What is 'Market Research'
Market research is the process of assessing the viability of a new good or service through research conducted directly with the consumer which allows a company to discover the target market and record opinions and other input from consumers regarding interest in the product. Market research may be conducted by the company itself or by a third-party company that specializes in the market research field. Test subjects are usually compensated with product samples and/or paid a small stipend for their time.
BREAKING DOWN 'Market Research'The purpose of market research is to examine the market associated with a particular good or service to determine how the audience will receive it. This can include information gathering for the purpose of market segmentation and product differentiation, which can be used to tailor advertising efforts or determine which features are seen as a priority to the consumer.
Market Research Process
A business must engage in a variety of tasks to complete the market research process. It needs to gather information based on the market sector being examined. The business must analyze and interpret the resulting data to determine the presence of any patterns or relevant data points that it can use in the decision-making process.
Primary and Secondary Information
Primary information is the data that the company has collected directly or that has been collected by a person or business hired to conduct the research. Primary information generally falls into two categories. Exploratory research is a less structured option and functions by asking more open-ended questions of those selected as part of the market research sample, and it results in questions or issues being presented that the company may need to address. Specific research obtains answers to previously identified issues that are often brought to attention through exploratory research.
Secondary information is data that an outside entity has already gathered. This can include population information from government census data, trade association reports or presented research that another business operating within the same market sector has already gathered.
Use of Market Research Results in Business
A company that was considering going into business might conduct market research to test the viability of its product or service. If the market research confirms consumer interest, the business can proceed confidently with the business plan. If not, the company should use the results of the market research to make adjustments to the product to bring it in line with customer desires.