Why Product Managers Should Understand The Importance of Market Research? | by Prayogi Adiraharjo | Jan, 2023

Market research skills are often overlooked, but it is crucial for building a successful product in the market

Entering a new market can be lucrative but challenging for a company, especially a new company with new products, having strong products or services is not enough to guarantee success. It is essential and crucial to thoroughly conduct market research to understand the local market and any potential challenges or risks. This includes examining distribution channels, cultural norms, economic and social trends, and competition. Doing so can provide valuable insights and help a company make informed decisions to enter the market with its product. As a product manager, the capabilities of doing market research play such a big role, it could reveal the product or service one step ahead or leave behind the competition, and it could be used as a strategy to move the business forward and utilized as a competitive advantage. This also can help a company make informed decisions about whether and how to enter a new market or whether they should pivot their company strategy.

Research has shown that customer-centric businesses are 60% more profitable.

A phased-to-launch product or service-to-market entry refers to the idea that entering a new market should be a carefully planned and structured process, rather than a sudden or haphazard decision. There are several steps or phases that a company needs to go through when entering a new market to launch a new product, including:

1. Sizing the opportunity: This involves evaluating the potential size and profitability of the new market and determining whether the company actually launching a product or service. The goal is to find out potential users or benefits that can be obtained from the sale of the products.
2. Concept testing: This involves testing new products or services in the target market to gauge consumer interest and identify any potential issues or challenges.
3. Competitor analysis: This involves studying the competition in the new market, including both well-known and lesser-known rivals, to understand the competitive landscape and develop a strategy for success.
4. Understanding the local market: This involves understanding the specific need of the user in a different category and adapting products or marketing strategies accordingly

Skill in market research will give benefit product managers, it helps to understand customer needs and market trends in order to develop products that meet the needs and desires of the target user and inform business and product development decisions, without hiring a market research agency, especially for a new startup company.

Here are four categories of decisions Product Managers use market research for. Market research is used by Product Managers for decision-making in the following areas:

Identifying the specific markets in which a product or service could potentially be successful

• Determining the specific needs and problems of customers within those markets
• Subdividing the larger market into smaller, more specific groups based on shared characteristics or needs
• Outlining the steps a customer takes in order to learn about, purchase, and use a product or service
• Assessing the potential feasibility and profitability of entering a new market

Defining the scope and boundaries of the product

• Developing and evaluating new product ideas
• Determining pricing strategies
• Identifying and prioritizing key features and release schedules

Evaluating marketing tactics and strategies

• Developing product messaging and marketing materials
• Tracking and analyzing the effectiveness of marketing efforts

Assessing business performance and success

• Gauging customer satisfaction levels
• Gathering information about competitors

During my time working at a market research agency, I was primarily assigned to the qualitative division. However, to accelerate my learning about research methods, I often conducted experiments on my own to gain a deeper understanding. Some of the common methods I used for user and market research purposes, both for personal projects and professional experience, can be considered for understanding the markets and users, which can be beneficial for business and product. These are some of the examples:

Primary Research

Primary research involves collecting first-hand data through methods like surveys, interviews, focus groups, and observations. It is also known as field research because it involves gathering data directly from sources rather than relying on preexisting information. Primary research is useful for obtaining current, relevant information about a specific research context, such as the evolving needs of a target market. Some benefits of primary research include:

• Greater control over research methodologies
• Access to current information
• Ability to reveal current trends rather than outdated ones
• Focus on individual markets rather than the mass market
• Ownership of collected data

Secondary research

Secondary research is a type of market research that involves collecting and analyzing existing information or research from external sources. It is typically less expensive and quicker to conduct than primary research, which involves collecting original data through methods such as surveys and experiments. Secondary research can be conducted by anyone, as no professional training is required. It is often used by small businesses and startups due to its low cost and ease of access to data. The advantage of secondary research includes the ability to obtain a broad understanding of a topic quickly, the opportunity to shape longer-term primary research investments based on initial findings, and the availability of data from various sources.

Qualitative

Qualitative research involves collecting and analyzing non-numerical data, such as opinions, beliefs, and experiences, in order to understand a particular phenomenon in depth. This type of research is particularly useful for businesses and start-ups looking to gain a deeper understanding of their target audience or market. Qualitative research can be conducted remotely or in person, and data is collected directly from individuals or groups.

Qualitative research provides insight to capture shifting attitudes and sentiments within a target group, uncovering insights that may not be revealed through quantitative methods, having more targeted and focused research, being able to manage cost and speed effectively with smaller groups, promoting authenticity in discussions, and offering greater flexibility as questions can be adapted over time.

Quantitative

Quantitative research is a type of market research that involves collecting, analyzing, and comparing numerical data. It is often used to make predictions, identify trends, find patterns, and calculate averages. Quantitative research can be conducted using primary or secondary data as long as it is in numerical form. This type of research is useful for businesses of all sizes and can help with forecasting, market sizing, validation, and more. Data is collected systematically and recorded in a database using various methods, such as surveys, polls, and experiments.

Quantitative research gives advantages including the ability to analyze data consistently and reliably, the potential to replicate studies in the future or in different markets, the ability to study large sample sizes, fewer variables involved, faster and easier data collection through automation, and cost-effectiveness compared to qualitative research.

Types of quantitative research include experimental research, descriptive research, survey research, quasi-experimental research, and correlational research.

Audience Research

Consumer insights are essential for any business to thrive. By analyzing consumer behavior, we can increase engagement, identify new digital strategies, and gain a deeper understanding of our target audience.

Some examples of how audience-based research can benefit organization include:

1. Determining the audience’s interests compared to those in the same industry or competitors.
2. Assessing audience loyalty.
3. Identifying where the audience spends their time online.
4. Obtaining a clear picture of the audience’s demographics, interests, and locations.

By conducting audience analysis, we can gain valuable insights that will help us to tailor marketing efforts and better serve customers.

Competitor Analysis

Conducting a competitive analysis can provide valuable insights into the market and industry. It allows us to understand what products and strategies are successful in the industry, what the target user is interested in, which competitors we should pay attention to, and how we can differentiate our offering from the competition. Overall, a competitive analysis can help to understand the competitive landscape and make informed decisions about how to position the product or service in the market. Through in-depth competitor research, we can stay ahead of the competition and make informed decisions about marketing and growth strategies.

Mixed Methods Research

Combining multiple research methods, known as a mixed-method approach, can enhance the accuracy and depth of our market research findings. By using a combination of qualitative and quantitative methods, we can gain a well-rounded understanding of our market and make informed decisions. By using a mixed-method approach, we can gain a more comprehensive and reliable understanding of the market.

Market research can also be conducted independently. It will be a more cost-effective and efficient way to understand customers without hiring a market research agency as I mentioned before. It can be conducted at any stage of a product’s lifecycle and can help businesses stay competitive by providing quick insights and keeping products on the cutting edge.

Market research can help understand user/customer needs and desire better, along with other important aspects of the target customers. When we understand our target customers better, that means we will be able to more effectively reach them. That is an essential step to creating a customer-centric business. Customer-centric companies keep the customer experience at the forefront of all they do.

Conducting market research can help to identify new opportunities for growth and improvement in business. This includes discovering unreached customer segments, potential business partnerships, and opportunities to improve or expand our products and services. By gathering insights about our target audience and the market, we can make informed decisions that will help the business grow and succeed.

Market research allows businesses to make informed decisions based on data, rather than guesses or assumptions, in order to increase their chances of success. Gathering information on consumer needs and preferences can help businesses minimize risks and maximize rewards by testing concepts and predicting their potential for success.

Before conducting market research, it is essential to determine the main key research question in order to identify new markets that should be covered. Forbes suggests considering 14 factors before entering a new market. These are some topics that need to be revealed before research starts

• Business goals: What are the objectives for entering the specific market? Which strategy will best meet these goals? Which markets should be considered?
• Size of business: Does our size mean some strategies might not be possible? What is the overall economic and social environment in the target market?
• Resources: Are there strategies we cannot use because of a lack of resources, such as direct investment?
• Product or service: Which strategy will align best with the product or service we’re offering? How should the product, service, or messaging be adapted to optimize the offer in the new market?
• Competition: What is the level of competition in the market? What entry strategies are our competitors using? Which strategy will give us the best competitive edge? How does the competitive landscape in the new market affect its attractiveness?
• Risk: What level of risk can the company face? Which strategies are the least risky?

Why do we need to consider all of those questions? Those questions will help to guide a holistic approach when conducting market research so that the data obtained will be insightful. The most important part is to use the right research method to gather the data.

Sensing the competitive landscape is very important, Porter’s Five Forces will help to understand the competitive landscape. This is a model tool used to analyze the competitive landscape of a new market. It helps to understand the intensity of horizontal competition from substitute products or services, established rivals, and new entrants, as well as vertical competition from suppliers and customers. In order to enter a new market, it is important to consider these factors and how they may impact the success of the business. Understanding the competitive landscape can help a company make informed decisions about pricing, marketing strategies, and potential partnerships.

When considering entering a new market, it is important for companies to have a thorough understanding of the customers, competitors, and regulations within that market. This can be achieved through in-depth market research, such as market segmentation analysis, and by considering potential partners, distribution and manufacturing infrastructure, and financial planning based on regulatory and trade cost analysis. It is also essential for companies to understand how their brand will be received in the new market, as simply transplanting their image and messaging may not be effective.

To effectively utilize market research, it’s crucial to take action based on the information gathered. The importance of taking action on market research cannot be overstated — without it, the research is rendered useless. To establish a successful product strategy, product managers should use market research to develop a well-informed strategy, communicate it effectively to the team and stakeholders, and take action to implement it.

We can learn from the Starbucks case. Starbucks was cautious about entering the Italian market due to the country’s highly developed coffee culture, and it wasn’t until 2018 that the first Starbucks branch opened in Milan after waiting for 47 years. However, the brand has struggled in Italy due to a lack of market research and an inability to meet local preferences. This is not the first time Starbucks has faced challenges in a new market, as it also failed to appeal to Australian coffee lovers and had to shut down its Israeli operations within two years of launch.