10 Reasons Why Market Research is Important for Today’s Business!
"Without data you're just another person with an opinion," it was rightfully pointed out by W. Edwards Deming. Business decisions should ideally be based on data-driven research and analysis, and not just gut reactions; the overall marked difference will arguably be better than your peers. Market research actually lays down the broad roadmap and provides a distinct direction, helping to maximize the two most important components of a business – time and money. Know your objective, fish out the information through an extensive market research study and put your concept into action.
Relevance of market research
Research is the process of gathering information on something that is yet to be explored. Market research is conducted not only with the purpose of learning but also with the need to take good strategic decisions. A decision based on market research is often chosen from a set of options which enhances the weightage of the business decision. Companies prefer to conduct market research before launching a product or service in order to understand the potential market and adopt a strategy that creates a hype for the product or service, in reference. The ultimate outcome of a market research study is diverse; through it, a company can gain business knowledge, incur profit and alleviate customer satisfaction levels. It also improves existing business strategies and helps in analyzing the path that a business rival is following.
What is Market Research?
Market research is a consistent process of gathering, studying and inferring information in order to empower a company with considerable statistics about the market for a particular product or service category. It helps gauge the competitive landscape and gather an idea about the potential customer base prior to launching a product, with measured steps. The whole and sole purpose of using market research by a company is to study the market in such a way that it can operate successfully and reign high in the competitive landscape. Along with the initial market research for planning to promote a product, companies are investing on regular research to stay updated on the market dynamics along with new business planning solutions for an improved company performance, sales and revenues.
Why Market Research?
To understand the market trend, leading companies focus on market research. A detailed region-wise revenue split, number of employees, leadership structure – every minute aspect is cohesively studied and analyzed. Investor-specific presentations and annual reports further help to understand the company developments and upcoming vision. Detailed analysis is often conducted on the focused product and its capabilities.
Reasons why market research is important for businesses:
Market research is essential in several ways - to understand the requirement of a specific product and its value in the market, the existing market players that dominate the market for a particular product, the impact of the product on customers post launch, the success of the product over competing products and so on. Let’s now elaborate the importance of market research through the following points that will help analyze the necessity of market research for an organization:
1. Assists in effective decision making
In order for a business to improve and grow, an efficient and cost-effective research is required to obtain information from customers and other businesses to make essential business decisions related to survival of the business, success as per different geographical regions, evaluating competitors, adopting an approach appropriate for the specific industry type.
Honda, a leading motorcycle company in India, did not conduct market research before shipping its product to the US. This resulted in business loss since the US market for motorcycle is seasonal and limited in between April to August. Also, in comparison to the US roads, the engine size was not compatible and thus sales suffered. Since sufficient market research was not conducted beforehand, appropriate strategic decisions could not be taken.
2. Identify undermined challenges
Market research provides detailed information on the market share, competitors, customer dissatisfaction levels if any, issues related to sales performance and channel distribution. Identification of the root cause of the problem helps address the issues in a prompt manner.
ARTec Colorist Collection, a hair color manufacturer, conducted market research on the consistency of its product based on customer satisfaction. Through the online survey and regression analysis, it was deduced that consumer’s attitude and usage behavior of the product plays a key role in deciding the future market of the product.
3. Recognize new business opportunities
The key responsibility of a business is to identify new market opportunities for existing and new products. As a result of severe competition, consumer needs are difficult to predict based on product functions alone. A good market research study will assist in production planning and make the distribution process seamless. Also, basis this information, correct product pricing can also be determined. A well-planned pricing and promotion of the end product successfully increases sales.
Frito-Lay, a famous chips and wafers company conducted a primary market research to increase its customer base depending upon flavors. Before it introduced any flavor, it wanted to gather information on the flavors in demand or that their competitors already had. Instead of conducting its survey through focus groups or control panels, it relied on social media. On Frito-Lay Facebook page, the company added “I’d Eat That” button next to suggested new flavors. This enabled respondents to select the flavor of their choice that they want the company to introduce. The survey suggested two particular flavors beer-battered onion-ring flavor and churro flavor, craved by the potential buyers. This proved useful to locate new business opportunities.
In a separate instance, using $20 per month, a subscriber can choose goods displayed by Conscious Box. The company, in return, requests its subscribers to share feedback on the products bought, rewarding them points that can be used to buy from Conscious Box's online store. Through this method, the company gathers data to share with the product manufacturer, select merchandise for the online store and decide on the product pricing.
4. Frame market strategies
Due to rapid globalization, companies are finding it difficult to effectively control the distribution channel. It is absolutely necessary to predetermine strategies based on market research. The collection of relevant data and analysis of the same helps entrepreneurs adopt a proactive approach for both, framing and implementing market strategies. Market research also helps in sales forecasting through market share method, sales force estimate method and the jury method. Scientific forecast assists in fixing sales quotas and marketing plans.
A caramel company in USA named Happy Goat made handmade chocolates and sweets. It conducted an online survey through SurveyMonkey to find out what appeals the mass. The market research concluded that the buyers are more interested in flavor and quality of the product than the ingredient. This made the company change its marketing strategy since initially it was stressing more on the fact that it uses organic ingredients in its product.
5. Understand customer requirements
Companies, across the globe, are becoming more customer-centric and thus the marketing and distribution of a product is gradually becoming more customer-oriented. With the help of market research tools like questionnaires, messaging, meetings, discussions and so on, companies try to understand customer expectations so that they can address them through improved solutions.
Lego, the Danish toy company conducted market research to find out their expanse of customer base. The research suggested that only 9% of its customers constituted girl children. This propelled the company to invest a massive four years’ time to analyze the changes that are rightfully needed to make in-house Lego toys more alluring for a girl child. To successfully implement these changes, the company ensured to also observe the playing habits of these kids (girls), even seeking their views on probable features that might interest them more. Putting all their research findings into place, Lego introduced a new range of toys and named them ‘Friends’ in January 2012, they had a more vibrant appeal with usage of bright colors, changed packaging and modified size and structure.
In a separate instance, it is worthwhile to mention that McDonald’s depends largely on market research to improve their product and service. The company tried to analyze the product acceptability, the amount of money consumers is willing to pay for the food, the media advertisements consumers are following, and the restaurants customers visit often. Through this kind of extensive market research, McDonald’s has been able to determine if their customer base is increasing. Keeping the perspective of business growth in forefront, the company also introduced healthy and organic food in their menu.
6. Detect potential customers
Market research helps a company determine the type of product or service that would be profitable to introduce in a market. This determines the potential customers along with an effort to find out if the existing product/service line is poised to satisfy the unmet customer needs. If not, then one can find out if change is required in the packaging, delivery or in the product features itself. It will also help determine whether the brand value has lost its sheen among customers.
McDonalds largely depend upon market research to improve their product and capture the potential market. Based on such research, the company changed its business strategy, functioning and brand awareness to accept and adapt different cultures and be flexible in modifying their product rather than forcing one culture across the globe. To create brand awareness, companies must also engage with their customer at culture level. When McDonalds introduced their product in India and Australia, it tried to understand the potential market through market research. Based on the local market, original McDonalds burgers and BigMac were replaced with McAloo tikki burgers, Chicken Maharaja Burger or Aussie burger, Brekkie Wraps and even Macca’s Steak keeping the Indian and Australian market in focus. This resulted in McDonald’s global success.
7. Analyze why existing customers switch brand
The whole idea is to promote and distribute ideas, goods and services to create a satisfying customer base. Along with this, market research also helps to analyze the cause of an existing customer to choose a different brand over the old one. The philosophy here, is to retain customer base while generating profit at the same time.
Starbucks conducted a research to locate the reason why existing customers changed brand. Through the market research, it was found that the customer base for dairy-free milk alternatives was increasing. So, the company began offering products made of soy milk, almond, coconut milk and oat milk. Post the launch of such dairy-free products, a consecutive survey indicated that there has been a steep increase in its sales.
8. Ensure Effective communication
Integrated and effective communication is the key to successful business. Use of promotional research to study media mix, advertising effectiveness and integrated communication tools helps organizations create market for their product.
Through market research and feedback, Verizon understood the customer concern of change of mobile numbers along with change of the service provider. This created unnecessary inconvenience to modify all legal and government documents that contained the old number. Considering all of this, Verizon became the first company in US to enable its customers to retain their mobile numbers even while switching carriers. This improved the company customer relationship to a great extent. Along with this it also introduced few flexible policies to improve brand loyalty. No charges were levied from Verizon to transfer numbers. Throughout the transfer process, the company ensured that the old connection works. All porting activities were informed via free text messages to maintain an effective communication.
9. Improve selling techniques
In order to improve the selling techniques, a company evaluates performance and effectiveness of a sales force. It also tries to identify the sales territories and allied shortcomings. Through market research, it tries to find an alternative method for distribution of goods.
Colgate was existing in the United States since a long time, when it wanted to capture the international market on oral care, it conducted a survey on the existing customers to find out the brand value. Based on the survey results, the company could gauge the brand acceptability and strategized to capture a wider market. The company along with the local merchandisers offered sample products and merchandising services to get high visibility in each store. It also invested on brand advertisement on print media as well as television and radio.
10. Set achievable targets
Market research ensures that the organizational goal of optimum customer satisfaction is achievable.
Apple depends on extensive market research to understand the need of their customers and what they expect from an Apple device. Accordingly, the company tries to figure out if incorporation of such requirements is possible in reality. Apple conducted a market research campaign on selected customers through a periodic survey. An email was sent from Apple's Market Research department to select customers. The email contained a survey that promised to take less than five minutes of the respondent’s time and invited the respondent to fill it, basis the apple product they own. Also, customers were requested to complete the survey with an assurance that their opinions matter and their identity will remain anonymous. The online survey, “Apple Customer Pulse” enabled the company to compile and analyze data faster and based on such survey, Apple modified its design and product specifications as well. As per the Apple Customer Pulse panel, the platform is considered as an online community of Apple product users who take the survey to provide input on the issues they face while using Apple products. Participants receive up to two surveys a month. On completion of the survey, the customers were invited to become a member of the "Apple Customer Pulse" group.
Customers are exposed to colossal amount of information today, and that is why a sturdy market research study with accurate results and data will definitely act as a trigger to swing an organization’s behavior and influence the decision-making process. An organization’s success broadly depends on the appropriate data about customers, products and the market, in general. Market research studies are a critical tool that helps gain exhaustive knowledge. Be it a quick research or an elaborate work, market research is fundamental to take business decisions. Similarly, be it a large or a small company, the fundamentals should be right in place, and should be well positioned to gain traction in the market. However, smaller players should definitely be having access to market research reports in their domain, they should look at market research companies which can offer all of these under the same umbrella – affordability, quick turnaround times, and ability to offer customized services. Therefore, as a business entity, you should ask the right questions and reaffirm your assumptions!
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- Kathakali Basu
Manager - Content Marketing & Strategy
- Kathakali Basu