Author: Dominika Jakubowska
UNDERSTANDING YOUR CUSTOMER’S NEEDS
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.
A relevant portfolio maximizes return on investment
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.
PHASES IN THE PRODUCT LIFE CYCLE
Going to the market, a product has a life cycle of four phases: Pre-birth, Youth, Maturity, and Old age. Examples of products in these phases are 3D television, Blue ray, DVD and video. Each stage has its own characteristics and market research is useful at all phases.
Establishing needs during Pre-birth
In the pre-birth phase, the sales are relatively low. The most effective types of market research studies for product development in this phase are needs assessment and concept screening studies. In need assessment studies, the usage of existing products are examined and unmet needs are explored. For concept screening a new concept is shown to the target audience for feedback. Questions address, for example, the clarity of the concept, the challenges that people face in using existing products, the reasonability of the concept’s pricing and the demand for the product or the purchase intention.
Stimulating product uptake during Youth
Youth is the growth stage. There are three crucial questions that need to be answered. Where does the product/company stand at this point in time? Where does the company wish to go? How can the company achieve its goals? Market research is highly effective in providing answers to all of these questions. It can provide an assessment of the size of the market, its growth prospects, the distribution routes, the market segments, and factors influencing the purchasing decision, including the perceived strengths and weaknesses of suppliers. It can guide product design, price points, packaging design, promotions and service.
Improving product performance during Maturity
Maintain market share. Market research can be used here for exploring optimum price points, determining market share and market size, and for gauging attitudes towards the consumption of the product. In addition, products can be compared to those of the competitors, addressing the perceived strengths and weaknesses and unmet needs. The research can even uncover potential product development opportunities. Three typical market research studies in this phase are mentioned here. Customer satisfaction research is done to retain existing customers and hopefully attract potential customers. Business-to-business market segmentation research determines how to tailor an offering to meet the needs of different segments. And, pricing strategy research determines optimal price points so as to achieve maximum profits.
Determining the future during Old-age
The final stage in a product's life cycle comprises the product's decline in sales and profits. Often there are substitutes available that are often cheaper or more efficient and new innovations gradually eclipse the product. Not all products necessarily die, as there are often opportunities for modifications and improvements that can result in a rejuvenation of the life cycle. Such opportunities for revitalizing a product can be uncovered through market research and can help a company seek new markets for its aging products. Typical market research studies conducted at this aging stage of the product life cycle include needs-based assessment.