The Guide to Market Research for eCommerce
In the digital marketplace we now call eCommerce, opportunities are rife. The growth has been astounding, and that will continue to be the case. With a projected revenue of $4.1 trillion in 2024 and the projected number of users to rea ch 3.6 billion by 2029, the numbers are astronomical.
With these numbers, this also means that merchants in the space are all competing for their slice of that revenue. And with the projected growth, the number of merchants will only continue to rise and lead to greater saturation.
As such, before becoming an eCommerce merchant you have to ask yourself some core questions:
- What items do you want to sell?
- Who are you competing against, and how can you be competitive? Is it pricing or are you offering a better product?
- Is the product in a growing market where demand will continue to outweigh supply in the coming months/years?
- Does the product have healthy profit margins?
Not to mention, you’ll have some secondary considerations as well:
- How are you going to store your inventory?
- How do you plan to get your product to your consumer?
- What happens if your customer has a complaint about your product?
Hence while eCommerce definitely presents great opportunities, the competition is extremely tight and there are many considerations that you’ll have to make.
If you’re feeling stressed out or confused by all these questions, fret not because it’s all part of the process. If anything, it’s good that it’s got you thinking about these potential issues. And lucky for you, the internet has a wealth of information (just like this one) to guide you through it.
So how can you tackle these areas? The answer: market research.
Breaking down market research
Market research in eCommerce is broad. It is the process of collecting market data, such as demand trends, profitability, consumer behavior, and competitive insights. Customer research data is collected based on what your business is trying to achieve, such as regarding a particular product or market niche.
The data is then used to make better investment decisions across the board. This could be for entering the market, launching marketing campaigns, new product launches, demographic expansions, and other strategies.
Through market research, it’ll help your business develop and allow you to fine-tune your tactics and strategies. You can also evaluate the viability of your business through research conducted directly with potential customers. It allows you to more accurately define your target market and get opinions and feedback from consumers about their interest in a product or service.
When you understand how your target consumer feels and behaves, you can then take steps to meet their needs and mitigate risks. Market research can also help you keep abreast of what your competitors are offering, which in turn will affect what your customers expect from you.
Market research connects with every aspect of a business—including brand, product, customer service, marketing and sales.
The types of market research
All methods of market research can be sorted into one of two categories: primary and secondary.
Primary research is market research data that you collect yourself. This is raw data collected through a range of different means—surveys, focus groups, observations, and interviews, being some of the most popular.
Secondary research is the use of data that has already been collected, analyzed and published—typically it’s data you don’t own and that hasn’t been conducted with your business specifically in mind. Secondary research can be used to support the use of primary research.
Both primary and secondary research have their advantages, but they are often best used when paired together. As a pair, they provide you robustness that gives you confidence in your hypotheses.
In-house vs outsourcing your market research
In-house market research here means using your own team and tools to gather and analyze the data to meet your objectives. This way, you’re in full control of the process, from what questions you ask to how you interpret the responses. Your business can focus on the exact issues that matter most to your business.
However, this may not be feasible for some. This would present a laborious and time-consuming task that stores with an already lean team would not be able to complete successfully. Not only that, if you have no idea how to conduct market research, biases or flaws in the research could arise that skew the data gathered.
On the flip side, outsourcing your market research means handing the control over to a market research company or agency. These are people who’ve got the experience and tools to conduct comprehensive studies properly, and might be able to spot trends or patterns that you didn’t even know to look for.
However, they aren’t versed in your day-to-day business and may not fully understand the challenges and goals you have. There’s a risk of potential communication gaps or nuances getting lost in translation which affects the quality of your data.
How market research can make or break your business
It is never a good idea to fly blind. Heck, it’s not even a good idea to fly partially blind.
This idea translates to market research and eCommerce as well. Market research gives you clarity into what you’re up against, enabling you to make educated business decisions. It can make all the difference between your business going red, or making monumental gains.
With market research, your business can stand to gain an understanding of many things:
- What your consumers like and dislike.
- What they need and what messaging they will respond to.
- An understanding of your competition to identify opportunities to differentiate their products and services from them.
- And a whole lot more.
Your business faces an endless stream of decisions around target markets, pricing, promotion, distribution channels, and product features and benefits. Not only that, you must account for all the factors involved. With market research, it makes the entire process an easier one to go through.
Market research allows you to make data-driven decisions to drive your growth and innovation. Without market research, business decisions are based at best on past consumer behavior, economic indicators, or at worst, on gut feel.
Decisions are made in a bubble without thought to what the competition is doing. As an eCommerce merchant, you are there to serve your customers, not personal preferences within the company. Success is more likely to follow if you know the difference, and market research will help make sure your decisions are insight-driven.
When does the need for market research arise
As mentioned above, the benefits of market research can be significant. The decision of embarking on market research ultimately lies on the business’ goals and next-steps.
Let’s say you’re a medium-sized store on Shopify selling apparel and you’re looking to grow your business. To do that, you decide that you want to start offering new products to increase your consumer base. How are you going to decide what to sell and how much of it?
Through market research, you can find out from your consumers what exactly they would want to see from your store and boost the customer experience. You’d be able to gather insights on what products would attract consumers, and not only that, offer you good profit margins as well.
Upon identifying potential products, you can also figure out what kind of competition you’d be facing in the marketplace and ideate ways to differentiate from them. In the saturated market that we have now, this is vital to grab as much revenue as you can.
With that said, any business will need to perform market research to a certain degree. This all depends on a number of factors:
- What are your research objectives
- What is your budget
- How do you intend to gather the data
Market research: use-cases
Building onto our previous section, market research can be done for almost anything. If you want to find something out from your target audience, it’s likely market research is the answer.
Here are a few common uses of market research:
Product development
You might have a great idea for a product, but this begs the question: is it something everyone would love or is it just you? This is a common question that businesses have to consider when developing new products, and is something that can be solved with market research.
Market research for product development can focus on different areas. You can research market viability, the demand for the product you have in mind, the features your target group is looking for, or the best way to position, price, communicate and market your product to your target audience.
Through this, you account for your competitors, market developments, and important trends. Whether you’re running market research for a startup or a massive brand, it’s an essential step to make sure your new products hit the mark.
Market research for new product development is all about identifying opportunities and finding out if it’s worth bringing your product idea to life. And if so, how to do that in the best way. It’s about more than what the competition is doing, and if your target audience would be willing to spend money on you. You can also dive into market trends to identify the best ways to market your product.
Buyer segmentation and profiling
Segmentation is a popular technique used to separate your target market according to key characteristics. These include: behavior, demographic information and social attitudes.
Segmentation allows you to create relevant content for your different segments, ideally helping you to better connect with all of them.
Buyer personas are profiles of fictional customers—with real attributes. With these personas, you can develop products and communications that are right for your different audiences, and can also guide your decision-making process.
Buyer personas capture the key characteristics of your customer segments, along with meaningful insights about what they want or need from you. They provide a powerful reminder of consumer attitudes when developing a product or service, a marketing campaign or a new brand direction.
By understanding your buyers and potential customers, including their motivations, needs, and pain points, you can optimize everything from your marketing communications to your products to make sure the right people get the relevant content, at the right time, and via the right channel.
Marketing strategy
Effective market research is also a crucial tool for developing an effective marketing strategy—a company’s plan for how they will promote their products.
It helps businesses to understand the target market to avoid mistakes, stay on message, and predict customer needs. Marketing needs to leverage relevant data to reach the best possible solution based on the research available. Only then can they implement the solution, modify the solution, and successfully deliver that solution to the market.
Step-by-step guide for eCommerce market research
With its importance laid out, let’s cover how your business can go about conducting research.
- Define your research objectives
This lays the foundation for your market research. By scoping down your goal, you will have a clear idea of what your business wishes to ask, gather and derive from this research.
- Identify your target audience
Following the previous step, we now have to ask ourselves what target customers we wish to hit. By establishing this, you have an idea of what their characteristics, preferences, and needs are. This way, it will guide the types of questions you ask and who you’re asking.
- Competitor analysis
Here you identify your main competitors and analyze them. This is to grasp where you stand or potentially will/want to stand in the market, and figure out how you wish to build out from there to differentiate.
- Analyze market trends
Stay updated on the latest industry trends, such as emerging technologies, new consumer behaviors, and changing regulations. This will enable you to adapt your strategy accordingly and capitalize on any emerging opportunities.
- Collect data
This can be done in a number of ways. Gather qualitative or quantitative data, through primary or secondary research. This all depends on the initial objectives you’ve set in step 1 that determine the kinds of data you require.
Data can take a number of forms: third, second, first, or zero-party data. There are stark differences between each of them and there are different use-cases for them, although zero-party data and first-party data are generally preferred.
- Analyze and interpret data
Upon collecting the valuable data, the next important step is to take the time to identify any patterns, trends, or insights. This can be performed using statistical techniques, data visualization, and more to gain an understanding.
- Draw conclusions
Summarize your findings, draw conclusions, and make actionable recommendations based on the results of your research. These recommendations should align with your business objectives and help you optimize your eCommerce strategy.
How the landscape is changing due to big data and AI
The most successful brands rely on multiple sources of data to inform their strategy and decision making. From their marketing segmentation to the product features they develop, to comments on social media.
There’re tools that use machine learning and artificial intelligence (AI) to automate the tracking of what people are saying about your brand across all sites.
The emergence of newer and more sophisticated tools and platforms gives brands access to more data sources than ever. This affects how the data is analyzed and used to make decisions. This also increases the speed at which they operate, with minimal lead time allowing brands to be responsive to business conditions and take an agile approach to improvements and opportunities.
Expert partners have an important role in getting the best data, particularly giving access to additional market research know-how, helping you find respondents, fielding surveys and reporting on results.
Interested to learn more about Fairing? Book a demo here today.
