The Indispensable Role of Market Research in Shaping Marketing Decisions
Brilliant Prussian general Helmut von Moltke the Elder once said that no battle plan ever survives the first contact with the enemy. Mike Tyson later rephrased it, saying that everyone has a plan until they get punched in the mouth. In other words, you must wait and see your plans in practice to see if they hold. The same is true not just of warfare, boxing, and the business world.
Entering the market while unsure if your product is even needed is outright reckless. So many small businesses fail (14% of all businesses that fail) because there’s no market need for their product.
So, how do you determine whether there’s a need before entering the market?
Sure, you can roleplay and ask yourself a question like:
- Would I want to buy this?
- Would I spend money on this service?
- How much would I be willing to spend on it?
The thing is that this line of deduction is incredibly unreliable. First, you’re not necessarily a member of your target audience. Many entrepreneurs provide services or products that they don’t personally use. Just think about it, if a company focuses on frugal/budget products, do you think their CEO (likely a millionaire) is using these regularly?
So, instead of this guesswork, you need proper market research. This will help you tailor your USP and adjust your marketing decisions. Here’s why this correlation is so important.
Source: unsplash
1. Through market research, you learn more about your target audience
Through market research, you get to learn who your target audience is. By learning who you’re speaking to, you can adjust your marketing message significantly. First, you’ll be able to find your USP. Why would someone use your services/product and not anyone else’s? Once your marketers figure this out, you can double down on this advantage, creating a relevant marketing message.
Regardless of what you’re trying to determine, you must take your customers as a starting point. Even in e-commerce, you can’t have the user experience without the user.
Another important thing to understand is that some people will not become your customers no matter what. If you’re selling tires or running a car wash, people who are not car owners will never use your services. So, why waste time and effort reaching out to them? So, with great market research, you get far more accurate targeting.
The conversion cost is probably the most important metric you must focus on. This is the amount of money you must invest to make a conversion. Naturally, this is not an exact science, and the number you’ll get is merely an average. Still, it will be indicative of the success of your marketing efforts. By understanding your target audience, you’ll be able to lower this figure significantly, thus making your marketing more cost-effective.
Lastly, by understanding your target audience (by forming and observing their customer profiles), you ensure they stay within the customer lifecycle for as long as possible. This means that your finds during the market research may determine your customer retention and brand loyalty further down the line.
2. Market research companies help identify local market opportunities
While most modern market research happens online, you need to understand that hiring a local market research agency is still the right way to go. The idea that the internet is somehow global without bias is a standpoint only someone with zero understanding of local SEO could take.
This is why, if your business is, for example, Illinois-based, you want to look for market research companies in Chicago and so on. While no one insinuates that a company from Tampa, Florida, would do a bad job in this scenario when looking to optimize the results and maximize the effects, going local is usually best. Naturally, the fact that they’re local should never be their main or only recommendation.
The main thing that local market researchers bring to the table is a higher level of market segmentation. Since they’re more in touch with the local community and economic implications, they can more accurately identify segments within the local market.
Another vital aspect here is the competitive analysis. Your offer is only good in relation to offers by your competitors. Without this, you won’t have a reference point. In other words, your offer is neither objectively good nor bad – it can only be better or worse than what the rest of the market offers.
3. Marketing companies use them for the evaluation of campaigns
So far, we’ve mostly focused on how you can research the market before entering it; however, this is not a one-and-done trend. How will you know if your campaigns have an effect if you don’t reevaluate their impact on the market? You can accurately assess all your marketing methods by monitoring the market and your position.
First, you need to establish your objectives and the KPIs that you intend to track. These are different for each industry, and a SaaS marketing company may settle on different KPIs than agencies specializing in other fields. You can’t reach success if you can’t define it.
For the sake of fairness, you need to set these baseline metrics and goals and put them in writing before your campaign begins. This way, you’ll avoid retconning in the aftermath. Data gained through market research is always objective, and it’s usually not hard to find an unbiased way to interpret it. You can make it all easier on yourself by setting these things objectively.
4. Determining market viability determines the market’s need for your product
Whether or not you launch or move into the market depends on the market need. This is one of the first things we’ve touched upon in the introduction. Early on, you need to focus on the SWOT analysis (strengths, weaknesses, opportunities, and threats):
- Strengths: Understanding strengths is fairly easy. If there’s a customer base and a pre-existing distribution, squeezing into the market will be much easier. Let’s say that you’re offering a completely new product. Your marketing would have to be off the charts since there’s no existing market. If there’s already a market, you must persuade customers to pivot to your brand.
- Weaknesses: Potential weaknesses of your product are the fact that you’re relatively new to the market (perceived brand weakness). Besides this, if your product is slightly different, it might be harder to use or have a less forgiving learning curve.
- Opportunities: This is a chance to maximize your profit. Are there cross-selling and upselling opportunities? Can you make alliances to handle co-branding campaigns? You can push this at checkout, but it’s much more efficient when pushed through a campaign first.
- Threats: Your competitors, market changes, and shifts in the economy (both local and global) are just some of the threats you’ll have to face. The thing is that existing threats aren’t all that you should worry about. There are newcomers to the market every day.
You can miss opportunities if you fail to seize them, while you can mitigate these threats if you spot them in time. The only way to gain this insight is through market research.
5. Market research is the only way to set your pricing strategy right
Price is not just a matter of your sales team. It has just as much to do with the marketing. First of all, a low cost can be your USP. Special offers, limited-time offers, special discounts, and similar occurrences are examples of where marketing and sales work hand in hand.
Without a pricing strategy, there’s no way to use the price as your USP. If you charge less, you can brand your product as frugal or promise to do the same for a lower price (thus bragging about high efficiency). If you charge more, you can add an extra feature and boast a higher service quality, or your audience is getting more value for their money.
You need to have a point of reference in either of these scenarios. How will you know if you’re cheap or expensive compared to others if you don’t know what they’re charging? Through market research! Moreover, is there a way for you to understand if you can spin this extra feature as worth the increase in cost that you’re going to implement without market research? Not really!
The key objective of your marketing is to understand the customer’s perception of the price. Then, you need to convince them that your price is not only fair but in their favor. You need to find out their expectations regarding the price and why they have these expectations. This is the only way to subvert them in your favor.
Market research is the most reliable way to obtain data for your data-based decision-making
In the end, market research is the only way for you to get the data you need. You get actionable information by interpreting your data, whether you’re using a BI or doing it the old-fashioned way (deduction). Around this, you can form your marketing strategy and later monitor its performance.
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