Understanding Markets and Customers

Understanding markets and customers are essential for businesses. Why? To target their marketing efforts to the right groups of customers in an effective market setting. By doing this, the business gains a competitive advantage, creates customer engagement, and thus promotes longstanding relationships with customers. One way organizations can understand their markets and customers is through conducting market research and understanding consumer behavior. Let's take a look in more detail.

Market Understanding Definition

How do we try to understand markets? Well, marketers must collect a lot of data to find insightful information on the market and their customers.

Segmentation, targeting, and positioning are methods marketers use to understand their customers, but beyond segmentation, marketers engage in market research to further their understanding of the market and customers. Although segmentation helps marketers generate customer profiles, market research can deepen their knowledge of customer and market wants and needs.

Understanding the Market

Market research helps businesses understand why customers purchase specific products or brands. It is directly related to the marketing mix, as it allows companies to make decisions about product, price, promotion, and place through the data collected during market research.

Understanding Markets and Customers: The benefits of market research

As a marketer, collecting helpful information and good data is essential. Good research can:

Conducting Market Research

Companies conduct market research to develop an understanding of their markets and customers. Figure 1 below shows the different types of market research firms may choose to undertake.

Fig. 1. Market Research Types

Market research helps describe the characteristics of markets and customers and their buying behavior (or how customers purchase a product or service, known as 'purchase patterns'). This area of research is known as descriptive research. This type of research helps identify trends and compare markets or different groups of customers.

Another form of research is predictive research. This type of research helps a company predict customer and market trends: what might happen in the future?

Explanatory research helps a company understand why a particular phenomenon occurs. This type of research can be useful in understanding why customers behave in certain ways.

Exploratory research helps marketers investigate a market, for instance, when there is no existing information available in a particular market. Exploratory research helps identify and understand problems or gaps in the market.

Finally, market research helps marketers understand the 6Ws (who, what, when, where, why, what influences) of customers and markets. They are as follows:

• Who are our customers, and who consumes our products? Remember, the consumer (the user) and the customer (the person who purchases the product) might be two different people.

• What do they buy? Are some of our products more successful than others?

• When are they buying? Some customers might purchase the product daily, whereas others might only purchase it monthly.

• Where do they buy our products? Certain customers might prefer to shop in-store and experience face-to-face interactions, whereas others might prefer to shop online from the comfort of their own homes.

• Why do customers buy our products? Do they buy it out of necessity? Do they buy it as a status symbol? Do they buy them as gifts to others?

• What influences customers to purchase the product? Is it a complex purchase with many steps? Do others influence the purchase, or is it an individual decision?

Marketers can develop better marketing strategies by finding answers to all these questions. Market research and customer understanding also help marketers gain insight into the types of products to develop - which product would be the most successful in satisfying our customers' wants and needs? Marketers might even discover new market trends that have not been addressed by other companies yet. Being the first to address a new customer need can result in a competitive advantage and high returns for the company.

The Importance of Technology in Understanding Markets and Customers

Recently, the state of technology and our access to technology have increased significantly. This development has made it easier for businesses to digitalize market and customer analysis and interpretation. Companies no longer have to physically go through old records and receipts to understand customers' and competitors' behavior, which saves time and helps them gain access to helpful information. Some of the digital tools used for market research include the following:

1. The Internet provides businesses access to various secondary information sources such as reports, databases, articles, etc.

2. Social media allows businesses to communicate directly with their existing customers and target potential customers directly with their advertisements and promotions. Through such direct communication, companies can create profiles of their customers and their behavior.

3. Competitor websites include public information available to anyone. They, however, also have information valuable to businesses trying to compete in the same market. This way, companies can find helpful information about what their competitors are doing (market conditions).

4. Online profiles and loyalty cards allow businesses to track and record what their customers are buying, how often they are buying, and how (online or offline) they are buying certain products or services. These profiles allow the business to gather valuable information on customer behavior which may help them understand how to create effective promotions and campaigns to target specific market segments.

Understanding Customer Behavior

Businesses try to understand customer behavior for a variety of reasons. They aim to create products and services that satisfy customer wants and needs. Therefore, customers are central to all marketing activities, and thus it is essential to understand their attitudes, behavior, and changes in behavioral factors.

As a result, companies should pay close attention to their target market and customer segments. One of the ways to do this is by conducting market research and analyzing consumer behavior.