In today’s highly competitive world, the ability to make well-informed, knowledgeable, and strategic decisions is critical to business success. Entrepreneurs and business managers require reliable information in order to develop strategies for marketing new and existing products and services that customers will value.
Market research is critical for fully comprehending your customers and competitors. To succeed, business owners and managers must understand their markets, customer attitudes and needs, competitors, and competitive position. Inadequate consumer knowledge puts a company at a distinct competitive disadvantage.
One harsh reality in business is that few people have unfailing intuition or dependable “gut feelings.” Many entrepreneurs’ downfalls can be attributed to subjective thinking. Fortunately, market research can be used to validate your ‘gut feelings,’ leading to more accurate decision-making.
Professional market research is rarely wasted because it can mean the difference between a successful venture and an avoidable failure. In fact, market research can save you money while also identifying opportunities to increase profits. Here are four ways market research can help you improve your bottom line and avoid costly mistakes.
1. Identify your target market.
Did you know that 7115 patents were granted by Intellectual Property (IP) Australia last year? It is expected that fewer than 50 of those patents will be granted. Why is there such a low success rate? Unfortunately, while the creators possessed the ability to create the items, they lacked the ability to research whether there was a market for their “baby.”
One of the most common mistakes made when developing a new product or service is assuming it will meet a market need. Customers, strangely, are picky creatures who want products that are exactly right for them. Developing a product or service that you believe people will want can be disastrous.
Before launching a new product or service, it is critical to understand:
- 1. Who actually requires the product or service I intend to sell?
- 2. How many prospective customers are there?
- 3. Where can I find my potential customers?
- 4. What is the maximum amount my customers are willing to pay for my product or service?
- 5. Does my product or service save or make a significant amount of money for my customer?
- 6. Why should they purchase my product or service?
By determining your target market, you will be able to assess the viability of your new product or service and understand the improvements required to boost sales.
The definition of your target market also influences the development of your promotional and sales strategy. Understanding your market reduces the likelihood of wasting advertising dollars on the wrong demographic. Furthermore, by understanding your market, you will be able to determine which benefits are conducive to sales, allowing for more effective selling strategies.
Once your target market has been identified, further market segmentation can be carried out, laying the groundwork for marketing and advertising strategies. Another common business stumbling block is having identified your market and assuming it was set in stone. Your market is likely to change as a result of emerging industries, new technology, or even changes in company decision-makers. Redefining and reviewing your market should be done on a regular basis.
You will be able to develop a relationship with your target audience if you fully understand it. This relationship has the potential to provide mutual and substantial benefits to both parties. You will be better able to predict market trends and identify market opportunities as a result of your knowledge. This will allow you to offer additional products and services to fill market gaps.
You can define your target market by conducting either primary or secondary research (or both).
Gathering actual data from those who use or are likely to use your product or service is what primary research (or original sources) entails. To gather information, questionnaires, in-depth interviews, focus groups, and observation are all used. It usually entails hiring a market research firm or a consultant to conduct research.
Secondary research (or printed sources) refers to information gathered and produced by others, such as trade associations, publications, or the government (eg: census data). This method takes less time and is less expensive. However, the data may not accurately represent your product or service, resulting in misleading analysis and bias. All of the secondary data in the world will be useless in untapped or niche markets. Know your customer from head to toe.
According to research, it is five times more expensive to acquire a new customer than it is to retain an existing one. In most cases, repeat and referral business accounts for 60-90% of total revenue. With this in mind, it is critical that you invest time and effort in learning what your customers think about your product or service (as opposed to what you believe they think).
Your product or service contains two distinct components. The tangible product characteristics (positives, negatives, benefits, and so on) and the intangibles such as customer service and after-sales care. It is critical for the success of your offering to ensure that your product and service exceed your customers’ expectations in both of these areas.
Customers can be difficult to please. The modern consumer is demanding, and they base their purchasing decisions not only on the benefits of the product, but also on the level of service. Having the best product in the market will not ensure your success if your service is subpar.
If you are not in regular contact with your clients, market research is critical in evaluating your customer perceptions, expectations, and satisfaction with both your product and service, as these factors are the lifeblood of your business.
In fact, the most critical time to conduct this research is during a recession, when competition for customers’ dollars is fierce. Conduct some valuable market research if you want to stay ahead of the competition. Your competitor’s market research effort will almost certainly be reduced, so the more you know about what your customers (and your competitors’ customers) think, the better off you will be.
A customer satisfaction study that uncovers attitudes toward both your product and service is the most appropriate research to understand your customer.
2. Be aware of your competition
It may seem obvious, but knowing what your competition is doing or planning to do is critical.
The only way to gather competitor intelligence is through competitive analysis. Nonetheless, few businesses conduct competitive analysis on a regular basis. Competitive data is typically gathered during the development of a business and marketing plan or prior to the launch of a new product or service.
To compete, you must concentrate on what you do better than your competitors (such as better product quality, better price, better distribution). You can capitalize on your most marketable advantage by sharpening your competitive advantage.
Competitive analysis should be done on a regular basis, and it does not have to be expensive. The Internet can provide a wealth of information, such as the website of the Australia Stock Exchange (www.asx.com.au), which offers a company research search engine for listed Australian companies. The Dun & Bradstreet website also provides fee-based and free company information (www.dnb.com.au).
If you require more detailed information, such as what your customers like or dislike about your competitor’s products or services, you must conduct a market research study.
3. Database Administration
As a market researcher, the most surprising thing I’ve discovered when working with companies of all sizes is how little emphasis is placed on maintaining customer databases. Databases contain a wealth of customer information.
Customer data collection is critical for understanding your customer profile. By making better use of your customer data, you can develop new products more efficiently and run a more cost-effective direct marketing campaign. A comprehensive database will even save you money because you will not need to hire a market research firm to find the information for you.
If market research is required, having up-to-date contact information for your customers will make recruiting participants for focus groups or interviews far less expensive than randomly dialing phone numbers from the phone book.
Finally, consider the following:
Because of the perceived difficulty and expense, many new and even established businesses avoid conducting market research.
It is not necessary to spend a lot of money on research. There are numerous ways to conduct market research in-house while outsourcing major projects to research firms or consultants.
Market research is a worthwhile endeavor that, when done correctly, yields financial rewards while reducing unnecessary costs. The cost of the research is frequently more than offset by increased sales revenue. So, what are you holding out for? Start those databases, research your competitors, define your market, and learn about your customers. “What gets measured, gets managed,” as the saying goes.
But be cautious. Accepting harsh market feedback is the main disadvantage to consider. While this is an unfavorable outcome, success can be found by welcoming and responding to criticism.