Mar 11, 2023 9:59:25 AM | Start a Business What is Market Research: Definition, Examples and How to Do It

In an ideal world, you’d just start your online business and everyone would rush to buy your products. While our world is far from ideal, the good news is that there’s a long list of things you can do to make sure customers buy from you and your business succeeds. At the top of that list, you’ll find market research. But what is market research? 

What is market research?

Market research is the process in which you collect and analyze information about a target market to make informed business decisions. (Some people call it “marketing research”, but we’ll go with “market research” for this article.) It involves collecting and interpreting data related to consumer behavior, preferences and trends to develop effective marketing strategies, optimize product offerings and gain a competitive edge.

You need market research for basically everything related to your business, from branding to selling on social media, because you need to know your market and your audience if you want your business and marketing strategies to be effective.

It’s an indispensable tool for businesses of all sizes as it helps in understanding the market dynamics, identifying potential opportunities and developing effective strategies to overcome challenges. Through market research, you get valuable insights into the customers’ needs, expectations and buying habits, enabling you to make data-driven decisions that align with the customers’ interests and preferences.

📊 Speaking of data-driven decisions, one powerful tool to turn your website into a selling machine is using heatmaps.

What is primary market research?

As you searched for the answer to the question “What is market research?” you might have stumbled upon the concepts of primary and secondary market research.

We’re here to clear everything up for you.

Primary market research involves gathering new and original data directly from the source, such as from customers, employees or suppliers, to obtain specific information and insights that are relevant to a particular research question or problem.

To put it simply, it’s info about your market that you collect yourself, without the help of a third party.

Primary research methods can include surveys, interviews, focus groups, observation, experiments and other data collection techniques that involve interaction with the target audience.

What is secondary market research?

Secondary market research involves using existing data and information from secondary sources, such as government reports, industry publications, academic studies and online databases, to gain insights into a particular topic or issue.

Secondary research can help researchers identify trends, benchmark performance and generate hypotheses or ideas for further investigation.

Essentially, the difference between primary and secondary research is that primary research involves collecting new data from the source, while secondary research involves analyzing and interpreting existing data from various sources.

Primary research is often more costly and time-consuming than secondary research, but it can provide more detailed insights into your problem or issue. When you conduct market research yourself, you can zero in on what’s more relevant to your business.

Secondary research is typically faster and more cost-effective, but it may not be as tailored to your specific needs. But both types of research are important and can be used together to provide a more comprehensive understanding of a topic or issue.

📖 We like doing research here at Shoplazza! Check out our report on social commerce trends.

Why is market research important?

Okay, so why do market research? The reason is quite straightforward: It’s an essential element of the business planning process. Market research helps in determining the viability of a business idea and identifying the target market for the product or service.

When you conduct market research, you collect a wealth of information that can be used to develop effective marketing strategies, optimize pricing and enhance your product offerings to meet the needs and preferences of the target market.

Not convinced yet? Well, then let’s break down the benefits of doing market research for your business:

1. Identify target market: Market research helps identify the target market for the product or service. It provides information about your potential customers' demographics, preferences and purchasing behavior, which can be used to tailor marketing strategies to their needs. It also helps find the most effective marketing channels and messaging to reach the target audience.
2. Enhance product offerings: Market research allows you to understand your potential customers' needs and preferences, enabling your business to develop products that meet their expectations. It provides insights into the features and benefits that customers value the most so you can optimize your product offerings.
3. Identify opportunities: Market research places a magnifying glass over potential opportunities in the market. It provides insights into your competitors’ strengths and weaknesses, making it easier for you to develop strategies to obtain a competitive edge.
4. Mitigate risks: Market research helps mitigate risks associated with product launches and marketing campaigns. Because you have so much information about your target customers, you’re able to develop products and campaigns that align with their interests.

How to conduct market research for your business

Now that we’ve answered the question “What is market research?” in every possible way (we think), it’s time to find out how to do it.

There are various methods to do market research, depending on the business's size, budget and objectives. Here are the steps involved in conducting effective market research for your business:

1. Define the research problem and objectives

Defining the research problem is the first and most important step. It involves identifying the objectives of your market research, the target audience and the information needed to solve the problem.

The following are some important factors to consider when defining the research problem:

1. Research objectives: Clearly define the purpose of the research and what you hope to achieve. This will help you focus the research efforts and ensure that the data collected is relevant and useful. The objectives of your market research should be specific, measurable, achievable, relevant and time-bound (in line with the SMART criteria).
2. Target audience: Identify the group of people or organizations that the research will focus on. This can include customers, competitors, suppliers, industry experts or other stakeholders. Understanding the characteristics of the target audience is important in determining the appropriate research methods and data collection tools.
3. Information needed: Determine the specific information you need to address the research problem. This can include data on customer needs, preferences and behavior, market trends, competitive landscape, industry regulations and so on. Prioritizing the information you really need will ensure that your research is focused on the most critical areas.
4. Constraints: Identify any limitations or constraints that may impact the research process or the ability to collect the necessary data. This can include budget constraints, time limitations or access to data or resources.

Once the research problem has been defined, you’ll need to validate the research objectives and refine them if necessary. This may involve conducting a preliminary review of the literature or consulting with stakeholders to ensure that the research objectives are relevant and achievable.

A clearly defined research problem sets the foundation for a successful market research project, as it helps ensure that your research is focused, relevant and actionable.

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2. Identify the target market

The next step in the market research process is to identify the target market for your product or service. This involves gathering information about your customers' demographics, needs, preferences and purchasing behavior.

Identifying the target market is a critical step in conducting market research, as it helps you ensure your research is focused on the group of people or organizations most likely to be interested in your product or service.

Here’s what you’ll need to do to identify your target market:

1. Define the product or service: Clearly define the product or service you’ll offer, including its features, benefits and unique selling points.
2. Analyze customer demographics: Analyze the demographic characteristics of your target market, including age, income, education and geographic location. This can help you identify patterns and trends in the target market and determine the best ways to reach them.
3. Identify customer needs: Identify the specific needs and preferences of the target market, including their buying habits, motivations and pain points. This can be done through primary research methods such as surveys, focus groups or interviews.
4. Analyze competition: Analyze the competition to identify their target market and the strategies they are using to reach them. A competitive analysis can help you identify gaps in the market and areas where your product or service can differentiate itself.
5. Evaluate market size: Evaluate the size of the target market and the potential for growth. This can help to determine the market share that the product or service can realistically capture.
6. Create buyer personas: Create detailed profiles of the target market, including their characteristics, needs, and preferences. This can help you develop targeted marketing campaigns and ensure that the product or service is meeting the needs of the target market.

💡 Pro tip: It’s essential to gather data from a representative sample of the target market to ensure that the insights are reliable and valid.

3. Choose the research method

Selecting the best research method is an important aspect of conducting market research.

You’ll also see people referring to methods as market research techniques. Whether you call it a market research technique or method, what you choose will depend on various factors, such as the research objectives, the target audience, the budget and the time available.

Here are the most common research methods for market research and how they work:

• Surveys: Collecting data from a large sample of people through questionnaires, either online or in person.
• Focus groups: Gathering a small group of people (usually 6-10) to discuss a specific topic, product or service.
• Interviews: In-depth interviews with individuals to gather detailed information on their opinions, perceptions and experiences.
• Observational research: Observing consumers in their natural environment or in a controlled setting to understand their behavior and decision-making processes.
• Experiments: Conducting controlled experiments to understand how consumers react to different variables and stimuli.
• Secondary research: Collecting and analyzing existing data and information such as market reports, company reports, government statistics and academic research.
• Social media analysis: Analyzing consumer behavior and trends by examining social media data, such as comments, posts and reviews.
• Mystery shopping: Having trained evaluators visit a store or interact with a business to assess the quality of service and customer experience.
• Ethnographic research: Observing consumers in their natural setting to gain insight into their behavior, beliefs and values.
• Online analytics: Analyzing data collected from website and social media analytics to understand consumer behavior, trends and preferences.

If you’re overwhelmed by all the options, don’t worry; we’ve also got some tips to help you choose the best research method for your market research:

1. Consider the research objectives: Your research objectives should be the starting point in selecting the research method. Different research objectives require different research methods. For example, if your objective is to understand consumer behavior, surveys, focus groups and interviews may be excellent methods for your market research.
2. Consider your target audience: Your target audience will also play a role in selecting the research method. For example, online surveys may be more appropriate for younger audiences, while telephone surveys may be more appropriate for older audiences.
3. Determine the budget: The budget available for research will also influence the choice of research method. Some research methods, such as focus groups or in-depth interviews, can be more expensive than others, such as online surveys.
4. Evaluate the time available: The time available for research will also be a factor in selecting the research method. Some methods, like online surveys, can be conducted quickly and efficiently, while others, like in-depth interviews, may take longer to complete.
5. Choose a mix of methods: A combination of research methods can be used to provide a more complete picture of the target audience and the research problem. For example, online surveys can be used to collect quantitative data, while in-depth interviews can be used to collect qualitative data.
6. Consider the validity and reliability of the research method: Validity refers to the accuracy of the research method in measuring what it’s intended to measure, while reliability refers to the consistency of the research method in producing the same results over time. Both validity and reliability are important in ensuring that your research is accurate and useful.

By considering these factors, you’ll be able to select the most appropriate research method for your market research project.

💸 On a tight budget? An online survey might be a good way to get started. You can use something simple as a Google Form to collect the information you need without spending a dime.

💰Speaking of budget… Do you know how much you have to sell until you turn a profit? No? Then you should learn about break-even analysis and find out how to do one. 

4. Design the research instrument

Once you’ve chosen your research method, the next step is to design the research instrument. This involves developing the survey questionnaire, interview guide or focus group questions. 

Your research instrument should be designed to gather relevant information that addresses the research objectives.

You didn’t think we would let you leave without any tips, right? Check out four suggestions to develop your research instrument and make the most of your market research:

1. Develop clear and concise questions. Use simple language and avoid technical jargon. Make sure each question is focused and only asks for one piece of information.
2. Use a mix of question types, including closed-ended, open-ended and scale questions. Closed-ended questions provide a limited set of response options, while open-ended questions allow respondents to answer in their own words. Scale questions ask respondents to rate their opinions on a scale.
3. Pilot-test the instrument with a small sample of your target audience to make sure it’s easy to understand and that the questions are clear and straightforward.
4. Ensure the instrument is reliable and valid. Reliability refers to the consistency of results when the instrument is used multiple times, while validity refers to the accuracy of the results. To ensure reliability and validity, use established research methods and statistical analysis techniques.

By following these tips, you can develop a research instrument that is effective in collecting the data you need to conduct market research.

5. Collect data

After developing a research instrument, the next step is to collect data for market research. The awesome surveys, interviews or focus groups you designed now need to be conducted.

The first tip we’ve got for you is: Collect data from a representative sample of the target market to make sure the insights are reliable and valid. A too-small sample may provide you with too-inaccurate information and steer your business in the wrong direction.

As it’s the case with the previous step, doing a trial run of your data collection will help you identify issues before you move on to a larger sample. Can you imagine finding out you’ve done something wrong during the interview after you’ve spoken to seventy people? All the time, money and resources you’ve spent will go down the drain because you won’t be able to use that data.

While collecting your market data, you should monitor and track the process to make sure everything is going as planned. This includes keeping track of response rates, collecting missing data and ensuring that data is being collected according to the research plan.

Also, don’t leave your ethics at the door! Ensure that the privacy and confidentiality of respondents are protected by obtaining informed consent, ensuring anonymity and confidentiality, and following ethical guidelines.

🔒 Respecting people’s privacy and information security online is paramount in the ecommerce world. To help our merchants safeguard their customers’ data and privacy, Shoplazza obtained the ISO/IEC 27701 Privacy Certification and the ISO/IEC 27001 Information Security Certification, and we’re also PCI Certified.  

6. Analyze data

Once your market research data is collected, the next step is to analyze it. This involves organizing and interpreting the data to identify patterns, trends and insights. Depending on your research objectives and your data, you can run quantitative research or qualitative research.

This part of your market research is “simple” in terms of the number of steps, but they’ll involve a lot of work.

First, you’ll need to clean and organize the data by removing any errors, inconsistencies or irrelevant information. Then, it’s time to analyze what you collected by applying statistical techniques and tools to identify those patterns, trends and relationships we mentioned before.

7. Draw conclusions

It’s time to make sense of the data you collected and draw conclusions based on your findings.

This involves interpreting the insights to make informed business decisions.

Your conclusions should be based on the data collected and should address the research objectives.

Once you conclude this step, you can report your findings by presenting the results in a clear and concise manner. Your market research report should include any recommendations or actionable insights that can be drawn from the data.

Market research is an ongoing process that requires continuous monitoring and evaluation. It’s important to regularly conduct market research to stay up-to-date with the changing market dynamics, industry trends and customer preferences. Businesses that run regular market research are more likely to succeed in the long run as they are able to adapt to the changing market trends and customer preferences.

🚢 I want to start a dropshipping business. Do I need to do market research? The answer is YES! The more reliable information about your target market, the higher your chances of picking the best dropshipping products to sell and scaling your dropshipping business.

Market research examples

If you’re doing your own market research, but you’re not yet a hundred percent about this whole thing, we’ll walk you through two market research examples from different industries.

Example 1: Market research for a new restaurant

Let's say you're planning to open a new restaurant in a specific area. Before launching the restaurant, it's important to conduct market research to determine the feasibility of the venture—but you already know that, right?

Here are some steps you can take to conduct market research for a new restaurant:

1. Identify the target market for your restaurant. This can be done by gathering information about the demographics, income level and food preferences of the residents in the area.
2. Analyze the competition in the area. This involves identifying the existing restaurants and the types of cuisine they offer, their pricing strategies and their strengths and weaknesses.
3. Conduct customer surveys to gather information about potential customers' preferences, expectations and dining habits. Your survey can be distributed online, in-person or through social media.
4. Observe customer behavior to get valuable insights into the dining experience. This can be done by visiting similar restaurants and observing the customers' behavior, preferences and feedback.
5. Analyze the data to identify the industry trends, customer preferences and potential opportunities.

Example 2: Market research for an ecommerce business

Let's say you're planning to start an ecommerce business to sell jewelry online. Before launching the business, it's important to conduct market research to determine the demand for your jewelry and the competition.

Here are some steps you can take to conduct market research for an online jewelry store:

1. Identify the target market: Who would be interested in buying your bracelets, earrings, etc.? Get all the information you can about the demographics, income level and online shopping behavior of your target customers.
2. Analyze the competition: What other online jewelry businesses are there? Do they sell selling similar products? What are their pricing strategies, strengths and weaknesses?
3. Conduct surveys. Because your potential customers are already online, conducting online surveys should be a bit easier. Collect information about their preferences, expectations and shopping habits. 
4. Analyze search data to assess the demand for your products. This can be done by using tools like Google Trends to identify the search volume for the product.
5. Analyze the market research data to identify the jewelry market trends, customer preferences and potential opportunities. This can help in developing effective marketing strategies and pricing strategies for your jewelry business.

What is market research: conclusion

In conclusion, market research is an essential tool for businesses of all sizes. It provides valuable insights into the market dynamics, customer preferences and trends, enabling businesses to make informed business decisions. Market research helps in identifying the target market, optimizing marketing strategies, enhancing product offerings, identifying opportunities and mitigating risks.

The process of conducting market research involves defining the research objectives, identifying the target market, choosing the research method, designing the research instrument, collecting data, analyzing data and drawing conclusions. By conducting regular market research, your online business will have a higher chance of staying ahead of the competition and achieving long-term success.