How to Perform Market Research
Steve Jobs once said of market research “People don’t know what they want until you show it to them”, and dismissed market research as unnecessary. Was he right? For people like himself, possibly. Real innovators can see past what customers are asking for and determine the next big thing – enter the iPhone.
For the rest of us mortals, we rely on market research to make sure we are meeting customer needs and anticipating changes in the market. Even for innovators, no harm could come from hearing what your potential customers have to say. So we have deemed market research as an effective tool for innovation.
How to Perform Market Research
There are two types of data that you can collect: qualitative and quantitative.
Qualitative data is more in-depth, personal, and is typically preliminary to collecting quantitative data. Qualitative data is typically collected through one-on-one interviews, focus groups, observation, or open-ended question surveys. The analysis of qualitative data is primarily used to form surveys for collecting quantitative data. Qualitative data is more exploratory in nature, and typically only requires a few responses (less than 100 depending on the study) to provide valuable insights.
Quantitative data is collected on a much larger scale than qualitative data. Surveys (phone, online, or mail-in) are the most common way to collect quantitative data, and questions are typically based off of findings from the qualitative data.
A small, premium grocery store is performing a study to determine their customer segments and how to better reach out to each segment. A qualitative study is completed by inviting shoppers of this store to participate in a focus group. In this focus group (20 people total), shoppers are asked questions like how often they shop this store, why they shop there, what they purchase, and the perceived value of shopping at this store.
Qualitative findings suggest that there are five customer segments: convenience shoppers, bargain shoppers, lunch shoppers, loyalty shoppers, and premium shoppers.
The quantitative survey then asks 1500 people to answer questions about their shopping habits. Only shoppers that have shopped at this store are invited to participate. The quantitative survey is about 30 questions and asks about life values, demographic questions, and similar questions to those asked in the qualitative portion of the study.
Once the data is collected, cleaned, and analyzed, findings show that there are actually only four customer segments: convenience shoppers who stop on their way home from work to pick up 1-2 items, loyalty shoppers who have shopped at this store for a long time and don’t want to switch despite high prices because they’re familiar with the store, premium shoppers who want high-end, organic, more expensive products because they perceive them as higher valued, and lunch shoppers who come into the deli every day to grab lunch and maybe end up doing a little bit of shopping.
Now that the grocery store has a more clear picture of who each customer is and what they are looking for, they are able to target ads toward those consumers. Lunch shoppers were given a wider selection of convenience items at the deli to encourage more grocery purchases, premium shoppers were given more ads and pictures depicting the high-quality food, convenience shoppers were presented with more options at the front of the store, and loyalty shoppers were invited to join a loyalty program wherein they could earn points for purchases.
Why is market research important?
The grocery store in the previous example couldn’t possible have determined its specific customer segments without market research. The analysis done increased customer retention and overall revenue within the first year, simply by knowing what each customer segment wanted.
Customers are willing to share their feedback with you. They want their needs met as much as you want to meet them. Market research plays a key role in innovation, marketing, and product development by providing insight that isn’t visible at the surface.