Launching the product without performing the market research is too risky nowadays. Read the article to learn how to use this valuable tool properly.
Market research is one of the most important components of any marketing strategy. To have a clear idea of how entrepreneurs need to develop cannabis-related businesses, successfully completed market research is vital. Eager to know how it helps to attract new investors, eliminate common pitfalls and most importantly, gain new, loyal customers? Let us reveal the cards!
What is Market Research?
Usually, marketers define market research as “determining features that are unique to a particular market and the analysis of these factors, which is aimed at making the right decisions regarding the cannabis business”. By analyzing the market, you can collect valuable data that will help you better understand your customers, determine appropriate pricing and identify your main competitors and their weaknesses.
Including market research in your business plan is a smart approach, especially if you are running a startup. Even if you are an individual entrepreneur and are not going to seek financial back up to manage your business, it is still important to have a clear plan. It is crucial to understand that market research is not just another section of a business plan, it is often its core component.
Types of Market Research
Market research includes many ways to analyze and prepare your business to successfully penetrate the cannabis market. The following are the main types of research that you should implement in order to gain a competitive advantage over the market and properly analyze the market needs together with the prospective customer base.
- Market Segmentation
While carrying out market segmentation the best way to identify the needs, values, attitudes, behaviors, and demographics of prospective clients are to conduct a survey.
Without market segmentation, cannabis-related companies are going in blind and may end up failing their product launch due to a lack of knowledge of the target audience. A cannabis company may reach a client by chance, but they would miss a lot of others.
- Product Testing
A thorough understanding of how your product satisfies (or fails to satisfy) your buyers' needs is essential to both product development and marketing, so these types of market research studies have to be performed throughout a product’s life cycle.
In summary, entrepreneurs should be able to make rapid “launch” or “do not launch” decisions about new innovations and products before the product's release. Therefore, it might end up saving money and time.
Successful product testing generally:
- Outlines competitive advantages, as well as possible threats from competitors;
- Determines the products with the biggest revenue potential;
- Explains what changes should be prioritized before a product's release;
- Determines which product characteristics are the most important to your TA;
- Help to deliver marketing messages that modify or enhance current insights into your products/services.
- Ad Testing
Just like the product testing mentioned above, tests of your ad campaigns can save you precious time and resources. By taking potential campaigns straight to your customers and measuring their response, you can concentrate on creating an impactful ad.
- Satisfaction and Loyalty Research
Satisfied customers do not necessarily equate to loyal clients, but gauging buyer satisfaction is an excellent way to increase customer retention.
The goals of this analysis are:
- To define what factors impact loyalty and inspire repeat purchases;
- To fully observe overall satisfaction and recommendation probability over time;
- To help determine the product areas that need adjustment or development to meet changing needs;
- To increase customer loyalty;
- To indicate when particular changes have to be made to improve services and customer retention.
- Brand Awareness and Reach
By carrying out thorough and regular brand awareness questionnaires, cannabis businesses may definitively analyze how successfully they are running their ad campaigns, and what should be improved to inspire more loyalty amongst customers. Such surveys are to measure the following crucial points:
- Brand Loyalty;
- Brand Image;
- Brand Trust;
- Brand Recognition;
- Brand Identity;
- Brand Recall;
- Customer Profile.
- Research on Pricing
This research is usually aimed at identifying the correct pricing range for your cannabis products. It can help you recognize what points are crucial to your TA, and what they would be prepared to pay for them.
If you combine it with some basic research on your competitors’ pricing range, it provides perfect synergy and helps to gain a competitive advantage over the market.
How to Do Market Research
In order to conduct market research correctly, you must first determine the objectives of your business. This will determine the choice of methods, budget, terms of the study and subsequent analysis. Discarding unnecessary goals at this stage of company development saves both time and money. For example, Genesis Grow Corp needed a complete comprehensive market research study when they were about to start their company because they were introducing a brand-new method of cannabis cultivation and product distribution, so they required a big picture of the market and industry overall. Sometimes only some specific questions need to be covered:
- Finding a promising niche;
- Choosing the optimal pricing policy;
- Scouting successful competitors.
The following are the most crucial steps in moving toward successful market research:
- Conduct product research
At this point, you should analyze the characteristics of the goods, and reveal the most valuable qualities for your consumers. Then the product is compared to a competitor’s one. Eventually, figure out how you can improve it so that it meets the expectations of the buyer in terms of quality and price.
- Determine the market capacity
Potential market capacity is the total quantity of goods (services) that can be purchased by a consumer during a certain period. You can calculate it in physical terms (units) within a specifically delineated region. According to the results, you get the vision whether it is worth further production of this product (increase production), or you need to re-profile the activity.
- Perform market segmentation
This means separating consumers into sustainable groups according to social characteristics (income), demographic (age), gender and so on. The purpose is to find the most promising categories of consumers and adjusting certain qualities of the goods (packaging, names) in accordance with the requirements of the target group.
- Study your Target Audience
Business owners or marketers should draw up a “portrait” of the ideal consumer according to their habits, seasonal preferences, and reactions. Then set up marketing and advertising policies. The opinions of consumers are revealed through questionnaires and surveys, and their wishes are listened to and applied to market strategies with the aim of continuous improvement of a product or service.
- Develop a pricing policy
Price is one of the main factors determining consumer choice. It should be in the optimal range. If prices are too low, it can cause suspicion of poor quality. If they are too high, they can prompt psychological rejection. It can also be beneficial to develop a system of bonuses and discount cards to attract buyers.
- Research the level of competition
Direct and indirect (by-product substitutes) competitors are revealed and their work methods are investigated in comparison with your own advertising campaigns, communications, and positioning of goods (services).
Why is Market Research Important for Business?
Mychron Extracts, a cannabis product brand says that nowadays, to reach the top in the cannabis industry, you not only need to be unique and/or offer creative solutions, but you also need thorough planning, research, and analysis. Below are the main reasons for you to consider market research as your next step before launching a new product, or starting a new business venture:
- Forecasting future trends – marketing research can not only provide information about the current state of the market, it can also be used to predict future needs of customers;
- Assessing brand awareness levels, as well as measuring the perception of your company’s image. Using “your audience” you will get an objective picture of which brands are in the consumer's potential portfolio (consideration set), and which brands do not fall into it, and for what reasons;
- Assess the level of customer loyalty and satisfaction in the category as a whole or to the brand in particular;
- Test new product concepts or marketing ideas;
- Find out how consumers evaluate and compare a product with competitors –both by purely aesthetical and emotional characteristics;
- Find out how the consumer will respond to packaging changes, rebranding or other changes within the brand;
Find out who the consumers of your category of goods or services are, as well as consumers of yours and other brands - their life positions, preferences, their lifestyle, what other categories they consume – all of this will help you to orient the product as close as possible to the end consumer, and build rapport in such a way that it will be heard and accepted (both by choosing the right channel and by using the right messages).