Market research is a systematic, objective collection and analysis of data about your target market, competition, and/or environment with the goal being increased understanding of them. Through the market research process, you can take data - a variety of related or non-related facts - and create useful information to guide your business decisions. Market research is not an activity conducted only once; it is an ongoing study.
The information gained through marketing research is information that can guide your most important strategic business decisions. Market research is effective when the findings or conclusions you reach have a value that exceeds the cost of the research itself. For example, if you spend $500 on market research that yields information leading to a revenue increase of $5,000, the research was well worth it. Suppose you spend $500 on a customer survey that uncovers an unmet customer need. you will have the opportunity to offer a new product or service (or alter your existing product or service) to meet the need and gain new revenues.
Some of the benefits of market research are:
Market research guides your communication with current and potential customers.
Once you have good research, you should be able to formulate more effective and targeted marketing campaigns that speak directly to the people you're trying to reach in a way that interests them. For example, some retail stores ask customers for their zip codes at the point of purchase. This information, which pinpoints where their customers live, will help the store's managers plan suitable direct mail campaigns.
Market research helps you identify opportunities in the marketplace.
For example, if you are planning to open a retail outlet in a particular geographic location and have discovered that no such retail outlet currently exists, you have identified an opportunity. The opportunity for success increases if the location is in a highly populated area with residents who match your target market characteristics. The same might be true of a service you plan to offer in a specific geographic area or even globally, via the Internet.
Market research minimizes the risk of doing business.
Instead of identifying opportunities, the results of some market research may indicate that you should not pursue a planned course of action. For example, marketing information may indicate that a marketplace is saturated with the type of service you plan to offer. This may cause you to alter your product offering or choose another location.
Market research uncovers and identifies potential problems.
Suppose your new retail outlet is thriving at its location on the main road through town. Through research you learn that in two years, the city is planning a by-pass, or alternate route, to ease traffic congestion through town. You've identified a potential problem.
Market research creates benchmarks and helps you track your progress.
It's important to know, for later comparisons, the position of your business at particular moments in time. Ongoing market research allows you to make comparisons against your benchmark measurements as well as chart your progress between research intervals (such as successive annual surveys).
For example, you might establish a benchmark measurement of your target market demographics and learn that 65 percent of your customers are women between the ages of 35 and 50. One year later you again survey your customers and learn that this age group now represents 75 percent of your customer base. You're tracking a trend in your customer demographics.
Market research helps you evaluate your success.
Information gathered through market research helps you to determine if you're reaching your goals. In the above example, if your product's target market is women between the ages of 35 and 50, then you're making progress toward your goal. If not, this information can indicate a needed change in marketing strategy.