Companies often put a lot of time and money into market research and development (R&D). R&D mainly focuses on bringing new products to market. It does this through formulating ideas, testing products and improving them. This is the first phase of the product life cycle, during which costs are high and no sales are achieved.
R&D is often required when new rival products appear on the market. Therefore, a business is likely to choose to develop improved products in order to differentiate its brand. This is particularly in industries where price competition is less important.
R&D can be made easier if a business has a registered trademark. This can be defined as symbols or logos which differentiate its brand from others. Trademarks are valid for 10 years and can be renewed. Organisations such as Nike, McDonald’s and thousands of others have based their marketing on recognisable symbols or logos which are displayed on their products. These logos are intended to clearly set apart their business from that of rivals.
R&D will involve prototypes which are versions of the final product which has been researched, tested and will undergo further testing before being released onto the market. Prototypes are a crucial part of developing products.
Once customer feedback has been collated and the product has undergone appropriate changes, a working model of the product will be produced. This will undergo further testing before being released onto the market. The length of this process varies. Dyson himself created 500 prototypes before he successfully launched his first bagless hoover.
A big part of R&D is market research. Market research is the process of collecting data on a market, and then analysing it to assist with market-related decisions.
Performing market research allows an entrepreneur to learn a lot of important information about the market they are trying to enter. This includes:
– The opportunities within the market, such as a recent trend paving the way for a new business.
– The size of the market in terms of both the volume of sales and how valuable those sales are.
– The rate at which the market is growing, so that future sales growth can be predicted.
– The market share of existing firms.
– The market segments within the overall market, which are groups of similar needs within the market. For example, in the clothing market there are different sectors for sportswear and formal wear which must be marketed in different ways.
As entrepreneurs often have very limited funding when starting a business, they may put all of these resources into starting the business and none into market research.
They may also ignore doing market research as they are sure that their product is good enough already. This explains the reasoning behind a lot of businesses failing shortly after starting up, as entrepreneurs don’t fully understand what a customer may want – unsurprisingly this can be a very dangerous thing to do and it leaves a lot of new businesses in very difficult circumstances!
A cheap way for these companies to carry out market research would be to do phone surveying. It is often cheaper than postal questionnaires. However, people may be unwilling to answer surveys over the phone.
Focus groups can also be useful because it allows for the detailed discussion of such issues, and may highlight other issues that the business may not have considered. However, as they only involve small numbers of people, they are often not truly representative of the wider population.
Finally, customer feedback is useful for businesses as they can be given customer opinions directly. However, there are a number of issues, such as feedback not being given by regular or potential new customers.
But the main moral of the story here is that whatever a business is doing, it’s vital that they know not only their product, but the market and the customer too!