Product market research is done in order to find out about the customers needs and wants, and it is an essential tool for market penetration. This research will ideally yield results that will help a company determine how to market a product, and what market segment should be the target audience for said product. This information is usually gathered through surveys, focus groups and choice modelling. Market research should not be limited to customer base though, competitors, products and marketing effectiveness need also be measured and evaluated.

A product market research survey questionnaire can be performed in a variety of ways, ranging from personally to e-mail and over the phone, but regardless of the setting, there should be a standard set of questions. Customers should be asked what they like or dislike about a particular product or service, and whether they would buy that product or service. They should also be inquired about their buying habits in general. Simple multiple choice/yes-no questions are the most recommended format. These types of questions may be followed-up by a “why” question, so that the person can elaborate on their answers.

A focus group differs from a survey in that it is not an individual activity. As the name implies, a group of people is asked about a product or service, and are encouraged to put forth their opinions, ideas and feelings on the subject. In addition to expounding their thoughts, members of the focus group are allowed to interact with one another. Focus groups help companies gain feedback on product market research, from naming and testing it to deciding the ideal target demographic for market penetration.

Choice modelling, unlike both surveys and focus groups, accurately predicts the way that an individual will react in a given situation by modelling their decision process in a specific context. These predictions can be made over a great number of possible scenarios. Choice modelling states that behind a person’s choices there is a rational decision process that uses a specific functional form. After the functional form of the decision process has been determined, a specific model can be calculated from available information.

As was mentioned above, not only potential customers but also the competition should be researched. Competitor analysis involves evaluating the strengths and weaknesses of current and possible competitors. It is advisable to put together a competitor array, defining your industry (scope and nature), determining who your competitors are,
determining who your customers are and the benefits they expect, determining what the key success factors are in your industry, ranking the key success factors and rating each competitor on each of the key success factors.