Market ResearchDefinition: The process of gathering, analyzing and interpreting information about a market, about a product or service to be offered for sale in that market, and about the past, present and potential customers for the product or service; research into the characteristics, spending habits, location and needs of your business's target market, the industry as a whole, and the particular competitors you face
Accurate and thorough information is the foundation of all successful business ventures because it provides a wealth of information about prospective and existing customers, the competition, and the industry in general. It allows business owners to determine the feasibility of a business before committing substantial resources to the venture.
Market research provides relevant data to help solve marketing challenges that a business will most likely face--an integral part of the business planning process. In fact, strategies such as market segmentation (identifying specific groups within a market) and product differentiation (creating an identity for a product or service that separates it from those of the competitors) are impossible to develop without market research.
Market research involves two types of data:
- Primary information. This is research you compile yourself or hire someone to gather for you.
- Secondary information. This type of research is already compiled and organized for you. Examples of secondary information include reports and studies by government agencies, trade associations or other businesses within your industry. Most of the research you gather will most likely be secondary.
When conducting primary research, you can gather two basic types of information: exploratory or specific. Exploratory research is open-ended, helps you define a specific problem, and usually involves detailed, unstructured interviews in which lengthy answers are solicited from a small group of respondents. Specific research, on the other hand, is precise in scope and is used to solve a problem that exploratory research has identified. Interviews are structured and formal in approach. Of the two, specific research is the more expensive.
When conducting primary research using your own resources, first decide how you'll question your targeted group: by direct mail, telephone, or personal interviews.
If you choose a direct-mail questionnaire, the following guidelines will increase your response rate:
- Questions that are short and to the point
- A questionnaire that is addressed to specific individuals and is of interest to the respondent
- A questionnaire of no more than two pages
- A professionally-prepared cover letter that adequately explains why you're doing this questionnaire
- A postage-paid, self-addressed envelope to return the questionnaire in. Postage-paid envelopes are available from the post office
- An incentive, such as "10 percent off your next purchase," to complete the questionnaire
Even following these guidelines, mail response is typically low. A return rate of 3 percent is typical; 5 percent is considered very good. Phone surveys are generally the most cost-effective. Here are some telephone survey guidelines:
- Have a script and memorize it--don't read it.
- Confirm the name of the respondent at the beginning of the conversation.
- Avoid pauses because respondent interest can quickly drop.
- Ask if a follow-up call is possible in case you require additional information.
In addition to being cost-effective, speed is another advantage of telephone interviews. A rate of five or six interviews per hour is typical, but experienced interviewers may be able to conduct more. Phone interviews also can cover a wide geographic range relatively inexpensively. Phone costs can be reduced by taking advantage of less expensive rates during certain hours.
One of the most effective forms of marketing research is the personal interview. They can be either of these types:
- A group survey. Used mostly by big business, group interviews or focus groups are useful brainstorming tools for getting information on produ