Market Research for Beginners: Deconstructing Myths
What is market research?
Market intelligence is the objective collection of information about your market and the stakeholders that may impact your business to drive your decision-making process and solve your problems. It is an essential tool in your business planning.
In the rapidly shifting, complex, and highly competitive environment, companies need strategic information to drive decision-making process. Regardless of the size, sector, or country, the success of a company depends on the level of knowledge about consumers’ needs and the dynamic of its industry.
Common applications of market research
Market research supports the creation of an objective strategy to meet your business targets, uncover opportunities to sustain and grow your business and mitigate potential risks.
Many companies use market research to understand their consumers, competitors and market environment. Market research can also help you find opportunities to enter new markets, launch new products and services, reposition your company/products and explore market potential.
Key Business Topics Market Research Addresses
- Understand which product or attributes your consumers demand
- Understand the potential for the products/services you provide or intend to provide
- Identify current and emerging consumer trends that impact your business
- Know which channels are most relevant to your consumers
- Analyse the players that compete with your company
- Get a sense of the products and services that compete with yours
- Define your pricing strategy
- Guide the development of new products
- Infer external factors that impact your business
- Explore new market frontiers
Common myths related to market research
1) I already know my clients and my industry, so market research will not tell me anything new
A strong analysis or accurate data can bring to light consumer’s preferences that may not be evident or reveal a new channel that is gaining importance among your clients. Either way, it may indicate an opportunity to launch a new product or reformulate products that integrate your portfolio. The markets are very dynamic and changes happen quickly. For example, consumers are becoming increasingly connected. As of 2017, 45% of the global population uses the internet. Euromonitor projects that 76% will have access by 2030. This connectivity trend is reshaping the distribution channels in which products are being commercialized. E-commerce has benefited from this trend and has become one of the most important channel for any company, projected to account for 15% of total global retail sales in 2022. It could be a great opportunity for companies to reach new geographies and consumers with their product and service offerings.
2) Only large companies need access to market research
Market research is not only for large corporations! Small companies face more challenges than ever before as they compete with large international players, which are usually more estabilished and have the advantage of the economy of scale, as well as smaller and local businesses. Whether you are just starting to operate, expanding your business or already consolidated in your market, businesses of all sizes should have strategic information to understand how to differentiate from the competition, what are the specific advantages that small companies should value, how to position this value and target the audience.
3) Market research is only applicable for B2C companies.
B2B corporations may not know or interact directly with the final consumers of your product, but that doesn’t mean they don’t impact your business. B2B companies should identify the trends shaping the behavior of your client´s consumer in order to understand how the demand is changing, hence being able to influence the B2C companies proactively. For example, if you are an ingredient company selling to beauty and personal care companies, you should be aware of the current organic and natural trends that consumers are demanding in skin care in order to develop an ingredient portfolio to supply your clients. In addition, B2B companies should also have a deep comprehension of the competitive landscape of the key sectors you act as supplier to evaluate your clients’ potential and risks and understand what they are likely to purchase.
4) Market research tools can be used only by corporations
All types of companies and institutions can benefit from market research. Government entities, trade associations, educational and financial institutions and agencies can all use market research to strategically achieve objectives. For example, an organization that promotes exports can use information about international markets to rank and prioritize key countries that may offer greater opportunities and guide trade promotion projects. A trade association can use information from a third and unbiased party to support lobby for public policies that may benefit and strengthen the sector. Educational institutions can use market research to map territories and identify expansion opportunities. Equity research and asset management organizations can use industry information strategically to allocate assets or evaluate investment opportunities.
5) Market research tools cannot be used by companies that operate in innovative and disruptive sectors
Companies should have solid information to support the creation and launching of an innovative product/service. It is essential to understand megatrends –long term shifts in behaviour or attitude with global impact across multiple industries—to evaluate if the consumers will demand and accept the concept of the product. Later in the process, companies should evaluate if this new launching can compete in the market, how to plan the branding and pricing strategy, how to define the appropriate channels, etc. For example, if you are launching a completely new activity wearable product targeting elderly consumers, you need to understand this population size, growth, life expectancy, income by age, connectivity as well as behaviors and purchasing decisions related to this demographic group. This is essential to understand if your new product is likely to be well accepted by senior consumers and succeed. Later in the process, companies can use market research to stay aware of competition that might be rising in the market.
6) I only have operations and clients in the domestic market, so I don’t need information about foreign countries
Your company may operate domestically, but you do not play alone in the field. You are part of a broader system. Your competitors may be operating internationally, bringing foreign concepts of products/services to your market. Moreover, your clients are global citizens with full access to information and products from anywhere in world. They may demand something new one day that you won’t be ready to provide if you’re unable to anticipate global trends. You need to stay tuned with new products and services launched worldwide, new concepts of channels that are emerging abroad and new ways of interacting with your clients if you want to be competitive in a fast-moving market. Remember: act local, but think global.
7) I already have internal information produced by my market intelligence department, so I do not need external sources
When you use only information produced internally, you may induct bias. It is essential to have an impartial third party source to accurately assess your competitive positioning, anticipate the threat of new competitors or products and track your consumer’s needs. In addition, internal information tends to be quite limited. You may not have information about correlated industries, your competitors or the performance of your sector/product in other countries. . For example, if you are a packaging supplier, you might have information about packaging sales, but not necessarily about the core industries or companies that are using your products. Market research will to have a broader perspective of the landscape in which your product is inserted.
8) I already have access to public statistics provided by official sources or trade associations, so I do not need market research
You might have access to public statistics, but so do all of your competitors. Strategic market research will help you answer business questions that are specific to your organization and will provide information to help you to analyse your market needs and stay ahead of your competition. You might have access to public statistics from government agencies, trade associations or balance sheets of corporations. It may be useful to identify demographic, economic and general industry trends by country or globally. However, these data tend to be more quantitative than qualitative and you may be missing the story behind the numbers. Market research sources will add qualitative insight on top of the hard data. In addition, data points from different sources have different methodologies, so you may not be able to make comparisons to strategically answer your business questions. Market research will provide you a holistic view of your industry and a deep understanding on your consumers demands. For example, if you are Brazilian company planning to export to Latin America you will need to identify which countries will have more opportunities. Public sources may help you to select key markets based on economic, business environment and demographic data. Market research will provide you with a deep understanding of the opportunities for your segment in the region. For example, you will be able to identify if product is actually demanded, the competitive scenario, the sector maturity and the best channels to enter a certain market. Market research will provide information to help you to analyse your market needs and stay ahead of your competition.
9) I am the leader of my category/segment, so I do not need market research
The markets are very dynamic and highly competitive. A company that is consolidated as a market leader or that has presented consistent growth should not assume this will definitely continue. Understanding who your key competitors are and how they have been performing over the years is essential to accurately assess your market position. In addition, market research will provide information to stay on top of companies that might be interesting opportunities for mergers and acquisitions. Multinationals often do not have certain capabilities or are interested in developing them to enter a niche market. Thus, acquiring a small company that is a specific category leader might be the way to enter this niche segment.
10) Market research is expensive
This myth is more related to risks than to costs. What are the costs and impacts of making the wrong business decision? How valuable would be to have insights on whether a product is likely to succeed or fail before entering a new market? How valuable would be to understand if the development of a new packaging concept will be appreciated by your clients?
Market research will help you to achieve desired outcomes, providing short-term and long-term ROI and preventing costly mistakes. There are different possibilities of market research solutions for different budgets standards. You may acquire an individual report, subscribe to a market intelligence system or contract a project tailored to answer a business question. There are a variety of options to fit your budget and your needs.
Euromonitor International’s market research can help. With data and analysis on more than 30 industries in 100 countries globally, we help develop your product strategy by identifying key markets for entry, competitive analysis, surveying consumers and identifying underlying consumer trends. Contact us or request a demonstration of Passport to learn more.