market research for price analysis

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8 min read Setting the right price means you can capture maximum revenue from your products. Pricing research helps you find the optimal price point to entice your buyers and grow sustainable market share.

You’ve spent weeks, months, or even years developing the perfect product. How do you ensure that your investment pays off? Pricing research. Getting your pricing dialed in has more influence on profitability than any other factor including market share, fixed costs, or variable costs.

What is pricing research?

Pricing studies aim to discover what customers are willing to pay for a product or a service. This enables you to determine the optimal price point to maximize profit, revenue, or market share. You’re aiming to find the price point that is low enough that customers are willing to part with their money without feeling overcharged, and high enough to make sure your profit level is high enough to sustain and grow your business. It also helps you to avoid cheap prices that, while sustainable for you, may make the customer question the product’s quality.

Pricing research guides organizations on how they can increase revenues and profit margin by increasing or decreasing prices over time, for example by adopting price-skimming or another pricing model .

Pricing research offers the following key benefits:

• Understand the market’s willingness to purchase
• Capture the highest return on our product investment
• Preserve the value of your brand
• Make strategic decisions on how to change pricing over time

Free eBook: How to Price Products for Maximum Profitability

ROI of pricing research

Make no mistake, getting pricing right is crucial. Price is the most important factor in profitability, according to Bain & Company. And according to a study by McKinsey , if the Global 1200 raised prices just 1%, profits would increase on average 11%.

In spite of this, many organizations still fail to price effectively. Most companies state that pricing is a top priority, but 85% say they have significant room to improve, according to Bain .

With meaningful margin upside at stake, managers cannot afford to continue pricing by guesswork or rules of thumb.”

– Ron Kermisch & David Burns, Bain & Company

Companies that fail to price correctly can leave thousands or even millions on the table. In the 1990s, hard-disk drive manufacturers invested $6.5 billion in research and development. These innovations resulted in significant innovation as storage capacity improved 1,000 percent. However, manufacturers failed to price these innovations correctly, resulting in net losses of $800M, according to McKinsey analysis.

But the right pricing approach can lead to market growth. Of the top-performing companies, Bain found that 76 percent strongly agreed that their pricing strategies maximized returns at the customer and product levels.

Common pricing methodologies

While there are many approaches to pricing strategy, a few leading methodologies generally emerge:

• Van Westendrop Price Sensitivity Meter
• Gabor-Granger technique
• Conjoint analysis

Cost-plus pricing

• BPTO (Brand price trade off)

Monadic price testing

Each option is best applied in specific situations and each comes with certain tradeoffs.

Van Westendorp’s Price Sensitivity Meter

Developed by economist Peter Van Westendorp, the price sensitivity meter is a type of direct pricing research that constructs a range of acceptable prices for a given product. By asking the following four questions, Van Westendorp’s Price Sensitivity Meter creates a range of acceptable prices for a given product:

• At what price would you begin to think the product is too expensive to consider?
• At what price would you begin to think the product is so inexpensive that you would question the quality and not consider it?
• At what price would you begin to think the product is getting expensive, but you still might consider it?
• At what price would you think the product is a bargain – a great buy for the money?

Van Westendorp will give you a set of ranges as well as an optimal price.

• Lower threshold – intersection of too inexpensive and expensive  
• Upper threshold –  intersection of too expensive and not expensive
• Optimal price point – intersection of too expensive and too inexpensive

Gabor-Granger Direct Pricing Technique

The Gabor-Granger technique is a type of direct pricing that asks respondents if they would purchase a product or service at a specific price. Researchers then change the price and ask respondents again if they would purchase the product or service. For example, researchers might ask respondents to respond to likelihood-of-purchase questions given the price would increase by an extra $5, $10, $15, $20, and so forth.

This direct pricing technique uses the results to determine demand at certain expected price points, which can then be used to determine an optimal price point within the market.

Keep in mind that because direct pricing measurement asks about pricing directly, researchers assume that survey respondents have a certain level of familiarity with the product or service. Additionally, the Gabor-Granger technique does not take competitive pricing into effect.

Conjoint analysis is often considered the most reliable way to determine pricing. Through discrete-choice modeling, a specific type of conjoint analysis, researchers can determine the influence that both price and product features have on customers’ willingness to pay.

Discrete choice modeling gives respondents a choice of two to five product configurations and then asks them to choose one of the configurations to help researchers determine packaging and pricing models. Ideally, a respondent’s choice reflects the value or utility he/she assigns to each attribute.

Cost-plus pricing means working out your price according to how much it cost you to produce the product, and then adding a markup, which is usually a percentage of the cost. It’s considered a very basic way to price products by some, but it does have a useful function in setting a floor for your pricing, under which you’d be making an outright loss.

To work out a price using this method, you would add together the cost of manufacturing (including materials), the cost of labor (what you pay for your employees), and a share of the cost of overheads (including things like lighting and heating).

Cost-plus methods may be appealing to customers, especially in B2B, because of their transparency. However they don’t take into account changes in the market, and may leave you open to losses if your costs increase unexpectedly.

BPTO (Brand-price tradeoff)

Brand-price tradeoff helps you understand how your brand value factors into the price you can charge. It’s a statistical technique in market research that helps you understand how your brand equity influences the price you can charge. It effectively puts a dollar value on your brand.

Another benefit is that it places your brand in context with the rest of the market, helping you understand how much market share you could achieve at different price points relative to your competitors.

Monadic pricing research works by splitting your testing participant into different groups and showing them all the same concept or product, but with different prices. These responses can then be analyzed as a whole to see which prices were most acceptable. It’s a popular method of pricing market research.

The great strength of monadic testing is that it’s unbiased – each group sees only one price and product combination, so their answer isn’t influenced by other possibilities they have previously been shown.

Tools for pricing research

• Gabor Granger
• Van Westendorp Price Sensitivity Meter

Related resources

Pricing Research

Product Price Optimization 12 min read

Competitive pricing analysis 15 min read, product pricing 18 min read, value-based pricing 9 min read, pricing strategies 24 min read, price sensitivity 9 min read, pricing surveys 14 min read, request demo.

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Pricing Research Methods: How to Run a Price Study

As a business owner, one of the most important decisions you will make is how to price your products or services. Pricing can greatly impact your business success, and getting it wrong can be costly. This is where pricing research comes in, which involves studying and analyzing different pricing strategies to determine the best approach for your business. In this article, we will explore pricing research methods, how to conduct a pricing study, the benefits of pricing research, and more.

Pricing research is a crucial aspect of any business, as it helps you to make informed decisions about pricing your products or services. With the availability of advanced market research software for pricing research, it has become easier to conduct pricing studies and make data-driven pricing decisions.

Types Of Pricing Research Methods

There are several types of pricing research methods. Some of the most common pricing analysis methods are:

• Conjoint analysis
• Price sensitivity meter (PSM--Van Westendorp pricing model
• Gabor-Granger pricing method
• Monadic price experiments

Each of these pricing analysis methods has its own unique approach and can provide valuable insights into consumer behavior and preferences towards pricing. The method you choose will depend on your research objectives, target audience, and product or service offering. Below, we will explore each of these pricing techniques, in more detail.

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Conjoint Analysis

Conjoint analysis is a popular pricing analysis method used to measure the relative importance of different product features and pricing attributes. It is based on the idea that consumers make trade-offs among different features of a product when deciding to purchase it. By using this analysis method, researchers can identify the most important product features and pricing attributes that affect consumer behavior.

• The conjoint analysis pricing technique helps businesses to understand the most important factors that influence customer decision-making, allowing them to optimize product features and pricing strategies.
• It allows researchers to simulate different product configurations and pricing scenarios, giving businesses valuable insights into how customers might react to different offerings.

Weaknesses:

• The conjoint analysis pricing method can be time-consuming and expensive to conduct, especially for complex products or services.
• It assumes that customers make decisions based solely on the features and pricing of the product, which may not always be the case.

Price Sensitivity Meter (PSM—Van Westendorp approach)

The Van Westendorp Price Sensitivity Meter is another pricing research method used to measure how sensitive customers are to changes in price. It is based on four questions that ask customers to specify the acceptability of different price points:

• At what price would you consider the product to be so expensive that you would not consider buying it?
• At what price would you consider the product to be priced so low that you would question its quality?
• At what price would you consider the product starting to get expensive, but you would still consider buying it?
• At what price would you consider the product to be a bargain, a great buy for the money?
• The Van Westendorp Price Sensitivity Meter provides businesses with a range of acceptable prices for their products, allowing them to make informed pricing decisions.
• It is a simple and easy-to-understand method that can be used with a wide range of products and services.
• The Van Westendorp pricing method relies on customers' perceptions of price, which may not always be accurate or reliable.
• It assumes that customers have a clear idea of what they are willing to pay for a product, which may not always be the case.
• It typically focuses on just one product concept, rather than multiple variations of the same product.

Gabor-Granger Pricing Method

The Gabor-Granger method is a pricing research method that asks customers to indicate their willingness to buy a product at different price points. It is based on the assumption that customers' willingness to buy a product decreases as the price increases.

• Gabor-Granger pricing method provides businesses with a clear understanding of the price range at which customers are willing to buy their products.
• It is a simple and straightforward method that can be used with a wide range of products and services.
• Gabor-Granger pricing method assumes that customers are rational decision-makers who will base their purchase decisions solely on price, which may not always be the case.
• It does not provide information on the relative importance of different product features or pricing attributes.
• It is so clearly a pricing game to respondents that the data may not be predictive of actual purchase decisions.

Monadic Price Experiments

Monadic price experiments involve randomly dividing respondents into different groups and showing each group a different price for the product concept.  Often, the test product concept is shown in competition against other fixed competitors, as well as the “None” option (the ability to walk away and not buy anything).

• The monadic pricing analysis technique is usually considered a scientifically sound experiment.
• If made to look like market choice scenarios with competitors also represented, it more realistically resembles market choices.
• It is quick for respondents to answer, since it typically only involves a single choice or buy/no buy question.
• The monadic pricing analysis method typically focuses on just one product concept, rather than multiple variations of the same product.
• Sample size requirements are typically larger than other pricing research approaches.

Quick Pricing Analysis Studies with Conjoint Analysis

Need to launch a pricing analysis study? Run a pricing study using the conjoint analysis pricing method with our free tool. In just a few minutes, you can create full conjoint analysis exercises with just a few clicks of our easy-to-use interface.

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How To Conduct a Price Study

Conducting a pricing study is vital for setting the right price for your products or services and understanding market dynamics. Here's a streamlined outline for the process of conducting a pricing study:

• Define Research Objectives : Start by pinpointing exactly what you aim to discover through your pricing study. Whether it's finding the optimal price point, understanding price sensitivity, or assessing competitive pricing strategies, clear objectives will guide your study's direction.
• Identify Your Target Audience : Knowing who your customers are and segmenting your market accordingly ensures your pricing strategy is focused and relevant. Consider demographics, purchasing behaviors, and preferences to define your audience accurately.
• Select the Pricing Analysis Method : Choose a pricing analysis method that aligns with your objectives and audience. The most common pricing analysis techniques to choose from include: Conjoint Analysis for feature-value trade-offs, Van Westendorp for acceptable pricing ranges, Gabor-Granger for maximum price tolerance, and Monadic Price Testing for response to specific price points.
• Plan and Execute the Study : Design your study with your selected method, recruit a representative sample of your target audience, and collect data. Ensure clarity in your survey or experiment to avoid biases and inaccuracies.
• Analyze Data and Make Decisions : Finally, analyze the collected data to extract actionable insights. Use these findings to make informed decisions on pricing that align with both market demand and your business goals.

This streamlined guide provides a clear path to conducting effective pricing studies, helping you to set prices that attract customers while maximizing profitability. Note: it's also important to determine how to price the study itself, which involves considering factors such as the level of detail required, the length of the study, and the resources available.

Benefits of Pricing Research

Pricing research offers invaluable benefits to businesses seeking to optimize their pricing strategy in a competitive marketplace. At its core, it provides deep insights into customers' willingness to pay , ensuring that your pricing aligns with market expectations and value perceptions. By meticulously analyzing consumer behavior and preferences, pricing research helps in pinpointing pricing strategies that not only resonate with your target audience but also bolster your brand's positioning and competitive edge.

Furthermore, an in-depth look at competitor pricing strategies through this research illuminates market trends and pricing norms, offering a clearer path to strategic pricing decisions that can outmaneuver competitors. Armed with this information, businesses can craft pricing models that enhance customer acquisition and retention, ultimately leading to increased revenue and profitability.

The benefit of pricing research lies in its ability to arm decision-makers with data-driven insights, enabling the formulation of pricing strategies that are both competitive and profitable. By leveraging the rich insights garnered from pricing research, businesses can navigate the complex pricing landscape with confidence, ensuring their product or service offerings are priced optimally to meet both market demands and business objectives.

An Example of How Pricing Analysis Can Affect Business Success

If you are launching a new product, you might consider using a penetration pricing strategy to capture market share quickly. This involves setting a lower price initially to attract customers and then gradually increasing the price over time as your product gains popularity. On the other hand, if you are offering a high-end luxury product, you might use a skimming pricing strategy to target customers willing to pay a premium price for exclusivity.

Pricing Strategies

There are four common pricing strategies:

• Cost-plus pricing
• Value-based pricing
• Penetration pricing
• Skimming pricing

Each of these strategies has its own advantages and disadvantages, and the best approach will depend on your business goals, target audience, and product or service offering.  The survey-based research methods we’ve been discussing in this article more directly address the proposition of value-based pricing: setting prices based on the perceived value of the offering to the consumer.

A good pricing strategy is one that aligns with your business goals, target audience, and product or service offering. It should also take into account your costs, competitors, and market demand. The best approach is to test different pricing strategies and measure their impact on revenue and profitability.

Conclusion: What Is the Best Pricing Research Method?

Ultimately, the best pricing analysis method depends on various factors such as product type, market demand, and competition. Conjoint analysis is a useful method for pricing new products or modifications to existing products, while the other pricing research approaches we’ve been discussing tend to focus on just one proposed new product or a single proposed product modification.

Pricing research is a crucial aspect of any business, and with the right tools and methods, it's easier than ever to conduct a pricing study and make data-driven pricing decisions. Understanding your customers' willingness to pay, identifying the best pricing strategies for your business, and testing different approaches will help you to increase revenue and profitability.

Learn more about how our Discover survey platform can help you with your next price study.

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Effective Price Analysis Techniques: A Comprehensive Guide

Matthias Hossp 2/28/2024

Article Contents

Understanding the Basics of Price Analysis

Different types of price analysis techniques, steps in conducting a price analysis, common mistakes in price analysis and how to avoid them, frequently asked questions (faq).

As an expert in the field of price analysis, I understand the importance of accurately evaluating the cost of products and services. Price analysis enables businesses to make informed decisions, negotiate contracts, and ensure fair pricing. In this comprehensive guide, I will take you through the essential techniques and steps involved in conducting an effective price analysis. So let’s dive right in!

Before we delve into the techniques, let’s start with the fundamentals of price analysis. Price analysis refers to the process of comparing the prices of goods or services to determine their reasonableness, competitiveness, or fair value. It plays a crucial role in procurement, contract negotiations, budgeting, and overall financial decision-making.

Definition and Importance of Price Analysis

Price analysis involves an in-depth evaluation of various factors such as market trends, supplier quotes, historical data, and cost elements to determine the true value of a product or service. It helps businesses ensure that they are not overpaying or underpaying for what they are purchasing.

Key Elements of Price Analysis

When conducting a price analysis, it’s important to consider several key elements:

• Market Demand and Supply: Understanding the dynamics of supply and demand in the market can help determine if the price is reasonable.
• Competitive Landscape: Analyzing the prices charged by competitors provides valuable insights into market rates.
• Cost Breakdown: Examining the various cost components involved in producing or delivering the product/service helps identify any potential price discrepancies.
• Price History: Evaluating past pricing data and trends can provide a benchmark for assessing the current price.
• Quality Comparison: Assessing the quality of different products or services is essential to ensure that price reflects value.

Market Demand and Supply: One of the key elements in price analysis is understanding the dynamics of market demand and supply . By analyzing the current market conditions, businesses can gain insights into the availability of the product or service and how it affects the price. For example, if there is a high demand for a particular product and limited supply, the price is likely to be higher. On the other hand, if there is an oversupply of a product and low demand, the price may be lower. By considering these factors, businesses can make informed decisions about the reasonableness of the price.

Competitive Landscape: Another important element in price analysis is analyzing the prices charged by competitors . By studying the pricing strategies of competitors, businesses can gain a better understanding of the market rates and determine if their prices are competitive. This information can help businesses adjust their pricing strategies to remain competitive in the market. Additionally, it can provide insights into the perceived value of the product or service based on the prices charged by competitors.

Cost Breakdown: Examining the various cost components involved in producing or delivering the product/service is crucial in price analysis. By breaking down the costs, businesses can identify any potential price discrepancies. For example, if the cost of raw materials has increased significantly, it may justify a price increase. On the other hand, if the cost of production has decreased, it may warrant a price reduction. By understanding the cost breakdown, businesses can ensure that the price they are paying aligns with the costs involved in producing or delivering the product/service.

Price History: Evaluating past pricing data and trends is an essential element in price analysis. By looking at the historical prices of a product or service, businesses can establish a benchmark for assessing the current price. This information can help identify any significant price fluctuations and understand the factors that have influenced those changes. By considering the price history, businesses can make more informed decisions about the reasonableness of the current price and anticipate any potential future price changes.

Quality Comparison: Assessing the quality of different products or services is a vital aspect of price analysis. Price alone does not determine the value of a product or service; it must be considered in conjunction with the quality offered. Businesses need to ensure that the price they are paying reflects the value they are receiving. By comparing the quality of different products or services, businesses can make more accurate assessments of the value and determine if the price is fair and reasonable.

Now that you understand the basics, let’s explore three key price analysis techniques:

Comparative Price Analysis

This technique involves comparing prices of similar products or services in the market. By examining the price ranges and evaluating features, specifications, and quality, you can establish a fair price range for the intended purchase.

Cost Analysis

Cost analysis focuses on determining the cost elements associated with the production or delivery of a product or service. This technique helps identify any significant cost variations and enables you to negotiate fair pricing with suppliers.

Break-Even Analysis

Break-even analysis is particularly useful when introducing a new product or service. By calculating the point at which costs are covered and revenue is generated, you can set an appropriate price that ensures profitability.

Now let’s explore the steps involved in conducting a comprehensive price analysis:

Identifying the Product or Service

Before you embark on a price analysis, clearly define the product or service that requires evaluation. This step is crucial because it sets the foundation for accurate analysis.

Gathering Relevant Market Information

Collect data on the current market landscape, competitor pricing, and industry trends related to the product or service in question. Utilize online resources, industry reports, and supplier quotations to gather comprehensive information.

Analyzing the Data

Once you have collected the necessary data, analyze it to identify patterns, market trends, and any variations in pricing. Consider the key elements we discussed earlier, such as market demand and supply, cost breakdowns, and quality comparisons.

Even in a comprehensive guide, it’s important to highlight common mistakes that can hamper the effectiveness of price analysis. Avoid falling into these traps:

Overlooking Market Trends

Failing to stay up-to-date with current market trends can lead to inaccurate price assessments. Keep a keen eye on changes in consumer preferences, technology advancements, and economic factors that impact pricing.

Ignoring Quality Differences

Price alone should not be the sole factor driving your decision. Failing to consider the quality differences between products or services can result in suboptimal choices that may lead to higher costs in the long run.

Failing to Consider Total Cost of Ownership

When evaluating prices, it’s essential to look beyond the initial cost. Take into account additional expenses associated with maintenance, repairs, and upgrades. A thorough assessment of the total cost of ownership will provide a clearer picture.

As a seasoned professional in price analysis, I’ve had my fair share of experiences. One particular scenario stands out in my mind. I was working with a client who was close to finalizing a deal with a supplier solely based on the price offered. However, after conducting a comprehensive price analysis, we discovered that the supplier had been compromising on quality to maintain those low prices. Armed with this information, my client was able to negotiate better terms and secure a supplier who offered both competitive rates and superior quality. This experience further reinforced the importance of thorough price analysis.

What is price analysis?

Price analysis is the process of evaluating the cost of goods or services to determine their reasonableness, competitiveness, or fair value. It involves comparing prices, analyzing cost elements, and considering market trends to ensure fair pricing.

What are the key elements of price analysis?

The key elements of price analysis include market demand and supply, competitive landscape, cost breakdown, price history, and quality comparison. Considering these elements provides a holistic view of pricing.

What are the common mistakes to avoid in price analysis?

Some common mistakes to avoid include overlooking market trends, ignoring quality differences, and failing to consider the total cost of ownership. Staying informed, assessing product quality, and looking beyond the initial cost are essential.

Now armed with these effective price analysis techniques, you can confidently navigate the complexities of procurement, negotiations, and financial decision-making. By understanding the basics, exploring different techniques, and following the steps outlined, you will be well-equipped to make informed decisions about pricing. Remember, thorough analysis leads to fair prices and ultimately enhances the success of your business.

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How to Do Market Research: The Complete Guide

Learn how to do market research with this step-by-step guide, complete with templates, tools and real-world examples.

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Market research is the systematic process of gathering, analyzing and interpreting information about a specific market or industry.

What are your customers’ needs? How does your product compare to the competition? What are the emerging trends and opportunities in your industry? If these questions keep you up at night, it’s time to conduct market research.

Market research plays a pivotal role in your ability to stay competitive and relevant, helping you anticipate shifts in consumer behavior and industry dynamics. It involves gathering these insights using a wide range of techniques, from surveys and interviews to data analysis and observational studies.

In this guide, we’ll explore why market research is crucial, the various types of market research, the methods used in data collection, and how to effectively conduct market research to drive informed decision-making and success.

What is market research?

The purpose of market research is to offer valuable insight into the preferences and behaviors of your target audience, and anticipate shifts in market trends and the competitive landscape. This information helps you make data-driven decisions, develop effective strategies for your business, and maximize your chances of long-term growth.

Why is market research important? 

By understanding the significance of market research, you can make sure you’re asking the right questions and using the process to your advantage. Some of the benefits of market research include:

• Informed decision-making: Market research provides you with the data and insights you need to make smart decisions for your business. It helps you identify opportunities, assess risks and tailor your strategies to meet the demands of the market. Without market research, decisions are often based on assumptions or guesswork, leading to costly mistakes.
• Customer-centric approach: A cornerstone of market research involves developing a deep understanding of customer needs and preferences. This gives you valuable insights into your target audience, helping you develop products, services and marketing campaigns that resonate with your customers.
• Competitive advantage: By conducting market research, you’ll gain a competitive edge. You’ll be able to identify gaps in the market, analyze competitor strengths and weaknesses, and position your business strategically. This enables you to create unique value propositions, differentiate yourself from competitors, and seize opportunities that others may overlook.
• Risk mitigation: Market research helps you anticipate market shifts and potential challenges. By identifying threats early, you can proactively adjust their strategies to mitigate risks and respond effectively to changing circumstances. This proactive approach is particularly valuable in volatile industries.
• Resource optimization: Conducting market research allows organizations to allocate their time, money and resources more efficiently. It ensures that investments are made in areas with the highest potential return on investment, reducing wasted resources and improving overall business performance.
• Adaptation to market trends: Markets evolve rapidly, driven by technological advancements, cultural shifts and changing consumer attitudes. Market research ensures that you stay ahead of these trends and adapt your offerings accordingly so you can avoid becoming obsolete. 

As you can see, market research empowers businesses to make data-driven decisions, cater to customer needs, outperform competitors, mitigate risks, optimize resources and stay agile in a dynamic marketplace. These benefits make it a huge industry; the global market research services market is expected to grow from $76.37 billion in 2021 to $108.57 billion in 2026 . Now, let’s dig into the different types of market research that can help you achieve these benefits.

Types of market research 

• Qualitative research
• Quantitative research
• Exploratory research
• Descriptive research
• Causal research
• Cross-sectional research
• Longitudinal research

Despite its advantages, 23% of organizations don’t have a clear market research strategy. Part of developing a strategy involves choosing the right type of market research for your business goals. The most commonly used approaches include:

1. Qualitative research

Qualitative research focuses on understanding the underlying motivations, attitudes and perceptions of individuals or groups. It is typically conducted through techniques like in-depth interviews, focus groups and content analysis — methods we’ll discuss further in the sections below. Qualitative research provides rich, nuanced insights that can inform product development, marketing strategies and brand positioning.

2. Quantitative research

Quantitative research, in contrast to qualitative research, involves the collection and analysis of numerical data, often through surveys, experiments and structured questionnaires. This approach allows for statistical analysis and the measurement of trends, making it suitable for large-scale market studies and hypothesis testing. While it’s worthwhile using a mix of qualitative and quantitative research, most businesses prioritize the latter because it is scientific, measurable and easily replicated across different experiments.

3. Exploratory research

Whether you’re conducting qualitative or quantitative research or a mix of both, exploratory research is often the first step. Its primary goal is to help you understand a market or problem so you can gain insights and identify potential issues or opportunities. This type of market research is less structured and is typically conducted through open-ended interviews, focus groups or secondary data analysis. Exploratory research is valuable when entering new markets or exploring new product ideas.

4. Descriptive research

As its name implies, descriptive research seeks to describe a market, population or phenomenon in detail. It involves collecting and summarizing data to answer questions about audience demographics and behaviors, market size, and current trends. Surveys, observational studies and content analysis are common methods used in descriptive research. 

5. Causal research

Causal research aims to establish cause-and-effect relationships between variables. It investigates whether changes in one variable result in changes in another. Experimental designs, A/B testing and regression analysis are common causal research methods. This sheds light on how specific marketing strategies or product changes impact consumer behavior.

6. Cross-sectional research

Cross-sectional market research involves collecting data from a sample of the population at a single point in time. It is used to analyze differences, relationships or trends among various groups within a population. Cross-sectional studies are helpful for market segmentation, identifying target audiences and assessing market trends at a specific moment.

7. Longitudinal research

Longitudinal research, in contrast to cross-sectional research, collects data from the same subjects over an extended period. This allows for the analysis of trends, changes and developments over time. Longitudinal studies are useful for tracking long-term developments in consumer preferences, brand loyalty and market dynamics.

Each type of market research has its strengths and weaknesses, and the method you choose depends on your specific research goals and the depth of understanding you’re aiming to achieve. In the following sections, we’ll delve into primary and secondary research approaches and specific research methods.

Primary vs. secondary market research

Market research of all types can be broadly categorized into two main approaches: primary research and secondary research. By understanding the differences between these approaches, you can better determine the most appropriate research method for your specific goals.

Primary market research 

Primary research involves the collection of original data straight from the source. Typically, this involves communicating directly with your target audience — through surveys, interviews, focus groups and more — to gather information. Here are some key attributes of primary market research:

• Customized data: Primary research provides data that is tailored to your research needs. You design a custom research study and gather information specific to your goals.
• Up-to-date insights: Because primary research involves communicating with customers, the data you collect reflects the most current market conditions and consumer behaviors.
• Time-consuming and resource-intensive: Despite its advantages, primary research can be labor-intensive and costly, especially when dealing with large sample sizes or complex study designs. Whether you hire a market research consultant, agency or use an in-house team, primary research studies consume a large amount of resources and time.

Secondary market research 

Secondary research, on the other hand, involves analyzing data that has already been compiled by third-party sources, such as online research tools, databases, news sites, industry reports and academic studies.

Here are the main characteristics of secondary market research:

• Cost-effective: Secondary research is generally more cost-effective than primary research since it doesn’t require building a research plan from scratch. You and your team can look at databases, websites and publications on an ongoing basis, without needing to design a custom experiment or hire a consultant. 
• Leverages multiple sources: Data tools and software extract data from multiple places across the web, and then consolidate that information within a single platform. This means you’ll get a greater amount of data and a wider scope from secondary research.
• Quick to access: You can access a wide range of information rapidly — often in seconds — if you’re using online research tools and databases. Because of this, you can act on insights sooner, rather than taking the time to develop an experiment. 

So, when should you use primary vs. secondary research? In practice, many market research projects incorporate both primary and secondary research to take advantage of the strengths of each approach.

One rule of thumb is to focus on secondary research to obtain background information, market trends or industry benchmarks. It is especially valuable for conducting preliminary research, competitor analysis, or when time and budget constraints are tight. Then, if you still have knowledge gaps or need to answer specific questions unique to your business model, use primary research to create a custom experiment. 

Market research methods

• Surveys and questionnaires
• Focus groups
• Observational research
• Online research tools
• Experiments
• Content analysis
• Ethnographic research

How do primary and secondary research approaches translate into specific research methods? Let’s take a look at the different ways you can gather data: 

1. Surveys and questionnaires

Surveys and questionnaires are popular methods for collecting structured data from a large number of respondents. They involve a set of predetermined questions that participants answer. Surveys can be conducted through various channels, including online tools, telephone interviews and in-person or online questionnaires. They are useful for gathering quantitative data and assessing customer demographics, opinions, preferences and needs. On average, customer surveys have a 33% response rate , so keep that in mind as you consider your sample size.

2. Interviews

Interviews are in-depth conversations with individuals or groups to gather qualitative insights. They can be structured (with predefined questions) or unstructured (with open-ended discussions). Interviews are valuable for exploring complex topics, uncovering motivations and obtaining detailed feedback. 

3. Focus groups

The most common primary research methods are in-depth webcam interviews and focus groups. Focus groups are a small gathering of participants who discuss a specific topic or product under the guidance of a moderator. These discussions are valuable for primary market research because they reveal insights into consumer attitudes, perceptions and emotions. Focus groups are especially useful for idea generation, concept testing and understanding group dynamics within your target audience.

4. Observational research

Observational research involves observing and recording participant behavior in a natural setting. This method is particularly valuable when studying consumer behavior in physical spaces, such as retail stores or public places. In some types of observational research, participants are aware you’re watching them; in other cases, you discreetly watch consumers without their knowledge, as they use your product. Either way, observational research provides firsthand insights into how people interact with products or environments.

5. Online research tools

You and your team can do your own secondary market research using online tools. These tools include data prospecting platforms and databases, as well as online surveys, social media listening, web analytics and sentiment analysis platforms. They help you gather data from online sources, monitor industry trends, track competitors, understand consumer preferences and keep tabs on online behavior. We’ll talk more about choosing the right market research tools in the sections that follow.

6. Experiments

Market research experiments are controlled tests of variables to determine causal relationships. While experiments are often associated with scientific research, they are also used in market research to assess the impact of specific marketing strategies, product features, or pricing and packaging changes.

7. Content analysis

Content analysis involves the systematic examination of textual, visual or audio content to identify patterns, themes and trends. It’s commonly applied to customer reviews, social media posts and other forms of online content to analyze consumer opinions and sentiments.

8. Ethnographic research

Ethnographic research immerses researchers into the daily lives of consumers to understand their behavior and culture. This method is particularly valuable when studying niche markets or exploring the cultural context of consumer choices.

How to do market research

• Set clear objectives
• Identify your target audience
• Choose your research methods
• Use the right market research tools
• Collect data
• Analyze data 
• Interpret your findings
• Identify opportunities and challenges
• Make informed business decisions
• Monitor and adapt

Now that you have gained insights into the various market research methods at your disposal, let’s delve into the practical aspects of how to conduct market research effectively. Here’s a quick step-by-step overview, from defining objectives to monitoring market shifts.

1. Set clear objectives

When you set clear and specific goals, you’re essentially creating a compass to guide your research questions and methodology. Start by precisely defining what you want to achieve. Are you launching a new product and want to understand its viability in the market? Are you evaluating customer satisfaction with a product redesign? 

Start by creating SMART goals — objectives that are specific, measurable, achievable, relevant and time-bound. Not only will this clarify your research focus from the outset, but it will also help you track progress and benchmark your success throughout the process. 

You should also consult with key stakeholders and team members to ensure alignment on your research objectives before diving into data collecting. This will help you gain diverse perspectives and insights that will shape your research approach.

2. Identify your target audience

Next, you’ll need to pinpoint your target audience to determine who should be included in your research. Begin by creating detailed buyer personas or stakeholder profiles. Consider demographic factors like age, gender, income and location, but also delve into psychographics, such as interests, values and pain points.

The more specific your target audience, the more accurate and actionable your research will be. Additionally, segment your audience if your research objectives involve studying different groups, such as current customers and potential leads.

If you already have existing customers, you can also hold conversations with them to better understand your target market. From there, you can refine your buyer personas and tailor your research methods accordingly.

3. Choose your research methods

Selecting the right research methods is crucial for gathering high-quality data. Start by considering the nature of your research objectives. If you’re exploring consumer preferences, surveys and interviews can provide valuable insights. For in-depth understanding, focus groups or observational research might be suitable. Consider using a mix of quantitative and qualitative methods to gain a well-rounded perspective. 

You’ll also need to consider your budget. Think about what you can realistically achieve using the time and resources available to you. If you have a fairly generous budget, you may want to try a mix of primary and secondary research approaches. If you’re doing market research for a startup , on the other hand, chances are your budget is somewhat limited. If that’s the case, try addressing your goals with secondary research tools before investing time and effort in a primary research study. 

4. Use the right market research tools

Whether you’re conducting primary or secondary research, you’ll need to choose the right tools. These can help you do anything from sending surveys to customers to monitoring trends and analyzing data. Here are some examples of popular market research tools:

• Market research software: Crunchbase is a platform that provides best-in-class company data, making it valuable for market research on growing companies and industries. You can use Crunchbase to access trusted, first-party funding data, revenue data, news and firmographics, enabling you to monitor industry trends and understand customer needs.

• Survey and questionnaire tools: SurveyMonkey is a widely used online survey platform that allows you to create, distribute and analyze surveys. Google Forms is a free tool that lets you create surveys and collect responses through Google Drive.
• Data analysis software: Microsoft Excel and Google Sheets are useful for conducting statistical analyses. SPSS is a powerful statistical analysis software used for data processing, analysis and reporting.
• Social listening tools: Brandwatch is a social listening and analytics platform that helps you monitor social media conversations, track sentiment and analyze trends. Mention is a media monitoring tool that allows you to track mentions of your brand, competitors and keywords across various online sources.
• Data visualization platforms: Tableau is a data visualization tool that helps you create interactive and shareable dashboards and reports. Power BI by Microsoft is a business analytics tool for creating interactive visualizations and reports.

5. Collect data

There’s an infinite amount of data you could be collecting using these tools, so you’ll need to be intentional about going after the data that aligns with your research goals. Implement your chosen research methods, whether it’s distributing surveys, conducting interviews or pulling from secondary research platforms. Pay close attention to data quality and accuracy, and stick to a standardized process to streamline data capture and reduce errors. 

6. Analyze data

Once data is collected, you’ll need to analyze it systematically. Use statistical software or analysis tools to identify patterns, trends and correlations. For qualitative data, employ thematic analysis to extract common themes and insights. Visualize your findings with charts, graphs and tables to make complex data more understandable.

If you’re not proficient in data analysis, consider outsourcing or collaborating with a data analyst who can assist in processing and interpreting your data accurately.

7. Interpret your findings

Interpreting your market research findings involves understanding what the data means in the context of your objectives. Are there significant trends that uncover the answers to your initial research questions? Consider the implications of your findings on your business strategy. It’s essential to move beyond raw data and extract actionable insights that inform decision-making.

Hold a cross-functional meeting or workshop with relevant team members to collectively interpret the findings. Different perspectives can lead to more comprehensive insights and innovative solutions.

8. Identify opportunities and challenges

Use your research findings to identify potential growth opportunities and challenges within your market. What segments of your audience are underserved or overlooked? Are there emerging trends you can capitalize on? Conversely, what obstacles or competitors could hinder your progress?

Lay out this information in a clear and organized way by conducting a SWOT analysis, which stands for strengths, weaknesses, opportunities and threats. Jot down notes for each of these areas to provide a structured overview of gaps and hurdles in the market.

9. Make informed business decisions

Market research is only valuable if it leads to informed decisions for your company. Based on your insights, devise actionable strategies and initiatives that align with your research objectives. Whether it’s refining your product, targeting new customer segments or adjusting pricing, ensure your decisions are rooted in the data.

At this point, it’s also crucial to keep your team aligned and accountable. Create an action plan that outlines specific steps, responsibilities and timelines for implementing the recommendations derived from your research. 

10. Monitor and adapt

Market research isn’t a one-time activity; it’s an ongoing process. Continuously monitor market conditions, customer behaviors and industry trends. Set up mechanisms to collect real-time data and feedback. As you gather new information, be prepared to adapt your strategies and tactics accordingly. Regularly revisiting your research ensures your business remains agile and reflects changing market dynamics and consumer preferences.

Online market research sources

As you go through the steps above, you’ll want to turn to trusted, reputable sources to gather your data. Here’s a list to get you started:

• Crunchbase: As mentioned above, Crunchbase is an online platform with an extensive dataset, allowing you to access in-depth insights on market trends, consumer behavior and competitive analysis. You can also customize your search options to tailor your research to specific industries, geographic regions or customer personas.

• Academic databases: Academic databases, such as ProQuest and JSTOR , are treasure troves of scholarly research papers, studies and academic journals. They offer in-depth analyses of various subjects, including market trends, consumer preferences and industry-specific insights. Researchers can access a wealth of peer-reviewed publications to gain a deeper understanding of their research topics.
• Government and NGO databases: Government agencies, nongovernmental organizations and other institutions frequently maintain databases containing valuable economic, demographic and industry-related data. These sources offer credible statistics and reports on a wide range of topics, making them essential for market researchers. Examples include the U.S. Census Bureau , the Bureau of Labor Statistics and the Pew Research Center .
• Industry reports: Industry reports and market studies are comprehensive documents prepared by research firms, industry associations and consulting companies. They provide in-depth insights into specific markets, including market size, trends, competitive analysis and consumer behavior. You can find this information by looking at relevant industry association databases; examples include the American Marketing Association and the National Retail Federation .
• Social media and online communities: Social media platforms like LinkedIn or Twitter (X) , forums such as Reddit and Quora , and review platforms such as G2 can provide real-time insights into consumer sentiment, opinions and trends. 

Market research examples

At this point, you have market research tools and data sources — but how do you act on the data you gather? Let’s go over some real-world examples that illustrate the practical application of market research across various industries. These examples showcase how market research can lead to smart decision-making and successful business decisions.

Example 1: Apple’s iPhone launch

Apple ’s iconic iPhone launch in 2007 serves as a prime example of market research driving product innovation in tech. Before the iPhone’s release, Apple conducted extensive market research to understand consumer preferences, pain points and unmet needs in the mobile phone industry. This research led to the development of a touchscreen smartphone with a user-friendly interface, addressing consumer demands for a more intuitive and versatile device. The result was a revolutionary product that disrupted the market and redefined the smartphone industry.

Example 2: McDonald’s global expansion

McDonald’s successful global expansion strategy demonstrates the importance of market research when expanding into new territories. Before entering a new market, McDonald’s conducts thorough research to understand local tastes, preferences and cultural nuances. This research informs menu customization, marketing strategies and store design. For instance, in India, McDonald’s offers a menu tailored to local preferences, including vegetarian options. This market-specific approach has enabled McDonald’s to adapt and thrive in diverse global markets.

Example 3: Organic and sustainable farming

The shift toward organic and sustainable farming practices in the food industry is driven by market research that indicates increased consumer demand for healthier and environmentally friendly food options. As a result, food producers and retailers invest in sustainable sourcing and organic product lines — such as with these sustainable seafood startups — to align with this shift in consumer values. 

The bottom line? Market research has multiple use cases and is a critical practice for any industry. Whether it’s launching groundbreaking products, entering new markets or responding to changing consumer preferences, you can use market research to shape successful strategies and outcomes.

Market research templates

You finally have a strong understanding of how to do market research and apply it in the real world. Before we wrap up, here are some market research templates that you can use as a starting point for your projects:

• Smartsheet competitive analysis templates : These spreadsheets can serve as a framework for gathering information about the competitive landscape and obtaining valuable lessons to apply to your business strategy.
• SurveyMonkey product survey template : Customize the questions on this survey based on what you want to learn from your target customers.
• HubSpot templates : HubSpot offers a wide range of free templates you can use for market research, business planning and more.
• SCORE templates : SCORE is a nonprofit organization that provides templates for business plans, market analysis and financial projections.
• SBA.gov : The U.S. Small Business Administration offers templates for every aspect of your business, including market research, and is particularly valuable for new startups. 

Strengthen your business with market research

When conducted effectively, market research is like a guiding star. Equipped with the right tools and techniques, you can uncover valuable insights, stay competitive, foster innovation and navigate the complexities of your industry.

Throughout this guide, we’ve discussed the definition of market research, different research methods, and how to conduct it effectively. We’ve also explored various types of market research and shared practical insights and templates for getting started. 

Now, it’s time to start the research process. Trust in data, listen to the market and make informed decisions that guide your company toward lasting success.

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