If you’re in business, or setting up a business, you need to understand your market. If you don’t understand your customers and your competitors, you are doomed to fail, says Paul Hague.
Goodness knows when market research was ‘invented’. It would be reasonable to suppose that sensible people in business have always researched their markets. They will have asked their customers what they want and if they are satisfied with the products and services they supply. They will have done a crude assessment of the potential for their products. They will have judged the best price to charge by carefully watching the competition. Customers have always been the most important part of a business.
Today, if you do not put the customer at the centre of your business, you will, over time, have no business. In other words, market research or market intelligence is essential.
However, market research is a bit more than the informal assimilation and interpretation of intelligence that is a natural consequence of keeping eyes and ears open.
Market research is structured and purposeful. It is the systematic and objective collection and interpretation of data to help reduce risk in marketing decisions.
A market researcher’s stock in trade is data, but good market research should not stop with data. Data is the collection of facts and opinions that are accumulated in the survey process. This needs converting to information that tells us something.
More than this, it needs to become intelligence so it helps us make smart moves. Market researchers collect statistics and opinions; then they work out what this data means, and draw conclusions which lead to improved business decisions.
All businesses need information to guide decision-making. Managers desperately trying to understand increasingly complex and global markets need more useable information than ever before. Because of this, the research sector plays a valuable role in the commercial world today.
Market research in the UK is split almost equally between that carried out with the general public and that with a non-public audience, such as businesses or the medical profession. There are six important categories of research:
• Understanding consumer perceptions and behaviour;
• Measuring consumer perceptions and behaviour;
• Product development;
• Promotions and branding;
• Understanding market size and brand shares.
Market size data is often obtained from secondary data and desk research. However, primary research can be used to make estimates of market size if there are no published figures. The market size would be calculated by collecting data from consumers on their use of products and services and the volume and frequency of their purchases. By using this data, together with population statistics, estimates can be made of the overall market size.
For example, if research established that 79% of people who saw a new light bulb were interested in the new product, it would represent 36 million people with an interest in the bulb out of the 45 million adults in the UK.
The researcher could now play ‘what if games with these figures. For example, what would that mean in revenue to the company if just 10% of this number bought at least one of the new light bulbs per year at a retail price of £.1?
Primary research is carried out to establish consumers’ use of and attitudes to products and brands. Typically researchers test the awareness of brands (unprompted and then prompted) and then determine which products are sometimes used and which are used most of the time. This shows consumers’ loyalty to brands and their switching behaviour.
Consumers build up prejudices and beliefs about products and services that affect their buying habits. Researchers test these opinions and attitudes to show what attributes are considered to be important in choosing a brand and how brands compare on those factors. Customer satisfaction research is based on this type of questioning.
Part 2 published tomorrow