Why is market research important? 📊
Around two years ago, I read this piece by Mark Ritson in the MarketingWeek, on why you should spend at least 5% of your marketing budget on research to ensure that the remaining 95% is spent correctly… I still think about it at times.
I wonder if brands still consider research to be an important factor when allocating their yearly budget, especially since most economies are still slowly playing catch-up.
Image source: IMF, 2024
In simple terms, hypothetically speaking, if in 2023 you allocated £100 for your marketing budget, you should ideally allocate £5 for research. However, due to a crunch, your budget in 2024 is now down to £50. The sensible thing to do would be to keep aside £2.5 for research, but the pressure from stakeholders to deliver would probably make you skip this step and spend everything you have to grab some eyeballs. Think events, guest blogs, collaborations, sponsorships, etc.
According to the latest numbers reported in the IPA Bellwether Report, marketing budgets were revised up to their strongest level in almost a decade in Q4 2023. Unfortunately, less money was being allotted to market research (-5%, compared to -1.5% from Q3 2023). But should you be holding back on research for your brand?
I’d say no.
Let me put it this way: it’s not just you going through a budget cut, but also your customers. They are making calculated decisions, too, and their preferences are changing.
When preferences change, you need to double down on your messaging—make it clear, make it stick, and, above all, tell your prospects why you’re better.
That’s where research will help you.
The traditional approach would be to deploy a survey to understand customer preferences and buying behaviour and test your messaging and pricing strategy.
But research has changed since then, or rather, introduced different ways worth exploring.
Some methods promise a new approach but do the same things under a different label, and some just build on existing techniques to make findings more digestible. But the big change is that market researchers have now mastered extracting different storylines and POVs from just a few sets of data points.
And that’s why we encourage you to look beyond the labels or be more like David Rose from Schitts Creek.
So how can you do it?
For starters, think about approaching your research findings from different angles. This will help you gain perspective on your findings and move past the idea that you must always deploy cutting-edge technology to stay ahead of the curve.
New angles can be used to breathe life into mundane numbers and create interesting storylines.
Another important factor is to clearly understand what you’re looking for. There are two main categories of research that will help you achieve that:
- Are you trying to understand your market structure?
Questions like how your consumers group different prospects of your brand, how your brand caters to different target audiences, who your prospects are, what features to include to keep everyone happy, etc., fall into this category. - Are you trying to understand (causal) relationships?
Questions like how a price reduction will affect your brand’s perception, how the new budget announcement will affect your sales, etc., fall into this category.
(Source: Analytics for Customer Insights – A non-technical introduction by Chuck Chakrapani, PhD.)
Now that you’re all caught up let’s dive into the next section…
Four research methods worth your time (and attention) 👀
1. Market Segmentation via cluster analysis
With customer preferences changing due to economic conditions, you must reassess your target audience and who you would like to cater to.
Grouping or segmenting audiences of different characteristics who are interested in your offerings is a basic marketing tactic, and that is how cluster analysis can help you:
- Understand what groups to target and run a specific paid-marketing campaign on socials
- Understand what offerings to club together to create custom packages
- Understand how your customers group you with your competitors based on perceived similarities
This is what the process looks like:
Finally, for clusters to be useful in marketing they need to make sense. So, the next time you’re using cluster analysis for market segmentation, ask yourself:
‘Do these clusters make sense?’
‘Are they doing what I expected them to do?’
2. Identifying customer needs via Kano Analysis
One of the biggest problems marketing runs into is not clearly understanding what the customer needs and how to communicate it. In fact, this problem plagues a lot of product teams as well.
While the product team likes to focus on functionality, the marketing team likes to focus on emotions – both being equally important to sell.
And that’s where Kano analysis steps in 👑 – it pits product features against customer satisfaction and tells you exactly what the customer needs.
Here’s what the analysis will look like (click on the image to enlarge it):
Also, if you’d like to further strengthen the results, add in the results from a Net Promoter Survey. Simply asking your audience how they feel about a specific feature, will help you establish satisfaction scores, giving your findings more credibility.
It will also tell you what features your audience simply doesn’t care about.
3. Study cause-and-effect through Regression Analysis
From a marketing perspective, a slight change in your messaging or campaign targeting can lead to a flurry of changes or, in some cases, lead to no changes at all (even though you were expecting some).
Regression analysis helps prove a cause-and-effect relationship between different factors.
In simple terms you isolate a dependent variable (like satisfaction or loyalty) and test it against independent variables (like price, quality, service, etc.).
For example, here the ‘Buying intent’ is a dependent variable and ‘Price’, ‘User Experience’, ‘Functionality’ and ‘Customer Service’ are independent variables.
Based on the results, we can find out what factors influence the buying decision, and that same information can be used to craft punchy marketing campaigns.
This not only helps your stakeholders know what’s working, but also helps them understand what is not a contributing factor.
💡Bonus tip – Be careful of multicollinearity!
In simple terms, if two variable factors are highly correlated to each other, it’s best to combine them.
In the above example, good user experience can also be linked to great customer service. So, if you see similar results from both of them, just combine to represent one factor.
4. Optimised advertising via TURF Analysis
TURF stands for Total Unduplicated Reach and Frequency.
Doesn’t sound sexy, does it? Let’s stick to TURF. (Or, as Eli likes to call it, Surf N’ TURF)
TURF analysis helps to find the best possible combination of factors to give you the best results. This analysis is used to solve various market research problems, like finding optimum product bundles, the best set of messaging for your campaign, or my personal favourite…
What combination of platforms would you spend your marketing dollars on? 💰
Apart from giving you a clear picture of what options suit you best, here is when you should use TURF analysis:
- Planning and evaluating your marketing campaigns
- Strategising your new product launches
- Finding best ways to enter a new sector/market
- Regularly assessing your audience
And that’s it. Those were the four research methods you should not be sleeping on. But I get it, this was from a marketer’s point of view…
So to conclude, I asked the research team one question to get their opinion – ‘What combination of the methods mentioned above would you recommend to a brand and why?’
And here’s what the experts said…
Any investment in research is money well spent, as it can enrich your company’s purpose and help you find better ways to communicate that to the market. I think a simple survey can do this so the investment doesn’t need to be huge and intimidating.
However, if you have the funds to invest, I think that ‘Market Segmentation’ would be my recommended method for many brands, as it can help them understand their current and potential clients. Once the investment has been made into a segmentation, the golden questions can also be reused for further studies and this method can evolve along with your businesses’ needs.
👋🏼 Connect with Katie on LinkedIn.
Market segmentation research coupled with some qualitative in-depth interviews would be my recommendation to any brand struggling to target and reach its customers.
Through using a combination of factor and cluster analysis (also known as ‘Persona analysis’ at Sapio Research) we can really bring the data to life. The output we provide is a handful of different characters (or ‘personas’) that signpost the different key types of customers in your target pool based on the data.
Within each persona we can tell you things like what makes them tick, where they look for information as well as their propensity to use your services/product. By recruiting and interviewing people in line with these personas, you can get a fully rounded idea of how to effectively reach your different customer groups and optimise your marketing strategy.
👋🏼 Connect with Lizzie on LinkedIn.
The foundation for ambitious business tactics is a strategy cemented in a solid foundation. This foundation should be formed from a suite of good market research.
The methodologies discussed here cover the range of research steps all businesses should be undertaking, from big macro deep dives across new or existing markets using market segmentations, through to the narrower ad hoc projects that typically occur as a reaction to issues that require guidance from the experts on what customers are doing and why they are doing it.
Picking the right research partner is critical in ensuring high ROI on any spend, whether you’re building out long-term strategies or trying to generate short-term sales uplift.
At Sapio Research, we cover the range of research methodologies to help you make the optimal decisions whatever your overall objectives.
👋🏼 Connect with Tom on LinkedIn.
That’s it. We hope this piece helps you decide what kind of research you want to do next.
