Why Market Research?

Last time, we defined what a market was.

A market, is when a product is bought.

The intersection between a customer, and a product (or service).

But you see, there are many, many ways of doing this wrong. And a million ways of making it better.

And that's where market research comes in.

If you ship 70,000 chocolate bars to a certain shop, and only 300 are sold, you wasted 69,700 chocolate bars.

If you sign a contract to sell 50,000 chocolate bars, but your supplier is running out of cocoa powder, you'll be losing money.

If you stock all the shops of a town with milky chocolate bars, but 70% of the population is vegan, you guessed it... you'll be losing money.

See, when there's a mismatch between supply and demand, you're probably losing money, or not making as much.

If you're trying to sell 400 chocolate bars to 1 customer, you'll be losing money. If you only have 1 chocolate bar for 400 customers, you'll be losing money.

The key is to get the balance right.

And getting the right equilibrium between supply and demand requires information; data, i.e. market research.

Wherever you are in the value chain, whether you're selling raw materials to make products down the line, or taking care of a recycling facility to repurpose old products, you can always benefit from a better alignment between supply and demand.

There's a whole lot of things happening between a customer discovering a product on the one side, and a company manufacturing a product on the other side, and finally, both of them meeting in the middle.

In the graph above, you can see some of key points across a journey from the seller and the buyer in a market.

Each of these steps, and the transition between them, can be maximized by better aligning it with supply and demand.

And by the way, these steps are interdependent and have far-reaching repercussions across the whole value chain, not only their immediate link. For example, imagine if everyone forgot (they had no more awareness) about chocolate bars. This would trickle down all the way back to raw materials, and threaten the viability of cocoa producers in the fields.

You may think that this is a farfetched example, but countless articles talk about Millennials destroying industries. In fact, they're not destroying industries as much as forcing a painful realignment between their demand and the supply from the said industry.

If you had this demand on track, you could avoid going bankrupt because you had not realized that younger generations do not buy engagement rings & diamonds.

Similarly, if you're a distributor, it really helps knowing how much you'll be asked to ship around. You can adapt your warehouse, you can avoid late-order fees on additional trucks, and you can keep your overhead costs in check.

Essentially, the objectives derived from being aligned with supply & demand are of two categories: making money & saving money.

Saving money makes sense. If you know how much is expected of you, you can prepare accordingly. You avoid waste by putting down just enough, and you can manage your time and resources better.

This was epitomized by the just-in-time movement.

Making money is a bit more technical.

Nonetheless, there's one simple rule: if you know what people want, you're better equipped at giving it to them.

And this means you're winning against your competitors.

You stop making guesses, and often the wrong guesses. You have the information required to make your case better. You win more contracts.

Trying to get ad space at the superball? Data shows that your product will benefit from more ROI than the others in the bid.

Want to rent your warehouse & distribution facilities? Data shows that you're the closest to large customer clusters.

Attempting to convince a big supermarket to sell your chocolate bars? Data shows that they'd make more money by switching considering their customers.

You know you're the best option, and are able to win against your competitors, because you're the best aligned with the supply and demand.

If you're more aligned, you're more profitable, more competitive, you have a better market fit, and you therefore win more.

If you win more, more people across the value chain want to work with you. Everyone wants to be your supplier. You gain leverage, and your margins improve, you produce better ROI, and you start making more money.

However, there are a thousand ways of getting it wrong.

You can have the wrong product, the wrong market, you're too expensive, you missed the trend, the market is too crowded, nobody wants your product,

You can have bottlenecks, incoherent inventory, wrong payment methods, unmanageable shipping costs,

The more information you have, the less risk you have to get it wrong and find the above pitfalls.

The more you know what people want, the best you are at at giving it to them.

And the less resources you waste getting it wrong.

This, in a nutshell is why you need market research.

Don't guess.

Be aligned.