What market research is for

1. Before it commits money to a product, a price or a new site, a business gathers information so the decision rests on evidence rather than a hunch.
2. Research is aimed at three things: how much demand there is likely to be, who the competition is, and who exactly the target market is.

Finding out likely demand

1. Demand is the quantity of a product customers are willing and able to buy, and research tries to size it before the business spends anything.
2. The business asks how many potential customers there are, how often they would buy and what they would be prepared to pay.
   1. A café owner who counts 1,800 people walking past a proposed site between 7am and 10am has evidence about demand that a hunch could never provide.
3. If the answers show too few customers, the business can change the product, pick a different site or drop the idea altogether while it is still cheap to do so.

Understanding the competition

1. Research also looks outwards at rivals: how many there are, what they sell, what they charge and how customers rate them.
2. That shows whether there is room to enter the market at all, and what the business would have to do differently to win customers away from firms already there.
   1. Aldi checks rivals' shelf prices constantly, which is how it can advertise direct price comparisons against Tesco and Sainsbury's.
3. Rivals' weaknesses are where the market opportunities sit, such as slow service, short opening hours or a part of the range that nobody stocks.
   1. Deliveroo grew out of one such opportunity, that thousands of restaurants had customers who wanted delivery and no way of delivering to them.

Identifying the target market

1. Research shows which customers actually want the product, so the business can aim at them rather than at everybody and hope.
2. Knowing the target market then sets the whole marketing mix, because the product, the price, the promotion and the place all follow from who the customer is.
   1. Monzo found that younger customers wanted instant notifications and simple budgeting on a phone, so it built an app-only bank instead of a branch network.

Reducing risk

1. Every business decision carries risk, the chance that the money, time and reputation put into it are lost.
2. Research reduces that risk by finding out what customers want first, so the business is far less likely to launch something nobody wants.
   1. The cost of a few hundred questionnaires is tiny next to the cost of fitting out a shop that then stands empty.
3. Research reduces risk without ever removing it, because a sample may not represent everyone, people do not always do what they say they will, and tastes can move after the research is finished.