There are many benefits of market research. Let’s think about how to answer these questions:
How does a company find out the size of its market?
How does a company find out its market share?
How does a company find out what type of customer will buy its product?
How does a company find out what price customers will pay?
How does a company find out how often customers buy the product?
How does a company find out what customers like and dislike about the product?
As in today’s business world most of the firms use Market Orientation approach to marketing, all the decisions what to produce and sell will be based on what customers need and want to buy.
Hence, market research helps modern companies to develop products based on consumer demand which has been identified and analyzed based on market research.
Benefits of market research in details
Market research serves several purposes. The data and information obtained from market research can be used by a business manager for many things. The main benefits of a Market Orientated approach, hence conducting market research, include:
1. Reduces the risk of launching new products
Market research helps to identify customer needs and wants. Having insights into customers’ preferences can substantially reduce the risk of new products failing. It is because products have been designed and produced according to market research information.
By identifying those exact needs and wants provided by existing and potential customers, the business will be able to evaluate whether satisfactory sales results can be achieved.
Test marketing on a small group of customers can help prevent any future losses in situations when the product is unsuccessfully launched to the whole market.
2. Provides insights about customer demand and the market
Market research gives the business the most up-to-date data and information about customer tastes and preferences.
It helps managers to find out what consumers like about the products and dislike the most. As well as assess which preferences are the most important to enable the business to implement any proposed changes that consumers rate most highly in order to incorporate them into the final product.
When products meet the exact needs and wants of customers, it will live longer on the market generating more sales and profits in the long-term.
Market research can also help the firm to discover information about current market size as well as future market size for the product.
How the product is perceived by people, its strengths and weaknesses, etc. Also, details about competitors, their actions, strengths and weaknesses of competitor products, and any Unique Selling Points (USP) they might have.
Last but not least, consumers’ preferences towards product packaging.
3. Helps design the appropriate Marketing Mix
Market research aids decision making in regards to the Marketing Mix for a product. The special feature of the products that make it different from competitors’ products. Appropriate pricing of the product allowing for profitability. Preferred promotion methods and the best ways of distributing the product to customers.
It enables businesses to improve their marketing strategies by using a distinct Marketing Mix for each customer target market.
Market research insights can be used to make sure that the new product is better – built on strengths and improved upon weaknesses.
4. Explains patterns in sales of existing products
Market research is not only undertaken for new products being launched to the market. It also provides information about the sales of current products. Comparisons in sales can be made against competitors as well as sales performance in previous years.
For example, Fast Retailing Group, owner of Uniqlo and Theory, has reported a 7.9% increase in revenue to £13.7 billion (¥2.3 trillion) for the year ending 31 August 2022.
Managers at Fast Retailing Group were able to analyze the sales data in order to confirm the growing trend in sales. Hence, market research can give businesses a clear understanding of the effectiveness of marketing strategies.
5. Predicts future demand changes and market trends
Market research enables the company to predict any changes in consumer tastes and fashion. And, it explains how these trends may impact future demand for products.
For example, Fast Retailing Group also plans to accelerate new store openings in fiscal 2023. The group forecasts it will operate a total of 3,747 stores by the end of August 2023 across all of its brands. From this, Uniqlo International will have 1,740 stores.
Understanding any future demand changes will help the firm to predict what is likely to happen and react accordingly. This will minimize any future sales losses and maximize on potential opportunities of rising demand for a certain product.
To summarize, benefits of market research include reducing risk of launching new products, aiding marketing decision making, providing a connection between the firm and the external environment, finding out the size of the market, making the company look good, etc.
