Informed Decisions with Market Research
Market research has repeatedly proven its worth in making business strategies and user requirement choices more effective. According to the Small Business Administration (SBA), a successful business is significantly contributed to by gaining knowledge about customers, competitors, and the associated industry.
Market research for new ideas
Research becomes especially important for market entry and product development in order to:
- define, validate and refine new ideas;
- establish target users; and
- manage or reduce risks.
Market research is a systematic and objective approach to gathering and interpreting market data, based on fact-finding as opposed to assumption-making. In the ideation stage (previously discussed here), many assumptions about the market and target audience needs may be made, but these must be validated and refined before embarking on planning and committing budgets.
In order to evaluate and validate new business ideas, market research gives a better understanding of target markets and the competitive landscape. Its ultimate aim is to help businesses make informed choices about future decisions, while managing risks and focusing on the most cost-effective and relevant option for their business and budget.
There are a variety of methods (online and offline) that can be used, and knowing how they are done, and their costs and benefits, will be useful in deciding how to conduct market research. The research methods most relevant to market entry and product development are:
- Concept validation
validating new ideas with respect to the target market/users
- Requirements validation
validating and determining features that are priority to target users
- Competitor analysis
understanding the benchmark and competitors in the market
Steps in market research
First, there needs to be a clear aim of what you are trying to achieve, and what information is needed for this goal. For example, you would need to know what target markets to test, and what issues or questions you want answered through data collection.
With this focus, methods and content can be created to collect and manage the relevant data. A market researcher will design and implement research methods, interpret and analyze resulting data, and provide a report of findings and implications to the client often combined with recommendations on how best to proceed.
The market research report may confirm the idea’s viability such as target audience interest and needs, or highlight new issues. This would direct future action on proceeding (or not) with the project as-is or with adjustments as needed to meet the actual target audience needs.
After product launch, regularly planned market research is useful for staying on top of customer needs, market trends and competitors. Your ongoing product or business strategy can then be formed and evolve around facts and clearly defined target audience needs rather than assumptions.
The most common method used is an online survey that can reach many target users in a short amount of time. Survey questions should be designed in order to elicit real answers, without giving away too much of the objective. For example, asking respondents if they would buy your app with a Y/N answer may not give useful results, as anybody would prefer a free app. However, asking respondents to rank aspects of the app (including pricing), may give a better understanding of the importance of pricing to the target consumers. The same question can be asked in different ways to further verify that respondents are giving real responses.
Survey design is especially important in engaging respondents, encouraging honest responses and full survey completion (Comley & Beaumont, 2011). Studies show that long and poorly designed surveys lead to a lower response rate, higher attrition, and lower engagement - i.e. biased, unrepresentative sample, increased sampling costs, and lower quality answers and results.
The survey should ideally take 5-10 minutes to complete, with a variety of question types that avoid repetition and complication, and with an appealing design. The “Twitter test” suggests that questions (and multiple choice answers) be ideally no longer that 140 characters to ensure it is read.
Finding an adequate sample size is often a problem here for those who undertake market research themselves. Professional market research agencies or consultants have access to a wide database and panel of participants, across different regions. A client’s own email database allows for control and low to no sampling cost, but may be limited in representing target markets.
Apart from using a third-party market researcher, there is the option of purchasing (subscription/pay per use) online access panels for faster researching, niche targeting and the option of reaching out to non-consumer respondents. However, this becomes costly with the number of regions and users being accessed, and results will still have to be analyzed.
Social media platforms and AWS Mechanical Turk are other options to explore in gathering global participants by yourself. Note though that there is no guarantee on the number and quality of participants that are reached.
In order to identify more specific, user requirements of the product, interviews or focus group discussions are most often used. These are typically carried out in 1-2 hour sessions with 1-10 people, in an office or a suitably quiet environment.
While online surveys have preset answers, interviews and focus groups use open-ended questions in order to find out user problems and needs. For example, at Binary Thinktank, we tend to focus on finding pain points that participants have before going over suggested solutions and requirements. This enables a discussion about what the users really want, and brings up new suggestions on what can be added or modified to improve the solution, or what is unnecessary and can be left out to reduce the budget requirements.
Again, there is a problem of finding a representative sample, and even conducting the interview/focus group. Response can be encouraged with monetary incentives, a common tactic for focus groups. Leading the discussion requires planning and a capable facilitator - professional market researchers may be useful here as they are skilled in asking the right questions. Businesses who do market research themselves sometimes tend to focus on finding proof for the results they want. The benefit of an objective third party is that the research will be conducted in a fair and factual manner, uninfluenced by preferred outcomes, they will give an objective analysis and recommendation.
A simple keyword web search on Google will bring up most competitors and show the amount of interest in such products. A competitor’s webpage will give plenty of information on its business, products’ features and costs, and main selling points. However, as these are for marketing purposes, it is important to look at other sources such as user reviews and ratings, or market reports, to accurately understand a competitor's product.
These are simple enough to find on your own, but it can be time-consuming to put together given the number of close and distant competitors and different information relating to them. Identifying key details and analyzing the overall competitor landscape is an important factor to producing a useful report. We should ask what is successful or not in the market, and why, when looking at competitors.
Apart from designing market research to obtain the right data, the analysis and interpretation of data is also essential to produce objective, relevant and important insights into the market. Objectives of the market research must be answered in this step, and implications for the new product should be highlighted.
- Self-conducted market research
Small-scale surveys and focus groups can be done at a low cost to gather information from potential customers, with secondary data collected from publicly available resources. However, this includes allocating sufficient time and resources to carry out adequate research - e.g. finding participants for surveys and focus groups. While part of the process can be outsourced by hiring a data collection firm, this still leaves the complexity of managing and analyzing the data and boiling it down to actionable results.
- Third-party professional market researchers
Agencies and freelance consultants can be hired to take over the entire market research process, with the benefit of conducting large-scale in-depth research and producing objective, relevant findings. With offices and contacts in different countries, and access to online panels, professional market researchers are able to reach a larger international audience more effectively.
A check with several market research firms [in Singapore] found that the process takes 4-10 weeks, depending on the method and level of detail required. Average costs range from SGD $4000-7000 for online surveys in a country, with sample sizes up to 300, and SGD $6000-10000 for a focus group session.
As part of Solution Architecture, Binary Thinktank offers in-house market research that is incorporated into the overall solution architecture. By working with our clients from the ideation stage, we have a clear idea on what questions to ask and which target markets to look at. A key distinction from other market research firms is that beyond concept validation, we dive deep into technical and user experience requirements in our focus group discussions. With technical knowledge, we can elicit specific responses to the app’s features and follow up with feasible recommendations on user requirements. This ensures a smooth, efficient process from ideation to development.
Do your research
Market research is invaluable for its insights into the target market: defining target/actual user needs, highlighting proven pain points and risks, and identifying market size and competition. All of these will help assess the viability of a product, and determine its likelihood to sell in target demographics and locations.
By understanding the process of market research, clients can decide if they are capable of carrying out small-scale market research or if hiring a third party would be more cost- and time- effective with better results.
Comley, P., & Beaumont, J. (2011). Online market research: Methods, benefits and issues - part 1. Journal of Direct, Data and Digital Marketing Practice, 12(4), 315-327. doi:10.1057/dddmp.2011.8