Most businesses feel they know their customers. However, these same businesses can often be surprised by the result of a product launch or a promotion. Market research prepares a company for the terrain ahead and is essential for understanding customers, competitors, and the market. Market research costs are essential to consider, but its value often transcends the price tag.
What Is Market Research?
No army would venture unprepared into a vital mission. Market research is like reconnaissance prior to a military operation. Just as scouts reconnoiter to discover terrain properties before troops can proceed, market research informs companies of the market terrain and gives them enough time to change approach if needed.
Companies can save a significant amount of money with market research, indicating whether a product will appeal to customers. Suppose a business strategy is based on an inference of what customers will buy based on similar past circumstances rather than research on their specific and present preferences. In that case, it may be vulnerable to failure. Many examples of companies have made expensive mistakes that could have been prevented with sufficient market research.
One costly assumption was that 3D television would be the next big thing. It seemed reasonable to suppose that the technology people loved in the theater would be popular on televisions. Although the idea seemed promising, the companies did not consider the expense of equipment, the complicated setup, and other problems experienced by customers, such as eyestrain. Market Research through focus groups might have saved the companies a fortune.
The foundation of market research is data. Much of the data is readily available, such as reports from government agencies and trade organizations. Other types of data require time and the right tools to collect. Surveys, focus groups, and interviews need planning and investment. Data from social media or reviews should be retrieved with software and AI tools, which require investment.
Market Research Costs
Since market research represents a significant investment, one of the first considerations could be the cost. There is a wide variation of market research costs, from $5,000 to $50,000. Several factors determine the budget.
The cost of research is affected by the type of research needed. For instance, a live focus group requires recruiting people, providing compensation or incentives for their time, arranging travel, and reserving a location. The sample size will also affect the price and the incidence rate or the number of people who qualify for the survey or group.
One way to reduce the costs of market research is to avoid duplicating efforts. Information about the industry, fundamentals of competitors, past consumer behavior, and market trends can be found in secondary sources. An effective market research approach involves a comprehensive strategy of using both secondary and primary sources.
The type of research and the amount to budget for it depends on business goals. A company should ask questions about sales targets, type of audience, and product and service decisions. Identify questions that need to be answered and what insights should emerge from the research. Other considerations include the timeline and what data is already available.
Making Market Research a Priority
Market research may be expensive, but it can be more costly to ignore it. What can be just as problematic as neglecting market research is taking the wrong approach. Just as it is essential to connect with the right potential customers, selecting an appropriate focus group that represents a range of customer types or choosing survey respondents who match the target audience is vital for market research success.
It is worthwhile to do preliminary research before the main part of market research begins. Run a few Google ads to see who clicks and ends up on landing pages. This can give a clue about people who may be interested in a brand or product. Pay attention to Google analytics and look at statistics such as clicks and views. Find out where they are coming from. This will help choose participants for a market research sample.
There are numerous cautionary tales about companies that launched products without doing enough preliminary research. In 1982, Colgate, the famous toothpaste company, decided to diversify into frozen food. Consumers associated Colgate’s brand name so closely with toothpaste that the connection between the two products seemed illogical and unappetizing to consumers. An effective focus group or survey might have helped the company spot the problem early on.
Wayfair, however, has been a marketing research success story. It asks customers to send pictures of furniture they like, and the company matches the photos to products they offer and promotes these directly to the client. Listening to customers and getting a full grasp of their preferences are the key to making marketing research work.
Marketing Research is a Valuable Investment
Marketing research often costs money, but the investment in an effective research strategy often pays off with increased sales. There are many considerations prior to allocating the budget, such as what type of research is needed, how much data is already available, and the timeline for completion. Adopting a comprehensive approach to market research can improve the chances for success.