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Every new product or solution comes with the same pressing question: “Will someone buy it?”.
To solve that question, it is crucial to understand how potential customers will react to your product. This leads us to conducting market research.  

What is market research?

Market research is a fundamental process that examines the consumer behaviour and trends in the market to help businesses develop strategies and come up with new products and services. By collecting and analysing the data, market research helps to understand target market, the competitors and the viability of the solutions, which leads to informed decision making. Methods such as surveys, focus groups and data analysis are amongst the most common techniques used for market research.

How important is market research?

Market research is critically important for businesses as it provides essential insights that form the basis of the business strategies and decision-making. No matter how strong your intuition is, you should always conduct market research to validate the problem you are solving. By understanding the consumer behaviour, companies can tailor their products to the market and consumer demands. Here are some of the reasons why market research is important:

  • Data driven decision making: decisions that rely on factual and objective information rather than intuition or guesswork are far more effective and impactful.
  • Risk reduction: by understanding the consumer needs and behaviour beforehand, the risk of failure can be mitigated.
  • Competitive advantage: analysing the market/industry trends and competitor behaviour, a business can take strategic decisions to gain competitive advantage to stay ahead of the curve.
  • Increased customer satisfaction: when products and services are aligned with customer needs, it leads to greater satisfaction rates.
  • Optimized marketing strategies: consumer behaviour can help construct marketing strategies that resonate with the target market.

How to actually conduct a market research:

Ok now that we’ve understood the importance of conducting market research, let’s reflect on how to do it.

Firstly, let’s define an objective:

Are you trying to find if there are any products similar to yours in the market?
Are you looking to check if your idea will be successful in a target audience?
Are you trying to understand customers’ experience with products like the one you are projecting?
By defining what questions you want to answer with your market research, it’s easier to know where to look for information and how to do so.

Having said that, how can we collect useful data?

Well market research is divided in two main families, in terms of data collection:

  • Primary market research: This is data collected by the entrepreneurs themselves, or by a market research personalized service. The importance of this approach relies on the direct contact with the possible customers it involves.
  • Secondary market research: This approach relies on data publicly available. This means data collected by third parties, which can be found mostly on search engines and social networks, but also in many other types of information sources.

Diving into Secondary market research:

Let’s start by going into more detail about secondary market research, which is more entrepreneur friendly in terms of cost and time consumption required. This is the recommended approach in an initial phase of a market research and can then serve as the foundational knowledge to guide the primary market research.
There are various ways of gathering valuable third-party information for our market research. Let’s explore some of the most common ones:

  • Social Media: The internet is actually the biggest provider of information sources to support a secondary market analysis. In that sense, social media can be a very valuable asset. This is for 3 main reasons:
    • Following our competitor’s activity in their social networks: this is a great way of understanding how the competition operates and what they offer as a company.
    • Looking for the customers’ opinion: Going through the comment sections of products similar to ours, searching for possible market pain felt by the customers. Also, looking for trends related to our target audience that can be valuable insights for our research.
    • Following industry-specific gurus: Tracking down people in social media (like LinkedIn or X) that have expertise in the field and might provide in depth specific market analysis, or even predictions for market trends.
  • Online Forums: Similar to social media, enables the possibility to participate and extract information from discussions about a specific market of interest and to communicate with people who might have precious insights.
  • Industry associations: These are associations between various companies in the same industry, that support each other. Most of the time, this associations provide research reports done by people full of expertise, about their respective industry which includes industry trends, market size and potential, consumer behavior and more relevant information. In the following website we can find a list with the industry associations by sector, existent in Portugal (click here).
  • Online platforms: There are amazing online platforms available to support the secondary market research phase. Google Trends is an example of a free option, while Statista is a one of the most well-known platforms for this matter, but requires paying for industries and markets reports.

After collecting and analyzing data from the sources stated above, you’ll be able to get a general understanding if your product/idea already exists or if it has potential to succeed in the market. Now, you either need to restart the ideation process (because you’ve noticed your idea isn’t worth it), or you are ready to embark on the journey of a primary market research.

Diving into Primary market research:

Let’s delve into primary market research, a crucial method for gathering new and direct insights from your target audience. This approach allows for more personalized data, addressing the specific questions the company wants answered about the market and the target audience. However, it is generally more expensive and harder to conduct, because it involves collecting first-hand information. That’s why this is normally done after going through an initial phase of secondary market research, to validate the business idea.
Once again, there are various ways of collecting valuable first-hand information for our market research. Let’s explore some of the most common ones:

  • Focus Groups: Bringing together a sample of the target audience, representing a niche of customers, to try a product or service. The main purpose of this, is to then receive feedback from that sample of people and taking conclusions from it. This is a great way of estimating the real performance in the market, because we can see the customers’ attitude towards our product.
  • Surveys: These are a cost-effective way of knowing how the customers feel about a product or experience. Surveys are useful to gather information about market pain, idea validation, or even for estimating a price point. These can be done via telephone, in person or (mostly) online.
  • Interviews: Conducting face-to-face interviews, can be valuable to identify product preferences and customer’s experience with similar products from the competition. Despite these advantages, this method is a bit old-fashioned and might be considerably time consuming.
  • Market research firm: You might decide to go for a less time-consuming option like resorting to the services of a market research firm. Although (highly) expensive, this way you’ll have people with expertise exploring the market you are interested in, while doing a personalized analysis to answer all the questions you’ve defined a priori.

With all this research on top of the foundational knowledge of the secondary market research, you should now have a deep understanding of the trends, the size and the potential of the market you’ve researched about. Hopefully, by this phase you have your idea/product validated by the focus groups and other methods of research, and have received constructive feedback that will help your project be closer to success.

Qualitative vs Quantitative market research:

When talking about types of market research, it’s also possible to divide those in terms of the subjectivity of the data collected:

  • Qualitative: This type of market research focuses on investigating in depth costumers’ behaviors, experiences and opinions, through non-numerical subjective data. The data collection relies on open-ended questions and is normally done to a smaller and more focused sample of customers. Examples of qualitative research methods: interviews and focus groups.
  • Quantitative: This type of market research focuses on examining customer behavior through numerical and statistical data. It seeks to generalize results and to produce objective and measurable statistical insights. The data collection relies on closed-ended questions and is typically conducted on a larger and more diverse sample of customers. Examples of quantitative research methods: surveys, questionnaires and secondary data analysis (like statistics from online platforms or databases)

How to conduct a Competitive Analysis?

Competitive Analysis helps you define who really are your competitors and how you can gain leverage by differentiating yourself from them in the shared market. It is essential to make more informed marketing decisions, benchmark against competitors and solidify your unique value proposition. It should be done regularly to stay up to date with the latest trends and identify new market pains.

Step 1: Define your competitors

Defining who you are competing against is a very crucial step in competitive analysis. You do not want to be running the wrong race because you did not know who you were supposed to be running against. Which means that you need to be able to characterize your competitors based on their proximity to you. You can divide your competitors into two different pools.

  • Direct Competitors or Primary: Sell a similar product to a similar audience. Example: Coca-Cola and Pepsi
  • Indirect Competitors or Secondary: Sell a similar product but to a different audience.
    This can be due to the product having a really different price range than yours, a very different business model, for example if they sell only online or only in store, or maybe they have different demographics, all those kind of factors define who is the target audience which consequently defines if you have a direct competitor (one who is contesting for the same audience) or indirect (one who is running a different race although being in the same league).
    Example: Gucci and H&M
  • Tertiary Competitors: Do not sell the same product but you both share the same market.
    Here the thing to look out for is if they may start selling a similar product and then become your competitor or if they are a potential partner.

Step 2: Analyze your competitors

After an initial analysis to categorize your competitors, you should strive to understand their positioning. Positioning is the most important thing in a business, if you can understand clearly your competitors’ position and differentiate yours from theirs you are in a great place to get ahead.
Here you are looking to compare and contrast your competitors in relation to you, but also between them and to determine this you should:

  • Understand their messaging: What story do they tell? What is their company description? What is their product positioning? How do they describe their unique value proposition? What are the company values?
  • Define their Strategy: What is their marketing strategy? Do they have an email newsletter? Do they promote on social media? Do they create marketing content? How is their website? What type of customer are they trying to reach? How do they try to reach their customers?

With this, you can better understand your competitors and then define how you are going to differentiate yourself from them. A good starting point for this is to try to get their customers’ pain points. You can do this through their reviews and complaints or reflections. Try and analyse if you could improve the shipping, improve or add a new feature to the product, improve on overall customer experience. If you can get something here that can really differentiate them from you, you have defined a path to overcome them.

Step 3: Conduct a SWOT analysis

Even more important than knowing your competitors is knowing how you are different from them and for this we recommend frequently doing a SWOT analysis internally. Like this you will be able to understand your strengths, weaknesses and how you will leverage your opportunities to grow your business.
We have a detailed guide on SWOT analysis so check it out!

Tools for market research:

Survey tools

When it comes to collecting primary research data, survey tools play a crucial role. Two popular platforms in this domain are Microsoft Forms and Google Forms. Microsoft Forms offers a user-friendly interface within the Microsoft 365 suite, making it convenient for businesses already utilizing Microsoft products. It provides a variety of question types, customizable themes, and easy data analysis options. On the other hand, Google Forms, integrated with Google Workspace, offers a straightforward and intuitive interface. It allows businesses to create surveys quickly, collaborate in real-time, and analyse responses using Google Sheets. Both Microsoft Forms and Google Forms are reliable options for collecting primary research data efficiently.

Data analytics tools

Tracking website and user behaviour is essential for understanding customer preferences and optimizing business strategies. Google Analytics is a widely used data analytics tool that provides comprehensive insights into website traffic, audience demographics, conversion rates, and more. It offers a user-friendly interface and powerful reporting capabilities. Another popular tool in this category is Mixpanel, which specializes in event tracking and user analytics. Mixpanel enables businesses to analyse user behaviour across their digital platforms and make data-driven decisions to enhance user experiences.

Social media tools

In today’s digital age, monitoring social media conversations is crucial for understanding customer sentiment and gathering feedback. Brandwatch is a powerful social media listening tool that helps businesses monitor brand mentions, track industry trends, and identify customer opinions and sentiments. It provides real-time insights and advanced analytics to extract meaningful data from social media conversations. Hootsuite is another widely used tool that allows businesses to manage and monitor their social media presence across multiple platforms. It provides features like social media scheduling, engagement tracking, and sentiment analysis to help businesses stay connected with their audience and gather valuable customer insights.

Competitive analysis tools

Evaluating competitor strategies and market trends is essential for staying ahead in a competitive landscape. SEMrush, which provides comprehensive competitor analysis, keyword research, and SEO insights. SimilarWeb offers a wealth of information on competitors’ website traffic, referral sources, and audience demographics. Additionally, Moz provides SEO analysis and backlink data, enabling businesses to understand competitors’ search engine rankings and link-building strategies. These tools equip businesses with valuable insights to refine their competitive strategies and identify opportunities for growth.

By leveraging these market analysis tools, businesses can gather data, track metrics, monitor social media conversations, and evaluate competitors effectively. Choosing the right tools based on specific requirements and goals will enable businesses to make informed decisions and stay ahead of the competition in an ever-evolving marketplace.

Conclusion

In summary, market research plays a crucial role for businesses by providing valuable insights into the competitive landscape and market trends. By using advanced market analysis tools, companies can save costs by making informed and strategic decisions. Moreover, this research enables businesses to identify growth opportunities and position themselves more effectively in the market.
Investing in market research not only helps mitigate risks and avoid unnecessary investments but can also significantly leverage gains by adjusting strategies according to the ever-changing needs and preferences of customers.

“Without data, you’re just another person with an opinion.”
W. Edwards Demming.

 
References:
Investopedia guide for market research
Shopify guide for market research
25 Tools for conducting Market Research
VIDEO: General overview of market research