The Lido 2023 Guide to Market Research

Market research is the main way a business can stay in touch with its target market as it changes over time. In this guide, we will answer the following questions regarding market research:

What is market research?

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Market research is the process of investigating your business’ target market through systematic data gathering and analysis. The type of data and information you gather through market research is then used to make informed business decisions.

Why conduct market research?

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There are main benefits from conducting market research. Here are some of them:

Helps you steer your business in profitable directions

Consistently conducting market research helps you not only determine the current state of your market but also how the market is changing, thus giving you the advantage of being able to anticipate future market trends. Being able to anticipate these trends will give you an early advantage! These market trends evolve fairly regularly in so-called hype cycles.

Helps you ensure the success of your new product or service

Market research will be useful in all steps of the development of a new product or service. Market research can yield crucial information that will be useful in the planning stages. It can also influence the subsequent adjustments necessary during final testing before the product launch. One such process in product or service development is A/B testing.

Helps you design your marketing campaigns

Sometimes your existing products or services are up to par for your market, but you either need to simply repackage them for the constantly-evolving market or launch them in a new market. Market research will be indispensable for that purpose! Marketing research will also be useful in planning your marketing budget.

Helps you establish your credibility as a business leader

The insights you gain about your market can also be used to establish your credibility as a business leader in your market. How? By sharing it in a blog. Running a competitive business does not always involve withholding the knowledge you have of your market and maximizing it solely for your advantage; in fact, regularly sharing your insights helps your business grow by establishing you as a credible business leader. Maintaining your own business blog will also help you increase the exposure of your business.

What should you take note when trying to conduct market research?

There are some major considerations when conducting market research. Here are some of them:

Budget

The marketing budget available serves to constrain the type of market research and its frequency. For relatively small marketing budgets, methods that are relatively easy to deploy, such as surveys, are preferable. For larger marketing budgets, one can opt to conduct more sophisticated market research or do simple methods more frequently. Multinational companies often employ research firms who handle all steps of market research, from planning to deployment and even the subsequent data analysis.

Ability to conduct market research

The budget also constrains the expertise that you can hire for your market research. For small businesses, simple surveys are relatively easy to analyze, so they can easily be deployed without having to hire more experts for the process. More sophisticated market research is best handled by qualified research firms.

Privacy and ethical concerns

As the data gathered describes real people, great care must be taken to preserve their privacy, especially when analyzing individual data. Steps can be taken to ensure the privacy and security of the data:

Limit and protect the information you collect on customers.
Use state-of-the-art encryption methods.
Focus on building trust for the long-term.
Be transparent regarding data privacy.
Make it convenient for your customers.
Train employees regarding data privacy.
Update data protection programs as instructed.

What are the types of market research?

Market research is like a Swiss Army knife: made up of several tools that can come in handy at crucial times, but each of these tools is not useful at all times! Market research is a broad methodology for gaining insights about your target market. Market research can be classified in three ways: how the data is gathered, the type of data gathered, and whether the research is focused on a single problem or is gathering as many insights as realistically possible.

Primary vs secondary research

The first distinction, on how the data is gathered, leads us to classify our market research as either a primary or secondary research. Primary research involves gathering raw data and then analyzing it. Primary research is relatively difficult to plan and conduct; in fact, the mere question on where to gather raw data is so difficult, an entire industry worth billions of dollars exists solely to answer it. Primary research is essential when trying to analyze the current state of the market. Some of the methods used in primary research are surveys and interviews.

Secondary research, in contrast, uses already-existing data stored in various sources. The sources can be one of the following:

Public sources - data gathered by government agencies and other entities that make their data freely available, such as the US Census.
Commercial sources - data gathered by research firms that offer access to it for a subscription fee, such as those offered by Pew and Statista.
Internal sources - data gathered by your own business such as transaction records, sales records, and revenues and expenditures.

Qualitative vs quantitative research

You can further divide primary research into either qualitative or quantitative research. Qualitative research involves gathering qualitative data, a type of data that is represented by words or a set of numbers that serve as identification. Examples of qualitative data are name, place of residence, and sex. Qualitative data is categorized based on identifiers such as attributes, properties, type, etc. Quantitative data, on the other hand, is represented by numbers and is generated through an act of measurement or counting. Examples of quantitative data are your height and weight, your annual income, and the number of purchases you made.

You can learn more about qualitative and quantitative data here.

While some methods of research can be classified as qualitative (interviews) or quantitative (secondary research), both qualitative and quantitative data can be gathered from the same research most of the time. Doing so is preferable because qualitative research is powerful in giving deep insights while quantitative research is powerful in uncovering trends.

Exploratory vs specific research

Finally, you can classify market research depending on your scope. Exploratory research is open-ended, and researchers try to gather as much data as they can as any missed detail can be the key to uncovering important insights about the target market. The main challenge of conducting exploratory research is that you need to have a methodology that can systematically gather as much data as possible for the limited time period.

Specific research, in contrast, is focused on solving a single problem. The accompanying questions must be specific enough so that it solves the problem as satisfactorily as possible. The main challenge of specific research is to fully cover the bounds of the problem while excluding everything else that can distort its results.

What are the steps in conducting market research?

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Market research is not a road trip that can be done spontaneously. Market research involves meticulous planning that is necessary in order to gain important information about your market. Here are the steps in conducting market research:

Step 1: Define the research problem

The first step in any research is to define the research problem. The research problem serves as the bounds of your market research. While the term used is research problem, there really is no need for it to be strictly about problems or issues that can come up in your business. It can simply be about determining the present state of your target market.

The questions you can ask depend on what you want to investigate via market research. Here is a list of questions you can ask, as listed by Marketing Donut:

Who your customers and potential customers are

If you sell to individuals, you need to know their sex, age, marital status, occupation, income, aspirations, wants, needs, lifestyle habits, etc.
If you sell to businesses, you need to know their size, sector, buying patterns and service requirements. Which individuals make or influence the buying decision?
How large is the overall market? What are the main market segments of similar customers?

What their purchasing behavior is

What products do they buy, in what quantities, and how often?
When do they buy? For example, any variations at different times of day or seasonal trends.
Where and how do they buy? For example, do they buy online or at outlets? Do they buy direct or through intermediaries such as retailers?

What influences customer behavior

What are the key factors that make them choose one product or service over another?
How much are they prepared to pay? How price-sensitive are they?
Which media and online information reach them?
Where else do they get product information and recommendations?
How effective are your current marketing and sales campaigns? What is your brand image?
How satisfied are potential customers with their existing suppliers and what would it take to get them to change? How satisfied are your customers?

What your competitors offer

Who are your competitors?
What products and services do they sell? How do they market them? How do their pricing and positioning compare with yours?
What are their strengths and weaknesses? What is the unique selling proposition (USP) that makes customers choose you?

How the market might change and evolve

What are the key market trends? What changes can you expect in external factors such as new regulations or technologies?
How is the competition likely to change? For example, improvements in existing products, new technology, or the emergence of new competitors altogether.
Watch for product or service breakthroughs that solve the same problem as your offering, but in an innovative way.

While defining your research problem, you can now as well answer the following questions:

Should you do primary or secondary research?
Should you stick to purely qualitative or quantitative research, or a mix of both?
Should you stick to a single problem, like in specific research, or try to uncover as many trends as possible, through exploratory research?
What part of the product cycle are you right now?

At this point, you should be able to also define what metrics you will calculate when you apply data analysis methods to the data you gathered in your market research. The chosen metrics will determine the subsequent research methods and data analysis methods that you need to implement.

Step 2: Create a research plan

After identifying down the research problem, you need to start working on a research plan to be able to answer the research problem. You need to document these in a so-called research brief. Here are some of the considerations in creating a research plan:

Marketing budget (as listed by SurveyMonkey)

What is the estimated price of the sample?
Will you need any services, or will your team have capacity to do things like survey translations for international studies and data analysis?
How frequently will you be running the study? Is this a one-off project or a recurring tracking study?
If you’re using a full-service research vendor, are there any additional agency fees?

You can learn more about marketing budgets here.

Method (the methods will be elaborated in the next section)

What methods of market research can best answer the research problem?
Can you conduct the chosen method of research? Do you need to outsource it to a research firm? Is the chosen method realistic given the budget you have?
For primary research, how will the sample be selected?
For secondary research, what sources will be used?
What metrics should you calculate to answer the research problem? What types of data analysis should be used to analyze the data gathered from the method?

Timeline

How long will the market research take?
Who should be involved in the decision-making for the market research?
How long should the data be gathered, for primary research cases?

Step 3: Implement the research plan

Once you have prepared the research plan and budget, you can start implementing your research plan. It can take from a few weeks to a few months to implement.

One crucial aspect of market research is the selection of the target audience. Some of the ways you can define your target audience are the following:

Demographics - age, gender, marital and parental status, etc.
Geography - location, culture
Employment information - type of work, industry, income
Shopping habits - preferences on the products bought at your store or on the competitors’ stores
Psychographics - existing mindset that can affect their buying choices

Depending on the research problem, you can target either your existing contacts (your current and former customers and those who have signed up to your marketing promos) or a sample of your target market. The advantage of using your existing contacts is that it is easy to conduct the research plan. The disadvantage is that they can be inherently biased towards your products and services, so unless your market research is directed to your customers, this may not give you the best results.

A sample of your target market, which includes those who may not even be familiar with your business, is preferable because it gives you a better overview of your target market. The disadvantage is that it is challenging to gather the sample of your target market. You will either need the services of an external firm to gather the sample or via an ads channel, where the channel manages the selection process of who gets to see the ad for the survey.

Step 4: Analyze the data and make your conclusions about it

Once you have gathered enough data, you can now start applying methods of data analysis to it. We have an entire series of articles for that:

Data Analysis 101: Why should you do data analytics and data analysis?

Data Analysis 101: Types of Data You Encounter in Data Analysis

Data Analysis 101: The types of analysis you can conduct

Data Analysis 101: Steps in Conducting Data Analysis

Data Analysis 101: Data analysis pitfalls to watch for

You can analyze the data using our Lido app. This app offers you not just robust tools for quickly analyzing big data but also integrations with various online platforms for eCommerce and marketing. Because Lido integrates your data into a spreadsheet and allows you to analyze the data in the same place, it is the perfect app to see in real-time the meaningful metrics that you are looking for, allowing you to quickly make important business decisions. Get started here.

What methods should you use in market research?

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There are a wide range of methods you can use in market research. We will briefly tackle some of the most common methods employed in market research.

Surveys

Surveys are one of the most common methods used in market research. Among the wide variety of methods you can use in market research, surveys are relatively simple to conduct and can easily be deployed in various channels to gather thousands of responses relatively quickly. In fact, Youtube even started placing survey ads in their videos.

Surveys are made up of a series of questions, which can either be open-ended or closed-ended. The type of questions can be one of the following, as identified by SurveySparrow:

Multiple Choice Questions
Opinion Scale Questions
Likert Scale Questions
Rank Order Questions
Yes/No Questions
Rating Questions
Slider Questions
Demographic and Firmographic Questions
Open-ended Questions
Dropdown Questions
Matrix Questions
Picture Choice Questions

The drawback of a survey is that there is a tendency for the target audience to drop the survey in the middle of it or simply ignore it. To ensure that your target audience will answer your survey, make sure that the questions go from general to specific, and make them as simple as possible.

Interviews

Interviews are another form of market research that can yield important insights into how the target market thinks and behaves depending on the conditions. As interviews are done one-on-one, one can easily dig deeper to understand the average customer better.

The main drawback of the survey is looking for a subject willing to be interviewed for market research. Interviews take a long time to conduct, so most, if not all, subjects would want to be paid for the effort.

Observation

Finally, it may be best to observe real customers as they make purchases in the physical stores. These have the advantage of observing customers without any form of prompts from the ones who conduct market research; additionally, they can observe what the customers actually do. This may not be simulated in surveys and interviews; they may say one thing but end up doing a different thing because real situations cannot be adequately simulated through surveys and interviews. The disadvantage of observations is that they cannot reveal what is going on the mind of a customer when, for example, they make a purchase.