The purpose of market research is to identify new business opportunities, and to determine why sales in certain markets have declined. Companies frequently hire market researchers from outside their company in order to ensure objectivity and to protect against parochial interests’ interfering in the informational process. This latter refers to the tendency of employees to shape data, or to maintain an excessively narrow focus on their research, in order to protect their own departments or offices. It’s a basic survival mechanism that is circumvented through the contracting of outside agencies.
Markets can and often do change over time. Public tastes evolve, and new potential markets are identified through research. On a global level, market research is essential to ensure that both products and marketing are culturally appropriate to each unique country. American marketers, especially during the 1970s, frequently had difficulty in certain foreign markets because of the failure to adequately understand the unique cultural and even physical characteristics of those markets. For example, American manufacturers of kitchen appliances learned the hard way that Japanese kitchens are considerably smaller than American ones by virtue of the far greater density of urban populations in Japan and the consequent size limitations on Japanese apartments. Smaller appliances, like refrigerators, had to be designed with those unique physical characteristics in mind in order to remain competitive. Similarly, American automobile manufacturers belatedly came to appreciate that European and Asian markets are less susceptible to the “big car craze” that regularly sweeps the United States. Again, urban density, costs, and more pragmatic approaches to transportation were inadequately appreciated by American companies
Market research should indicate when a particular country or segment of a population is experiencing fundamental transformations in taste or demand. And the data collected should provide sufficient lead-time for manufacturers to reorient their facilities to meet those newly emerging demands. The best market research helps to create new demands by identifying unmet “wants” on the part of consumers. The public didn’t know it wanted the capability to store the texts of thousands of books on a small hand-held reading device that it could carry around like a paperback. Amazon.com, however, identified a market for such a device, and the Kindle paved the way for an entirely new industry: ereaders.
In short, market research serves multiple purposes. It identifies new markets for existing products; it identifies new products for existing markets; and it helps to predict transitions in markets before they occur.