Market research – is it worth it?
No matter what industry you’re in, there’s no avoiding it: doing business is complex and competitive.
Whether you’re worried about:
- the implications of new legislation like GDPR,
- competition in an increasingly global marketplace, or
- understanding and reaching your target market across a variety of channels.
The underlying issue remains the same: each problem you face seems to demand total focus – to be so important that you can’t afford to ignore it.
And when you’re under pressure to perform in so many different areas, it’s only natural to ask yourself: “Do I really need to commit time, money, and /or personnel to this?”
“This” could be the cost of hosting an annual event for clients, attending local industry meetups, or even something like hiring full-time support staff, depending on your core business offering.
Often the activity in question is something you can’t easily attribute a direct ROI to since few people would question the merits of an activity they know is profitable.
And that brings us to the topic of this piece – market research: is it worth it?
It’s tempting to shortcut market research. You assume you already know everything there is to know about your target market. Maybe you’ve proudly served your customers for 20 years and are confident in your insights, or your well-honed gut instincts. Maybe you’ve never really noticed much of a benefit from having someone in-house handle the task. Maybe you’ve tried working with an outside firm in the past but didn’t have a good experience.
When you’re under time and budgetary constraints, it’s natural to look for shortcuts – some faster, easier ways to achieve your goals. But thinking you can skip out on effective market research (whether you do it yourself or hire an outside firm to help) is a costly mistake.
This short piece explains the merits of market research, and why choosing not to engage in this task can be so damaging to your business. (also see: giving market research greater impact with visualisations )
What is Market Research?
Market research is the process of obtaining information about customer needs and habits and interpreting the results to support strategic decisions in a business environment.
The above short definition (courtesy of UK-based consulting firm Teneric) tells us everything we need to know. Market research (logically enough) is research you do into your market. The goal of this research is to offer you an insight into the mind of your market, allowing you to make strategic and profitable decisions moving forward.
Why Is Market Research Important?
It goes without saying that a deep understanding of your target market is critical for business success.
This is obvious when you recall the sobering statistics surrounding small business failure. According to research compiled by The Career Cafe, the businesses most likely to fail within five years of opening in the UK are:
- Retail stores (80% failure rate)
- Independent restaurants (60% failure rate)
Of course, “retail” is a very general term, as is “restaurant”. However, there is at least one common thread that binds these two differing business models:
They attract entrepreneurs who are passionate about them – perhaps to a fault.
Passion is often bandied about as the most important factor in ensuring your business succeeds. But passion alone poses problems. It can blind people to reality, leading them to jump in without taking the time to objectively consider the merits of their new venture.
New restaurants open every week in the UK’s major cities. The new owner is usually someone with a passion for food and a great love of the industry. But love and passion must be coupled with an honest understanding of the market. The aspiring entrepreneur who fails to consider whether their neighbourhood wants or needs another Italian restaurant, or a clothing store, or whatever else they’re passionate about is doing their business a disservice.
A business that does not address a market need will almost certainly fail. Exceptions to this rule are hardly even worth paying attention to, often surviving in spite of (not because of) their poor judgement.
Budding small business owners owe it to themselves, their staff, their customers and the market at large to carry out proper market research. Without taking the time to do this due diligence, the chances of failure skyrocket, directly contributing to the astonishing small business failure rates we see around the country.
But market research failures aren’t solely a small business story…
More Than Just a Small Business Problem
Big businesses also fail when it comes to conducting adequate market research – and these failures are often much larger in scale, given the bigger budgets involved.
Notable examples of market research flops include Coca-Cola’s farcical introduction of New Coke, Microsoft’s attempt to create a rival to the iPod, and Amazon’s brief foray into the smartphone market.
There are plenty of lessons to be learned on this side of the Atlantic as well. Take one of the UK’s most recognisable entrepreneurs – Sir Richard Branson. His umbrella corporation Virgin Group has holdings in many successful businesses, including Virgin Air, Virgin Mobile, and the ambitious Virgin Galactic.
However, hidden beneath these roaring successes, you’ll find a litany of forgettable ventures. Here’s a brief list of the markets this superstar entrepreneur’s businesses failed to crack:
- Virginware (women’s lingerie)
- Virgin Express (budget air travel)
- Virgin Cola (UK and US soft drinks market)
- Virgin Cosmetics (beauty products)
- Virgin Interactive (computer games development)
Clearly, these failures haven’t limited Sir Richard’s abundant success – he’s a household name around the world – but one has to wonder if a lack of rigorous market research contributed to the seasoned entrepreneur’s failure to make an impact in the above markets.
If the most famous entrepreneurs in the world can’t get away with skipping out on this vital part of the process – why would you think you can?
So why should you commit resources to market research?
It’s a fair question. With all the demands on your time, and the pressures of business in an increasingly competitive global marketplace, it’s tempting to cut corners wherever you can. Freeing up your time, attention and other precious resources to focus on what’s truly important is a smart strategic choice.
But underestimating the value of effective market research would be a mistake. In today’s ultra-competitive business environment, not knowing your customers and/or your market can be a death sentence, no matter what industry you’re in, the size of your business, or how established you are. Commit to market research to gain a deeper understanding of your customers, uncover challenges to your own business assumptions, and to ultimately serve your market better and increase customer retention and profits.
Enjoy this blog? Read our related posts and free downloadable materials:
Read our paper that considers How Marketers can Improve the Customer Experience
And finally, if you’d like to understand more about how to make your data go further, visit:
Eye CX for Customer Experience Professionals
Eye Trackit for Market Research Professionals