There comes a time when you can confidently say you know your business’ product or service like the back of your hand.
You work with it every day and know it inside and out: all of its features, how it benefits users, and where it falls short.
Yes, you know your product or service like nothing else, but what about your users? What do you actually know about the people buying your product?
Understanding your target market is one of the most important parts of creating a product or service that people simply love. To achieve this, you need to conduct market research.
What is market research?
Market research opens doors for businesses by giving them the information they need to provide a one-of-a-kind product or service and unforgettable customer experience.
Market research definition
Market research refers to any method used to better understand a company’s target market. Businesses use market research results to create products, experiences, and messages that will attract and maintain a solid customer base.
Already know the basics of research? Feel free to jump ahead:
Whether you’re doing research to understand a market or draw conclusions on squirrel migration patterns, there are two kinds you can conduct: primary and secondary.
Primary research is research you conduct yourself. It includes going directly to a source to gather original data.
Secondary research includes gathering information from research that has already been conducted. In this case, one researcher uses the primary research of another researcher as their source of information, as opposed to doing the research themselves.
It is important to not only understand the difference between primary and secondary research but also to recognize when you should use each one. When conducting market research, you can, in fact, use both. Primary research is good for gaining unique insights for your business, while secondary research can help fill the gaps where you are missing some details.
For now, the squirrels can wait. Let’s take a deeper look at how to conduct market research, the methods you can use, and some tips for small business owners.
How to conduct market research
The purpose of market research is to gain an understanding of your customer base so you can offer them a one-of-a-kind product or service that fulfills their wants and needs.
It might require some extra digging, but following the steps below is a good place to start.
1. Identify your target audience(s)
Your first step is to identify your target audience. Who do you think will benefit most from your product?
To keep this process organized, you can use the different types of market segmentation to divide your larger audience into small groups based on their location, demographics, personality traits, and buying behaviors.
Because you are segmenting your audience on more than one quality, you will likely end up with more than one group to target. This is perfectly fine.
From these audiences, you can create a persona, or a made up person that might be interested in your business. This will help you hone in on the pains you will be relieving and gains you will be offering with your business.
Below is a good example of a buyer persona for a kitchen supply store.
2. Scope the competition
Doing research on your competition is arguably the most effective way to understand your market. By observing other businesses in the same line of work, you can get a better feel for the marketing mix you need to match to be successful and overpower your competitors. A business’s marketing mix includes four parts:
Product: What is your competition selling? What are the benefits of the product? How can you make it better?
Price: At what price are they offering their product? Are people willing to spend that much? Can you charge more for a luxury item or less for a cheaper version?
Place: How is your competition reaching its customers? Is this channel effective? Or can you find a better way to reach them?
Promotion: How is your competition promoting its product? Where are they spending money on marketing wisely and where they are wasting it?
3. Engage a portion of your persona
Once you have a handle on your competition, you will want to refocus on your audience.
During this stage, you will conduct primary research to find out what your audience looks for in a product, why they find it valuable, and how it will benefit them. What's working for your product? What should you change? Should you scrap your idea and start over?
Directly engaging with customers in this step is your best bet. Compile focus groups, send surveys, or use another market research method. We will go into more detail on those later.
Your first goal will be to gather some demographic information. Ask customers their age, gender, income range, profession, education, and city of residence. Once you have that, you can ask more about their hobbies and interests, as well as the associated goals and challenges they face on a daily basis.
Then it’s time to get down to business. Ask your audience about their buying patterns like what products they like, where they go to buy them, and how often they buy a specific product. Have them go into detail about why they buy a certain product and ignore others.
Figuring out who is buying your product or service (and who is engaging with your competitors) will ensure that you've created the right target buyer persona.
4. Summarize data and draw conclusions
At this point, you have gathered a lot of data that will help you better understand your market. The last step is to organize your data and conduct customer data analysis to draw conclusions about your target audience(s) so you can provide them with the best product, service, and messaging.
If this all sounds a bit intimidating or like something you simply don’t have time for, check out G2’s highest-rated market research services and leave the reporting up to them.
Market research methods
When engaging with your audience you will need to use market research methods. There are five basic market research methods that will provide you with the information you need: surveys, focus groups, personal interviews, observation, and field tests.
In focus groups, a moderator asks a group of people questions about a product, service, or general topic in the hopes of starting a discussion. Focus groups are often videotaped and might even make use of a one-way mirror so the market researcher can observe the discussion without being seen.
To obtain worthwhile data, focus groups cannot be a one and done process. You must conduct more than three to get accurate information. Similar to surveys, the more you do, the better the data.
Interviews are arguably the most insightful market research method. Not only do they flow naturally like a conversation, encouraging the subject to share more, but you can also focus on the nonverbal communication cues of one person as opposed to a whole group.
A survey is the gathering of information from a large group of people. The results are used to make generalizations about an entire group. This means that the more people that respond to your survey, the more accurate the data will be. They can be sent electronically or on paper, so long as you have access to the results.
Surveys quickly gather data and are inexpensive to make, especially with survey software.
Observation in market research is looking at the way people interact with your product or service, or that of a competitor. The researcher can take note of the user’s shopping and buying behaviors in action, as opposed to listening to what they claim to do.
A field test shows the product or service in the environment it will be used.
Field tests can be risky, but they show you how people react to your product while surrounded by other viable options. This way, you can make adjustments on things that might make users give their business elsewhere, like price or packaging.
Market research for small businesses
Starting a small business requires you to do a lot of work on a small budget. There are a lot of day to day tasks that need to be prioritized, so the thought of doing market research as a small business owner might seem like a joke.
However, skipping out on market research can hurt your business. Without a proper understanding of your target market, you could be missing out on information vital to creating an ideal product or service that fits your customers’ wants and needs.
If you don’t have the resources for the market research methods listed above, there are other options that can still help you understand your target market.
Use existing research
It is possible, and highly likely, that another business has already done the research for you. Unless your business is extremely niche, like a glow-in-the-dark scooter producer or a pet Halloween costume creator, other people have probably offered similar products or services. Secondary research is completely valid. Use it.
Listen to your customers
Chances are, your customers are already talking about your product or service on the internet. You just have to find it. Head over to Yelp, Facebook Reviews, or G2 for insight on products and services that are similar to your own. See what users like and what they wish were different.
Observe, observe, observe
Observation is a typical market research method, and it is free. All it costs is time and attention.
Observe people using your product or service, or one similar to it. Notice how they use it and if there is a feature they love or leave alone.
Go forth and research
Market research provides businesses with the information they need to craft a product or service fit for their audience. Your buyers have a lot of power (and money), and taking the time to understand them will be worth your while. Without understanding your target market, how can you give them what they want?
Want to learn more about the marketing side of your business? Check out our resource on marketing and download the template to create your own personalized marketing plan.