Market Research Best Practices
Market Research Best Practices
Market research is the process of systematically gathering, recording, and analyzing data regarding customers, competitors, and market conditions, to help organizations make better business decisions about the development and marketing of new or existing products and services.
Benefits of Market Research
- Drive Customer-Centricity- use our Customer-Centricity Checklist to learn 12 proven strategies.
- Identify Market Opportunities- read our report: Market Segmentation, Targeting, & Positioning, to learn how to identify new opportunities.
- Reduce Time-to-Market- leveraging the "voice-of-the-customer" streamlines the product development, testing, and marketing processes, increasing velocity.
- Monitor Competitive Advantages- regular competitive analysis ensures that your organization will not lose or fail to communicate key advantages.
- Provide Decision-Making Insights- making decisions without adequate market intelligence can be disastrous. Base your decisions on facts, not gut instinct.
- Better Allocation of Resources- by analyzing which products, programs, channels, and markets are most lucrative, organizations can focus their precious resources on profitable activities.
- Increase Profitability & Growth- having a solid understanding of market needs is critical for meeting and exceeding customer expectations, and leads to customer retention, increased profitability, and growth.
There are two categories of market research: primary research and secondary research. Primary research involves the collection of data that does not currently exist or is unavailable to an organization. Secondary research involves the collection, analysis, and summarization of existing data derived from third-party research firms or other sources.
Many organizations do not have the resources in-house to conduct effective primary research campaigns, and glean insights from full-service research firms such as Gartner, Inc., IDC, Forrester, Harris Interactive, AC Nielsen, Datamonitor, Dun and Bradstreet, Millward Brown, NPD Group, or TNS.
Following are a list of common market research projects designed to test or validate assumptions made by the business:
- Market Sizing & Segmentation- how large is our target market? How should we segment our market? What are our customer profiles?
- Competitive Analysis- who are our direct/indirect competitors? What products/services are eroding our market share? What messages are competitors sending? Who is growing quickly and needs to be watched?
- Product Positioning- how much price power do we have? Where do customers position us? What is our price elasticity of demand?
- Product Penetration- what is our market share? Are we gaining or losing share of wallet? What geographies are not penetrated?
- Brand Awareness & Preferences- what brand attributes are most important? How aware is our market of our brand?
- Consumer Behavior- how do our customers use our products? What products are usually purchased together? How does placement affect sales?
- Customer Analysis- how many customers do we have? What customers are most profitable? What is our customer lifetime value?
- Customer Satisfaction- what is our retention rate? How does customer satisfaction affect profitability? Are we getting referrals?
- Demand Forecasting- what were our previous sales by product line? What staffing will we need to deliver on sales? What is our sales forecast?
- Distribution Channels- which channels are not producing results? How can we increase promotion of our products?
- Decision-Making Process- how do our customers prefer to buy? What are the top buying criteria? Is our sales process aligned?
- Marketing Effectiveness- how effective was our last campaign? Where do the majority of our leads come from? What is the ROI from marketing?
1. Define Responsibilities- Use our Marketing Analyst Job Description to define key responsibilities and set the direction for this function.
2. Identify the Problem- a clear statement of the problem is the key to effective market research. Examples of common research problem questions are:
1. What competitive advantages do we have?
2. Who is our target market? What makes them unique?
3. Where do our prospects position us in the market?
4. What is our market share? Is it being eroded?
5. How likely are customers to refer us business?
6. Which sales channels are most effective?
7. How can we improve our sales process?
8. What new products should we develop?
9. How effective are our marketing campaigns?
10. What is the optimal price for our products?
- Establish Research Objectives- set objectives that once achieved provide the information required to solve the problem. Generally, your objective is to validate a working hypothesis. For example, your objective may be to test a cause-effect relationship such as: if we reduce our price, what will the impact be on sales volume and profitability?
- Set Research Project Timelines- based on your problem and objectives, develop a project charter to schedule resources and set timelines for execution.
- Select Research Design- there are three main types of research design: exploratory, descriptive, and causal. Exploratory research involves collecting information in an unstructured and informal way, such as reviewing competitors. websites to gain further understanding of their offerings. Descriptive research refers to methods that analyze marketing variables like consumer attitudes, behaviors, and intentions. Customer satisfaction and brand perception surveys are examples of descriptive studies. Causal research is conducted by controlling various factors to identify cause-effect relationships that affect the problem. Testing the effect of marketing campaigns on sales in a specific geographic region is an example of causal research. Causal research is most informative but can be very expensive and can require complex experiments to ensure validity. Start with exploratory and descriptive research designs if your organization does not have an existing market research function.
- Determine Data Requirements- determine what information you will need to solve the research problem and estimate the cost of gathering that data. Primary research data is typically more expensive and time-consuming than secondary research data, but provides much more accurate insight. Depending on your timelines, budgets, and resources, decide if purchasing an industry benchmarking report from an analyst firm will provide a better cost/benefit than conducting primary research for your project.
- Download Tools & Templates- following are some market research reports, tools, and templates that you can download and quickly customize to suit your specific needs:
2. Business Requirements Template
3. Brand Perception Survey
4. Competitive Ad vs. PR Analysis Tool
5. Competitive Analysis Tool
6. Competitive Website Analysis Tool
7. Customer Profile Template
8. Customer Satisfaction Survey
9. Market Requirements Document
10. Market Research Report Template
11. Marketing Analyst Job Description
12. Market Segmentation, Targeting, & Positioning
13. Practical Product Management Tools Report
14. Product Development Charter
15. Product Development Schedule
16. Product Feature Priority Tool
17. Product Feature Request Form
18. Product Launch Checklist
19. Product Positioning Tool
20. Product Requirements Document
21. Product Sanity-Check Tool
22. Sales Analysis Tool
23. STEP Industry Analysis
24. SWOT Internal Analysis
- Choose a Research Method- there are two methods for gathering information: observation or asking questions. The most common, and cost-effective tool is the questionnaire or survey. Structured surveys are quantitative and list close-end questions, such as multiple-choice, yes/no, or scale rankings. Unstructured surveys gather qualitative data and allow respondents to answer in their own words. Depending on your research objectives and problem, either type of survey can be effective. Some organizations find that mixing these types provides both measureable results and real-world insights that can be missed by setting specific questions. If you require primary research data, consider each of the following research methods:
- 1. Telephone Surveys - consider Harris Interactive.
- 2. Online Surveys - Question Pro, Key Survey, SPSS.
- 3. Personal Interviews - use our Business Requirement Document to collect data directly from discussions.
- 4. Focus Groups - create a customer/prospect advisory panel that represents a cross-section of your target market and their needs.
- 5. Video Cameras - watch consumers USE your product.
- Collect & Analyze Data- once you have selected your research method, built your data-collection tool, and performed the study, gather all the data together to glean insights. The first step is the ensure data quality and accuracy; verify that raw data was correctly entered into the data-collection form and that there are no respondents who are looking to skew results. Next, aggregate the data to determine averages, slice-and-dice by demographics, and do other statistical analysis. Ensure that there is a large enough sample size to provide a real statistical representation and determine the margin of error. For a survey of 100 people, expect a margin of error of +/- 10%. For a sample size of 600, expect +/- 4%.
- Report to Senior Management- based on your findings, create a report summarizing the research problem, objectives, research design & methods, information sources, and results. Focus on providing a high-level overview rather than getting into the low-level findings. Assess the implications of your results on business opportunities and risks, and make recommendations for improving business operations. Send your Market Research Report to the relevant stakeholders, and invite them to meet to discuss further.