How to do market research to increase the chance of business success

Importance of market research

Instead of making assumptions or relying on your gut, market research lets you go straight to the source — your customers — and uncover their priorities, painpoints, behaviors, and decisions.

With this information at hand, you can:

• Identify underserved needs and niches in the market
• Develop differentiated products, services, and messaging that align with consumer demand
• Keep a pulse on industry trends and emerging opportunities

By proactively adapting your business to match target customers’ evolving needs, you cement loyalty and protect your bottom line from encroaching competitors.

Defining your target audience

Before you start sending links to surveys and paying for social listening tools, you should first determine who you will be researching.

That’s where customer personas come in: fictional, generalized representations of who your business should be targeting. Here are some ideas on how to define your customer personas:

• Demographics: What is their age, gender, income level, education, occupation, location, and family status?
• Psychographics: What are their values, attitudes, interests, lifestyles, and behaviors?
• Pain points: What frustrates them? What problems could you solve?
• Motivations: What do they want to achieve or feel by using your product/service?
• Objections: What may prevent them from buying from you?
• Purchasing factors: Are they price sensitive? Loyalty driven? Looking for convenience?
• Communication preferences: Where and how do they want to receive information?

Primary vs. secondary research

Given all the different types of market research, differentiating between primary vs. secondary research can make the process less overwhelming. While both provide valuable insights for growing businesses, they have key differences in their approaches and applications.

Primary research involves collecting new, original data directly from target customers, typically through surveys, interviews, focus groups, and observation. While primary research lets you tailor questions to get the specific information you need, it is typically more time-intensive and expensive to conduct — especially when aiming for a larger sample size.

On the other hand, secondary research involves analyzing existing information from industry reports, government data, academic studies, and company databases. Although secondary research is usually quicker and more affordable, the data may not fully align with your specific business goals or even be outdated or incomplete.

Primary research: conducting surveys and interviews

Surveys and interviews are the bedrock of primary research methods but can be challenging to get right.

Use these tips to ensure your efforts yield valuable and actionable data:

• Clearly define your research objectives: What specific answers do you need?
• Determine your target respondents: Will you reach them online or in person? Make sure you have a plan for distributing your survey or finding interview respondents – after all, the larger the sample size, the more reliable your data may be.
• Formulate your questions: Approximately 31% of people are willing to spend 10 to 14 minutes completing a survey, with shorter surveys often yielding better data quality.¹ Use simple, clear wording, and try to include a mix of quantitative and qualitative (open-ended) questions.
• Organize your survey or interview structure: The questions should flow logically, and you should have an introduction that sets expectations.
• Test and refine: Test your survey or interview with a smaller group to refine or replace unclear questions.

Secondary research: analyzing competitors and market trends

While secondary market research may appear easy to conduct, it can be daunting if you don’t know where to start looking.

Here are some tricks to keep in mind when analyzing competitors, staying atop industry trends, and understanding evolving consumer behavior:

• Clearly define your research goals: What data do you need to make informed business decisions?
• Determine your sources: Cast a wide net across industry publications, databases, government data, and competitors' websites. Use specific keywords and tags to filter for the most relevant data points.
• Organize and document sources: Track where you find useful data so it's easy to reference again.
• Critically evaluate data: Check for potential biases, limitations, age of data, and small sample sizes. Try to corroborate key findings by verifying that data points are consistent across multiple sources.

Utilizing online tools and resources

Secondary research can be conducted quickly and affordably by leveraging online resources and databases that provide market insights, trends, competitive intelligence, and consumer behavior data.

Here are some top online tools and resources to check out:

• Competitors’ marketing touchpoints, including websites and social media accounts, allow you to compare positioning, messaging, and offerings.
• Press releases let you learn about new competitor product launches and business moves.
• Industry research reports, whitepapers, and publications are helpful ways to learn more about trends, forecasts, and market data.
• Business databases and platforms, like Statista, IBISWorld, D&B Hoovers, and Euromonitor, provide trusted industry research and consumer trends.
• Google Trends lets you analyze search volume patterns around keywords.
• Social media analytics from Facebook, TikTok, and Instagram provide details on followers, engagement, and competitors.
• Review sites like Yelp or Amazon offer a glimpse into what your competitors’ customers are saying.

A great way to leverage broad market and consumer insights is by benchmarking them against your business’s data and analytics, which you can uncover using PayPal’s reporting tools.

Interpreting data and making research-based decisions

Gathering data is just the first step. The true value of market research comes once you interpret the findings and apply them to your business decisions. Use these steps to get started:

• Review data and highlight key takeaways: What are the major themes, patterns, or surprises in the research? Are there potential problems to solve or opportunities to pursue? Where can you differentiate yourself from competitors?
• Develop specific strategies for Product Development: Design offerings that solve customer pain points or target unmet needs.
• Develop specific strategies for Marketing: Craft messaging and campaigns that speak to customer motivations and preferences.
• Develop specific strategies for Sales: Optimize channels and approaches based on how target customers want to browse and buy.
• Develop specific strategies for Pricing: Set pricing backed by perceived value rather than assumptions.
• Develop specific strategies for Tracking Results: This allows you to demonstrate the ROI of market research and fine-tune future approaches.

When conducted effectively, market research helps you gain a better understanding of the market and subsequently make smarter, data-driven decisions that increase the odds of sustained growth. It can also offer the insights you need to create a tailored marketing strategy — a must-have for every growing business.