Market Research: Step by Step Algorithm

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What is Market Research?

Market research is a type of marketing research. In short, it is the collection, processing, and analysis of market information.

Here are the variables included in the concept of “market research”:

  1. Setting goals and objectives, identifying specific business problems.
  2. Identification of information sources.
  3. Data collection.
  4. Analysis of information.
  5. The final result.

The purpose of market research is to identify the capabilities of the company and test the competitive environment.

To know what exactly needs to be investigated, it is necessary to divide the market into types.

Types of Market

  1. Consumer market – consists of everyone who buys goods for personal use.
  2. The market of manufacturers – this includes legal entities that purchase goods and services for use in production.
  3. The market for government institutions is a collection of state enterprises that buy goods and services for use in their work.
  4. The intermediary market is people and companies that buy products and then resell them.
  5. The international market – includes all intermediaries, as well as legal entities and individuals who are abroad.

Why Market Research

Here are the tasks it performs:

  1. Analyze consumer behavior to understand what products people are now interested in. This will help to find out whether the goods or services that the company offers are in demand.
  2. Assess the level of competition, find the strengths and weaknesses of competitors. This is necessary to understand in which direction the business should move.
  3. To study competitors’ products or services, pricing policies and ways to promote products.
  4. Assess the competitiveness of the company and products. Determine what their strengths and weaknesses are compared to competitors.
  5. Identify a profitable distribution channel.
  6. Find unoccupied market niches.
  7. Identify market capacity and company share in it.
  8. Assess the prospects of the market and the current distribution channel.
  9. To form the basis of a further strategy for promoting the company and products on the market.
Identify market capacity and company share in it.
Market research Task

Types of Research

For the analysis of the market using different types of research. Each of them has its own methods of collecting and processing information, but they are all divided into two main types.

1. Quality

These are hypotheses that are compiled based on the opinions of analysts and marketers, as well as data on competitors and consumers. The results of such studies are subjective, they do not have a clear structure.

Using qualitative research, they determine the motives of consumer behavior, their perception of the company and specific products. This allows you to find innovative and creative solutions for the tasks of the company.

2. Quantitative

These include statistics: numbers, indicators, calculations. They are visual and can be compared with each other.

Such information is considered more reliable. It allows you to track the effectiveness of the company in different periods.

Also, market research will be divided into subspecies. Before you start searching for information, decide which one the company needs to avoid unnecessary work.

Look at this list, here are the types of research on the subject and purpose.

  1. Market structure research. The analysis of market trends, capacity and market conditions.
  2. Product research. We study the share of company products in a particular segment.
  3. Target segment research. To select the most suitable market segment for the enterprise, a general analysis is carried out.
  4. Consumer behavior research. It is required to find out the needs of customers, pains and interests, to understand how people relate to the company and its products.
  5. Market price research. Comparison of company and competitor prices.
  6. The study of free niches. Search and selection of possible niches, selection of the most suitable and profitable.
  7. Study of competitors. The goal is to find out the strengths and weaknesses of rivals.

To understand what kind of analysis a company needs, ask a simple question: “What exactly needs to be learned?”. Take a piece of paper and write in a column the areas in which you feel the lack of information. Then under each writes the questions you want answers to. Based on these data, a further research plan is drawn up.

It also happens that a firm needs a complete market analysis on all counts. This is a very voluminous work, but quite workable. if you use proven methods and act in stages.

Market Research Methods

The primary collection of information for analysis is carried out using several methods.

1. Observation

This method helps to gather information by observing the object. You do not need to act on it.

Observation takes place in the field or laboratory conditions. The field is a natural environment. For example, monitoring the behavior of buyers and sellers in a store.

And laboratory ones are artificially created situations.

The effectiveness of this method is quite high, although it is costly and can greatly depend on the opinion of the observer.

2. Poll

This is the way information is received from specific respondents. This is a popular method used by up to 90% of marketers.

Surveys can be done orally (interviews) or in writing (questionnaires), depending on the situation.

This method allows you to know the opinion of consumers about goods and services, the company and its services.

3. Experiment

Using it, you can track some factors to understand how they affect the activities of the company. The experiment requires the active participation of the organizer. It can be carried out in laboratory and field conditions.

4. Panel

This is a method of creating a marketing model that recreates the picture of individual factors on a computer, rather than in life. To do this, controlled and uncontrolled factors that the firm is confronted with are introduced into the computer program. After that, possible outcomes of events are calculated. In the end, you need to calculate the probability of these events.

Thanks to the panel method, you can understand how certain situations will affect the business.

The method is complicated, it is laborious to carry it out, but it’s worth it.

5. Expert Assessment Method

Using formulas and calculations, it is not always possible to get the necessary information in a business. To solve a problem, sometimes it requires the opinion of someone who is well versed in it – an expert.

This method is simple to organize and has many advantages, but the results may turn out to be subjective or incorrect due to the human factor.

6. Benchmarking Method

This is an analysis of company data in comparison with competitors. This method compares not the results of work, but the business processes that occur in companies. It is often used to test a competitive environment. An analysis of the internal environment of the company is also possible to determine the effectiveness of different departments.

Focus groups

Studies with their use are conducted when detailed information is required from customers and a simple questionnaire will not be enough. Then a group of clients of the company is selected (6-12 people). For more accurate and versatile results, several groups can be distinguished according to different variables (gender, age, place of residence, income level).

The focus group is explained their purpose, then they are asked questions of interest, and on the basis of their answers, they form a report.

Market Research Stages

Market Research Stages

To make the analysis effective and not cause unnecessary difficulties and problems, divide it into separate steps. Let’s look at each of them in more detail.

Follow this sequence in market research:

1. Definition of purpose

First of all, you need to understand why the company needs this study. If there is no goal, it will be difficult to evaluate the result.

Decide what exactly you would like to consider: competitors, company products, business promotion , market structure, consumer behavior, market niches, target segment.

A clear understanding of the goal will help to draw up the right plan of action

2. The study of goods or services

At this stage, identify the needs of customers. For example, with the help of a survey and observation, you can find out which goods and services are most in-demand and why. Here it is possible to identify individual characteristics that consumers like or, do not like.

In the course of the study, the company will determine what of its products most of all meets the expectations of customers, and what is not interesting to them.

To identify this, you need

  1. Interview consumers.
  2. Compare the characteristics of their own products.
  3. Compare the same products with competitors’ products.

3. Determination of market capacity

Market capacity is the number of customer requests that a company and its competitors can expect from potential customers. Capacity is calculated only for specific regions and for one product. That is, it is impossible to calculate the capacity for all goods and regions at once. You can choose any length of time for which this indicator will be calculated. For example, year, quarter, month.

Determination of market capacity

During this study, the company will understand which products are falling and which are increasing. This will allow you to take action and even out indicators. In order to regulate the situation in the future, one must also understand what factors influence the demand in this business.

4. Market Segmentation

The market is divided into segments – groups of people according to certain criteria. When we segment the market, we find the part of consumers that is most interested in the company’s products.

This stage of the study will determine:

  1. The most effective promotion methods.
  2. Marketing tactics of the company in the market.
  3. Profitable points of sale
  4. Properties of the goods that need to be changed in order to interest buyers.

5. Analysis of consumer behavior

Analysis of consumer behavior

Now it’s time to find out the wishes of the segments that are most loyal to the company. At the same stage, a portrait of a potential buyer looms. The analysis will include the attitude of customers to specific products, market behavior, habits, inclinations, preferences.

Surveys will help to conduct research – interviews and questionnaires.

This will help to identify the weaknesses of the company and products, to predict the reaction of consumers.

6. The study of distribution channels

We have decided on the target audience, now you need to understand how to better sell the product. The aim of this research phase will be to find the most profitable sales channel for the company.

In the process of analysis, you need to collect information about the work of outlets, determine which of them copes better with tasks and which are worse. To solve the problems of lagging points, you also need to know the factors that affect sales. For example, a distribution channel may not generate revenue for various reasons: due to location, due to the sloppy work of employees, lack of advertising, etc. Another detail is distribution channel costs. To understand how beneficial it is, they also need to be taken into account.

The result of the analysis will be the screening of unprofitable sales channels or reorganization.

7. Analysis of the effectiveness of advertising

Now we will test the promotion of the company and goods or services in the market. The evaluation criteria are as follows: as the advertising firm and its competitors operating on the consumer, what methods of promotion bring the best results, and which do not work, what relation to the Company generates advertising.

For the start of sales of goods or services to be successful, promotion is absolutely necessary. Without it, the process stalls. This item needs to be given special attention, it largely affects the company’s sales and profits, as well as its image

The result of the work will be the definition of:

  1. The best tools and promotion methods.
  2. Advertising triggers.
  3. Audience preferences and reactions regarding advertising
  4. Economic indicators dependent on advertising campaigns

When all these variables are available, the company can identify and eliminate weaknesses in advertising, and this will directly affect sales.

Analysis of the effectiveness of advertising
Analysis of the effectiveness of advertising

8. The study of competitors

Another very significant stage of the study. It helps to understand what exactly the company is doing wrong, why competitors sell similar products or services better. You can evaluate the advertising of competitors, their promotion strategy, characteristics of goods and services, target audience and distribution channels.

The study of competitors
The study of competitors

Before conducting this analysis, identify direct and indirect competitors.

To make the research as effective as possible, you need to find out the following information about your opponents:

  1. Features of the advertising strategy and its costs
  2. Pricing policy and price-quality ratio.
  3. Which distribution channels competitors rely on. Which of them is the largest?
  4. How these companies relate to customers: what benefits they provide, which promotions, what attract new customers
  5. What are the intermediaries of competing firms?

Getting information about opponents is not always easy. But you can do it this way: interview the company’s customers or introduce a mystery shopper. It happens that an employee even temporarily gets a job with competitors. This, of course, is effective, but very laborious.

9. The formation of a pricing strategy based on the data

We determined the preferences of customers, market segments, distribution channels, and promotion methods. Now you need to carefully analyze the information, compare it and determine the pricing policy of the company. At the same time, it is important to consider the policies of competitors.

10. Sales forecasting

In order to plan further production and marketing work of the enterprise, you need a sales forecast. This is the total potential sales of goods or services of the company.

The forecast gives an understanding: what resources are required by the company, which distribution channels need to be used, how to expand production and what innovations will be needed.

Of course, the forecast does not give accurate results, only an approximate picture. However, the company cannot do without it

Information Collection Methods

Now let’s look at where and how to get the data we need for research.

Here are the sources of information

  1. Buyers Surveys or questionnaires are conducted, as a result of which you can find out the opinions of customers – held or potential.
  2. Social networks. The opinion of people about goods or services can be found on the Internet. If you have your company communities in social networks, just invite subscribers to write an honest review. For some already popular products, people can make detailed reviews on various reviews. So there you can search for information about competitors’ products.
  3. Workers. You can also ask your staff for opinions on the work of the company. Who, if not they know most about the work of the company. It is best to do an anonymous questionnaire so that no one is afraid, to tell the truth.
  4. Own experience. Take your products and competitors’ products. Rate them in action. Just try to be impartial and intentionally not to underestimate or overstate, otherwise, this experiment will not work. If you want to get a more accurate result, connect employees, let them also compare.
  5. Behavior Monitoring. You can independently come to the sales points of competitors or send other employees to monitor the progress of sales.

How to Organize a Market Research Study

How to organize a study
Organize the Market Research Study

There are 3 ways to do market analysis.

1. Independently

You can do it yourself if the business is small and there is simply no money for professional research. Well, or if you need only one type of analysis.

This option will cost less, but it will take a lot of time and effort. Doing everything yourself is energy-intensive, it is better to delegate such tasks, if possible. Especially if you are not too good at conducting market research. There is a good chance of a mistake.

2. With the help of the marketing department

If the company has its own marketing department, then it would be logical for him to delegate the collection of information and research. Do not forget to pre-agree the plan, this will help to avoid unnecessary work.

3. With the help of a marketing agency

This is the best option. Especially if complex research is required. Yes, you have to allot a budget to hire specialists. But in return, get quality work and unload your own schedule. To carry out such a voluminous work on their own is quite difficult. The agency will work on the analysis at once several employees who will be able to assess the problem from all sides.

5 Tips for organizing market research

  1. Structure of the information you collect. Sort by blocks, divided into parts, sign. Do not forget to draw conclusions and analyze this array. Otherwise, the information will accumulate and in the end will fall on you like an avalanche. It’s much easier to understand them than at the end to scoop up a bunch of heterogeneous information.
  2. Do not analyze the show. If you read the article and decide that you need to do the research, but don’t understand how this will be useful in your work, don’t do it better. Research should have a clear goal. The analysis is conducted for the sake of the result, not the process itself.
  3. Do not forget about people. Some make the following mistake: they conduct research based solely on statistical indicators. Of course, they are more objective than someone else’s opinion. But you will be surprised how much you can learn about the market if you ask customers, company employees, and marketers.
  4. Do not start work without a clear plan. It is not necessary to describe in detail each step of the analysis. But a plan is still needed, otherwise you risk scattering yourself on unnecessary actions. In the toga, the study may drag on, overgrown with unnecessary information, and some of the really important information will be lost – without a plan it is easy to forget about it.
  5. Do small research if there is no budget for the in-depth. Sometimes this is enough. Sitting in the unknown and waiting for the company to have more money is often unjustified.

Conclusions

Now let’s summarize, briefly outline the most important thing to remember.

  1. Market research is one of the types of marketing analysis, which consists of the collection and processing of data from various sources.
  2. With the help of the study, the strengths and weaknesses of the company, the market position, the level of competition are identified, they find a suitable niche and distribution channels. In general, this is an excellent solution for those who do not understand why the business does not generate income.
  3. There are several methods for finding information for analysis. Use the ones that suit your business. Do not forget that not only statistics and figures are important, but also the opinions of customers, employees, and experts.
  4. A complete study includes 10 stages. But it is not necessary to do everything. If the analysis is needed only in a specific area – exclude the rest.
  5. If possible, contact a marketing agency. So you get a better result.

 

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