Written by Sonal Patil
Understanding the two sides of market research will enable one to do market research in an appropriate way: plan the best strategic decision and accomplish goals. Among the many areas of market research, stock markets are particularly difficult to analyze effectively due to their potential volatility.
Please share this article – Go to very top of page, right hand side, for social media buttons.
Is Market Research a Boon or a Drawback?
Market research is a methodical, factual collection and analysis of data about your target market, audience, competition, and/or environment aimed towards increasing your understanding of them. What most people overlook is the fact that market research is not an activity to be conducted only once. It is an ongoing cycle, or at least it should be if you want to reap the benefits.
It is said that knowledge is power and so is the case when it comes to market research. The information you find in the process can steer key strategic business decisions and usually, if market research is conducted properly, the findings and conclusions you attain have a value that surpasses the cost of the research itself. The same is true of researching the stock market and analyzing company data prior to investing.
Market Research has almost always been a prerequisite to success of any upcoming or existing services or products in the market. There never has been or will be any other alternative to market research (other than an occasional occurrence of “dumb” luck) which is used in striking a chord with the target audience. However, just like a coin, it also has two sides i.e. it comes with its own upsides and downsides.
Just What is Market Research?
In the simplest terms, market research is the process of defining a market, competition in that market, and pricing that the market can support. But here are a lot of subtle factors beneath that basic statement. From the Entrepreneur Encyclopedia:
Market research provides relevant data to help solve marketing challenges that a business will most likely face–an integral part of the business planning process. In fact, strategies such as market segmentation (identifying specific groups within a market) and product differentiation (creating an identity for a product or service that separates it from those of the competitors) are impossible to develop without market research.
Market research can be original, that which a firm does for itself of hires a consultant to develop. Customer surveys are an example of this type of research. It can also be “generic”, information compiled by and available from generally available sources such as government agencies, trade associations, and academic institutions. For example, extensive demographic data is available from the U.S. Census Bureau.
Market Research as a Boon
Marketing research is an invaluable tool and just the kind of investment you should make to be at the top of your game. Some benefits of market research are listed below:
1. Market research gives you insight into the minds of your current and potential customers.
Once you have your research outputs, you should have sufficient ammo to devise effective ways to interact with your customers. You should be able to figure out the likes and dislikes of your audience. Then you can customize what you say to them in accordance with their tastes and make them take the desired action.
2. Using Research and Analysis in the Stock Market
A totally different type of market research is used by investors. When involved in the stock market, fundamental research and analysis will enable you to maximize investment opportunities. This type of analysis involves researching company data such as financial records, researching a company’s assets, its market share and market potential.
Sources for such information include annual reports, financial statements, balance sheets, cash flow statements and others. Such information can be obtained from databases such as EDGAR (Electronic Data Gathering, Analysis and Retrieval), an electronic filing system created by the Securities and Exchange Commission to make corporate filings more accessible
This type of research provides potential investors with the type of background information needed to make informed investment decisions. The more research you carry out, then the lower the risk of investment should be. In such cases market or company research is a definite boon
3. It helps you spot opportunities in the marketplace.
Research might bring it to your notice that the new product/service you plan to launch may not be what your market wants or needs. You may then go ahead and tailor your offer as per the market’s demands. It may also identify investment opportunities, or even cases where the data obtained may indicate it time to sell shares in a particular company or business sector.
4. It helps you curtail risks.
Market research may provide you with all the information you require to decide related to your targeted market whether to take action on a particular concern. For example, you may discover through research that the specific location where you zeroed in on opening a store already has a flooded market in your line of business. Hence you will now look for a more appropriate store after foreseeing this potential future threat in your market.
It may also indicate a reduction or increase in stock market risk – again this may indicate a good time to buy or to sell shares. It’s not only company data that may be important here, but also an analysis of trends in a market or business sector. This is just as true in Forex as in more traditional stock transactions.
5. It assesses your position in the market.
It is always good to know where you stand amongst your competitors. Market research gives you a peek into this and you can then take appropriate actions so as to strengthen your stature and increase your market share in the same way as Nintendo Shares Increased.
6. It points out probable problems.
You can get customers’ feedback to a new product/service when it is still being developed. This may help steer further development in the right direction so it suits its intended market.
7. It helps you plan ahead.
Research can help you guesstimate the prospective sales of a new product/service and also the advertising costs required to attain maximum profits.
8. It can help you set up trends.
If you consider market research as a continuous practice carried out at regular intervals, then you will compile a lot of data which may be used to analyze your consumers and initiate new trends. Not only that, but you can get useful information through trend analysis.
A stock market analysis by Bespoke Investment Group revealed a significant gap between daytime profits and those achieved overnight when the market was closed for normal trading. The highest profits during this market research came overnight.
9. It helps you track your progress.
It is important that you are aware of the progress of your business at any point in time. Information from market research helps you gauge and keep tabs on your progress, which can be helpful in making key decisions and taking appropriate measures.
Market Research as a Drawback
Though market research can be a great tool it comes along with its own set of limitations. We have compiled a list of these:
1. It Does Not Cure All Corporate Ills.
Marketing Research is not the ultimate solution to every marketing issue. It does offer potentially accurate information but it must be used properly to solve the problem.
2. Not an Exact Science but a Fact-Finding Exercise.
Market research is largely associated with human behavior and hence there are no absolute rules. Market forces are influenced by many uncontrollable and intervening factors. This provides scope for inaccurate or time-dependent conclusions. Results may not be conclusive or even accurate as we shall discuss shortly. And when investing, a lot can happen in financial and stock markets in a short period of time to negate the results of protracted analysis periods.
Data must be properly collected and organized. The Bespoke Investment Group research – mentioned earlier would not have shown the day-night difference in profit had it been carried out over 24-hour periods rather than split between day and night profits. Currency exchange markets can be very volatile, and Forex profits are often made with rapid on-the-spot trading conditions. It is critical to recognize time variability of data.
3. Time Constraint Is Always an Issue
Researching a market is a long process and needs sufficient time for completion. The period between initiating the research and implementation of deduced decisions may be critical. Situations can change, and with them the conclusions drawn. The accuracy and usefulness of research results can be questionable. As stated above, protracted research periods can produce outdated results with limited usefulness. This is particularly so in a volatile stock market, but also must be watched in retail markets as well. Yesterday’s fad can become tomorrow’s dud.
4. Mistakes Can Happen.
Complex problems may not be thoroughly studied and their effect may not be properly analyzed by the researcher due to insufficient funds, time and technique. This results in flawed findings.
5. Research Can be Costly
Market research can be costly depending on the methods chosen by the company. Outsourcing market research to a company comes at a huge cost. Research and results analysis using company employees must be scheduled and accounted for during office hours while significant changes can occur out of office hours. This is particularly true in foreign exchange markets.
6. Limitations of Tools and Techniques Is a Barrier.
Certain types of research, including stock market research, may involve specialized tools and techniques. This requirement, including a lack of tools and training, can lead to questionable results.
Is Market Research a Boon or a Drawback: Conclusion
The usefulness of market research, including stock market research, depends on how it is carried out, the timescale and the training and expertise of researchers. Whether market research is a boon or a drawback depends on a number of factors, many discussed here. Market research can be invaluable or a complete waste of time and money. Identifying the difference will go a long way toward having a boon rather than a big drawback.
So basically, whether it is a boon or a drawback for you will always depend on how efficient and smart you are while utilizing this tool. Let us know your suggestions in the comments section below.