How to do Market Research for your Business
In today's world, consumers hold power to research products and services on their own and make purchase decisions independently. Instead of speaking to a sales representative, they seek referrals from their networks and read online reviews.
To cater to today's consumers, you must understand your buyers, your market, and what influences their behavior. This is where market research comes in. Whether you're new to it or not, my guide will provide a blueprint for how to do market research for your business.
What is market research?
Market research is the process of gathering information about your target market, competition, and customers. The business can then use the findings to make key decisions throughout the company's journey, from validating the idea itself to scaling into a multi-million dollar brand.
However, it is important to remember that market research is not a magic solution. The business that conducts the most thorough market research is not always the most successful. For example, a company that creates a distribution advantage or recruits a more capable team may outperform the company with more accurate market research. Ultimately, market research is a core component of a larger business strategy that wins and retains customers.
Why is market research important for a business?
Businesses can leverage market research in many ways to drive financial outcomes, including but not limited to the following:
- Validate a new business idea: Market research can help you validate whether a new business idea is likely to be successful before sinking time, money, and resources into it.
- Beat your competitors: Market research can help businesses understand their competition and learn how to separate from the pack.
- Build a product customers love: Market research can help businesses uncover their customers' needs, preferences, and pain points, which can inform the development of new products or services that customers love.
- Foresee macroeconomic conditions: Market research can help businesses evaluate the potential impact of external factors, such as economic challenges (i.e., the 2023 SVB banking fallout) or regulatory changes (i.e., the implications of a TikTok ban).
- Unlock profitable distribution channels: Market research can help businesses save money on shipping, handling, and other distribution-related costs by picking the proper distribution channels.
- Set a winning pricing strategy: Market research can help businesses determine the optimal price point for their products or services based on their customers' willingness to pay.
- Create a delightful customer experience: Market research can help businesses identify ways to turn customers into promoters with a customer experience that delights.
- Anticipate changes in consumer behavior before anyone else: Market research can help businesses identify changes in consumer behavior, which can inform decisions to adjust products and services in time to capture the new demand.
- Set accurate sales forecasts: Market research can help businesses set accurate sales forecasts, saving them money on headcount and inventory costs.
- Build a memorable brand: Market research can help businesses create a brand that people actually remember, drives demand, and gives them leverage to charge premium prices.
When should you do market research?
Most people think you only need to conduct market research when assessing whether a new business will work. Instead, companies should aspire to build systems and processes to continuously collect and use market research in ways that are effective, organic, and low friction for themselves and their customers.
Common methods to do market research (+ how to pick which one to use)
You have many options, all with their pros and cons, to do market research for your business. However, the art of market research is understanding which methods work best for your business and when they are most appropriate based on your goals. It can be confusing, but I'll demystify this decision in this section.
1. Interviews
An interview is a one-on-one conversation, typically in person, but a phone or video call can also work. If you learn one thing from this post, the secret to business success is talking to your customers.
Interviews allow business owners to ask open-ended questions, giving you a deeper understanding and a complete picture of who your customer is. It also allows you to build a personal relationship with your customer, helps you develop emotional empathy for their experience, and can motivate you to create a better business to solve their needs.
When to use interviews vs. other market research methods:
- Validate a new business idea
- Build a product customers love
Examples:
- Erik Torenberg, founder of On Deck, hosted dinners for years to talk with hundreds of people thinking about their next thing to validate his business idea before writing a line of code or building the fellowship product you see today.
- Brain Chesky, founder and CEO of Airbnb, talks to customers to build a product customers love. To do so, he recently opened up his San Francisco home on the platform.
Related article:
2. Surveys
A survey uses a list of questions to gather information from a set of people. Surveys may be conducted over email, by phone, in the mail, or via the Internet. A survey is a simple yet effective way to gather helpful insights for your business.
Surveys are standardized, meaning that each respondent receives the same questions in the same format. This makes it easier to collect and analyze data on a large scale and reduces the potential for bias in the data. Additionally, several free tools are available to make it easy to administer a survey to a large group.
When to use surveys vs. other market research methods:
- Create a delightful customer experience
- Anticipate changes in consumer behavior before anyone else
- Develop a high-performing team and a great workplace culture
Examples:
- Amazon uses post-purchase surveys to gather customer feedback on their shopping experience to create a delightful customer experience.
- Ford conducts yearly surveys to anticipate changes in consumer behavior before anyone else, allowing them to retain the best-selling truck for 46 straight years.
- Google administers surveys internally to collect upward feedback from employees to define their management principles, understand how to construct teams that perform the best, and promote top performers.
Related article:
3. Focus groups
A focus group is when you bring a curated group of people together to give feedback on a topic. A moderator leads the discussion by asking open-ended questions and encouraging participants to share their thoughts and opinions.
Focus groups allow participants to interact with each other, which can generate new ideas and perspectives that may not emerge in one-on-one interviews or surveys. This can help business owners understand the social and cultural factors influencing opinions and behaviors.
When to use focus groups vs. other market research methods:
- Generate new ideas
- Create a delightful customer experience
- Build a memorable brand
Examples:
- Focus groups play a big part in Procter & Gamble's (P&G) R&D process to generate new ideas, allowing them to develop innovative products like Tide Pods, which became a $1.5 billion product line in less than five years.
- Disney uses kid-centric focus groups to create a delightful customer experience.
- Nike conducts virtual focus groups to understand how consumers perceive their brand. The insights from these studies are used to refine their brand position and messaging to build a memorable brand.
Related article:
4. Observational research
Observational research is a method of collecting data by observing people in the natural environment in which they use the product or service. Observational research is a fantastic way to understand human behavior because humans often say one thing but do another.
By watching users interact with a product or service (or a similar one from a competitor), you develop a more fundamental understanding of their human behavior and how it relates to your business. Business owners can gain insights into how they use the product or service, what roadblocks they run into, and what features capture their attention.
When to use observational research vs. other market research methods:
- Build a product customers love
Examples:
- SoFi uses Glassbox, a tool to conduct observational research, to get the most accurate picture of how members experience their app so they can use those insights to build a product customers love.
Related article:
5. Social Listening
Social listening, also known as social media monitoring, is monitoring social media platforms for mentions, discussions, and insights related to a particular topic. Social listening is one of the best ways to get real-time feedback because big brother is always on. Social media knows you better than anyone else.
Social listening provides real-time customer feedback, making it a more dynamic and flexible market research method. Surveys and focus groups can take weeks or even months to complete, whereas social media listening can provide results almost instantly.
When to use social listening vs. other market research methods:
- Build a product customers love
- Create a delightful customer experience
Examples:
- Apricotton uses social listening to monitor their audience to understand their needs and preferences, so they can build a product customers love.
- H&M collects millions of data points each year from social listening to create a delightful customer experience.
Related article:
6. Competitive analysis
Competitive analysis is collecting and analyzing information about the strengths and weaknesses of businesses that compete with you. Competitive analysis is essential because you need to understand the rules of the game before you can win the game.
A competitive analysis allows you to understand your competitors' strengths, weaknesses, strategies, and positioning more than other market research methods. The insights from the competitive analysis can help you separate yourself from the competition in the eyes of your customers.
When to use competitive analysis vs. other market research methods:
- Beat your competitors
- Foresee macroeconomic conditions
- Unlock profitable distribution channels
- Set a winning pricing strategy
Examples:
- Facebook regularly conducts competitive analysis to understand their competitors' relationships with regulators in international markets and determine the best ways to get ahead of any regulatory problems they may encounter with international parties, which gives them an edge to beat their competitors.
- Elon Musk, founder and CEO of Tesla, used competitive analysis to foresee macroeconomic conditions, specifically climate change, which would increase consumer demand for cars using clean energy. He had so much conviction in the analysis that he bet his entire money and assets on the company.
- Incumbent razor brands like Gillette used competitive analysis to evaluate how new razor brands like Dollar Shave Club were selling direct-to-consumer, which helped them unlock the same distribution channel for their benefit.
- Uber, the ride-sharing company, uses competitive analysis to keep tabs on the pricing strategies of competitors like Lyft.
Related article:
7. Landing pages
A landing page is a stand-alone web page, void of any distractions, that incentivizes visitors to take a specific action. A landing page may be the best way to validate a business idea fast without spending much money.
A landing page is a powerful tool to help you validate your business idea before sinking time, money, and resources into something that may not work. You no longer need to rely on your gut. Instead, get quantitative data throughout the process with a landing page to make a data-driven decision on whether to pursue your business idea.
When to use landing pages vs. other market research methods:
- Validate a new business idea
Example:
- Vladimir Tenev validated Robinhood, the commission-free stock trading app, with a simple landing page that got nearly one million sign-ups.
Related article:
Steps to do market research for your business
Step 1: Define your research goal
Ask yourself, what are the biggest questions you have about your business? Here are some examples of big questions that a business owner may have:
- Do people even want my product?
- What will people pay me for this?
- How do I stand out from my competitors?
- Where should I sell my product?
- What features of my product do my customers care about?
This will help you prioritize what you hope to learn with your market research and pick the suitable method to find an answer. As a rule of thumb, avoid incorporating your guess about the answer into the question. For example, a research question, "will people pay me $10 for this" may influence you to confirm your prior beliefs. Instead, a better framing for your research question is, "what will people pay me for this?" This framing decreases the risk of your previous assumptions influencing the result.
Step 2: Pick the method(s) of market research to answer your questions
Reference the previous section where I discuss when to use one method of market research over another one based on your research goal. Some other considerations to make this decision include:
- Cost: what is your budget for market research?
- Time investment: how much time are you willing to spend on market research?
- Time to results: when do you need the results to make decisions for your business?
- Audience: can you reach my target audience with that market research method?
- Sample size: do you need to contact a small or large group?
- Data quality: do you need quantitative or qualitative data?
Step 3: Conduct your market research
Once you have defined your research goal and selected the appropriate method(s), it's time to conduct your market research. The process of conducting your research will vary depending on the method(s) you have chosen. Reference the related articles in the previous section to find a step-by-step process that you can follow for each method.
Step 4: Summarize your findings
Aim to spend as much time reflecting on the findings from your market research as you spent conducting it. This is because you must process what you learned and determine how to use the insights best to drive business outcomes.
Upon reflection, summarize your findings by following this outline to create a straightforward summary for yourself:
- Introduction: What was your research goal? What questions about your business did you want to answer?
- Conclusion: What were the biggest takeaways or learnings you uncovered with your market research?
- Support: How did you come to your conclusions?
- Action plan: What are the next steps to use the insights to drive business outcomes
- Questions: What additional questions do you have about the business based on your research?
Tips with market research
- Put your customer first: When conducting market research, consider your customer's needs before yours. Factor this into the method you pick and how you execute it. For example, I may choose to interview customers if that is the method with the least friction for my customer to provide honest feedback. The more natural and unforced it is, the more valuable the insights will be.
- Don't outsource market research: Business owners must be involved in market research. An outside firm has different incentives than a business owner, and they don't have the same context about the business as you do.
- Be flexible regarding the results: While you should run a clean and strict process when conducting market research, be flexible with the results. You should be ok, even happy, for the results to reveal that your initial hypotheses were wrong.
Common mistakes when conducting market research
- Failing to build systems and processes around it: Many business owners treat market research as a one-off thing, which creates more work for themselves. As you approach market research, think about systems and processes you can implement to streamline the process.
- Moving too slow when conducting market research: If you move too slow, it will be harder to spot trends and patterns in your market research as you will get a fragmented timeline. Additionally, a long timeline allows external factors to influence the data in different ways at different times, creating more variables and a higher likelihood that the results will be inaccurate.
Drive business outcomes with market research today
Market research may seem daunting, but it doesn't have to be. Remember that at the heart of market research is understanding your customers' needs, wants, and pain points. Following this guide, you can conduct market research like a pro and use the insights to build a business that truly serves and delights your customers.
