identify new opportunities. 

Why is market research so important for new businesses?

Market research is particularly important when you’re just starting out because it can provide important insights to help you build a stronger business. 

1. Reduces the risk of entering a new market

Before launching a new product onto the market, you need to establish whether there’s sufficient demand. Failure to do so could result in large financial losses, potentially ending your business before it’s even got off the ground. 

By carrying out the necessary research, you can find out whether there’s enough interest in your product or service and whether you should refine it in any way. Market research can also help you determine how much people are willing to pay for your product or service, so that you don’t set your prices too high (or too low). 

2. Teaches you more about your customers

Understanding your customers is key to driving loyalty and engagement. If you know their desires, needs and pain points, you can create a better user experience. 

This knowledge can also help you to create a more effective marketing campaign as you have a better idea of what should resonate with your audience – and what won’t. 

3. Helps you understand your competition

Taking the time to research your competitors can enable you to engage with your customers more effectively. Look at what your competitors are doing right and where you could do better. 

Analyse their marketing strategy, products and customer feedback to help you draw up a plan to stand out in the market.

4. Enables you to uncover industry trends

It’s important to stay on top of the latest market trends so that your business can evolve over time. Consider consumers’ purchasing behaviour alongside advertising trends, product features, packaging and messaging to ensure you remain up to date and deliver the best products and services you can to your customers. 

5. Encourages you to make more informed decisions

Overall, carrying out market research can result in better decision-making for your business. 

For example, it can help you assess whether you need to modify a particular product or take it off the shelf, which channels you should use for your next marketing campaign, whether you need to adjust your pricing strategy, and whether it’s the right time to open a new retail store. If you don’t have the relevant information at your fingertips, your business is less likely to thrive.

• How to start a business

Main types of market research

There are several different types of market research you can use to achieve your business goals. These include:

• Primary research

Primary research is the data you gather yourself, such as through surveys, interviews, focus groups and other observations. It can tell you exactly what your customers want, how happy they are with existing products and services, and whether your competitors do things better. 

• Secondary research 

Secondary research is public information that already exists. This could be government or industry reports, for example. It can be a useful way to gather information if your business has a small budget and can help you better understand industry trends.

• Qualitative research

This type of research gives you deeper insights into customer behaviour, helping you to understand what motivates them to buy. It collects non-numerical data through surveys and focus groups.

• Quantitative research

Quantitative research focuses on numerical data and is easier to collect. You can do this through polls and surveys and use it to provide statistical insights to help you draw conclusions and make predictions.

• Branding research

This type of research can help your business create, maintain or redefine its brand. This can include the tone, images, value and identity of the company. 

You can carry out interviews, focus groups or surveys to establish the level of brand awareness among your target audience and whether there’s any interest in your products or services.

You could also investigate brand loyalty and how your brand is performing against its competitors.  

How to brand your business

• Marketing campaign research

In addition, you might want to do some research into the effectiveness of your marketing campaign. How many customers have seen your online advertising and how many have clicked through to make a purchase? This can help you establish whether you need to change tack with your advertising or whether you’re on the right track.

• Customer research

With this type of research, you’re looking to gain a better understanding of your customers. Look into their buying behaviour, shared characteristics and what makes them happy. The better you understand your customers and what drives them, the more you can tailor your products towards them. 

• Competitor research

It’s essential that you know who your competitors are, along with their strengths and weaknesses. This knowledge can help you work out how to be better than them and stand out from the crowd. Look into their marketing campaigns, brand reputation, revenue and sales volume. 

• Product research 

You can also use market research to make sure there’s enough demand for any new products you wish to launch before taking the plunge. Find out how customers perceive your product and think about any improvements you could make before you go to market. 

How to conduct market research for your business idea

If you’re ready to carry out market research for your business idea, follow the steps below: 

• Define your research purpose: Consider what you want to achieve from your research. Are you looking to gauge consumer interest in your products, create a brand identity, confirm consumers’ pain points or asses whether your product meets your customers’ needs? 

• Identify your target market: Think about exactly who you want to target. Consider their characteristics, age, where they live, their education, income and the types of products or services they currently buy. 

• Establish your research methods: Work out what types of research you’re going to carry out. Could you use both qualitative and quantitative research? Would you prefer to set up focus groups and interviews or stick to polls and surveys? 

• Look at competitors: Identify your competitors and look at their audience and how they communicate with them. Think about their strengths and weaknesses so you can make better decisions. 

• Analyse your results: Once you’ve collected your data, analyse it for trends and patterns. It can help to arrange your data into groups and create different buyer personas (imaginary characters) if you have more than one audience type. 

• Create an actionable report: Summarise your findings into a report that outlines the steps you need to take to address your market research results. Don’t worry if you have both positive and negative insights – this can help you refine your business idea to ensure it’s a success. 

Simple market research methods for startups

Secondary research is a good place to start because you can use data that already exists. Look for government reports, industry data or statistics on market trends to give you some inspiration and a better understanding of the market and your competitors.

Once you’ve done this, you can move on to primary research. Some of the most popular methods for doing this include:

• Surveys: Create a list of questions that you can share with people by phone, in person, by post or online using a survey software such as SurveyMonkey. This can be an easy way to gather feedback and information fast.

• Focus groups: Arrange to bring together groups of people to discuss their thoughts and opinions. Usually, there are around eight to 12 people in each group, with a moderator to ask the questions. You could use your focus group to gain feedback about a new product or advertising campaign.

• Interviews: A one-on-one interview lets you pose more detailed questions to gain a better understanding of that person’s thoughts and opinions. However, interviews won’t provide you with the statistically reliable data that you’d get with a survey.

• Market observation: You can also watch consumers to see how they interact with a product. This can help you better understand consumer behaviour and their preferences for certain products.

Common mistakes to avoid when doing market research

Before carrying out market research, take note of some of the most common mistakes so that you can avoid them:

• Not knowing what you’re looking for: There’s no point starting your market research if you don’t have clearly defined goals. Be sure to establish the questions you want answered before you begin.

• Using a poorly designed survey: Make sure your survey is easy to understand and try to avoid asking too many questions at once. It’s also important that your questions aren’t leading. 

• Speaking to the wrong people: Be sure to direct your market research to the right audience. 

• Using a poor-quality sample: Similarly, you can’t carry out a focus group with just your friends and family or send a survey to all your Facebook friends. Make sure you’re using an objective source and not a group of people who likely want to support your business idea.

• Relying on one set of data: It’s a good idea to use both primary and secondary data to get the most out of your research. 

• Misinterpreting the data: Take your time to study the data carefully. If you don’t use the data in its entirety or use incorrect statistical methods, you can come to the wrong conclusions.

When should you carry out market research? 

It’s crucial to carry out market research before you launch your new business. Doing so helps to set your business up for success right from the very beginning, giving you a clear idea of your target audience, your competitors and the most effective marketing strategies.

However, market research isn’t a one-off activity. You should carry out further rounds of market research as your business grows. It can be an effective tool whenever you want to launch a new product or marketing campaign, and it can help you respond to changing market conditions. You could also use it to help you diversify and enter a new market by using your research to identify existing gaps. 

Incorporating market research into your business plan

Market research should also be an essential part of your business plan. It helps to back up what you’re saying and shows you’re serious about your business. 

Use your market research to identify your target audience, as well as outline who your competitors are in your business plan. Use your analysis to show potential investors there’s demand for your products and that you fully understand the market and the latest trends. 

Incorporating your market research into your business plan can increase the chances of securing financial backing to help your business grow, and help you set goals and targets for the next three, four or five years.