Market Research for Retail: 5 Reasons Why It’s Important

Welcome to the first chapter of our comprehensive retail business guide. You’re in the right place if you want to transform that fantastic business idea into a thriving retail venture. 

Starting a retail business is an exciting journey filled with potential. Still, before you take that leap, there’s a crucial first step you can’t afford to overlook: market research.

Market research is crucial for a retail business’s success. Failing to invest ample time and effort in market research is a leading cause of companies struggling and ultimately failing. It can significantly impact decision-making, differentiating between wise choices that propel your business and poor ones that harm it.

This guide will take you through market research’s pivotal role in your retail business’s success. We’ll present five compelling reasons why it’s vital. We’ll also give you practical tips for effective market research to give you an edge in building a successful retail business. 

Let’s get started.

What is market research?

Market research is when a company studies if a new product or service will work by talking to potential customers. This business strategy helps the company determine its main customers and what those customers think about the product or service.

You can conduct market research yourself or hire a third party. These specialists can use surveys and focus groups, among other methods. Usually, the people who help with the research get something in return, like product samples or a small payment for their time.

Primary vs. secondary research

Market research is a process that involves two main types — primary and secondary research. These two types help gather a wide range of information from various sources, forming the core of market research.

Primary research means getting new information directly from people or sources for a specific reason. We do this using surveys, interviews, observations, or focus groups. Primary research is beneficial to gain insight into creating buyer personas and segmenting your target market.

You can split primary research further into two groups: exploratory and specific. Let’s break down each one:

• Exploratory Research: This type of primary research doesn’t worry much about customer data and trends. It’s more about spotting problems a team wants to address. This research usually comes before specific research and involves talking to a small group through open-ended interviews or surveys.

• Specific Research: Specific primary research follows exploratory research. It helps businesses dig deeper into important issues or opportunities they’ve already found. Here, you can focus on a smaller, more specific group and ask them particular questions to solve a known problem.

On the other hand, secondary research means using information already gathered from different sources and is available to the public. It can include data from government censuses, reports from trade associations, poll results, and research from other businesses in the same market. Secondary research is beneficial when you want to study your competition.

Read more: Customer Development Process: 4-Step Framework for Startups

Why is market research essential for businesses?

Market research is vital for businesses like yours. It’s not just a routine task; it’s a strategic necessity. This strategy is crucial because it forms the foundation for intelligent decisions and seizing profitable opportunities. So, let’s examine why market research matters to business owners like you.

Gives you a better understanding of your customers

Market research is crucial for your business because it helps you better know your potential customers. Companies that focus on their customers tend to be 60% more profitable, so market research is a crucial step for your success.

By collecting data about your target audience, such as their age, interests, and behavior, you clearly understand who they are. This information is like a treasure map for creating effective marketing strategies and customizing your products to match what they like.

For example, you want to start an online fitness coaching service. Market research reveals that your primary customers are busy professionals aged 30 to 45. They value convenience and want workouts tailored to their needs. With this information, you can create coaching programs that fit these specific preferences, increasing your chances of success.

Helps you find gaps to exploit

Market research helps you discover hidden or overlooked opportunities in your industry. For instance, let’s say you’re in the coffee business. Through research, you might find a growing demand for high-quality, sustainably sourced coffee beans in your area. By recognizing this niche, you can specialize in sourcing and selling such beans, setting your coffee shop apart from others in your crowded market.

Analyzes your competition in the market

Competitor analysis is a vital part of crafting successful business strategies. When you conduct market research, you can evaluate what your competitors are good at and where they might fall short. This knowledge can guide positioning your offerings and designing your marketing campaigns.

Plus, it lets you pinpoint areas where your products or services can shine brighter than your rivals. Understanding your competition through market research sets the stage for strategic advantage.

Minimizes risks

Risk is a significant factor in business, which companies work hard to minimize. One of the most effective ways to do this is by ensuring actual demand for a product before diving in. The truth is, many products don’t make it in the market. In fact, according to some experts, as many as 95% of new products fail.

Given the high stakes, it’s crucial not to rely on mere intuition when creating a product. Instead, invest in comprehensive market research to assess whether a product concept can succeed. Market research helps develop products that meet and exceed customer expectations. Reducing risk and increasing product success go hand in hand.

Improves your decision-making process

Market research is a powerful tool that helps companies make intelligent decisions based on facts, not just instincts. Relying solely on gut feelings can lead to risky choices. With market research, you have a reliable compass guiding your every move. It’s like having a GPS for your business strategy, helping you navigate toward winning and keeping your ideal customers.

This valuable research provides concrete insights that make decision-making much more manageable. Whether figuring out how to price your products, planning marketing campaigns, or developing new products, having trustworthy information at your fingertips dramatically lowers the chances of costly blunders. So, think of market research as your trusted ally in the business world, always ready to steer you in the right direction.

Read more: Building a Company: 4-Step Customer Development Guide

6 steps on conducting market research

Effective market research involves several vital steps to gather valuable insights and make informed business decisions. Here are six essential steps for conducting market research:

1. Identify your problem or goal

The first step is setting clear goals for your business and research. Ask yourself, “What do I want to achieve by doing this market research?” Be specific about the problem or goal you want to tackle. It could be things like figuring out what customers like checking how much demand there is for your product, seeing what your competition is up to, or finding new chances for growth.

2. Develop your market research plan

Once you’ve figured out what you want to discover in your research, the next step is to plan how to gather the needed information. Previously, we mentioned two main data collection methods: secondary and primary research. 

Which one you choose depends on your research goals, budget, and timeline. If you have limited resources and need quick answers, secondary research might be the way. However, if you want specific information not already out there, you’ll need to do primary research.

Once you’ve decided that, you’ll also need to consider how many people you’ll include in your study and who they are. Your sample size should be a good representation of the target audience you’re studying. 

For example, if you’re researching a product for young adults, your sample should mainly include young adults. You should also consider things like their demographics (like age and gender) and their buying habits and attitudes if those are relevant to your research. These decisions will help you get the best and most valuable data for your study.

3. Gathering your data

Once you’ve planned your research, it’s time to gather data. In marketing research, you’ll mainly collect quantitative data, which means numbers and facts, instead of descriptive information.

Quantitative research happens mainly online through emails, texts, social media, or websites. If needed, you can also use traditional methods like postal surveys or face-to-face interviews, especially for the older demographic and people without internet or smartphones. Companies can get quantitative data from their contacts, online traffic, or by working with a panel provider who can find the right people for your study.

You can typically use focus groups, interviews, or ethnographic research for qualitative research. However, online qualitative research, like video surveys, is becoming more popular.

When collecting data, ensure it’s fair and doesn’t try to influence the answers. Avoid questions like, “Do you think we should charge more for extra services?” These kinds of questions can sway the responses. Instead, ask open-ended questions (where people can answer freely) and closed-ended ones (like multiple-choice) to get a clear picture.

4. Analyzing gathered data

The next step in market research is analyzing your findings. Today, we use advanced computer software and automated tools for this. You decided which research methods and data analysis to use during the design phase.

First, tidy up and organize your data to prepare it for analysis. Once you have all the necessary information, it’s time to dive into data analysis. Instead of focusing on single data points, look for trends in the data. Avoid trying to find patterns based on your assumptions before collecting the data.

Here are some quantitative techniques you can use to make sense of your findings:

1. Market Segmentation: This helps you group your customers into different categories based on their preferences.
2. Conjoint Analysis: Use this to compare different product or service ideas and determine what people like about them, such as price, color, or features.
3. A/B Tests: With this method, you can compare how people react to different product ideas, communication methods, or advertisements. You do this by dividing them into similar groups.
4. TURF Analysis: This helps you determine the best product combination to reach the most customers.
5. Price Sensitivity: Use this to see how changing the price of a product or service affects how many people want it.

It’s okay if your initial assumptions turned out to be incorrect. We test instead of relying on assumptions when making crucial organizational decisions. Accepting the results is more beneficial than attempting to manipulate the data to fit your preconceived notions.

5. Presenting your analysis

Now that you’ve researched and crunched the numbers, it’s time to share what you’ve found with stakeholders. This step ensures everyone, even those who weren’t part of the research, can get what you’re saying.

Why is presenting your analysis to stakeholders necessary? Valuable findings often form the basis for effective business decisions. However, incomprehensibly presenting these findings can render them useless. Therefore, it is essential to communicate these findings clearly and effectively to maximize their impact and inform the decision-making process.

Keep your message clear and to the point to ensure it gets across. You can use reports, presentations, or pictures to show your learning. Images can be convenient because they can tell a story that words alone might miss. Think about who you’re talking to. Are they people inside your company, investors, or your team? Tailor your talk to them. And don’t forget to use charts, graphs, and plain talk to make your data easy to grasp. That way, everyone can see the big picture and make better choices for your business.

6. Incorporate your findings into your business

Once you’ve gathered your market research, it’s time to put it to good use in your business. After all, the reason you did all that research was to make your business better. Now, let’s take some action.

Start by turning your research into practical suggestions. Think of it like getting a roadmap for your business. These suggestions can be about anything, like improving your products, finding better ways to market them, or even redesigning your packaging to make it more appealing.

Take these suggestions and make them part of your business plan. That means integrating them into how you run your business, promote your products, and develop new ones.

Running a business is dynamic, and the market can change fast. You must watch what’s happening in your industry to stay on top. Keep an eye out for trends and shifts in what customers like. When you notice something new, be quick to change your plans. Being adaptable helps you stay competitive and keep up with the market’s changes.

Market research strategies to use for your retail business

Below are some strategies that you can use in your market research. These strategies, meticulously tailored to the retail landscape, provide the insights needed to navigate this ever-changing terrain successfully. Let’s delve into these strategies individually, ensuring you have a clear roadmap to drive your retail business forward.

Surveys

Surveys are great tools for retail businesses. They help you gather essential numbers and information from many customers. You can use different types of surveys, like online, in-store surveys, or email surveys. Surveys are perfect for discovering what your customers like, how satisfied they are, and how they like shopping.

Here are other reasons why surveys work best for retail stores:

1. Large Sample: You can survey many customers at once, making it easier to spot trends and patterns.
2. Satisfaction Levels: Learn if your customers are happy with what you offer. Are they satisfied with your service? Do they feel valued?
3. Shopping Behaviors: Understand how your customers shop. Do they visit your store every week or only during sales events?
4. Preferences: Find out what products or services your customers prefer. Do they like the red shoes or the blue ones? Do they choose to shop online or in your store?

Focus groups

A focus group is when you gather a small group of people that represents your target audience. You share your ideas and ask them questions about your product, service, or business. This group should include people who already buy from you and those who might buy from you. It’s essential to have this mix of perspectives to get the best feedback.

Focus groups are one of the ideal strategies for getting qualitative data because: 

1. Deeper Insights: Focus groups give you a peek into customers’ thoughts and feelings. You can’t get this kind of information from numbers alone.
2. Hidden Discoveries: Sometimes, customers share things you never expected. These surprise insights can help you make your store even better.
3. Improvement Ideas: When you hear what people love and hate, you can improve your products or services to make customers happier.

In-depth interviews

This strategy involves talking directly to one customer at a time. Customer interviews provide valuable insights into your shoppers, helping you make smarter business decisions. 

This strategy allows you to:

1. Get to Know Your Customers Better: You can get to know your customers by talking to them one-on-one. It helps you understand their experiences and preferences when shopping at your store.
2. See Things from Their Perspective: These interviews help you see things from your customers’ point of view. You get insights into what they like and dislike about your products or services.

Contextual inquiry

Observe customers in their natural shopping environment to understand their behaviors, needs, and pain points. This method involves watching and interacting with customers to gain firsthand insights.

This strategy works best for retail businesses because it allows you to:

1. See Real Behavior: By watching customers shop, you can see what they do without influence. 
2. Hands-On Insights: Interacting with customers lets you ask questions and get immediate feedback. This personal connection is valuable.

Mystery shopping

A valuable market research approach involves deploying undercover researchers as customers to your and your competitors’ stores. This strategy allows a firsthand assessment of store operations and customer experience.

This strategy suits retail business because it allows for:

1. Customer Insights: Mystery shoppers give you a peek into the customer’s perspective. You learn what’s working and what needs improvement.
2. Employee Training: It helps you train your staff better. You can use the feedback to teach them how to provide excellent customer service.
3. Competitive Edge: Mystery shopping helps you stay ahead of the competition by continually improving the shopping experience.

Summary

This first chapter stresses the importance of market research in launching a successful retail business. Market research matters because it helps you understand customers, identify market gaps, assess competitors, minimize risks, and improve decision-making.

In the next chapter, we’ll dive into creating an effective business plan. It will include the elements needed and the different types of business plans for you to use.