The 8 Reasons You Should Include Market Research in Your Annual Strategic Plan
by: Grant Gooding
It is about this time of year when we are inundated with meetings with clients and prospects who want to talk about their strategic plans for the next fiscal year. As you do the same with your leadership team, consider these eight common reasons organizations include market research in their budgets to improve the success of their annual strategic plans.
1. Your customer’s landscape has changed.
That is not an estimation; it is a certainty. Changes in your customer’s landscape typically include things like their financial situation, changes in their lifestyle, use of direct or indirect competitors, loss of need of your product or service, and a litany of other factors. In a recent Nielson report, 73% of consumers said they would change their consumption habits to lower their impact on the environment. Does this statistic impact how your customers purchase from you? Would you need to rework your packaging or your messaging? Or are you insulated from this trend? This is just one example of a landscape change that could make or break your strategic plan.
Suppose you don’t understand how your customer’s landscapes are changing. In that case, your forecasting won’t be accurate which impacts your allocation of resources, human capital, and profit margins — all misalignments which ultimately jeopardize the success of your year.
2. Increase the close rate of your sales team.
Sales teams don’t utilize market research as much as they should. Most of the time we find the reason is because finding actionable insights to drive the sales process isn’t apparent from a typical market research report. If you have the right market research, however, it can inform your salespeople what they should be saying depending on the target they are speaking to – an incredible advantage to a salesperson’s success.
A Market Research Impact Report by Hanover Research revealed that 68% of companies that increased their sales had used market research to achieve this growth. Additionally, companies that frequently conduct market research were 76% more likely to report an increase in revenue year over year.
3. Win customers away from your competitors.
Rest assured, they are keeping tabs on you. The right market research can show you where your competitors are underperforming so you can exploit their weaknesses with messaging giving you the ability to win customers away from your competitors.
One thing that has been found particularly valuable as a part of competitor analysis is identifying and quantifying the indirect competitors that organizations face. Many times, product or service alternatives that organizations don’t consider “direct competitors” are where the biggest threats and largest opportunities exist. Understanding how your customers (not an industry report) view your competitors is a basic need of any organization.
4. Create more intuitive messages and marketing efforts.
Human being’s behaviors are motivated by how they feel. If you can create emotional and intuitive messages and utilize the preferred mediums of your customers and prospects, you should expect to retain more customers and grow new ones. An Epsilon study from 2018 found that 80% of customers are more likely to purchase from brands that offer personalized messages and experiences.
Market research, if done correctly, can provide the narratives and messages to inform your marketing team on who to talk to, what to say, and which medium to use. According to Forbes, marketing spends that are backed by research can lead to a 5-8 times ROI.
5. Take the risk out of your decision-making.
A recent study by Gartner found that, on average, data-driven decision-making can improve a company’s bottom-line performance by more than 20%. Market research provides that crucial data, making it an indispensable tool in removing risk from your annual strategic plan.
Knowledge is the most valuable tool you have to make your executive team more effective. If you know what your customers are thinking, decision-making is easy. However, we see that most organizations think about decision-making backward. Many focus on making the right decision when it is substantially more important to simply eliminate as many bad decisions as possible. Market research is a good method to quickly and cost-effectively identify and eliminate bad decisions and remove substantial risk from your team’s decision-making.
6. Ensure your areas of innovation succeed.
According to a BCG report, 79% of executives rank innovation as one of the top three business initiatives in their organization. Market research ensures that innovation is not just creative but also customer-centric and intuitive, significantly enhancing success rates.
Product or service innovation is not just about increasing your portfolio in a market, it is about being different and relevant to the market you are entering. Market research acts as a confidence litmus test for new ideas, ensuring you are investing in the ideas with the highest probability of working. A report by Nielsen concluded that 63% of product launch failures were attributed to inadequate market understanding. The expense of market research relative to the investment in product or service launches is a rounding error and as such a significant contributor to the success of the launch is a no-brainer for your annual strategic plan.
7. Future proof your strategic plan
Your strategic plan is long-ball. It is about positioning your organization to win over time to create predictability and sustainability. A study by Forbes in July of 2023 found that market-informed companies were 19 times more likely to be profitable, 7 times more likely to retain customers, and 1.5 times more likely to report annual revenue growth of more than 15%.
Market research provides the strategic insights needed to ensure your long-term strategies are rooted in accurate, realistic data and that your expectations for product growth, competition impact, positioning, and financial goals are as accurate as possible.
8. Improve your NPS, CES, and C-SAT scores
Running NPS (Net Promoter), CES (Customer Effort), and C-Sat (Customer Satisfaction) scores is a great way to get a quantitative pulse on your customers. According to a Walker study in 2020, customer experience has now overtaken both price and product as key brand differentiators.
If you need some direction to improve your scores and how your organization is perceived, you need research to understand the emotional and behavioral drivers behind those scores. Market research is the most efficient and effective way to understand the “why” behind your customer scores and how to improve them.
We also get asked a lot about how much should be budgeted for market research in a given year. Typically, that is dependent on the size of your product or service portfolio and the perceived dynamic change in your market. Most SMBs only need about $15-20k allocated for market research for the whole year. If executed correctly, a small budget should afford one good study that can inform several areas of your organization’s strategic plan.
While there is no shortage of reasons you should use market research to make your life easier, these are the most common topics of conversation we have around strategic planning time and what you should be talking about with your executive team.