How to do market research

Select from the links below to find out more about the different ways market research can help your business.

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Product testing

Developing new products, or trying to improve existing ones, is vital if you want to take your business to the next level. But how do you know that people will actually buy your new offering?

Gut instinct just won’t cut it. New products fail for many reasons, and one of those is if companies fail to do any up-front research. It’s the only way to get proper insights into who your target market is and whether they’ll actually buy a new product.

From spotting any glaring issues in the seeds of an initial idea right the way through to honing your offering for launch, market research gives your business a systematic process to boost the likelihood of success.

And crucially, because new product development is costly in terms of time and resources, it’ll also help you avoid wasting time and money if the evidence suggests your new product isn’t as good as it could be or, worst of all, won’t cut it in the marketplace.

Let’s look at the two key phases in new product development and testing market research is vital for.

Identifying new opportunities
Exploratory research can help your business generate ideas for new products or services that could be viable in the market.

You can use it to get an understanding on what your target audience is looking for, for answers to questions including:

  • How satisfied are customers with products already available?
  • How could products on the market be improved?
  • Are customers interested in any new products or features?
  • What do customers need?
  • Are any customer needs not being met?
  • Who would be most interested in a new product?
  • How do customers decide to buy a new product?

Testing new products
Baking market research into your product development means that you’ve already solved any upfront issues before you get close to launch. But at the very least, it’s key to test your product on some intended target customers before it goes to market.

It doesn’t matter what you’re launching - whether it’s a piece of software, a consumable like food or toiletries, or a service - what counts is giving it to a small selection of consumers to find out what they think.

Insights you get from product testing market research will help you make informed decisions on any changes you should make before you push the button.

Research can provide answers to these questions:

  • How do customers react to the product?
  • Does it meet their needs?
  • What types of customers are most likely to buy it (ie demographics as well as psychographic information - their habits, spending tendencies and values)?
  • Which features and benefits do different buyer personas respond to most (and vice versa)?
  • How likely are people to buy it?
  • How much are they willing to pay?
  • How do they view it compared to a competitor product?

Market research insights can also help you uncover the best way to communicate to potential consumers about your new offering. From marketing and branding to technical messages you use to describe the product, connecting with the buyer is crucial if you want to succeed in a competitive marketplace.

Customer satisfaction

Making sure customers have a positive experience with your brand is crucial - even more so in our digital times. Although positive reviews posted online pack a punch, just one bad review can be toxic to your brand’s reputation.

Some studies show that eight out of 10 consumers won’t purchase from a company with negative online reviews. Customers are far more likely to tell friends and family about a bad experience - and it’ll be shared on social media faster and more widely.

Unhappy customers can cost your business in sales and revenue, and that’s not even taking into account those people who have a bad experience with your brand but leave without comment never to return.

Measuring positive and negative experiences
These are reasons why it’s important to use market research to proactively measure customer satisfaction. Finding out what your buyers think of interactions with your business, from delivery time, cost, customer service and your overall brand will help you spot any problems and give you a chance to fix them.

Research insights will also help your business shine a light on good experiences, not just bad. You’ll get a deeper understanding about what buyers want and expect, helping you define your short- and long-term goals and making it simpler to develop future products and services.

Boosting customer retention
Measuring the customer experience is also about customer retention. There’s no doubt that keeping hold of loyal purchasers is good for your bottom line. The probability of selling to current customers is around 60-70%, while selling to new ones is lower at 20%.

And studies suggest that if you boost customer retention rates by 5% you can increase your profits from a healthy 25% up to a massive 95%.

Customer satisfaction surveys
Customer satisfaction surveys are probably the best known of all market research tools. They’re a way of measuring how satisfied customers are with their experience of interacting with your business.

You can gage customer satisfaction in person and over the phone, but thanks to digital technology it’s easier than ever to poll large numbers of customers online to find out what they like, dislike or improvements they’d like to see.

The most common types of customer satisfaction survey methodologies are:

  • Net Promoter Score (NPS), which measures customer loyalty towards your brand. A typical NPS question asks ‘How likely are you to recommend [our company or product] to a friend?’ on a scale of 1-10.
  • Customer Effort Score (CES), which measures how easy (or hard) a customer has found their interaction with your company. For example, ‘How easy was it to deal with our company today?’ with a response on a five-point scale from ‘very difficult’ to ‘very easy’.
  • Customer Satisfaction (CSAT), which measures customer satisfaction on a single issue. For example, ‘How satisfied were you with your experience?’, again on a sliding scale.

This kind of market research can help your SME measure how your products or services met, exceeded or fell short of your customers’ expectations - plus how loyal they are and how they feel about your brand.

But don’t be tempted to carry out surveys for the sake of it. It’s crucial to have a clear purpose, and be left with meaningful and useful results that will give you the information to make changes.

Competitive intelligence

As an SME, you’ll know it’s vital to be aware of what’s happening in the marketplace. An ever-changing business environment makes it essential to monitor trends in your industry and adapt your strategies to fit.

The more you know about your competitors and their products and services, the better. As well as keeping an eye on what your rivals are doing, what counts is understanding where in the marketplace you stand compared to them. It’s also important to discover how customers compare you to them.

Competitive intelligence is about collecting and analysing information about your competitors and the marketplace, and actioning it to inform your business strategy. The right intel can also help you anticipate what the market could be like in the future and help you face new competitors when they emerge.

As a small or medium-sized business you may not have the financial or logistical power of a large corporation. But your size makes you more nimble and able to react quickly to what your rivals are doing, whether that’s in product development or pricing strategies - so competitive intelligence can be a fantastic tool for you.

Using competitive intelligence
Chances are your SME is already monitoring the competition in some way. It’s easy to do desk research as there’s so much information available online.

You’ll already be familiar with their products and services, pricing and approach to communicating with customers. You’ll probably subscribe to their newsletters, have set up Google Alerts for mentions, keep an eye out for their job openings and order their products to scrutinise. Just a few clicks can give you an idea of their customer shopping experiences, social media presence and customer feedback on review sites and comments in support forums.

Consider running specific profiles on each of your key competitors, digging a little deeper into what’s available to answer these questions:

  • What are they doing better than us?
  • What tactics are they using successfully that we can copy?
  • Have they made any mistakes that we can learn from?
  • Are we doing anything better than them?
  • How do their customers view them?

A competitive advantage for your SME
To get a truly detailed strategic picture of where your business sits in the competitive landscape, you may need to glean more in-depth competitive intelligence.

There are paid tools to help you track your rivals’ movements online, but the information you need may be harder - and more time-consuming - to find. That’s when it can help to outsource market research to a qualified agency.

Market Research Society accredits organisations and members who abide by the MRS Code of Conduct, and you can find a list of accredited agencies who specialise in SME research using the search facility at the bottom of this page.

A market research agency or supplier will use the most up-to-date tools to drill down to give you a detailed map of your competitors and help predict their future actions. You’ll also be able to get valuable insights on relevant stakeholders, consumer behaviour, similar supppliers, products and market trends as a whole.

UX / User research

The term ‘user experience’ covers every part of a person’s interaction with a business, whether that’s its website, staff or a tangible product that’s being offered.

It’s about making sure everything a company offers is designed with the user in mind, and now usually refers to the experience customers have online - on a company’s website, app or piece of software.

From users being able to easily navigate your website to find what they want, to being reassured by a safe and reliable checkout process - with well-designed pages that load quickly on the way - a good online experience is all. A positive UX is more likely to convert visitors to customers, see them return and also hopefully spread the word about you.

Bear in mind, too, that today’s internet users are savvier than ever. Give them a poor online experience and you’ve probably lost them for good. They simply won’t revisit anything that’s not up to scratch.

UX inbox as well as online
User experience is hugely important offline, too, and if your business deals in tangible products or services it’ll help you stay competitive in a crowded marketplace.

Customers want dealings with bricks-and-mortar businesses and organisations to be pleasant and smooth. They want physical products that are intuitive to use, and packaging, labels and signs that are easy to get meaning from. If any of these turn out to be frustrating or difficult, it means a poor user experience.

Online user research
For your SME to ensure it’s offering the best possible user experience online, user research can be invaluable.

User research studies how users behave when they interact with your business, and how they make decisions to buy from you. At its simplest, it means observing how your customers interact with your product or service.

From quizzing members of your target audience in focus groups to using specialist digital tools, there are lots of ways to find out how people are interacting with your business. User research software is probably the next best thing to asking to stand over someone’s shoulder as they’re actually on your website.

Heat mapping shows what’s getting a user’s attention on your web page by monitoring where they tap their finger on a mobile or tablet, or click their cursor or move their mouse on a desktop device. It can also indicate where people tend to scroll down to on a specific web page.

Session recording or journey analysis lets you watch every click, scroll and more as individual users make their way round your website in real time. For a more basic picture of how users navigate their way around your website, you can also dig into Google Analytics data.

Take action for a more positive UX
Carrying out user research can be invaluable for letting you what’s not working (or what is working and what to do more of). The next step is to use the evidence to crack your SME’s user experience, increasing user engagement and boosting conversion rates.

New customers

No matter the age of your company - whether you’re just starting out or are well established - the only way to grow is with a steady pipeline of fresh customers. Finding out what those customers really want is crucial if you want to retain them, and attract new ones.

Market research takes the guesswork out of identifying your SME’s target market, the consumers or organisations you have the best chance of selling your products or services to. You’ll be more likely to develop a deep understanding of who they are, how they think and what motivates to buy from companies like you.

With information and insights from market research you’ll also be able to:

  • Find out who has the most potential to become a customer
  • Hone your offering to suit customers’ specific needs, wants and aspirations
  • Tailor sales and marketing messages to appeal most to specific groups
  • Leverage your current customer base to introduce new customers

Knowing your target market
You’ll already know that you need to have as much intel about your target market as possible - and keep refreshing it to ensure an accurate picture as the market changes.

If your business is in the B2C market, you’ll get a much better sense of your customers if you can discover their:

  • Income
  • Basic demographic information like age, sex, location and occupation
  • Hobbies and interests
  • Shopping patterns
  • Online habits
  • Pain points

Whether your SME gets this information using surveys, polls, focus groups, insights from social media - or ideally all of the above - it’ll make it easier to engage potential customers with the right pricing, distribution channels and marketing strategies.

Segmenting the market
There’s a way to drill down into your target market further to help grow your customer base. Target market segmentation involves breaking a larger target market into smaller segments or subcategories based on shared characteristics. 

For example, consider dividing the market based on:

  • Demographics: the fundamental characteristics of customers, like their age, gender, income, education level and marital or family status and family size.
  • Psychographics: who people are as individuals. For example, their attitudes, values, personality, behaviours and lifestyle.
  • Geographics: where your target customers live.
  • Behaviourals: how customers interact with your product or service when they’re deciding to buy. For example, how often they buy it, and where.

By segmenting, your SME can spot the groups of consumers who have the most potential for growth - or have the highest chance of being profitable. It’s also a handy tool for honing your sales and marketing, plus customer experience, to reach specific segments of customers.

Creating customer personas
If you have a real understanding of who buys your products or services and what motivates them, you can target new customers using the same customer profiles.

The information you get from your market research will help help you create customer personas (also known as customer profiles or avatars). These are generalised pictures of your ideal customers and will give you an even more authentic understanding of who they are.

Market sizing

Knowing the size of your market is a key factor in your SME’s future success. If you’re a start-up, are there enough customers for you to make money? If it turns out you’re operating in too small a market you’ll have zero chance of survival.

Whether your SME is new or established, finding out market size can help you work out potential revenue and will go towards informing your business strategy. Used alongside other forms of market research, it’ll have an impact on future products or services you create.

This information will also be crucial if your business needs to pitch for finance, whether that’s to create enough working capital, purchase assets or fund growth. Ultimately, banks and investors want to lend money to viable companies, and drawing on accurate figures and statistics can show there’s enough demand for your products or services.

Working out different markets
Market size depends on working out two factors: addressable market and available market.

Addressable market is the size of the total market, the number of customers who might buy your product or service if you had 100% success with every sale and zero competitors.

Realistically, that’s not a situation any business will find itself in but there will be a smaller fraction of those people who will want and be able to buy. This is the segmented addressable market (or available market).

Top down and bottom up analysis
To calculate your segmented addressable market, first think of your target customer. What type of person or company are your products and services solving a problem or fulfilling a need?

Once you’ve got a profile of a typical customer, carry out some desk research online to collect facts on how large your market is. There are many sources of publicly available sources of data - try company and industry reports and the Office of National Statistics.

The next step can be a top down analysis. Beginning with figures that represent the market as a whole - the largest possible size estimate - it’s about working down using information about your business and your sector to estimate your share of that market.

Now on to calculating your segmented addressable market - a picture of how many customers your SME can realistically reach. Bottom up analysis can be helpful here. This involves looking at the number of customers and the price of the product you sell to these customers then estimating their size and growth.

Carrying out customer interviews and surveys, focus groups and speaking to market experts can help give you the information you need.

Make market sizing an ongoing process
Going through the process of calculating an accurate market size for your SME can be immensely helpful. Digging into research and statistics, and using customer polls, surveys and focus groups can all inform other parts of your business strategy.

But it’s unrealistic to think you’ll arrive at the exact numbers every time and getting close enough to a decent picture of your business’ market size can often be enough.

Markets develop constantly and consumer buying habits inevitably change so you need to build in market sizing as an ongoing exercise for your SME.

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