Market research is often the first step before launching a new product or promotion. Finding more information about markets, customers, and competitors can guide campaigns and provide direction for strategies. Before beginning the process, it is important to examine the market research costs and benefits as well as ensuring the research provides value.
What is Market Research?
Market research is the process of discovering information that is useful for marketing products and platforms. It can include examining the fundamentals and financials of a company and competitors, sectors, and the industry as a whole. In addition, it involves finding information about markets, past, present, and potential future customers, and which products they tend to buy.
Sources for market research may include secondary sources such as government reports and information from trade organizations. Primary sources are produced through surveys, focus groups, and interviews as well as collected alternative data from internet sources.
The Cost of Market Research
Marketing budgets allocate some portion of resources for research and development. The question arises of how big a piece of the budgetary pie should be earmarked for market research. The amount spent depends on the type of research that is required, and this can be determined after establishing the goals of research and deciding which questions need to be answered.
If a company wants to find out how customers respond to a new product, the method of choice would seem to be a focus group. This requires planning and deciding what kind of participants are needed, locating them, providing incentives, and transportation.
A survey may be a less costly solution, but it will be hard to determine if participants are actually using the product remotely. Therefore, product testing may require a focus group, which is more expensive than, for instance, researching the best-selling sneaker in Asia, a question that can be answered using secondary data.
There are several ways to keep costs for market research down. Looking at data that is already available and finding out what can be determined from secondary data. Focusing on methods that are relatively low-cost, such as internet research and can provide substantial information with a lower cost than live research. However, sometimes focus groups, though costly, are needed, but if conducted efficiently, they can provide significant value.
The cost of marketing research can range from $4,000 to $40,000. Top-Level reports can range from $100 to $1,000. They provide a general overview of the industry, top companies, fundamentals, and sectors.
Full-Market Reports can cost an average of $4,000 and provide a full view of an industry including metrics and companies and includes future projections. A Full-Market Report also provides explanations for how conditions developed and what may change.
Product-Detail Market reports can cost $15,000 to $35,000 and cover the general information about markets and companies and also delve into the performance of specific products and their subcategories in a number of markets. For example, If a company wants to know how a specific brand and make of sneaker sells in several Asian countries, a Product Detail Market Report provides the information.
Market Research Benefits
Market research may seem expensive, but it can be more expensive not to do research. Sometimes cutting corners can be as severe as neglecting research altogether. Too often, companies form strategies based on ideas that seem profitable or assumptions about future customer behavior based on special cases in the past or generalizations.
Market research refines these intuitive ideas and demonstrates which can yield fruit and which ones are impractical. For instance, it seemed reasonable to assume that since consumers loved 3D in the theaters, they would naturally welcome 3D technology at home on their televisions. Companies didn’t take into account the cost of equipment, the complicated set-up, and the eyestrain that customers would experience watching 3D images on home screens.
Another example is Colgate’s unsuccessful launch of its fast-food product line in the 1980s. The frozen food business was booming in the 1980s, but not for Colgate. The company failed to consider that the association of Colgate with toothpaste was so strong that the whole idea of Colgate frozen meals seemed bizarre and unappetizing.
Both of these product launch failures could have been prevented with the right kind of market research. A sufficient number of customers testing 3D technology in their homes over an extended period of time could have shown that many were growing disenchanted with the idea. A survey could have revealed that the extensive brand association of Colgate with toothpaste made expanding into the food business unwise.
How to Tell if Market Research is Trustworthy
Solid market research is effective, but sometimes can be flawed. There is no guarantee that investing in extensive market research will yield the expected results. It is important to determine whether the research is trustworthy.
Stay aware of the methodologies used for the market research, and ensure that they are appropriate for the goals. If the research is aimed at asking customers how they felt about using a product, ensure the focus group members were given a chance to use it. Stay alert for reports that draw hasty conclusions or do not specify the sources of data.
Research conclusions are trustworthy if they employ the right size and kind of sample. Having too few participants may not represent consumer views of your product. Enlisting participants from Canada when the objective is to discover what people in the Midwest think of a brand of sneakers is not likely to be helpful.
In addition, segmentation has to be accurate. If a marketing team needs to know about ice skate sales, including roller skates is going to skew the data. A careful examination of the report will indicate whether segmentation was done properly, and it is important to check this before drawing conclusions from a report.
Getting the Most out of Market Research
Market research can be a profitable investment, but it is important to be aware of the benefits and drawbacks. Extensive research can be costly, but not every company needs to spend tens of thousands of dollars on focus groups. Using secondary sources combined with primary sources provides a comprehensive approach that can help companies to make the most of their budgets and create an informed and profitable strategy.
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