Market Research

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The first step in formulating most marketing strategies is conducting market research. It is an essential step as it allows companies to explore whether specific ideas are likely to work or not. Before conducting market research, it is vital to figure out which type of research works best for the current project. Let's take a look at how exactly marketers can do this.

Market Research Definition

Market research is used by many companies worldwide. Whether small or large and whether the company spent £100 or £1 million, all businesses use a form of market research. Market research is the process through which organisations collect data about customers and markets to help them construct better marketing strategies.

Check out our explanation of Marketing Strategy to find out more.

It helps companies understand why customers purchase certain products or brands. Market research is directly related to the marketing mix; therefore, it allows marketers to make decisions about product, price, promotion and place through the data they collect during market research.

Market research involves collecting and analysing information about markets, consumers, and their behaviour.

Market research involves designing a research project and collecting, analysing, and reporting relevant data. As a result, market research may help companies understand:

Customer wants and needs,
Consumer behaviour,
Customer satisfaction,
Customer attitudes and preferences,
Market potential,
Market share,
Market growth,
Demand trends,
The impact of marketing mix elements like pricing, promotion, etc.

Some organisations might have large departments working on research and spend millions yearly conducting market research. Other companies might hire external organisations and consultants to help them conduct market research for specific projects.

For instance, pharmaceutical giant Novartis spent $9.5 billion on research and development in 2021.¹

Types of Market Research

There are two branches of market research depending on the organisation's objectives. Firstly, the firm must decide whether to conduct primary or secondary research. Secondly, the researcher must decide whether to use quantitative or qualitative tactics. Let's now take a look at these four types of market research.

Primary market research

Primary market research is sometimes called 'field research' because the researcher needs to take a direct approach to collect data. This is a type of research that an organisation plans itself and involves collecting new data that has not been gathered before.

Primary research involves collecting and interpreting primary data. This is new data that has not been collected before.

Primary research involves collecting data based on a research problem or question that is specific and unique to the business. Primary market research can be carried out by the company itself or an external organisation, but the data collected will be brand new. It often involves gathering data on the business's existing customers. Primary data are collected through surveys, focus groups, interviews, and questionnaires.

To learn more about this data collection technique, check out our explanation of Primary Market Research.

Secondary market research

Secondary data has been collected before for purposes other than the research question or problem at hand. Secondary data can be collected both internally and externally. This could include things like sales and inventory records of the company (internal), internet research (external), market reports (external), or information from the U.K. Census (external).

Secondary market research involves interpreting secondary data. This type of data was collected before the researcher began their research.

Secondary research is often referred to as 'desk research' as it can be conducted from your desk. Your role as a secondary researcher is to find data relevant to your business research objectives.

To learn more about this data collection technique, check out our explanation of Secondary Market Research.

Figure 1 below outlines the main differences between the two types of market research. There are advantages and disadvantages to both primary and secondary research. The type of research chosen will depend on the objectives and aims your business is trying to achieve.

Market Research, the two types of market research Fig. 1. Two types of market research, StudySmarter

Market Research: qualitative research

This research tries to describe specific situations and understand characteristics, opinions, concepts, and experiences. It is used to understand complicated customer motivations that are difficult to study with quantitative methods. It is also used to illustrate the impacts of different factors on customer decision-making.

Qualitative research focuses on gathering and analysing data that is not numerical.

Qualitative data is usually collected from smaller sample sizes. The goal of this type of research is to question and observe what people say, do, and how they react to certain situations or ideas. Questions are usually open-ended, and it is up to the respondent how they answer each question (no predetermined answers).

Market Research: quantitative research

Quantitative research usually involves structured questions, where responses to those questions are predetermined, and respondents choose between one of the predetermined answers. Sample sizes are generally larger (more people surveyed).

Quantitative research is the opposite of qualitative research. This type of research focuses on collecting numeric data, which the researcher can later analyse through different statistical measures.

For instance, understanding age's effect on the number of clothes customers purchase each month is an example of a quantitative research project.

Marketing Research Process

Now that we understand why organisations conduct market research let's explore the process behind it. The marketing research process is made up of six steps (see Figure 2 below).

1. Define the research problem and objectives

During this step, the researcher needs to define the problem they are trying to solve with their research. It is vital to make sure that the problem the researcher decides to focus on is not too broad. The researcher then has to define their objectives and decide on the type of research they will conduct:

Descriptive - describe a situation, event, market, or customer group.
Exploratory - collecting preliminary information to understand the problem and develop hypotheses.
Causal - exploring cause and effect relationships.

This step should result in a defined research question.

2. Develop the research plan

The researcher then has to develop the research plan. During this step, they decide whether they will be collecting primary or secondary data and the type of research method they will use (surveys, focus groups, etc.). This step also involves coming up with a sampling plan. Sampling could either be:

Random - all people in the sample group have an equal chance of being selected.
Convenience - choosing the people that volunteer to take part in the research.
Judgement - deliberately choosing certain people to sample.

3. Collect the data

During this step, the researcher conducts the research.

If their research method is an online survey, this is when they would send participants the survey and ask them to complete it.

4. Data analysis

During this step, the researcher uses various statistical tools if they are conducting quantitative research or analyses different interviews if they are conducting qualitative research.

5. Present findings

During this step, the researcher will format their analysis and data into detailed insights - translate data into valuable recommendations for managers.

For example, imagine a researcher exploring customer satisfaction in a restaurant. Instead of mentioning that a unit increase in staff friendliness will significantly increase perceived service quality, the researcher would advise the restaurant manager to carefully train their customer-facing staff as this could improve customer satisfaction.

6. Make a decision

This is where the organisation would decide how to tackle the problem they were researching with the researcher's findings. For example, this step could involve a decision on whether to launch a new product or not.

Market Research Examples

Let's now take a look at a few market research examples.

Example of primary market research

A popular type of primary market research is surveys. You can customise your survey to be as short or as extensive as you wish. Surveys can be digital, received via email, for example, or in a physical form, like a card you receive to share your thoughts after staying in a hotel. Surveys are helpful when you want to measure something specific.

When you use certain services, you will likely receive an online survey after completing the purchase and utilising the service. An example of this is ordering food online through a delivery service like Deliveroo or Uber Eats. Once you have made your purchase and received your food, you could find a survey in your inbox with prompts like:

How likely are you to recommend this service to a friend?Please rate your experience with this service on a scale from 1 to 5. How likely are you to use this service again?

Answers to these questions are then analysed and turned into valuable data and actionable insights.

Example of secondary market research

Secondary market research can take several forms. Consider the example below, which outlines how a marketer might combine various secondary sources.

Imagine you are working for a company that is trying to develop a new product. Instead of conducting your own research, you decide it would be more efficient to gather information from existing resources.

You look at industry reports and see data on whether the industry is growing and whether it seems profitable. You then examine market reports which describe customer needs and wants in the industry and predict customer attitudes and behaviours in the future. You also conduct internet research to investigate how your competitors act in the industry. You then look at your company's internal records of sales and expenditure for current products and brands you offer.

Based on the data and information gathered, you then decide whether it is worth developing a new product; the type of product you should create (what are customers looking for?); how you could differentiate your product from competitors, and how much money you would need for the development of this new product (budget).

How to do market research for a startup?

Founders often establish startups to address a problem in the market or to take advantage of certain opportunities other organisations have not yet addressed. However, conducting market research for a startup is similar to that of an established company. Once the startup has its main idea, it must:

Define the research problem and objectives,
Choose a research approach and create the research plan,
Collect and analyse data,
Interpret and present findings,
Make a decision.

Similar to other forms of market research, startup market research also aims to understand markets and consumer behaviour. However, it is crucial for startups to also conduct extensive environmental and competitor analysis before launching the research and development of a new product. Having a cohesive market research plan and understanding the ins and outs of an industry or market will also increase the chances of investment into the startup.

Market Research - Key takeaways

Market research involves collecting and analysing information about markets, consumers, and their behaviour.
Primary research involves collecting and interpreting primary data. This is entirely new data.
Secondary market research involves interpreting secondary data. Someone else collected this type of data before the researcher began their investigation.
Qualitative research focuses on gathering and analysing data that is not numerical.
Quantitative research collects numerical data, which the researcher can later analyse through different statistical measures.
Marketing research involves defining the research problem and objectives, developing the research plan, collecting data, analysing data, presenting the findings, and making a decision.

References

Novartis. (February 2, 2022). Novartis AG's expenditure on research and development from 2004 to 2021 (in billion U.S. dollars) [Graph]. In Statista. Retrieved August 30, 2022, from https://www.statista.com/statistics/266134/novartis-expenditure-on-research-and-development-since-2004/

Frequently Asked Questions about Market Research

Market research is collecting and analysing information about markets, consumers, and their behaviour.
Market research involves designing a research project and collecting, analysing, and reporting relevant data.

The first step in the marketing research process includes defining the research problem and objectives. During this step, the researcher needs to define the problem they are trying to solve with their research. It is important to make sure that the problem the researcher decides to focus on is not too broad.

Market research is important because it helps marketers understand customers’ wants and needs. Market research can also help an organisation predict customer preferences and purchase patterns. This can aid in deciding how to position a products or brand in relation to competitors. Market research is also essential for developing marketing strategies.

The purpose of market research is to understand what customers want and need within a target market or industry. It is also useful for gaining insight into customer behaviour and customers’ attitudes towards different products and services. Market research is essential for developing new products, introducing new brands or coming up with a new marketing strategy.

Flashcards in Market Research25 Start learning

What is qualitative research?

Qualitative research focuses on gathering and analyzing data that is non-numerical. This type of research tries to describe certain situations and understand characteristics, opinions, concepts, and experiences.

What is quantitative research?

Quantitative research is the opposite of qualitative research. This type of research focuses on collecting numeric data which can, later on, be analyzed by the researcher through different statistical measures.

Which of the following statements is correct about market research?

The qualitative researcher usually poses open-ended questions.
Quantitative research involves smaller sample sizes.

Only statement I. is correct.

What are the two types of market research?

The two different types of market research are primary and secondary research.

What is primary market research?

Primary market research is a type of research that an organization plans itself and involves collecting new data that has not been gathered before.

What is secondary market research?

Secondary market research is a type of research that involves gathering data that already exists. This can include internet research, examining market reports or government data. This type of information has been collected before for a purpose other than your research.

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