It’s easy to dismiss the importance of marketing research. After all, when you first think of a business idea, spending hours on market research is the last thing on your mind. Most of us would rather start making and selling products right away than think about the value of marketing research.
But for any type of business, there’s a real need for market research. This is especially the case for small businesses, where the first few months can prove to be precarious. New businesses need sales and customers as soon as possible, and market research can ensure that those sales and customers don’t stop coming.
In this article, I’ll explain some basic marketing research concepts. I’ll also explain why marketing research is important and share some resources to help you get started on your own marketing research.
What Is Marketing Research?
Before you can understand the importance of marketing research, you need to know what it is. Market research isn’t about a specific method or activity, it’s just what businesses call their attempt to learn more about their target customers.
While tasks like surveys and focus groups can help, they aren’t absolutely necessary, and they aren’t the only things you can do to research your target market. Here are some tasks that can be part of your market research:
- Have short conversations with contacts who are part of your target market. Let’s say you’re looking to launch a wedding photography service. Talk to your contacts who have been married or who are engaged and ask them about their experience in hiring and working with a wedding photographer. Even a five-minute conversation can give you insights on how to run your business.
- Look up Facebook groups relevant to your target market. This can help provide you a free, low-effort way to reach target customers online and ask them questions. Eventually, you can go back to these groups to promote your business, if the group rules allow for it.
- Add a survey form to your website. If you already have a website for your small business, you can offer potential customers a small discount in exchange for filling up a survey. This tutorial on online market research forms can help you get started.
The above activities are just a handful of tasks that could be part of your market research. In fact, you can classify any task as a market research activity as long as you end up knowing your target market’s needs, behaviors, and preferences.
The Importance of Marketing Research
These are the seven reasons why market research is important, especially for smaller teams and businesses:
1. Easily Spot Business Opportunities
After you’ve done your market research, it’ll be clear to you who you want to reach out to (your target customers), where you can reach them (your marketing channels), and what they’re interested in. Once you’ve defined these, you’ll be able to easily spot business opportunities. For example:
- Form partnerships with other businesses. Learning about who your customers are, such as their demographics, can help you find other small businesses that serve them. You can approach these businesses for joint promotions that’ll be mutually beneficial.
- Create profitable order upgrades. Knowing the other products and services that your customers tend to buy can help you come up with add-ons, product bundles, and upsells that increase the average value of each order.
- Find new locations to sell to. Knowing the geographical areas where most of your target customers live will allow you to create compelling targeted campaigns that suit the needs and culture of that area.
2. Lower Business Risks
Around half of businesses with employees don’t survive past the fifth year, according to data from the Bureau of Labor Statistics. The way to make sure that your business survives for longer is to ensure that you’ve got a steady stream of sales and customers. To do that, you need market research.
Regular market research will be your way to check in with your current customers and potential customers to ensure that you’re still meeting their needs. Here’s how you can apply this:
- Test new designs and products before launching. Before you go all-in on a dramatic change for your business, you can test it on a smaller subset of your audience to see if the change would be welcome. For example, if you plan to do a redesign of a popular product, show the new design to your most frequent buyers. Test or ask them if they’re more likely to buy the new design versus, an alternative new design, or the old design.
- Find out why customers don’t come back. Ideally, your small business should have recurring customers. If they don’t come back, you can conduct a survey of previous customers or set up a focus group to find out why you’re not making any repeat sales.
- Get insights on problem areas. If your most popular product sees a big drop in sales for three consecutive months, you need to find out how to fix it before it ruins your profits completely. Survey your most frequent customers about the product and find out where the problem lies. It could be anything from a decline in the product quality or a glitch on your online store. You’ll never know unless you ask.
3. Create Relevant Promotional Materials
If you’ve ever wondered what text or images to put on your fliers, website, or social media accounts, with thorough market research, you’ll know exactly what to do. Since target customers have already expressed all their wants, needs, and frustrations with you, you’ll know exactly what to address and how to address it when you start creating your marketing materials.
For example, author Tiffany Sun surveyed her readers to find out which problems they’re trying to solve. Instead of coming up with blog topics or headlines in a vacuum, she uses the results of this survey to brainstorm compelling topics.
Here are some other ways your marketing materials will be easier to create:
- Knowing whether customers see your products and services as a necessity or as a luxury can help you design your product labels, brochures, and website that fits their perception.
- Identifying the age range of your customers can tell you the type of language you’ll be using in your promotional materials. You’ll write differently when addressing retired Baby Boomers than you would when addressing young professionals.
4. Know Where to Advertise
One of the problems that small business owners face is a limited budget. Because of this, your marketing budget should be optimized to give you the best returns possible. Your market research can help ensure that you’re reaching your intended audience in the channels where they’re most likely to see your message.
These are some of the budgetary tasks that your market research can help with:
- Buying ads on social media. If your market research shows that your target audience spends most of their time on Instagram and almost never use Twitter, you’ll know to direct most of your social media ad budget to Instagram and forget about Twitter.
- Placing flyers and posters. Knowing the physical spaces where your customer spends their time will tell you where you can best place your advertising. For example, university students are likely to be on campus, so placing ads for that market means that you can try bulletin boards on campus or outside local establishments that their crowd tends to frequent.
- Targeting ads. Online ads such as social media ads and pay-per-click ads can often be targeted with precision. This means that you can target based not just on the usual demographic data, but also based on online behaviors, life stage, and interests. If you truly know your customers, you’ll be able to maximize the potential for targeting. For example: here are some of the targeting options for Facebook Ads:
5. Outsell Competitors
The business that knows their customers more tends to win more. If you can beat your competitors at finding out your customers’ needs and you aim to fulfill those needs, you’ve got a better chance of standing out from the competition. Here are some ways you can use market research to outsell competitors:
- Target dissatisfied customers. Asking target customers about their frustrations with your competitors’ products or reading their product reviews can help you improve your own products and market them to an audience ready to switch brands.
- Find an underserved customer segment. Your market research might reveal that there’s a segment of the market that your competition has neglected. This will give you a new customer segment to reach out to.
- Identify unaddressed customer needs. During your market research, you might uncover some customer pain points or desires that you don’t see addressed in your competitors’ marketing materials. Try including them in your own marketing and see if the results show an increase in sales.
If you need to know more about conducting market research with competitors in mind, here are some helpful guides:
Small BusinessHow to Write a Competitive Analysis for Your Small Business (With Template)
Small BusinessCompetitive Analysis: How to Find Out Who’s Buying From Your Competitors
6. Set Better Goals for Your Business
When business owners set goals for their business, it’s typically related to growth in sales or customers. But without market research, you won’t be able to know if your goal is achievable and how to achieve it in the first place.
You might say that you want to double sales by the end of the next quarter. How would you know if this goal is feasible if you don’t know whether the size of your target market is more than twice the size of your current customer base? Without knowing the current size of your potential market, you’ll just be setting arbitrary goals.
With market research, you’ll be able to determine the specific directions you want to grow your customer base. For example, do you want to grow your customers via a new untapped market segment? Or do you still have room for growth among your current target audience?
If you need help setting growth goals for your business, the following tutorials can help:
GrowthHow to Plan an Effective Small Business Growth Strategy
FreelanceHow to Set Effective Goals for Your Freelance Business
7. Decision-Making Becomes Simple
The need for and importance of marketing research frequently comes up when making tough business decisions. Instead of having arbitrary criteria for the decisions you make as a business owner, you can always go back to your market research report. Based on that report, will this decision lead to more customers? Will you be able to reach more people who are likely to buy from you? Will it be clear to them that your business can meet their needs?
While not all decisions should be solved by market research, many of them can be, such as:
- where to spend your advertising or marketing budget
- whether there’s a demand for a new product you want to make
- if you should open a storefront in a new location
- which products to discontinue and which ones to merely improve
- how to price all your offers
There’s a real need for market research because it provides you with solid facts. Through market research, you’ll make more informed decisions rather than resting the fate of your business on guesswork.
More Resources to Help You Start Your Marketing Research
Now that you see the importance of marketing research, it’s time to get started on the process. Don’t be intimidated by the task ahead. Instead, start by gathering data only on these two things: your target customer and your competitors.
You don’t need to get all the information right away. After all, your target customers’ sentiments might change over time. Also, as a business owner, you can’t spend all your time on research and forget about execution. To make sure you’ve got a focused start, you can follow this step-by-step tutorial:
If you need to present your market research report to other people, such as a business partner, an investor, or your team, you can simplify the process by using a presentation template such as this Digital Marketing Agency PowerPoint template or the Digital Agency template from Envato Elements.
The Importance of Market Research for Your Business
Now that you understand the need for market research, you’re ready to get started. Your business doesn’t have to commit tens of thousands of dollars on focus groups and extensive surveys to conduct market research. But, it’s important that you do market research in the first place.
As long as you end up with a thorough list of your target market’s demographics, needs, and frustrations, you’ll be able to reap the above benefits as you grow your business. Why not get started with your marketing research today?