The investment for opening the store in Monterrey was about USD 1 million dollars. The potential entrepreneurs spent around USD 10 thousand in marketing research, which kept them from making a bad investment.
The market research process
There is an inherent risk when trying to expand the market, launching a new product, or starting a new business. Defining that a market exists for your business idea will help in reducing that risk.
You may think that with a bunch of collected data and facts you will be able to decide whether or not to go forward with your idea. But the challenge is not just collecting the data, but how to transform it and how to use it. Market research will support you in collecting, transforming, and getting meaning from the data.
Some of the reasons why market research is so important are:
- The cost of errors. Launching and selling a new product that is not successful in the marketplace could cause you to lose your entire investment.
- Conducting market research will help you identify new trends, market segments, and niches.
- Market research will end up saving you time by developing focused strategies based on a better understanding of your customers.
Market research involves all the activities that allow the company to obtain the required data for decision support. Market research is collecting, interpreting, and communicating the information used for strategic marketing. The most typical approaches are to conduct a tailored, one-time market research study as described below, or to use readily available information such as the periodical information provided by companies like AC Nielsen.
This section will describe how to conduct a market research study. The main steps are:
- Identify and define the problem: The first step is defining the target or problem to solve for your market research. Most of the time it is more than one problem to solve, but you should prioritize. The right definition of the problem should allow us to obtain the needed data.
- Define the objectives: The objective should answer the question of what you want to obtain from the market research. In this step you should define the scope and action plan. Developing the objectives should consist of establishing a budget, understanding the environment, developing the approach to analysis, and formulating hypotheses.
- Developing a research plan: Based upon a well-defined problem and objectives, the framework for the research plan should be apparent. This step requires the greatest amount of thought, time, and expertise. It includes incorporating knowledge from secondary information, analysis, qualitative research, methodology selection, question measurement and scale selection, questionnaire design, sample design and size, and determining the data analysis to be performed.
- Collecting the data: This is the point at which the finalized questionnaire (survey instrument) is used in gathering information among the chosen sample segments. There are a variety of data collection methodologies to consider. For instance: Computer Assisted Telephone Interviewing, Mail Survey, Internet Survey, Mall intercepts, Traditional telephone interviewing, Internet panel, home panel, among others.
- Performing data analysis: This is the process of analyzing the collected data, and transforming complex to simple information. Less complex analysis on smaller data sets can be handled with any of a number of personal computer office suite tools, like spreadsheets, while more complex analysis and larger data sets require dedicated market research analysis software. Types of analysis that might be performed are simple frequency distributions, crosstab analysis, multiple regression (driver analysis), cluster analysis, factor analysis, perceptual mapping (multidimensional scaling), structural equation modeling and data mining
- Reporting and presentation: This is one of the most important steps. All business critical information and knowledge that comes from your market research investment are limited by how they are presented to decision makers. There are as many reporting styles as there are research reports, but some are definitely better than others, and there are definitely trends to be aware of.
It is important to mention that market research by itself does not arrive at solutions or marketing decisions. It does not even guarantee your business success. However, when conducting a well-executed market research study you can reduce the uncertainty in the decision-making process, increasing at the same time the probability and magnitude of success.
To illustrate these concepts in a live situation, we have included a discussion of how a market research study was performed to determine the potential market for a new concept for funeral services in Monterrey, Mexico.
