Market Research

Frustrated with the mundaneness of your job, you realize what better time to fulfill your dreams of being an entrepreneur than now. You switch gears and choose to join the tech industry. But with limited market knowledge, how will you drive your business to success? This is where market research comes in.

Market research helps to answer your questions about:¹

1. The emerging trends in the market 

2. The size of the market

3. The competitors

4. The consumer behavior

5. And, whether the product or service you want to introduce would be viable for your target market

Having these sorts of answers would allow a company to understand their target market whilst also gaining insight into consumer opinions. Given that the goal is to produce something that meets a market need, market research is the ultimate litmus test to find out how to do it. This information is vital for the profitability of a business and the foundation of marketing and sales plans. It is the key component in any business’s research and development stage.

Market research uses a combination of primary and secondary research methods. Primary research is when we are collecting our own original data from the subject of interest. Here, you would ask questions specifically related to your product, service, or business. Data would often be gathered using both qualitative and quantitative approaches, either through focus groups, interviews, or questionnaires.

Secondary research is the collection of second-hand data from an external source. Essentially, you are learning from research that has already been conducted. Much of this information can be gathered from web sources such as population census data from the government, published research reports, and literature reviews from research conducted by other organizations in the same industry.

So, how do we go about conducting market research?

1. Determine your goal(s): You are investing a lot of time and money into your research. It is important that you end up with valuable answers. So, you would want to outline and specify the goals you want to achieve with the study. The study would aim to provide an answer to a clearly defined question. For example, what are the target market’s specific preferences for a smartwatch product?

2. Decide who your study participants are: You can’t possibly collect information on every single person there is. You need to define the type of consumers that would be studied to best answer your question (i.e. your target market). It is also important to be aware of sampling biases at this stage and the sort of compensation you are willing to give your participants for their time.

3. Design your method: Now that you have decided on your research participants, how are you going to study them? Here, based on the type of participants you decide to study, you would determine whether conducting primary or secondary market research is more appropriate and the particular research method you are going to use to collect your data.

4. Collect and analyze your data: It is time to conduct your study and analyze the data you have collected. This is all summarized into a research report.

5. Draw from your research to make decisions: Having completed your study, you can now use your results to make informed decisions about the problem you initially had. Referring back to the smartwatch example in step 1, the data you have analyzed should tell you what your target market is looking for in a smartwatch. This should help you with your product design choices and its overall functionality.

Primary Data: Data that is collected first-hand by the researcher through methods such as surveys, interviews, and observations. The data is specific to the study and has not been previously gathered.

Secondary Data: Information that has already been collected, published, or recorded by someone else. This data is found from existing sources such as books, research articles, and databases.

Focus Group: A qualitative research method where a small and representative group of people are gathered to discuss the study’s questions. Participants are free to share their opinions which provides businesses in-depth insight into consumer behavior and preferences.

Survey: A primary research method where participants are asked specific questions individually through various means such as questionnaires and interviews.

Target Market: A specific group of potential customers a business aims to reach with its product or service. This group is defined based on shared characteristics from demographics to needs that make them more likely to purchase a business’s product.

Sampling Bias: This bias occurs when the sample selected for a study fails to reflect the variety in a population. This leads to skewed results misrepresentative of the population.

The history of market research dates back to the 1920s. American psychologist, Daniel Starch, came up with the Starch test as a way to evaluate the effectiveness of advertisements in newspapers and magazines. The test required researchers to canvass door-to-door, finding readers of a certain newspaper or magazine, and asking two things: 1) whether they remember any ads in the publication and 2) what sort of impression they made. The Starch test allowed companies to find out whether their ads were doing what they were supposed to be doing and how they fared with competitors.

In the 1930s, George Gallup furthered Starch’s study on advertisements with his aided recall method. During an interview, he had people recall an ad they had seen to measure its memorability. This question-asking strategy would then be adapted to gauge the effectiveness of radio and TV commercials.

As consumerism boomed post-World War II, it became increasingly important for businesses to understand their customers on a more personal level. Quantitative surveys and focus groups became the go-to method for consumer research. But researchers realized a discrepancy between people’s answers in a research setting and reality. To solve this, Ernest Dichter came up with a new type of method known as motivational research. Inspired by Freudian concepts, he believed that consumers have hidden desires, wants, and needs. A way to access this information is through in-depth interviews, and almost therapy-like discussions, allowing companies to leverage this information in their marketing strategies.

Dichter’s recommendations eventually became a little too Freudian for the American commercial landscape which led some to abandon his ideas. Quantitative methods resurged in the 1960s, coinciding with the use of technology in research. Marketing expert, John Howard, introduced an interdisciplinary approach to marketing research, borrowing from academic fields like psychology, anthropology, and economics. Focus groups became the golden standard method of study as the experiential quality of being a customer became the focus of consumer research.  

The age of technology has left us with several tools and techniques at our disposal. The advent of the Internet has allowed us to research on a far bigger scale to gain information on the most minute aspect of human nature. It has also made conducting market research incredibly easy with the accessibility to huge amounts of data. Triangulating methods in market research has provided businesses with a more comprehensive understanding of consumer behavior at the individual as well as the group level. The awareness that consumer behavior varies with time and place informs the contemporary practice of market research. AI technology has also revolutionized the market research space by facilitating data collection and analysis for more accurate conclusions. 

Daniel Starch: An American psychologist who is considered a pioneer of 20th-century marketing and consumer research. His research on advertising effectiveness and the development of the Starch test in the 1920s changed the future of market research.

George Gallup: The founder of the American Institute of Public Opinion and the inventor of the Gallup poll, his development of Starch’s ideas created a technique to study the effectiveness of commercials. His survey sampling techniques have also become a popular statistical method of measuring public opinion.   

Ernest Dichter: An American psychologist famously known as the father of motivational research, Dichter applied Freudian psychoanalytic theories to business. Emphasizing the importance of understanding the subconscious desires that drive consumer behavior, he advocated for the use of qualitative methods in market research.

Market research is analogous to a compass guiding ships sailing the seas. Just as a compass helps sailors navigate through unknown waters by providing direction, market research helps businesses navigate the complexities of a market by providing valuable insights. 

Knowing the target market: Understanding in-depth your target audience is the core of successful marketing. If you can pinpoint your customer’s needs, wants, and pain points, you can tailor your product or service in a way that resonates with them. Feeling heard can lead to enhanced customer loyalty and connection.

Identifying market trends: innovation means that ideas are boundless, but at the same time you want to create a product that meets demands and aligns with market trends. With trends coming and going faster than ever,⁴ having information on where the market is at allows you to stay ahead of the curve and provides you with a buffer for risk mitigation.  

Strategic decision-making: In essence, we conduct market research so that we can make informed decisions. Basing decision-making on empirical data instead of assumptions guarantees a higher chance of success. Imagine renting an apartment unit blindly. No viewings, virtual or in-person. No research. Just straight to the application. What a risk!

Entrepreneur Henry Ford famously said, “If I had asked people what they wanted, they would have said faster horses”. For context, he is the Ford in Ford Motor Company who made cars both practical and affordable. What he was trying to say is that there are times when customers themselves don’t know what they truly want or need. So, while market research is an important driver of success, it is also valuable to look beyond the obvious answers.

With that, one of the major pitfalls of market research is the lack of reliable data. The “say-do” gap in consumer behavior prevents businesses from gathering data that is both accurate and reliable. The fact that more than half of market research professionals have concerns about data quality is troubling.⁵ This sort of data ends up skewing the results of the study and the trajectory of a business’s direction should they use the results. What we may end up with is exactly the opposite of what market research is meant to achieve. Given that businesses would spend lots of time and resources to conduct market research, is conducting a study always worth it?

Another significant issue is businesses drawing inferences from market research too literally. Going back to the point that conducting market research is expensive, businesses may expect a certain outcome from the study to confirm that what they are already doing is perfectly fine just to cut their losses. Spending millions on market research and then spending millions to make business changes based on the study—it doesn’t feel good. Businesses may frame their market research in a self-serving way that influences participants' true responses. Without considering the potential for researcher or participant biases, taking the results of the study literally can be detrimental to businesses.

The bottom line is that market research can only do so much. It doesn’t necessarily hold the truth or guarantee the success of a product. Like other research in different disciplines and fields, it is important to remain critical of the arrived conclusions.

New Coke?

Coke is an iconic drink. Its place is well-established with brilliant marketing campaigns. But when sales declined in the 1970s and 1980s, the company believed that it was because of the taste. In response, they introduced New Coke, a sweeter version of the original Coke. Taste tests and market research demonstrated a preference for this new flavor compared to the original Coke or the competitor, Pepsi. The positive outcome of the research led to the original Coke flavor being replaced with New Coke. This dramatic change proved to be a disaster.

It turns out that in conducting the market research, researchers did not account for the emotional impact the original Coke had on consumers. Participants of the original study were also not informed that they had to choose between the original Coke and the new Coke. The company failed to realize the emotional connection people would have to the brand which ended up misinforming how they went about conducting their market research. This echoes the idea of being critical of conclusions derived from market research.

McDonald’s Arch Deluxe Burger

McDonald’s arch deluxe burger was an effort to attract adult customers to the establishment. It was a burger with a taste that suited the likes of sophisticated and mature adults. They marketed this new burger through images of young people rejecting the burger because it was too flavourfully complex for them. But when you think of McDonald’s, you would think of a child-friendly restaurant with bright colors and a signature “happy meal,” so why would creating a burger geared towards adults make sense? Few would go to McDonald’s expecting a refined experience, the mascots and the indoor playground are enough to drive adults who want a fancy experience away.

The problem was that McDonald’s conducted market research on the wrong target audience. Their study on adults suggested that they wanted a burger designed for them specifically. But the adults surveyed were not necessarily reflective of regular McDonald’s customers. The introduction of the arch deluxe burger, with no surprise, ended up being a major failure for the company. But this is not to say that market research is useless and the cause of many business failures. It is still a valuable tool but doing it right makes the biggest difference.

Focus Group

We talked about the many different ways of conducting market research. Focus groups have been the popular option since the 1960s following the rise of consumerism. But have you wondered just how influential they have been ever since it has been introduced as a research method? Read more about it in this TDL article.

UX Research

UX research and market research are two different methodologies. They have different processes, different contexts, and different histories. But they both study the same type of person—the product’s user and have the same type of goal—to create a product that meets the customer’s needs. UX research is much more specific than market research, namely in that it is nestled in the field of user-centered design. Check out TDL’s article on UX research.

Why Is the Backward Research Method So Effective?

We talked about the steps one would take to conduct market research. But what if we did it the opposite way around? What does that mean for the business? It turns out that the backward research method can counteract the pitfalls of traditional market research. In particular, it can help uncover subconscious biases and heuristics that influence the outcomes of the study. Read about the examples of success stories in this TDL article.

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2. Booker, B. (2020, January 7). The 100-year history of market research -- 1920 to 2020. Attest. https://www.askattest.com/blog/articles/history-of-market-research
3. Kierlanczyk, K. (2016, February 4). A Brief History of Market Research. Kelton Global. https://www.keltonglobal.com/perspectives/a-brief-history-of-market-research/#:~:text=The%20first%20true%20instances%20of
4. Ewens, H. (2022, December 14). How the 20-Year Trend Cycle Collapsed. Vice. https://www.vice.com/en/article/bvmkm8/how-the-20-year-trend-cycle-collapsed
5. Idjoski, S., & Laskovic, G. (2023, January 13). Market research -- top challenges and ways to overcome them. Collabwriting Blog. https://blog.collabwriting.com/market_research_top_challanges/#:~:text=to%20overcome%20them.-