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Conducting market research is the first step to launching a new business or product. — Getty Images/ laflor

Think back to the last time someone told you about their exciting new business idea. What most people don’t realize is that new business ideas are a dime a dozen. Almost anyone can come up with an idea for a product or service.

The real question is, can the business idea be tested, validated and executed? A product is only valuable if customers are willing to buy it. This is why successful businesses conduct market research.

Market research involves gathering, analyzing, and interpreting data about a given market. This includes things like the industry you’re going into, possible competitors, and buyer spending habits. This information helps businesses make informed decisions about their products, operations and customer base.

This guide explains what market research is, the benefits of it, and how to carry it out. This will be useful for you whether you are in the startup stages or getting ready to launch a new product within your existing company.

What is market research?

Market research is useful whether you’re starting a new business, launching a new product or deciding where to allocate company resources. For non-researchers, it can be an intimidating prospect — but it's a necessary one.

The goal of market research is to get the information you need to help make informed business decisions. Regularly conducting market research will keep you better positioned to improve your products, keep up with your competitors, mitigate risk and help your company to grow.

The complexity of your market research is up to you; but in the end, you should be able to answer these three questions:

  • Is there a market need for my product or service? In theory, everyone could benefit from your product. The reality, however, is that only a select group of people will want to buy it — and 42% of startups fail because there is no market need for their product or service. This is why you must discover who your target consumer is and always keep them top of mind.
  • What are customers willing to pay for my product or service? Pricing is one of the main reasons most customers will leave a business to purchase from one of their competitors. You need to understand what a customer considers to be a fair and competitive price for what you’re offering.
  • Are there new opportunities I may be missing? Market research can help you uncover underserved markets. This is why market research is not just meant for startups, but existing businesses as well. Market research can help you find new customers and explore new opportunities of which you weren’t previously aware.

How to conduct market research

To get the best results from your market research, you need to start with the end in mind. Have a clear idea of what you’re hoping to learn and then create a plan for how you will accomplish it. Knowing the data you’re looking for will help you stay focused.

Once you have a set plan, you can begin the data collection process. We’ll look at more in-depth methods for collecting data below.

The obvious first step is to collect information relating to the potential market for your product or service. Once all the data is collected, you’re left with a large amount of data that needs to be analyzed and interpreted. And, of course, the most important part of market research is analyzing and then acting on the information you receive.

This means you have to be willing to set aside your own biases and stay open to any negative feedback that your research uncovers. This is the most difficult part of doing this research. You have to be willing to stop if your data tells you to.

Be willing to set aside your own biases and stay open to any negative feedback that your research uncovers.

Types of market research

There are two types of market research that you’ll want to focus on: primary and secondary research.

  • Primary research: This is first-hand data you’ll gather about products you plan to offer. This usually involves meeting with existing or potential customers one-on-one and receiving direct feedback from them. Primary research is beneficial because it will allow you to receive in-depth information about your business and products.
  • Secondary research: Also referred to as “desk research,” this step involves looking at published data as a method for understanding your competition better. It is easier to get started with secondary research but be careful to stay on target so you don’t become overwhelmed with information.

Using either primary or secondary research, there are two different types of studies you’ll conduct:

  • Exploratory: The goal of exploratory research is to gather as much data as possible so you can understand the problem better. You’re just trying to get a bird’s eye view of how your target market perceives a certain issue. This will allow you to make an informed decision about how to address it.

  • Specific: Once you have gathered enough exploratory data and understand the larger issue, you can begin to get more specific. Asking specific questions can help you gather feedback about a new product or business opportunity.

[For more on performing market research, see Tips for Conducting Market Research.]

Primary market research methods

Primary market research involves gathering detailed information about your target market. The questions you ask will vary depending on your situation; but, in general, you’re looking to find out what your target audience looks for in a purchase and how your product is exceeding or failing to meet their expectations.

There are many ways to receive this information, but here are some of the most popular methods:

  • Surveys: A survey is a list of questions that will give customers an opportunity to explain how they feel about their experience with your product or similar products. Surveys can be conducted over the phone, in person or online.
  • Focus groups: When you conduct a focus group, you’ll bring a group of people together to understand their collective experience. A moderator will lead the group and pose questions for the group to discuss. The size can vary but is usually no bigger than 12 people.
  • Interviews: A one-on-one interview is a good way to ask questions and learn more about that person’s individual preferences. This is more time-consuming but can lead to valuable information.
  • Observation: This involves watching how your customers interact with your product in a real-world setting. This can be a good source of unbiased information that you would have a hard time getting any other way.

Secondary market research methods

Secondary research is a good way to learn more about broad industry trends and shifts in the market. Before you begin your secondary market research, you’ll want to establish what you’re hoping to learn and what information you’ll need to receive for that to happen.

Here are some of the most common resources for secondary market research:

  • Publications in trade journals
  • Online periodicals
  • Studies
  • Reputable websites
  • Government reports
  • Competitor information
  • Internal resources like profit and loss statements, inventory records, and more.

Common market research mistakes

Market research is an important tool that will help you better understand your target market and improve your business. But there is a lot of planning and strategy that goes into it.

Business owners are usually short on time and money, so they sometimes choose to take shortcuts when conducting their market research. This is understandable but certain missteps can backfire and derail your best efforts.

Here are five common mistakes to avoid when you’re getting started:

  • Using only secondary research: Secondary research is useful but it won’t give you a complete picture of your target market. And secondary research can quickly become outdated, causing you to miss out on relevant information.
  • Only talking to friends and family: Your friends and family are not going to be the best sources for your research because they lack objectivity. To get the information you need, you’ll need to talk to real customers about their experiences with your product.
  • Relying too heavily on one set of data: Whether it's a focus group or a research study you conducted, one set of data will not give you the insight you’re looking for. Good market research involves a variety of both primary and secondary data.
  • Failing to research your competitors: You’ll need to thoroughly research your competition to understand their pricing, content strategy and their strengths and weaknesses.
  • Researching the wrong group: A focus group or survey is only useful if it includes your target market. Often, businesses make the mistake of gathering a group of random people without confirming they are part of their target market.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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