Market research is gathering information about consumers’ needs and preferences. Market research could include readily available research conducted by third parties. This is also known as secondary research. A problem that could arise with secondary research is the research could be outdated. Market research generally includes market size, the target audience, and the competition.
The market size is the potential number of customers within a specific industry. All businesses or companies within the specific industry compete for this same pool of potential customers.
The target audience is the group of people most likely to purchase a product or service. Businesses or companies need to consider whether or not their target audience wants to buy this type of product. Another consideration is whether or not this product is in their price range or budget.
The most important competition considerations are the largest or most important competitors. The most important competitors include companies with the best SEO rankings on the first search engine results pages(SERPs). Another consideration is how a business can differentiate itself from the competition.
Supply and Demand
Supply and demand are the cornerstones of economics. Adam Smith discussed the invisible hand of the market in his book The Wealth of Nations. Introductory economics courses are generally about supply and demand. Real-life market situations don’t always neatly align with supply and demand curves discussed in books or economics courses. However, that is well beyond the scope of this blog post. Supply is intuitive; it’s the amount of a product available to be consumed. Supply shortages can be artificially created. When shortages occur, the demand for that product generally increases and becomes more expensive.
Demand is how much consumers are willing and able to buy a certain product over a given period of time. Questions businesses should ask themselves: is there reason to believe the level of demand for this product will continue? Is there enough demand for this product to make it worth selling? Is this the type of product their target audience would consider buying?
Beyond supply, demand, and scarcity. Economics books and courses often teach correctly that businesses and companies are motivated by profit. In business, you have to spend money to make money, and the goal is to generate more revenue(maybe, realistically, a lot more revenue) than expenses. Simply put, profit is the total revenue minus the total expenses.
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