How to carry out quality market research for e-commerce
NOVEMBER 1, 2022 | USE CASES
Whether you’re an emerging brand preparing an e-commerce launch in a competitive industry, an established merchant looking to refresh your store, or a startup that's trying to rapidly grow e-commerce sales there’s a common theme: you need to know your market.
Without research, you'll quickly fall into some of the same assumption-based traps that have doomed other businesses. You'll overspend on inventory that doesn't move, never really understand what motivates your customers to buy (or not buy), and be constantly frustrated by why your conversion rate isn't higher.
Unfortunately, there's no drive-thru menu for comprehensive market research. You can't pick it up on your way home, and you can't find it in the discount bin. It's hard work, and it takes time and money to do it right. The global market research industry exceeded more than $76 billion in 2021, according to Statista.
Luckily, we're here to help.
In this article, we'll look at everything you need to know about market research for e-commerce, including:
What it is
Why it's important (and how it can benefit your business)
What are the different types
How to create a plan
Ready to become an industry encyclopedia? Let's get started!
What is market research?
So, what exactly are we trying to find out? In a nutshell, market research is the process of gathering data and insights about a given market. This can include everything from understanding consumer trends to measuring brand awareness.
In the context of e-commerce, market research is critical for five main reasons:
Make better product decisions
Product decisions are tricky. You want to offer products that will sell, but you also don't want to be stuck with a bunch of inventory that's gathering dust: not only does it impact your bottom line, but it can also impact your seller ranking on platforms like Amazon. Market research can help you find the right balance by studying consumer trends and understanding what people are looking for.
Validate (or invalidate) business hypotheses
Similarly, business hypotheses are often based on assumptions. For example, you might assume that increasing your ad spend will lead to more sales. But without market research, you won't know for sure if that's true. Market research allows you to test these assumptions and make decisions based on data rather than guesses.
Understand your target market
If you want to be successful in e-commerce, you need to understand who your target market is. Market research can help you identify your ideal customer and learn more about their needs, wants, and motivations. This information is critical for everything from developing your marketing strategy to choosing the right products to sell.
Competition is fierce in the e-commerce world. Market research can help you understand what your competitors are doing, where they're succeeding (and failing), and how you can differentiate yourself from them. It might even give you an idea of where the industry is headed so you can stay ahead of the curve.
Track (and improve) key metrics
Finally, market research can help you track important e-commerce metrics, such as customer satisfaction levels and brand awareness. This information is critical for understanding how well your business is performing and where there's room for improvement.
Types of market research
Walking around the mall and watching shoppers could be considered market research but we're talking about much more comprehensive data-based studies. They can take a variety of different forms, but often fall into the following four categories:
This type of research is all about understanding who your target market is. This can include everything from basic demographics (age, gender, location) to psychographics (lifestyle choices, personality traits).
You can use audience analysis to segment your customer base and create targeted marketing campaigns.
It might be obvious that young mothers are a target market for baby clothing, but you can further cross-segment that group and look at things like income, education level, or even whether they're first-time mothers.
Maybe you are going to go after something as specific as eco-conscious, multi-child mothers that are in a household making at least $100,000 per year for your sustainable, upscale children's clothing line.
Or maybe you are starting a hiking equipment brand, and want to go after more than just the people who love being outdoors. You can prioritize your research by proximity to high-level hiking trails, or might find there is a huge demand for more technical information and equipment among newbie hikers that live in cities.
When you look at a broader group of users, there may be some incorrect assumptions made about where your target market lies. This type of research can help you to focus on the right group and more accurately target potential leads.
Value proposition research
Understanding the ceiling and limitations of what your target market is willing to spend on a product or service is critical for any business.
No matter how good your product is, there's always a limit to what people are willing to pay. Value proposition research helps you understand this so you can price your products accordingly and avoid leaving money on the table.
If you are developing a luxury product, for instance, it is not enough to just set a high price point and move on. Your target market may value things like quality materials and craftsmanship, or they could only be looking for exclusivity and status. Both sides would lead to a higher price but for very different reasons.
With a more affordable product, you might find that your target market is price-sensitive and willing to switch to a competitor if they feel like they're being overcharged.
In this case, it would be important to make sure that your price point is in line with what the market is willing to pay, and that you offer some sort of value-add or differentiator that justifies any slight premium you might charge.
If you're using larger platforms, you may also be able to get ahead of the wave with dynamic pricing. This is a game-changing method for e-commerce entrepreneurs, meaning you can have AI adjust your price as needed for different demand seasons, profiles, and more.
As business looking to grow e-commerce sales, it's important to make sure you're selling products that people want to buy. That might sound like a no-brainer but you'd be surprised how many businesses get this wrong.
Product research for e-commerce can help you validate your product idea, understand what features customers are looking for, and even help you come up with new product ideas.
Say you're thinking about starting an online store that sells pet supplies. Before investing a lot of time and money into building out your store, you want to make sure there's a market for what you're selling. To do this, you might conduct some product research by:
Searching for pet supply retailers online and seeing which ones are doing well
Asking shoppers if they would buy pet supplies from an online store
Looking at trends in the pet industry (e.g., more people are buying organic pet food)
Talking to experts in the field (e.g., veterinarians, pet groomers)
Maybe you don't want to go up against the big dog food brand but have noticed there's a real lack of gourmet options for hamsters. That's product research at its best!
Even established brands need to keep their eye on the competition. This type of market research can take many different forms, but the goal is always to understand what your competitors are doing and how you can do it better.
This could involve everything from conducting interviews with their customers to see what they like and don't like, to hiring a company to do a full-scale analysis of their marketing campaigns.
You can analyze what keywords they've used on their website or product listing, who their paid advertising targets are, or the social media voice they are using to connect with consumers.
Every morsel of information will give you a better understanding of how to approach your marketing strategy.
Creating a market research plan
To understand the entire pie, you'll need to introduce several different strategies. This is where a lot of businesses get overwhelmed and either give up on market research altogether or only focus on one area (usually the easiest).
Creating a comprehensive market research plan doesn't have to be complicated. We've broken it down into five simple steps:
1. Define your objectives
2. Set your budget
3. Choose your methods
4. Collect and analyze your data
5. Take action on your findings
Let's take a closer look at each one.
1. Define your objectives
The first step is to sit down and figure out what you want to learn. This might seem like a no-brainer, but it's important to be as specific as possible. After all, you can't hit a target if you don't know what it is.
Some common objectives for market research include:
Determining whether there's a market for your product or service
Identifying your target audience
Learning about user needs and wants
Gauging customer satisfaction
Measuring brand awareness or perception
Without a goal, you won't be able to properly assess the findings of your research, and you'll likely end up with more questions than answers. So, take the time to think about what you want to learn and write it down.
2. Set your budget
Before you run out into the wild and start asking questions, you need to set a budget. This will ensure you're not spending more money than you have to and help you prioritize which strategies are most important for your business.
There are two main costs associated with market research for e-commerce:
The cost of conducting the research itself
The opportunity cost of not conducting the research
The first one is pretty straightforward. It includes things like hiring a firm to do surveys, focus groups, or in-depth interviews. If you're conducting the research yourself, it also includes the cost of things like software, questionnaires, and other materials.
The second cost is a bit more difficult to quantify. It's the potential revenue you could be missing out on by not doing the research in the first place. This is why it's so important to have a clear understanding of your objectives before you even start thinking about your budget.
Once you know what you want to achieve, you can better assess the potential ROI of market research and make a more informed decision about whether or not it's worth the investment.
3. Choose your methods
Now that you know what you want to learn and how much you're willing to spend, it's time to choose your methods. There are a ton of different options out there but not all of them will be right for your business. The key is to find the ones that align with your objectives and fit within your budget.
Surveys are one of the most popular methods because they're relatively cheap and easy to administer, and we collected some great examples at Affiliate World in Barcelona recently. You can reach a large number of people with minimal effort, and you can get a lot of useful data in a short amount of time.
There are several different options here, like:
Post-purchase surveys: These can be used to determine what value buyers were looking for in a product, and what challenges they had while trying to find a solution.
Sign-up surveys: To find out what industries your audience is coming from, and what needs they have that your product could address.
On-site surveys: These are used to collect data about customer satisfaction, or to find out how likely someone is to make a purchase.
That said, surveys also have their drawbacks. They're often not as reliable as other methods, and it can be difficult to get honest answers from respondents.
Focus groups are another common option, especially for businesses that are launching new products or services. They provide an opportunity to get feedback from a small group of people.
These are often done to:
Test product concepts
Identify messaging that resonates
Get feedback on packaging or design
Uncover unmet needs
However, they're also quite expensive, time-consuming, and can sometimes lead to more inaccurate data compared to broader, quantitative research.
In-depth interviews are a great way to get detailed information about a specific topic. They allow you to ask follow-up questions and probe deeper into certain areas. But like focus groups, they can be costly.
There are several other methods available, including ethnographic research, observation, and experimental studies. The best way to choose is to look at your objectives and budget and decide which method will give you the most bang for your buck.
4. Collect and analyze your data
Here comes the hard work. This is where you go out and collect the data you need to answer your research questions. Once you have it, it's time to start analyzing.
This is usually done with the help of specialized software or online tools. There are several different options available, each with its own set of features and capabilities. The key is to find one that meets your needs and allows you to easily analyze your data.
Once you have your data, it's time to start looking for patterns and trends. This is where you'll start to see the answers to your research questions emerge.
At this point, you may also want to consider conducting additional research to further explore certain areas. This is often referred to as secondary research, and it can be very helpful for getting a more complete picture of your market.
5. Take action on your findings
Testing, testing, testing. No company will have success without first putting its products and services to the test. Leverage your market research and analysis to fine-tune your offering and ensure that it's as appealing as possible to your target customers.
And don't forget, market research is an ongoing process. You should never stop collecting data and trying to improve your understanding of your customers. The more you know, the better equipped you'll be to make decisions that will help your business grow.
There isn't a one-size-fits-all solution for market research for e-commerce. The best approach will carefully consider the unique needs of your business.
By following the steps outlined above, you can develop a comprehensive plan that will help you collect the data you need to make informed decisions about your products, services, and marketing strategy - and most of all, start converting more sales. With a strong knowledge of how your business positions itself, you're in the right place to start scaling your business – and this is where Multilogin comes in. With the ability to run multiple accounts without bans, you can open several store fronts on the same platform to target different segments, grow different niches and more. Find out how it works in our e-commerce explainer.