Market research: Understand customers and grow your business

Published Friday 3 October 2025

Table of contents

• What is market research?
• Types of market research
• What’s the point of market research?
• Where to start
• How do I do my own market research?
• What to ask
• How to analyze your research results
• Don't let research slow you down
• Start making data-driven decisions
• FAQs on market research

Key takeaways

• Start with free secondary research by spending 2-3 hours reviewing government statistics, industry reports, and trade publications to understand broad market trends before investing in primary research.

• Focus on essential questions first such as whether customers will pay for your solution, what minimum viable product they need, and how they currently solve the problem, rather than getting bogged down in detailed demographics or advanced features.

• Use both primary research methods (surveys, interviews, focus groups) and secondary research (existing data) to get a complete picture of your market, as each provides different types of valuable insights.

• Launch once you have answers to core questions and use paying customers for ongoing refinement, as real transactions provide the most valuable feedback compared to theoretical responses.

What is market research?

Market research helps you understand your customers, what they need, and how you can meet those needs. It reduces risk and helps you make smarter decisions by listening to your market.

Types of market research

You can use two main types of research. Using both gives you a fuller picture.

Primary research

This is new research you conduct yourself to answer specific questions. Examples include sending out surveys, running focus groups, or interviewing customers. You get direct, tailored feedback.

Secondary research

This involves using existing data that has already been collected by others. This could be government statistics—where agencies like the where agencies like the Office for National Statistics (ONS) survey around 62,000 businesses survey around 62,000 businesses in Great Britain annually—industry reports, or articles.

It’s a great way to understand broad market trends or get background information.

What’s the point of market research?

Market research helps you understand your customers so you can make better business decisions. It ensures your product or service meets real customer needs and your marketing resonates with the right people.

Market research reveals:

• Who your customers are: Demographics, preferences, and buying behaviours
• What they value: Key features, benefits, and pain points that drive purchases
• How they make decisions: The buying process and factors that influence choice
• What they think of competitors: Strengths, weaknesses, and market gaps

Where to start

Secondary research uses existing data to understand your market before you invest in primary research. Start with these reliable sources:

Government and industry data:

• Check national statistics offices for market size and demographics
• Use industry associations to find trends and benchmarks
• Read trade publications for competitor analysis
• Review local government data for regional insights

Define your target customers by identifying specific characteristics:

• Identify their age range and life stage
• Find out their income level and spending habits
• Note their professional background or industry
• Determine their geographic location

Important limitation: Secondary research provides general insights but won’t answer your specific business questions. Use it as a foundation, not your final answer.

How do I do my own market research?

Primary research methods range from one-on-one conversations to large-scale surveys. Always offer value in return – people are giving you their time.

Individual interviews:

• Best for: Deep insights and detailed feedback
• Key requirement: Use unbiased participants, not family or friends

Focus groups:

• Best for: Group dynamics and multiple perspectives quickly
• Time investment: 1-2 hours for substantial data

Online surveys:

• Best for: Large sample sizes and quantifiable data
• Advantage: Cost-effective way to reach many people

Customer communities:

• Best for: Ongoing feedback and relationship building
• Platforms: Facebook groups, email lists, or dedicated forums, with some organisations using analytics tools to analyse real-time consumer opinions from thousands of sources

Beta testing:

• Best for: Product feedback and user experience insights
• Setup: Provide refreshments and a comfortable testing environment

What to ask

Market research questions fall into two main categories: product development and marketing optimization.

Product development questions:

• Usability testing: How do customers interact with your product?
• Pricing validation: What would you pay for this solution?
• Feature prioritization: Which features matter most to you?
• Competitive analysis: What do you like or dislike about [competitor]?

Marketing optimization questions:

• Brand testing: Which name/logo resonates with you?
• Messaging validation: Which tagline is most compelling?
• Packaging preferences: Which design catches your attention?
• Channel preferences: Where do you typically look for this type of product?

How to analyze your research results

Collecting data is only half the battle. The real value comes from analysing it. Look for patterns, themes and surprising insights in the answers you receive, joining the 26% of UK businesses that use their data to generate new insights. Are customers repeatedly mentioning the same problem? Is there a clear preference for one feature over another?

Don't let research slow you down

Research scope management prevents analysis paralysis. Focus on essential questions first, then launch and learn from real customers.

Essential questions (must-know):

• Will customers pay for your solution?
• What's the minimum viable product they need?
• How do they currently solve this problem?

Nice-to-know questions (research later):

• Detailed demographic breakdowns
• Secondary use cases
• Advanced feature preferences

Action principle: Launch once you have essential answers. Paying customers provide the most valuable feedback – they have real skin in the game, which is why some organisations conduct a nationally representative survey of consumers to understand their financial situations.

Start making data-driven decisions

Market research implementation follows a simple, cost-effective progression that any small business can follow.

Your action plan:

1. Start with free secondary research: Spend 2-3 hours reviewing industry reports and government data
2. Move to primary research quickly: Begin customer conversations within your first week
3. Focus on essential questions first: Validate core assumptions before exploring details
4. Use paying customers for refinement: Let real transactions guide your improvements

Budget reality: Most small business market research costs under £500 and can often be done for free through online surveys and customer interviews.

Ready to make smarter business decisions based on real customer insights? Try Xero for free and use Xero’s reporting tools to track how your research-driven changes impact your bottom line.

FAQs on market research

Here are common questions and answers most small business owners might have about conducting market research.

What are the main methods of market research?

The four most common methods are surveys, interviews, focus groups, and observation. Each helps you gather different types of information, from broad opinions via surveys to in-depth feedback from interviews.

What are the steps in the market research process?

A typical process involves seven steps: defining your objective, designing the research plan, creating data collection forms, selecting your sample audience, collecting the data, analyzing the findings, and presenting the results to make decisions.

How much does market research cost for a small business?

Costs can vary widely. You can start for free by using online resources and talking to customers yourself. Paid options like online survey tools or hiring a freelancer for focus groups can range from a small subscription fee to several hundred pounds, depending on the scale.