Top 7 Reasons Why Marketing Research Is Important For Every Business
As a small business owner, you may not know what market research is or why marketing research is important for your business. Unfortunately, this is probably why many small business owners don’t do it. After all, you know what customers need and how to deliver it! Right?
When you launch a new product or service without conducting marketing research, you risk wasting a lot of time and money on an offer that may not generate income. This can be a costly mistake – particularly for small businesses where every dollar counts!
Before we get into the particulars of marketing research, it’s essential to understand what marketing research is and how it differs from market research.
What Is Market Research?
Market research is the process of discovering consumers’ interest in a potential product or service by obtaining feedback directly from potential customers. (Investopedia)
What is Marketing Research?
Marketing research is a more comprehensive process that includes market research and helps companies:
- Identify marketing opportunities and problems
- Discover consumers’ interest in a potential product or service
- Determine which marketing activities to do
- Evaluate the effectiveness of your marketing activities
- Monitor marketing performance
- Define how to collect information to measure marketing activities and performance
- Analyze and report on the data collected to make informed business decisions
In addition, marketing research helps companies develop strategies that are tailored to specific audiences. For example, a boat captain can offer charter services to consumers for sightseeing, freshwater fishing, saltwater fishing, diving excursions, and dinner cruises. And each of those services appeals to different audiences and requires different strategies to be marketed successfully.
And, marketing research also allows companies to create effective campaigns and measure their success.
Marketing research is a crucial part of any successful marketing plan that should always be conducted before launching a new product or service or marketing an existing product or service to a different target audience. This way, you can ensure that your strategy aligns with your customers’ needs.
Effective marketing involves four key steps, which are known as the 4 P’s of Marketing:
- Product: Identifying the right products and services for your business
- Price: Choosing the right price for your products and services, so consumers want to buy from you
- Place: Identifying where your products and services are needed most
- Promotion: Finding out which marketing channels work best
And marketing research helps with each of these steps.
The Importance of Marketing Research
These are the seven reasons why marketing research is important, especially for small businesses. Marketing research will help you:
1. Identify New Business Opportunities
Your market research should give you an idea of who you want to reach (your target audience), how you can reach them (your marketing channels), and what your target audience wants and needs. In addition, it helps you spot business opportunities you otherwise might have missed, such as:
- Mutually beneficial business opportunities you can develop with other complementary businesses. Cross-promoting and jointly promoting one another’s products and services enables you to reach exponentially more customers than you could reach alone.
- Opportunities to increase your average order value by offering other products and services your customers tend to buy. Order upgrades presented at the time of purchase can significantly increase sales. Consider add-ons, bundles or package pricing, and upsells that deliver even more value to your customers.
- New potential customers to market to within the same geographic region of existing customers. Once you understand the culture and needs of a particular geographic location, it’s easy to spot other potential customers within that same location and focus more marketing resources on them to obtain new customers.
- New geographic locations you haven’t marketed to yet. When you identify where your customers are coming from, it’s easy to identify other places that your marketing message has not reached.
2. Minimize Business Risks
The four most common reasons that small businesses fail, according to Investopedia, are:
- Lack of capital or funding
- Lack of effective management
- A flawed business model or inappropriate infrastructure
- Unsuccessful marketing
Any activity that wastes time, money, or resources increases the risk that your business will fail. So the best way to reduce risk and ensure the survival of your business is to ensure your business is profitable and has a steady stream of customers and sales. And marketing research helps you do just that.
Marketing research ensures that you periodically check in with current and potential customers to understand their changing needs and wants.
You should always know what your customers want. Understanding your customers’ wants and needs helps you create better products or services. You should also know if there are any problems with your product or service. For example, if you notice that people aren’t buying your product as much as they used to, you should seek to understand why. Is the quality bad? Are you offering too many different options? Or maybe you’re just selling something that isn’t needed anymore.
You should test your ideas before going all-in on them, especially when you want to make drastic changes to your product or service. Try out your idea first on a small sample group of customers. See how they react to the new design. If they love it, then you know it’s a winner!
You should know if your customers are repeat customers and, if not, find out why customers aren’t coming back. You can survey previous customers or set up focus groups to determine why you aren’t making repeat sales. Find out if the problem lies with your products or services or something else. Then fix it if necessary.
Gain insights into potential problems and solve them before they affect your profits. For example, if you see a downward trend in sales of a popular product for three consecutive months, you need to find out why. By asking customers about their satisfaction with your products, services, and the purchasing process, you can easily find where problems lie. It could be due to a decline in product or service quality, availability, or a glitch in the purchasing process. The point is, you will never know what the actual problem is – or how to fix it – until you ask.
3. Create the Right Marketing Materials
Businesses often struggle to figure out what content to include on their website, flyers, brochures, social media accounts, and ads because they don’t use marketing research effectively.
Marketing research makes it much easier to create compelling marketing materials because it reveals your target audience’s wants and needs, frustrations, and other insights. Then you can use these insights to develop effective marketing materials.
For example, when you know what kinds of problems your target market is trying to solve, you can use this information in your marketing materials to explain how your product or service will help them solve those problems.
When you know the age range of your typical customers, you can craft more personalized marketing messages that speak to other consumers in that age range using language and images that resonate with them.
For example, if you want to sell a condo to a retired Baby Boomer, your marketing messages might focus on:
- Amenities that help support their active lifestyle
- Belonging to a close-knit community of friends to prevent loneliness and isolation as they age
- Beautiful surroundings that they do not have to maintain (no yard work, no shoveling snow)
- Opportunities to enjoy their retirement because they have fewer responsibilities
Whereas if you were marketing a condo to a young professional, your marketing messages might focus on:
- Building equity so they can one day afford to purchase their dream home
- Proximity to shopping, transportation, entertainment, and major employers in your area
- Amenities like a gym or pool that eliminate the need for a separate fitness membership
- Amenities for entertaining guests – like barbeque or recreation areas, or a clubhouse
When you know whether consumers view your product or service as a luxury or a necessity, you can design a website, product labels, brochures, flyers, and other marketing materials that fit that perception. Having marketing materials that align with consumers’ perception of your offers makes it easier for them to trust you and want to buy from you.
4. Make the Most of Your Advertising Budget
One of the biggest challenges small businesses face is a limited advertising budget. That’s why it’s critical to invest your advertising dollars in the marketing channels that will give you the best returns possible.
Marketing research helps you reach more potential customers by focusing on the marketing channels that your intended audience is most likely to use.
If you intend to use flyers and posters, your marketing research will help you identify the best physical locations where potential customers spend time. For example, if you want to offer childbirth classes to expecting moms, you’ll want to place flyers and posters near gynecologist offices or in yoga studios where young women are likely to be.
If your marketing research indicates that most of your customers spend time on Pinterest, you’ll know that’s where you should focus your marketing efforts and social media advertising budget. Of course, you should still maintain a presence on other social media channels but concentrate primarily on Pinterest.
Marketing research also helps you reach potential customers with highly targeted ads based on online behaviors, interests, and life events, in addition to standard demographic data (age, gender, location).
For example, if you offer math tutoring services to college students and your marketing research indicates that a majority of your potential customers spend time on YouTube, you can create ads that target individuals who:
- Graduated from high school (life event) and
- Are interested in college (interest).
5. Stand Out From the Competition
Consumers want to do businesses that they know, like, and trust who meet their needs. When you use your marketing research to understand and meet your customers’ needs, you set yourself apart from the competition and stand the best chance of making more sales.
Your marketing research helps you understand why customers are dissatisfied with competitors’ offers so you can improve your products and services and market them to an audience that is ready to make a switch.
You might also discover a segment of your target market that competitors have not reached. You can use your marketing research to target this underserved segment and gain a competitive advantage.
Your marketing research may also reveal customer problems or needs that your competitors aren’t addressing. As a result, you may increase your sales by addressing these deficiencies in your marketing materials.
6. Set Better Business Goals
Marketing research is beneficial before setting any goal. It helps you determine the size of your potential market, potential market segments, and the right direction for growth. Marketing research also enables you to determine if your goals are achievable and how to best go about achieving them.
For example, this year you may want to double your sales. You might be able to achieve this goal by:
- Selling the same product or service to new customers, or
- Selling more products to the same customers
If you’re going to double sales by selling to new customers, that means you will need to double your customer base. Again, your marketing research will tell you if there are enough potential customers in your target market to make this method effective.
Suppose you want to double sales by selling more products to the same customers. In that case, you must have additional products that your current customers want or need, and your existing customers must be willing to purchase those other products. Your marketing research will help you determine if current customers are looking for additional products and are eager to spend more money to get them.
7. Make Better Business Decisions
Marketing research reports often help businesses make informed decisions by understanding what their potential customers want and if the business is meeting customers’ needs.
Companies also use market research to compare themselves to competitors and other companies to gain a competitive advantage and identify opportunities they may be missing.
Marketing research also helps businesses determine:
- Whether a decision is likely to lead to more customers
- Whether a decision is expected to lead to more sales
- How to price their products and services
- Where to allocate their marketing and advertising budget
- If they can achieve growth in their current market
- If there are opportunities that they may have overlooked
- Whether there’s demand for a new product or service they want to offer
- Whether they should open a new location
- Which products need improvement and which they should discontinue
As a business owner, you want solid facts on which to base your decisions rather than relying on guesswork and trial and error to help you guide your business. Marketing research provides the facts you need to make the best decisions for your business with confidence.
How to Conduct Marketing Research for Your Business
There are three primary ways to conduct marketing research:
- Primary Research
- Secondary Research
- Online Surveys
Primary research involves talking directly to your target audience using surveys, focus groups, and individual interviews. It gives you an in-depth understanding of who they are, what problems they face, and what motivates them to act. You’ll also learn what they think about your competitors.
Secondary research uses publicly available sources such as newspapers, magazines, books, and government reports. For example, you could use Google Trends to see if there’s been a spike in searches related to your industry.
Online surveys are another great option. They’re easy to set up and take less than 10 minutes. Once the data is collected, you can analyze it and draw conclusions.
When deciding between primary and secondary research, choose primary research whenever possible. And online surveys are an excellent alternative if you don’t have access to your target audience.
Marketing Research Steps:
1. Set clear goals and objectives for your research project.
Market research goals include:
- Brand awareness
- Brand image
- Consumer perception
- Consumer attitudes
- Buyer behavior
- Product satisfaction
- Consumer experience
Market research objectives include:
- Promoting new products or services
- Expanding online presence
- Lead generation
- Obtaining new customers
- Retaining existing customers
- Developing brand loyalty
- Increasing sales, revenue, and profit
Whatever goals and objectives you choose, your target audiences, business objectives, challenges, and end customers should be the central focus.
2. Determine your sample size.
How many participants will you need for your study? A good rule of thumb is 10% of the population if it does not exceed 1,000 participants.
If you plan to conduct a very large or complex survey or plan to use complex statistical analysis of your results, use this calculator to help you determine the appropriate sample size.
3. Choose the research method you will use to obtain the data.
Decide whether you conduct a survey, host a focus group, conduct phone interviews, or use some other method for collecting data from participants.
4. Craft your research questions.
Ensure your questions are unbiased. Use open-ended questions and allow for flexibility in responses.
5. Collect the data.
Gather data or responses from the participants or sources you have selected.
6. Analyze the data.
It’s important to remain objective during data analysis and not jump to conclusions.
Use solid analytical skills to probe for answers and interpret the findings. Examine research findings within the context of other factors to accurately interpret the data and what it means for your business.
7. Prepare the report.
The marketing research report should include an introduction, background and methodology, executive summary, results, and a conclusion with recommendations and links to all references.
Investing in marketing research provides business owners with great insights about their business and the market where they operate. It also helps you understand your customers and identify opportunities you may be missing. In addition, good market intelligence can help you minimize risks when making crucial business decisions.
As a small business owner, marketing research may seem daunting. A great place to start is the Small Business Administration. They offer a list of marketing resources you may find helpful and counseling services through their resource partner network.