As the business and economic landscapes continually evolve, market research has become essential for all types of organizations. Prioritizing market research allows business professionals to effectively address market challenges and capitalize on market opportunities.
Learn more about market research, its core methodologies, and its potential to help business leaders understand consumer behavior and make better-informed strategic decisions.
Understanding Market Research
Generally governed by organized processes and customized to reach specific goals, market research is the collection, analysis, and interpretation of data about customers, competitors, and industry trends. The restrictions and objectives of each market research initiative should dictate the specific research approaches and strategies used. Broadly speaking, this research can be divided into two general types: primary research (which involves collecting data first-hand) and secondary research (which involves sourcing data from third-party sources).
A Brief History of Market Research
Merchants have been trying to gather information about their consumers since the very birth of commerce, but formal market research as a distinct industry has only been around for about a century. Origins can be traced back to 1920s Germany and 1930s France and Sweden, after which American firms began leveraging market research techniques more widely around the World War II era.
American psychologist Daniel Starch was the first person to develop specific methodologies to govern market research for advertisers. Other key figures in the early days of market research include George Gallup (who pioneered scientific survey polling in the 1930s) and Paul Lazarsfeld (who developed the field focus group research in the 1940s).
After the rapid rise of digital technology during the 1990s, web analytics became a major component of the market research mix. Today, marketers continue to embrace the latest research techniques to survive in the modern marketplace. “To stay competitive and gather relevant insights, organizations should consider embracing cutting-edge approaches and technological advancements in the market research sector,” writes Forbes contributor Rick Kelly, who works as a chief strategy officer (CSO).
Why Market Research Is Essential for Businesses
Market research benefits organizations in numerous different ways:
Reducing Business Risks
Because companies must make substantial investments to support their operations, uncertainty is an inescapable part of doing business. Running a business always comes with a certain amount of risk, but market research can help mitigate this risk by providing business leaders with the relevant and reliable information they need to make wise decisions. As Kelly puts it, “Companies that prioritize market research as a fundamental function … have a higher likelihood of thriving amid economic uncertainty.”
Identifying Market Trends and Opportunities
In addition to managing risk by helping businesses identify and overcome challenges, market research plays a pivotal part in the detection and exploitation of market opportunities. Beyond focusing on existing prospects, market research into relevant trends can keep companies ahead of the curve when preparing for the future.
Improving Customer Experience
Much of market research entails precisely defining consumer wants and needs to better meet them. To target the right potential customers, researchers focus on consumer motivations to purchase as well as the underlying characteristics and values that influence those motivations. They also help people engage with brands by identifying and overcoming any barriers that impact the consumer journey.
Strengthening Competitive Advantage
A great deal of market research focuses on consumers and the general marketing environment — which includes economic, legal, political, and sociocultural conditions. However, competitive research is equally vital for most companies. To help an organization outpace and learn from its competitors, the United States Small Business Administration recommends sourcing and analyzing competitor data in terms of their current market share and various strengths and weaknesses.
Enhancing Marketing Campaigns
To better tailor their marketing campaigns, businesses invest heavily in market research. Through analyzing relevant data concerning market trends, customer experience, and competitive advantage, researchers can craft marketing campaigns that use the right messaging to reach the right audiences through the right channels.
Market Research Methods
Anyone who has completed a school research paper has a general understanding of how secondary research is conducted. Primary research, though, requires far more than simply accessing information from sources that have already compiled it. Whether conducted face-to-face, online, over the telephone, or by mail, the following market research methods are effective ways to gather data directly.
Keep in mind that not all these methods will be useful for every market research project. However, most market research projects will benefit from a diverse mix of research methods.
Some experts, for instance, advise shifting the emphasis more toward insights about the consumers you aim to reach as opposed to your brand. After all, many people are more focused on how a product can meet their personal needs than the brand itself. In the words of Forbes Council member Rebecca Brooks, “The shopping landscape is complex,” and “a single methodology, like a survey, is usually not enough to build understanding.” In short: “The more methods you employ, the better your understanding will be.”
Surveys
One of the most popular methods of gathering data through primary market research, the survey is an ideal way to reach large numbers of participants easily and inexpensively. With that said, surveys are generally limited when it comes to collecting in-depth, descriptive, qualitative feedback, and people are often quite reluctant to complete them. Depending on their target participants, market researchers might decide to use online, phone, or mail surveys. They might even go door-to-door with surveys or distribute them in public places such as shopping malls.
Focus Groups
While surveys are great for getting qualitative (numerical) data from large populations of consumers, focus groups are far better at gathering qualitative data because they allow participants to elaborate on their answers and offer their opinions freely. Typically consisting of eight to 12 people led by one or more market research professionals, these groups allow participants to interact and build upon one another’s comments. Focus group leaders record member responses and observe interactions when members are exposed to an idea or a concept.
Interviews
Unlike focus groups, which involve interactions within small groups, market research interviews generally focus on a single individual. Whether conducted in person, on the phone, or online, an interview is defined by two-way communication with a highly personal focus. When conducted by a skilled professional researcher, the interview process can collect marketing information that is difficult to obtain otherwise. However, personal interviews can be expensive to conduct, and researchers must be thoroughly trained.
Observational Research
Observation-based market research techniques range from recording sales data to watching customers interact with a product in various “real-world” settings. When completing surveys and interviews, people don’t always respond accurately — and both survey and interview subjects often forget or fail to clearly communicate their genuine behaviors and feelings. What’s more, survey and interview subjects often struggle to know the actual truth about their behaviors or feelings.
Direct observation and recording of consumer behavior helps eliminate all the above problems. However, observation-based researchers often avoid direct contact with the subject to reduce bias due to possible awareness of the observation process. Additionally, observational research only monitors actions without explaining the emotions and attitudes that underlie those actions.
Social Media Listening
Generally defined, social media listening involves monitoring social media sites to identify and assess all activity that involves a particular product, company, or brand. To aid in their social media listening efforts, market researchers commonly employ a range of software tools that mine text for specific keywords and gather relevant posts from Facebook, Instagram, X, TikTok, and other leading social media sites. After identifying references that are relevant to a particular marketing campaign, researchers can take important cues from those references.
Real-World Examples of Market Research
Using surveys, focus groups, interviews, observational research, social media listening, and other market research methods, organizations have boasted some remarkable accomplishments. Below are just a few case studies of companies that demonstrate the power of market research to improve products, marketing, and customer engagement:
Starbucks and Customer Feedback
Few companies have dominated their market sector quite like Starbucks over the years, and paying close attention to customer feedback has helped get them where they are today. Forbes contributor Bernard Marr positioned Starbucks “on the cutting edge of using big data and artificial intelligence to help direct marketing, sales and business decisions.”
Using its brand-name mobile app, online surveys, and other outreach channels, Starbucks has been able to adapt to meet the specific wants and needs of its target consumers. For instance, when it saw an increased customer interest in cow milk alternatives, Starbucks responded by adding coconut, almond, soy, and oat milk to its menu. In November 2024, Starbucks removed all extra charges for non-dairy milks to better serve its customer base.
Netflix and Data-Driven Decisions
In 2017, Wired reported that more than 80% of the content streamed on Netflix was discovered by viewers through the platform’s proprietary recommendation system, which closely monitors viewer behavior. Although the inner workings of this recommendation system are a well-kept industry secret, Netflix has revealed that it consists of a series of machine learning algorithms and a team of human taggers with a deep understanding of the platform’s content. Rather than making recommendations based on broad genre categories, Netflix examines nuanced qualities within each genre. Beyond recommending content to viewers, Netflix uses viewer behavior analysis to make choices regarding content acquisition and new productions.
More recent research has explored the development of a content-based recommendation system by analyzing Netflix’s dataset. The study developed a content-based recommendation system focusing on textual features like director, description, listed categories, and rating — which was then tested by inputting a list of shows previously watched by a user. Based on these inputs, the system successfully recommended five similar shows. Its effectiveness in providing personalized content suggestions underscores the potential of content-based recommendation systems in enhancing user experience by providing tailored content suggestions based on textual attributes of shows.
Amazon and Customer Behavior Analysis
Like Netflix, Amazon gets a tremendous amount of value from serving personalized recommendations to customers. By continually analyzing the search history, purchasing patterns, and customer reviews of each visitor to the Amazon website, the company has developed a revolutionary recommendation engine that contributes significantly to all kinds of purchases, including the sale and rental of streaming audio and video content. The secret to the success of this engine: its built-in feedback loop mechanism that constantly refines Amazon’s algorithm models to boost the accuracy of future recommendations. If you have ever made a purchase based on an Amazon suggestion, you might know just how effective this recommendation engine can be.
Spotify and Music Personalization
Leading music streaming platform Spotify relies heavily on machine learning to collect and analyze lister data and user preferences to curate personalized playlists. The first of these playlists, Discover Weekly, was the result of one of Spotify’s revolutionary Hack Weeks, during which company team members pitch innovative ideas and bring them to life. Discover Weekly presents a new mix of custom-chosen songs to each user on a weekly basis. Spotify subsequently expanded this idea with Blend, which examines listening data from two users to create playlists that combine their tastes in music. Most recently, the company added editorial commentary and artist stories to their playlists with the AI-powered platform DJ. All of these personalized Spotify services have led to improved user retention — and none of them would be possible without ongoing and in-depth market research.
Final Thoughts: What Is Market Research?
A crucial component of strategic planning and daily operations for many companies, market research helps businesses manage risks, understand their customers, structure their promotional outreach, and stay one step ahead of the competition. For these reasons, organizations of all sizes are encouraged to embrace market research and data-driven decision-making.
Market Research as Part of a Comprehensive Marketing Degree Program
Intrigued by market research methods? You can delve into this plus more modern marketing strategies by enrolling in a degree program like the online Bachelor of Science in Marketing and Advertising at Johnson & Wales University. This comprehensive program contains insightful and practical courses such as Market Research and Consumer Insights.
For more information about completing your degree online, complete the Request Info form, call 855-JWU-1881, or email [email protected].