Market research is a process of systematic data collection, about a particular target market, competitors, customers, market trends, etc. The aim of market research is to obtain an in-depth understanding of the particular subject.
Rising competition has compelled many organizations to conduct market research. Organizations may conduct this research themselves, by appointing a team to work on the same, or may get it done via a consultancy or an agency.
This research is vital for businesses that are looking to tap the market, for firms that have come up with an improvised product and want to evaluate its demand, and even for companies planning to introduce their products into the market. However, before conducting this study, it's vital to have the objectives defined.
Once the objectives have been outlined, research can be carried out in different ways. There are two methods of conducting market research: primary research and secondary research. The choice of the method depends on the research objectives.
Primary research involves the collection of crucial data via interviews, surveys, or focus group sessions. It's time-consuming and expensive. However, it is suited for gathering specific data. Primary research can be further categorized into the qualitative and the quantitative type.
The numerical or quantitative information obtained is then statistically analyzed. Such surveys comprise questionnaires with closed-ended questions. In a close-ended question, a respondent is needed to answer by ticking one of the options given. People generally agree to cooperate, when surveys are less time-consuming.
For example, a bank may generate a questionnaire, wherein its aim is to find out what people think of their services. Numerous questions may be asked in the questionnaire and the answer options are excellent, good, poor, or very poor. This data obtained is analyzed statistically and a conclusion is ascertained.
The main rule followed while conducting quantitative research is that all the respondents should be given the same questionnaire with the same set of questions. These quantitative surveys can be carried out, either face to face (asking people on the street to fill them), email, telephone, or by post (self completion and posting it back).
They include in-depth interviews, wherein a trained executive interviews one or more respondents. The interviewer may carry out the interview on a one to one basis, with two, three, or even 4-5 respondents.
Such open-ended interviews enable the researcher to receive data about their likes-dislikes, requirements, positive-negative feedback, trends, and emotional motivators of the primary market. Unlike the quantitative type, this type does not comprise a fixed set of questions.
The interviewer may have a basic framework of questions ready, however, the flow of the interview is impromptu. The respondent has the freedom to express himself. This helps the interviewer understand the situation better. Focus groups are another method of carrying out qualitative research.
These groups generally comprise 6-8 respondents, led by experienced professionals. The role of the professional is to ask general, as well as specific questions to the group of respondents. By encouraging a discussion, they are to draw out the required information. However, since focus groups require experienced professionals, it's an expensive technique.
In secondary research, the analysis of information that has been collected for some other purpose is carried out. This means, that secondary research is carried out by gathering data from sources such as government publications, libraries, internet, magazines, chambers of commerce, etc.
Firms can also obtain data from libraries, various books and publications, banks, insurance companies, real estate companies, etc. As compared to primary research, secondary research is easier. It is less time-consuming and not as expensive.
However, the drawback of secondary research is that the data may not be updated and may not be customized to suit the need of the research. Since it involves the analysis of data collected by somebody else for a different purpose, the analysis may not be accurate.
For example, a firm manufacturing leather bags can find out how many people buy their bags using secondary research. However, they can't determine the amount people are willing to pay for their particular leather bag design.
For firms planning to introduce a new product or service, conducting market research helps understand the customer attitude and preference. It also minimizes the risk of incurring losses in the business. A market research conducted by either primary or secondary method is vital to any business and its objectives.