Market research is essential to a new business. Here are six examples of market research your business can use to test your business idea, find customers, and create new products.
Market research is an essential step in launching a new product or starting a new business. It can help you find out if your business idea is something customers want and provides feedback on your start up plans before you make any costly mistakes.
Market research helps you to find out more about your customers – from what they buy and how much they’re willing to pay, through to more insightful information such as how they view your competitors. Research findings can then be analysed and turned into insights – information that can help shape everything from your product development strategy to your marketing messages and where you’ll advertise.
There are lots of ways to carry out market research but there are some key research methods worth knowing. Most companies start with secondary market research as it’s cheaper and you can get started straight away, before using the five more complex primary research techniques that involve collecting information specific to your objective.
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1. Secondary market research
Secondary research is typically known as desk research and involves seeking out existing research and data. This may be government census information, market reports, whitepapers, journals, news stories and articles, Twitter comments, and more. In a nutshell, it means using the internet to find out information about your market and industry from trade bodies, existing research and official government organisations such as the Office of National Statistics.
Advantages of secondary research – Desk-based research using the internet is usually free or low-cost, and can be done in your own time.
Disadvantages of secondary research – Finding existing data that can be applied to your specific market research objective can be a challenge, and information can vary in quality or be out of date, making it less relevant to your business.
2. Market research surveys
When most people think of market research, they tend to think of customer surveys. The most common market research method, surveys come in all shapes and sizes.
Surveys can be conducted in all sorts of ways, including telephone surveys, hosting a survey on a website, using social media polls, asking questions face-to-face with customers, using SMS text messages, or simply filling in a survey card in a restaurant or when leaving a shop.
Surveys can be self-administered, where the person being surveyed answers the questions alone – such as filling in an online survey using a computer at home – or they can be administered by a person who reads out the questions and records the responses, which are typically used in telephone surveys.
How does a customer survey work?
A customer survey is a cheap and simple way to gather information. It’s simply an identical set of questions that you ask a selected group of people, such as potential customers. Questions can either be open-ended, allowing for a wide range of comments, or more specific questions.
Surveys are only useful if you ask a large enough group of people the same questions. The larger the group, the more reliable the results. You need at least 40 people to complete a basic survey but it’s best to aim for at least 100 people for the results to be statistically relevant.
Advantages of surveys – Surveys are great for measuring specifics, such as getting a score between 1 and 10 for your customer service, where 1 is poor and 10 is excellent or by asking ‘how much are you willing to pay’ and giving options such as ‘£5’, ‘£10’ and ‘£15.’ By counting the responses for each option, you can get a clear idea of what most people think.
Surveys can be cheap and even free to run, especially online. Survey services such as SurveyMonkey allow anyone to set up and run a basic survey, and even help you collate and measure the results. Online surveys can be added to social media sites, such as your company Facebook page.
Disadvantages of surveys – Surveys aren’t useful if you’re still exploring the questions you want your market research to answer. The more open-ended the questions you ask, the more work it will take to wade through the responses to find useful information.
3. Focus groups
Unlike surveys, focus groups are a form of market research where you ask open-ended questions to a small group of people. The idea is to record their responses, giving space for more detailed and in-depth answers that help you understand customer thinking and how they feel about an idea.
Focus groups can be used following survey research. They can be used to present several versions of a product idea, for example, asking customers what they like or dislike about it, what they’d change, and the reasons for their responses.
Watch this: Want to know more about focus groups and how they are used? This short video from the University of Derby explains the advantages of focus groups and how they work.
How does a focus group work?
Focus groups are often held in a dedicated room with recording equipment and a one-way mirror so sessions can be observed, although a hotel room or other venue can be used. Sessions consist of between 6-10 people and attendees usually fit a specific profile, such as ‘mothers of children under 12’, or ‘men aged 40-50.’
Participants are usually paid in cash. Expect to pay each attendee around £25 to £60 per hour depending on location, with sessions typically lasting between 1 and 3 hours. A moderator will run the session, asking attendees questions and introducing stimulus such as a product prototype or sample of advertising. Responses are recorded, analysed and then presented back to you with any important findings or insights.
Advantages of focus groups – Focus groups are great for exploratory, qualitative research where you’re more interested in the thoughts and feelings from customers. They’re particularly effective for respondents, such as young children, who might not be suitable for other market research methods. Responses tend to be rich and deep, complementing customer survey results.
Disadvantages of focus groups – With a small group, responses can be biased and not represent the entire market, so conclusions will need to be seen in that light. It can be hard work and expensive to find the right target people to attend the sessions, and it can also be time-consuming to analyse all the recorded data afterwards.
4. One-to-one interviews
One-to-one interviews are one of the oldest and most widely used forms of market research. They typically involve a structured conversation or questionnaire designed to find out what people think, need and want.
How do one-to-one interviews work?
Conducted in a similar manner to focus groups but with just one person, one-to-one interviews are a qualitative market research method. You can interview people at home, in the street or shopping centre, in an office or at a specialist market research facility. Usually interviews last an hour or two and may be recorded for future analysis.
There are lots of different interview formats, depending on the goal of the research, such as free-flowing interviews more akin to a conversation, through to highly structured questions and activities such as word association games.
If you’re running one-to-one interviews at a market research centre, the format usually involves the interviewer sitting in the room with the person to ask them questions while a researcher/company may watch through a one-way mirror.
Advantages of one-to-one interviews – One-to-one interviews generate rich data. The use of visual aids and the detection of social cues and body language allows the interviewer to gain a deeper insight to specific questions and answers, as well as deducing the validity of each response.
Disadvantages of one-to-one interviews – They’re expensive due to the cost of interviewer and the time required to capture data and bias can creep in on both sides. Also, the interviewee may not fully represent the breadth of opinions of the target market.
Watching how customers use your products or services is a quick way to spot potential problems, such as how difficult it is for customers to navigate your online store. Observation spans a huge range of applications – from browsing habits on a website to watching the flow of traffic into and out of a car park.
How does observation work?
Observation is a type of qualitative market research, where you gather insights and information by watching people go through a series of activities. Observation is usually hidden – for example using online customer monitoring software such as LuckyOrange or through security cameras – though some might be overt, such as walking with a customer around a store. They don’t have to take place in special rooms or labs; observing customers in shops, restaurants or even out-and-about are all valid approaches.
Advantages of observation – While you always need permission and full consent from a subject, if you’re able to watch them covertly subjects often behave more naturally and show their true actions, rather than their ‘ideal selves’ that they typically show to strangers.
Disadvantages of observation – Observation is time-consuming and expensive. Researchers have little control over the situations and environments typically used in observational research, and sometimes the act of observing can bias results or influence the situation. Someone who knows they’re being observed may act less naturally.
Testing focuses on learning about people’s experiences. Often used in later stages of product development, it’s a chance for potential customers to test out your product or service. It can be used to ensure a product is fit for market – such as being robust enough when handled – to getting feedback on how a product works.
How does testing work?
Any time that your customers try a new product or service is technically a test – for example, a restaurant chain may place a new dish on the menu, advertising the dish with discounts and money-off coupons. Sales of the new dish can then be tracked to validate its success, and feedback sought from customers as to whether they liked it.
Advantages of testing – Testing can result in specific feedback that can help hone a product. By letting customers test a product, any rough edges can be refined before rolling it out on a larger scale. Testing also puts the product in a real-world environment, which can throw up usability issues that otherwise wouldn’t have been spotted.
Disadvantages of testing – It can sometimes be expensive and time-consuming, and some companies can often overlook this stage because it happens quite far into the development cycle.