Why is market research SO important?
Market research is a broad field that encompasses the study of economics, statistics, marketing, social science, and advertising. The market research process is carried out by collecting and transforming data. Intelligence, obtained from the information, is the most valuable for decision-making.
In a world of increasingly global competition, market research helps companies gain real and sustainable advantages. It serves as a guide for striking differences, redefining strategies, reducing risks, and sparking innovation for growth.
1. Industry Analysis
The first step for market research is to conduct an industry analysis. In order to identify positions in a company and the overall industry trends from a macro perspective, we often use common analysis tools, such as Porter’s Five Force Analysis, PEST Analysis, Diamond Model, and Driving Forces Analysis. Among all tools for industry analysis, Driving Forces Analysis is the quickest approach to get a bird’s-eye view of your business. It keeps up with industry trends and the possible reasons behind the trends, involving market size, industry life cycle, and tech innovation.
The example of an electric vehicle company illustrates how industry analysis works. First, the scope of the market must be defined. Is it based on local, regional, or international markets? Does the company serve a BEV segment or a PHEV segment? Second, we should evaluate market share or market trends for the next 3-5 years. For instance, conventional gasoline-vehicle sales declined in 2020 for the first time, a turning point which a company should be alert (as shown on the left); we then should look into the industry life cycle, too. Since the electric vehicle has around 15% of the market share, it enters into the growth phase of the industry life cycle (as shown on the right). In this phase, sales increase rapidly and product innovation is highly valued.
2. Competitor Analysis
Competitor analysis is one of the most common but misused market research approaches. Many managers, even analysts, often underestimate the true meaning of competitor analysis. Take a semiconductor company for example. We all knew that the development of digital technologies, such as AI and 5G, has brought huge benefits across semiconductor businesses. However, this opportunity doesn’t belong to a single company. The truth is that every company in the semiconductor industry enjoys equal chances of the rapid pace of technological change.
In order to eliminate blind spots, we can use a more comprehensive analytical framework, Competitive Strength Assessment. By horizontally observing the company itself and its major competitors, we can figure out the most unique characteristics, including key success factors, strengths, weaknesses, opportunities, threats, and others. For example, to identify the characteristics and core competitiveness of Dell Technologies in the global PC market, we first define our major competitors, Lenovo and HP Inc. Then, we compare these companies in the aspect of product features, finance, supply chain management, and even organizational structure, which reaches clear decision-making and strategy priorities.
Reference: The official websites, case studies, annual financial reports of Dell, Lenovo, and HP Inc
3. Customer Behavior Research
The street corner experiment done by American psychologist, Daniel Starch, in 1923 is believed to be the earliest record of market research. In order to evaluate how effective specific advertisements are promoted to Americans, Starch randomly selected passers-by on a street corner and asked them to make comments on specific ads. This social experiment set a foundation for consumer behavior analysis and turned out to be a huge market research agency industry. In general, there are 2 major methodologies, qualitative research and quantitative research. The former involves social observation, like interviews; the latter is based on statistics, like questionnaires.
Apart from agencies, a company can conduct other consumer behavior research, such as market segmentation, customer journey mapping, and customer persona. A vivid example of a Taiwanese electric scooter startup, Gogoro, depicts a whole picture of consumer behavior through geographic, demographic, psychographic, and behavioral market segmentation, respectively. His or her characteristics include living in Taiwan, especially in urban areas with dense networks of electric scooter charging stations; being young and financially established; having a high level of environmental consciousness; being up on the latest fashion trends.
4. Brand Analysis
While unique products or services dominated in the past, increasing Internet penetration rates spurred the growth of branding and marketing. Good brand analysis helps evaluate whether the current brand strategy is aligned with customer needs. There’s no such thing as universal theory. In order to build a comprehensive brand strategy, we must look at different aspects, such as brand matrix, brand equity model, brand mantra, and brand personality. For example, Nike’s brand mantra is composed of authentic athletic performance, while its brand personality is excitement. (Extended reading: Your One-Stop Guide! 4 Key-Steps to Successful Brand Management)
As another example of brand analysis, the brand matrix helped identify key messages for Cargotec, a Finnish cargo-handling machinery company: reliable, digitalized, and customer-centric. An industry analysis has to be reevaluated regularly, and so does brand analysis. In this case, Cargotec’s vision shifted over 3 years, becoming the leader in intelligent cargo handling to sustainable cargo handling. It shows that brand analysis plays an essential role in leading transformations. It ensures a cumulative development of brand heritages to build up a strong brand image.
5. Social Media Research
Recently, innovative market research methods have sprung up due to the development of digital technologies, significantly affecting the growth in social media research. Social media research tools, such as Google Trends and Awoo, provide social media trends and search volume by countries, cities, times, and websites. (Extended Reading: Social Media Marketing: 10 Easy Ways to Increase Efficiency)
Through social media research, we are able to learn from target audiences, involving biases on tones and manners, topics, contents, format, and language. We should also keep in mind that there is no universal strategy for social media management. Build tailor-made content and advertising strategies on different social platforms so that a company can deliver its brand image efficiently to target audiences, make the brand stand out, and even boost engagement among customers.