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. This practice 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. It can be done through surveys, product testing and focus groups. 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.
Market Research: 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. This type of information generally falls into two categories: Exploratory research is a less structured option and functions via more open-ended questions, 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 from another business operating within the same market sector.
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.
The History of Market Research and Where It Is Today
Market research was first put into place in the United States in the 1920s, and originated during the advertising boom during the Golden Age of Radio. Companies that advertised on the radio began to understand the demographics that were revealed by how different radio shows were sponsored. From there, companies were developed that would interview people on the street about publications that they read and whether they recognized any ads that were published in the magazines or newspapers the interviewer showed them. Data collected from these interviews were compared to the circulation of the publication in order to see how effective those ads were. Market research and surveys were adapted from these early techniques.
Data collection then shifted to the telephone, making face-to-face contact unnecessary. A telephone operator could collect information or organize focus groups — and do so quickly and in a more organized and orderly fashion. This method improved the market research model greatly.
Within the last 10-15 years, market research started to make a shift online. While the platform may have changed, data collection is still mainly done in a survey-style form. But instead of companies actively seeking participants by finding them on the street or by cold calling them on the phone, people can choose to sign up and take surveys and offer opinions at their leisure. This makes the process far less intrusive and less rushed, since people can do so on their own time and by their own volition.