As a business resource, market research is useful for both identifying and solving any number of problems. Through a mixture of data and analysis, market researchers supply the guidance necessary for firms to develop strategies and solutions for some of their most pressing issues. Market research services can be broken out, roughly, into two categories:
- Quantitative analysis: numerical forecasts based purely on statistics and hard data
- Qualitative analysis: a more subjective judgment based on information from consumer and other surveys, in-depth interviews with experts, and such intangibles as industry cycles and emerging markets
Paired together as one powerful problem-solving tool, these methods are highly effective for firms looking to evaluate their strengths and weaknesses. Here are just a few business problems market research can help you solve.
1. Understanding Market Share
When it comes to understanding a market, sizing the overall industry is just the beginning. What companies can most benefit from is knowing their market share — the percent of total product sales that a company owns compared to its competitors. For larger producers, a significant market share — perhaps even a leading one — may be the goal. What this share constitutes from industry to industry can vary.
“You could have a very concentrated industry where the top producer could be 20-40% of the total, or it could be fragmented, with the top producer having only 5%.”
— Kyle Peters, Manager, Equipment and Components, The Freedonia Group
Using quantitative and qualitative analysis, market researchers can assist a business in determining how an industry is divided and who the leaders are, as well as identify opportunities for growth. Firms are then able to use this information to make any number of strategic decisions with an eye toward cementing, increasing, or even decreasing their own share of the market.
2. Trend Analysis and Prediction
Oftentimes, it’s hard to tell how an industry will change. Some products flop spectacularly (“New Coke,” anyone?), while others take off into the stratosphere and end up defining the genre for a generation or more (for example, you may be reading this very article on an iPhone). Predicting these changes can be tricky, but with market research, it can become a little less so. A trusted market researcher can provide businesses with a snapshot of where their industry is and where it is going, whether it’s a mature market with lower room for growth, a sector that’s characterized by rapid product innovation, or an industry that’s expected to boom.
Market research can also anticipate disruptors — competitive threats posed by startups, mergers, and new technology and product innovations — to help companies get ahead of the game. Perhaps the best-known disruptor in recent history is e-commerce giant Amazon.com, which has sent shockwaves through essentially every industry it has involved itself in since its beginnings as an online book retailer in 1995. In the 20+ ensuing years, the Jeff Bezos-led behemoth has found itself at the center of controversies, upheavals, and existential questioning in the publishing, brick-and-mortar retail, and grocery industries, just to name a few.
Using market research to understand where the next big industry shake-up might come from allows companies to plan for these disruptions in advance, rather than react to them as they happen. A business may not be able to stop the next Amazon, but it can use appropriate planning and strategy implementation to shield itself from adversity and adapt to new market conditions with a little more peace of mind.
3. Upsize or Downsize — Market Research Can Help You Decide
For most businesses, there comes a certain point at which owners and operators must face tough questions about their company’s size and growth prospects. Sometimes, addressing these questions might entail expansions through acquisitions, new hiring, capacity increases, or greater investment in research and development. Other times, a challenging current market environment might lead owners to explore divestitures, rebranding, business restructuring, or expenditure cuts.
Possessing an unbiased industry projection from a reliable source can help simplify at least one facet of the decision-making process to ensure that a company is making the right call in the short- and long-term. When quantitative analysis may indicate one outcome, an experienced market researcher can supplement these results with variable-based qualitative findings that will mitigate hasty or reactive action.
To Find Out More
Interested in learning more about market sizing, analytical approaches, and how market research can help your business? Download “The 5 Keys to Estimating Market Size for Strategic Decision Making”, the latest white paper from Freedonia Custom Research.
About the Author
Alecia Mouhanna is a Corporate Analyst at The Freedonia Group, where she researches and writes about a diverse range of topics, including construction and building materials, chemicals, packaging, and more.