Market research

Market research is the process of gathering, recording and analysing data about customers, competitors and the market. It turns a hunch about what buyers want into evidence a business can act on.

Four purposes

• Understand and meet customer needs — what people want, what matters most to them and what they are willing to pay, so the product is designed around what buyers have asked for.
• Spot a gap in the market — a customer need that no existing business is meeting, which gives an opening for a new or improved product (explained in the Gap in the market note).
• Reduce risk — research shows how likely a business idea is to succeed, so a business is less likely to pour savings into a product nobody wants.
• Inform business decisions — price, location, product features and promotion can be chosen using data rather than guesswork.

A worked example

Jodie is thinking about opening an indoor skate and scooter park in an empty unit on an industrial estate. Her research shows the nearest skatepark is outdoors and shuts at 4pm in winter, so riders have nowhere dry to go after school — a gap in the market. She also finds most riders would pay £4 for a two-hour session and that parents want a seating area with a view of the ramps, which shapes her prices and her layout. The same research tells her which evenings to open late and where to advertise, and it means she risks far less of her savings than if she had simply rented the unit and hoped.

Support, not a guarantee

Research makes success more likely, but it cannot promise it. Customers may say one thing and do another, or the market may change after the research was done, for example if costs rise. Its value also depends on how reliable the data is.