If used properly, market research can help you add more profits and increase the bottom line of your company. Here is one of the most common — but avoidable — problems in business.
Management or the business owner comes up with the idea of introducing something new. Since they feel they know the market fairly well, they don’t spend the time to check whether or not their customers actually want it — after all, they “just know.”
Certain their experience and intuition will guide them, they barrel onwards, investing a lot of time and money into the effort and find out that in fact nobody cares. The product or initiative flops.How common is this? According to Intellectual Property Australia, of the 7,112 patents it granted last year, under 50 of them will make for successful products. This is because, while their creators had the talents needed to invent the products, they didn’t do any research to see whether there was a market for their idea.
There is a better way — market research. It can be used in many ways, all of which will increase your profits. For example, did you realise petrol stations are big fans of market research?
It may not seem obvious, but there is a small but significant group of clients who are really willing to pay more for the convenience of shopping at petrol-station stores. Petrol station operators therefore use customer segmentation to tell exactly which people their product development and marketing efforts should target.
How can market research help you increase profits? Here is a sampling of ideas:
Market research can tell you what will appeal most to your customers, and what they expect.
You’ll know where to spend your energy, and which aspects of your idea you can leave on the drawing board. This alone greatly increases profitability. As you know, customers are often a tough lot to please. It’s much easier to please them if you start by working from what you know they want, rather than what you think they want.
A well-designed research programme can help you understand what would make the ideal offering to introduce. What price should it be, what format, what benefits should it have, how large should it be, how should it delivered, should you include bonuses? Market research can tell you all these things.
Market research can’t guarantee your next product will be a “smash hit,” but it help you get an accurate idea of what products your customers want to buy from you next. A single question may be all that’s needed to save you a considerable sum, and identify new opportunities you’d never have spotted otherwise.
You can even use market research to determine what kind of language appeals most to buyers. Are they driven by greed or by fear? Are they seeking pleasure or avoiding pain? What kinds of words will work best driving them towards the sale? Knowing all this can give you the best and most attractive messages needed to sell your services or products. It can give you the information you need to hold people’s attention all the way through closing the sale.
In other words, with market research you can tell which areas of your marketing work — and which are the areas where you’re just wasting money.
Market research can help you position your business.
Have you ever wondered what your market thinks of you as a company? Using market research, you can gauge your company’s reputation (or your own) amongst your prospects, customers, and opinion-setters — the people that influence your future.
At the same time it can tell you how customers see you compared with the competition. If you knew which areas of your service or product people thought were inferior to the competition, that might go a long ways to showing you what to improve — and where you can find some “easy profits.”
The fact is, even really excellent marketers can have trouble when it comes to “selling themselves.” Market research tells you what your customers find most attractive about you — and why your best customers keep coming back. Then, it’s just a matter of emphasising those aspects in your marketing.
For that matter, market research is an excellent tool for helping you better understand exactly what your market looks like. Are your customers primarily male or female? Young or old? Are they medium-sized businesses or small home businesses? Are your customers middle-class or super-rich? What are their job titles, hobbies, and experience levels? Simply understanding these factors can make a big difference in profits.
The fact is, spending a bit of time and money on professionally executed market research often makes the difference between successful ventures — and avoidable failures. Done properly, market research almost always brings in more profits. In fact, there is only one major downside to market research: the market may not tell you what you want to hear. Yet if you can accept even harsh feedback from the market, market research is an extremely powerful tool for boosting profits.
Alex Pejak is an economist currently working on a few projects in Australia. She is interested in topics related to market research and project management.