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The importance of market research

Market research isn’t just for big businesses. Whatever size you are, whatever stage you’re at and whatever type of business you are, market research is vital.

In this article we’ll look at:

  • What market research is and what it can do for you
  • Types of market research
  • Setting up marketing information systems
  • How to get the best from your market research

What is market research and why do it?

Market research is key to making better business decisions. It can help you answer key business questions such as:

  • Is my business idea or new product/service viable? Is there a market for it and what do customers think of it?
  • Are my customers satisfied - and if not, why not?
  • What are the key trends in my market that I should be aware of - and what should I be doing about them?
  • Is my advertising working?
  • Will my business model work in a new or different market?
  • Who is my competition? What is their customer value proposition and point of difference?

Market research doesn’t have to be complicated or expensive. Successful business people often do it instinctively – for example, talking to your customers and keeping an eye on what people are saying about your business by speaking with them across different channels and monitor social media comments on your company page are some ways of researching your market and gauging customer satisfaction

Other ways of getting information about your business and your market include reading newspapers and magazines (and their online equivalents), watching TV, listening to the radio, keeping up (networking) with others in your industry or using third party sources of information like Statistics New Zealand or your local Chamber of Commerce.  

You can also research your target market directly by:

  • Talking to or interviewing people in your target market
  • Running small focus groups – put on some food and drink and invite people to come in for an hour or so and talk about their perceptions of your product or service 
  • Running surveys – either online or asking customers to fill out questionnaires when they do business with you.

Whatever method you use, the objective of market research is to be better informed about your customers, competitors, and market - because the better information you have, the better business decisions you can make.  

That’s why it’s important you plan your market research efforts carefully and focus on finding the answers to a small number of key questions that will make the most difference to your business.

Types of market research

To help you plan, it’s useful to understand the different types of research you can do.

  • Primary research is getting information directly from your customers, non- customers or competitors – for example, talking to your customers or asking them to take part in surveys or focus groups. Because it’s directly from the source it’s usually the most valuable type of research.
  • Secondary research is using information others have produced, like your local Chamber of Commerce, industry organisations, government bodies like Statistics New Zealand, NZ Trade & Enterprise, and searching the Internet. It can be a cost-effective way to find information.

When conducting research, there are two key methods - qualitative and quantitative.

  • Qualitative research is used to gain an understanding of people’s underlying reasons, opinions, and motivations. It can tell you what people think about your business, your products and your services. Some common methods include focus groups, face to face in depth interviews and observations, and sample sizes are typically small.
  • Quantitative research is used to collect hard facts and uses measurable data to formulate facts, validate hypotheses and uncover patterns. Quantitative data is structured and statistical. Quantitative research usually has more respondents than qualitative research so you can apply statistical analysis in order to validate a hypothesis. Some common methods include surveys and polls.

While it’s useful to understand the different types of research, don’t get too hung up on the terms. The main thing is to ensure that you are constantly listening to your customers and to what’s happening in your market.

That can be as simple as:

  • talking informally to customers and/or people in your target market
  • holding focus groups – put on some snacks and drinks and get customers and potential customers in to talk about what they think of your product or service

Marketing information systems

You already get lots of great information every day, simply in the course of doing business. The trick is capturing that information in a way you can use and analyse it. That’s why it’s important to have good internal systems.

For example, you could set up a customer database that captures key information when you deal with customers and suppliers. Then you could analyse your database to find out things like:

  • Your average sale value
  • Who your most valuable customers are, where they live, and their age
  • Your most popular (and least popular) products

Getting the most out of your market research

1. Involve your staff

You can improve the effectiveness of your market research by making it part of your everyday business activities and involving your staff – for example:

  • Train your staff to ask customers specific questions, like ‘What other products or services could we stock to meet your needs?’ or ‘Would longer opening hours be valuable to you?’
  • Encourage staff to record all interesting snippets, feedback and responses — they’re easy to forget.
  • Hold regular marketing meetings where people can share market research information, and work out ways to gather more, and discuss how you could use the information to improve the business.
  • Share responsibility by assigning specific areas to suitable staff members. For example, assign a person with strong computer skills to conduct research on the internet such as competitors’ websites, trends and developments in your industry.

2. Don’t reinvent the wheel

Other people may have already researched many of the questions you’re interested in, so use existing research where possible before investing your own time and money.  For example, read news and magazine reports related to your industry and check out government sources such Statistics New Zealand and relevant industry organisations. 

3. Take advantage of free digital tools

There is an amazing amount of information and tools available online that you can use for free. Here are some of the most popular:

  • Google – Google offers a whole range of insights and information, many of them free. For example, Google Trends is a great place to find out what’s popular and what people are searching for and identify potential opportunities or gaps in the market, while Think with Google has a range of useful consumer insights and marketing resources.
  • Facebook – Facebook’s Audience Insights tool can provide a host of insights about your existing or new target markets. Your business’ Facebook page can also help you find out a lot about people who are interested in your business, by looking at what they post, their responses to your posts, posting questionnaires on your page, etc. 
  • Surveys - there are a whole host of online survey tools, many of which are free (though you may need to pay if you want to use more advanced features. Survey Monkey, Qualtrics, Confirmit are few tools, but it’s by no means the only ones - look around to find one that suits your needs.

4. Use the insights to drive your business decisions

There’s no point doing market research if you don’t use the information you get from it in your business planning. At the same time, remember that market research is not infallible. For example, the people you talk to might not be 100% representative of your total market – and new developments (particularly digital ones) can change markets very quickly. But while it should be just one of the inputs into your overall plan, it’s a very valuable one. Good market research can give you unique insights that can help you reduce risk, challenge your thinking and grow your business over the long term.

 

For more information

 

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This material is provided as a complimentary service of ANZ Bank New Zealand Limited ("bank"). It is prepared based on information and sources the bank believes to be reliable. It is subject to change and is not a substitute for commercial judgement or professional advice, which should be sought prior to acting in reliance on it. To the extent permitted by law the bank disclaims liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to the material.

This material is for information purposes only. Its content is intended to be of a general nature, does not take into account your financial situation or goals, and is not a personalised financial adviser service under the Financial Advisers Act 2008. It is recommended you seek advice from a financial adviser which takes into account your individual circumstances before you acquire a financial product. If you wish to consult an ANZ Business Specialist, please contact us on 0800 269 249.