Market research is a valuable tool for small and medium-sized enterprises to minimise the risk of a product launch. It also helps to create and develop a relevant portfolio of products and is a vital tool in product development.
Combining market research with new product development can provide exciting new products that respond to consumer needs. A relevant and up-to-date portfolio maximizes return on investment for a company and results in happy, satisfied and loyal consumers. Market research can ensure that you produce what customers really want and not what you think they want. It can help the company to plan ahead, look at what products or extensions should be developed and for whom. It involves the systematic gathering, recording and analysis of data about customers, competitors and the market.
Small and medium-sized enterprises exist in a fast-moving world with increasing consumer choice. Of the hundreds of products launched every year in consumer goods markets, very few reach significant market share. In order to reduce risks, it is essential to know the target market segment and its consumers, in advance of engaging in new product development. Across regions and countries, consumers are different in terms of culture and lifestyle. The challenge for small and medium-sized enterprises is to find similar insights from consumers across different regions and countries.
Lots of questions need to be answered: What is the target market? What do they need in a product? Is there a gap between the products available and consumer needs regionally? What is the competition doing? What position do we have in the market? Market research can explore the underlying needs of the market and make a judgment as to how well a new product meets these needs. It serves a host of information, such as establishing needs, identifying unmet needs, estimating the demand, setting prices and shaping product specifications.
What's more, market research can unleash potential opportunities for new products, as well as rejuvenate existing products, perhaps by incorporating new features or finding new markets. This ensures the products are relevant to different groups of consumers and will deliver the maximum return when launched.
Companies can benefit from market research at different phases during the product development process. Each phase requests a different approach. Market research should first inform companies about consumer's needs, desires and trends across markets and cultures. In addition, good market research gives the consumers the opportunity to contact food producers so that their views are taken into account.
When interpreting the outcomes of market research, you need to acknowledge that consumer tastes evolve over time. An initial rejection of a new product in a market research study may shortly become an enthusiastic embrace. Hence market research cannot be expected to give definitive and direct answers to new product questions; rather it should be used to provide a backdrop of understanding to the needs and unmet needs of the market. It is the market researcher's task to use these insights to assess a product's potential.
New product research often requires a mixture of primary and secondary research. Primary research typically starts with qualitative research followed by quantitative approaches. It meets a specific objective for a specific project. Secondary research uses information in the public domain such as sales data, previous consumer research or industry reports. Secondary research is quicker and often less expensive than primary research, but is often not completely related to the needs of a specific project.
Qualitative research is needed to obtain a deep understanding of requirements and (unmet) needs. The principal research tools are focus groups or in-depth interviews, which allow questioning and probing far below the skin of the subject. This involves far more detailed investigations. For example you need to gather a small group of 'typical' consumers to taste products or to talk about their preferences and experiences. Qualitative research is not representative of the general population, but provides greater insight into 'why' people think what they think.
Once the needs are understood and it is clear that there is a market for a new product, it is time for quantitative research. A relatively large number of questionnaires or structured interviews are required to provide a robust and statistically valid result. This research addresses for example the size of demand, usage habits, attitudes to products and the likelihood of up-take of the new product. Such quantitative research studies tend to be conducted either by telephone or online.
Take home message
Market research is a tool to establish needs and to explore market potential. It’s been proven useful during many steps of the product development process and during all phases of the product life cycle.