Market Research Business Guide: Understanding your Target Market with Surveys, Focus Groups & Test Marketing

In an increasingly complex and dynamic business environment, developing a successful marketing strategy can be a major challenge for any business organization. Constant product innovations and rapidly changing tastes, preferences and aspirations of the customers make it difficult for a business to arrive at the most appropriate strategy that can achieve optimal results. In such circumstances, market research is the most important tool of marketing management available to a business.

Market research can be both primary and secondary, depending on the needs of the business and the budget allocated for such research. Primary research is more focused and can yield highly effective results. It can help to design the most appropriate product development and brand marketing strategies. For medium and large businesses, which have a considerable marketing expenditure in a year, such research is a worthwhile investment. In the absence of such research, the company’s product and marketing efforts may be misdirected, leading to the failure of a product or a business in a competitive market space.

Benefits

Defining the Target Market

The target market for any product or service must be defined as clearly as possible. This is the primary requirement before a marketing campaign can be devised and focused around that target market. Primary market research tools such as surveys and focus groups can help to match the product or service very closely with the most appropriate segment of the market. Once the target market is well-defined, the entire marketing budget can be deployed within that specific market.

Profiling the Target Market

Once the target market has been identified, the next step is to understand the average customer profile of this market segment. It can include attributes such as the average age, gender, educational background, financial capacity, tastes, preferences and aspirations of the customer within this market. An intimate understanding of the customers’ choices can help to adapt the product and the marketing campaign to them as closely as possible.

Superior Marketing Efficiency

The goal of any marketing campaign is to achieve maximum sales at minimum cost. Market research activity helps to confine the marketing efforts to a very focused and limited area. Marketing efforts are not dissipated in unrelated directions, and precious marketing resources are utilized in the best possible manner.

Risk Reduction

The American Marketing Association says that 74 percent of all marketing campaigns that are based on scientific market research data lead to successful results for the marketers. Tools such as focus groups and test marketing limit the marketing risks substantially. In that sense, research is an effective tool that improves the predictability of a product development or marketing campaign.

Pitfalls

Risk of Outdated Data

If the business organization relies on secondary sources to collect market data, there is an inherent risk of the data being inaccurate or outdated to a considerable extent. Even minor inaccuracies in the data can lead to completely misleading results for a company’s product or marketing strategy.

Wrong Data Interpretation or Analysis

Sometimes the data collection exercise may be performed correctly, and significant investment may be made in the collection of primary data. However, if the data sample is incorrect or inadequate, or there are faults in the data interpretation and analysis methodology, the results may be inaccurate or misleading.

Risks with Focus Groups

Sometimes the market research may rely heavily on the outcomes revealed by interviewing or testing of focus groups. The legendary New Coke marketing disaster came about as a result of focus group research, which suggested a very positive market response for New Coke.

Risks with Test Marketing

Test marketing is a useful tool of research, but it is not a foolproof method. The limitation of test marketing is that it provides the results and market response from a very small and homogenized segment of the market. The real market is a very large and complex system with diversified consumer interests. Therefore, launching a new product or a large marketing campaign based on the results of test marketing can carry inherent risks for the company.

Pricing

Costs of market research will depend on whether the business chooses primary or secondary sources for research and how extensive the market sample may be. Innovative methods such as online questionnaires and surveys can reduce the costs of research, while still producing primary market data for the business. In any case, a moderate expenditure on research is a worthwhile exercise for most businesses rather than making product and marketing investments merely on the basis of past experience and guesswork about the future.

Market research is a critical part of overall marketing management in a complex and fast-changing business environment. Large-scale product launches and marketing campaigns cannot afford to ignore the research exercise. A careful analysis of the consumer preferences within the target market is very important prior to the deployment of precious marketing resources in particular direction. Research helps to improve the predictability of results and reduces the degree of marketing risk that is associated with any new product or new market.