research about market structure

Market Structure

How different industries are classified and differentiated based on their degree and nature of competition for services and goods

What is Market Structure?

Market structure, in economics, refers to how different industries are classified and differentiated based on their degree and nature of competition for goods and services. It is based on the characteristics that influence the behavior and outcomes of companies working in a specific market.

Some of the factors that determine a market structure include the number of buyers and sellers, ability to negotiate, degree of concentration, degree of differentiation of products , and the ease or difficulty of entering and exiting the market.

• Market structure refers to how different industries are classified and differentiated based on their degree and nature of competition for services and goods.
• The four popular types of market structures include perfect competition, oligopoly market, monopoly market, and monopolistic competition.
• Market structures show the relations between sellers and other sellers, sellers to buyers, or more.

Understanding Market Structures

In economics, market structures can be understood well by closely examining an array of factors or features exhibited by different players. It is common to differentiate these markets across the following seven distinct features.

• The industry’s buyer structure
• The turnover of customers
• The extent of product differentiation
• The nature of costs of inputs
• The number of players in the market
• Vertical integration extent in the same industry
• The largest player’s market share

By cross-examining the above features against each other, similar traits can be established. Therefore, it becomes easier to categorize and differentiate companies across related industries. Based on the above features, economists have used this information to describe four distinct types of market structures. They include perfect competition, oligopoly market, monopoly market, and monopolistic competition.

Types of Market Structures

1. perfect competition.

Perfect competition occurs when there is a large number of small companies competing against each other. They sell similar products (homogeneous), lack price influence over the commodities, and are free to enter or exit the market.

Consumers in this type of market have full knowledge of the goods being sold. They are aware of the prices charged on them and the product branding . In the real world, the pure form of this type of market structure rarely exists. However, it is useful when comparing companies with similar features. This market is unrealistic as it faces some significant criticisms described below.

• No incentive for innovation: In the real world, if competition exists and a company holds a dominant market share, there is a tendency to increase innovation to beat the competitors and maintain the status quo. However, in a perfectly competitive market, the profit margin is fixed, and sellers cannot increase prices, or they will lose their customers.
• There are very few barriers to entry: Any company can enter the market and start selling the product. Therefore, incumbents must stay proactive to maintain market share.

2. Monopolistic Competition

Monopolistic competition refers to an imperfectly competitive market with the traits of both the monopoly and competitive market. Sellers compete among themselves and can differentiate their goods in terms of quality and branding to look different. In this type of competition, sellers consider the price charged by their competitors and ignore the impact of their own prices on their competition.

When comparing monopolistic competition in the short term and long term, there are two distinct aspects that are observed. In the short term, the monopolistic company maximizes its profits and enjoys all the benefits as a monopoly.

The company initially produces many products as the demand is high. Therefore, its Marginal Revenue (MR) corresponds to its Marginal Cost (MC). However, MR diminishes over time as new companies enter the market with differentiated products affecting demand, leading to less profit.

3. Oligopoly

An oligopoly market consists of a small number of large companies that sell differentiated or identical products. Since there are few players in the market, their competitive strategies are dependent on each other.

For example, if one of the actors decides to reduce the price of its products, the action will trigger other actors to lower their prices, too. On the other hand, a price increase may influence others not to take any action in the anticipation consumers will opt for their products. Therefore, strategic planning by these types of players is a must.

In a situation where companies mutually compete, they may create agreements to share the market by restricting production, leading to supernormal profits. This holds if either party honors the Nash equilibrium state and neither is tempted to engage in the prisoner’s dilemma. In such an agreement, they work like monopolies. The collusion is referred to as cartels.

4. Monopoly

In a monopoly market, a single company represents the whole industry. It has no competitor, and it is the sole seller of products in the entire market. This type of market is characterized by factors such as the sole claim to ownership of resources, patent and copyright, licenses issued by the government, or high initial setup costs.

All the above characteristics associated with monopoly restrict other companies from entering the market. The company, therefore, remains a single seller because it has the power to control the market and set prices for its goods.

Related Readings

Thank you for reading CFI’s guide on Market Structure. To keep learning and developing your knowledge of financial analysis, we highly recommend the additional resources below:

• Herfindahl-Hirschman Index (HHI)
• Imperfect Competition
• Legal Monopoly
• Nash Equilibrium
• See all economics resources

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Market structure analysis: What it is and how to do it

This article examines market structure analysis, including a comparison of marketing and economic methods and discussions of defining a market, getting to an overall market structure, marketplaces versus study of important groups, market structures, and market structures versus market segments.

Editor’s note: Steven Struhl is senior vice president, senior methodologist at Total Research, Chicago.

What is market structure analysis? We start with perhaps the most obvious opening question of any article that you will read this year or next. We also begin our answer with an enthusiastic statement: “Unfortunately, no clear definition exists.” Now, let’s see what we can do about this.

Many of us have remained blissfully ignorant of this, but there is nonetheless a large literature on market structure analysis. (A sampling of just some of the articles is cited at the end.) Careful review of these leads to two basic conclusions:

• Numerous approaches to market structure analysis have been proposed in a very large number of scholarly works, with no approach seeming predominant.
• Plowing through all these articles requires frequent naps.

Some of the confusion surrounding this topic arises from the fact that two contrasting traditions have embraced it - namely, marketing and economics. As you might expect, the basic approaches are different. (Perhaps more surprisingly, some of the marketing papers are even harder to read than the ones from some economists. So we can see that, over the years, marketing at least has gained in the area of obscurity.)

Comparing and contrasting: marketing vs. economic methods

We will briefly review both methods, point out some very large differences and commonalities, and then discuss the marketing approach.

Marketing approaches mostly include these basic elements:

• some means to analyze the structure of relationships among competing companies;
• some other means to analyze the structure of relationships among competing brands.

Typically these studies include several areas of focus, whether primarily geared toward looking at competitive entities or brands. They often will investigate how brands are used, and the relationships of usage patterns among brands. They often look at the relationships in ways that brands are perceived. It is fairly common for studies of market structures to include just these topics.

Price elasticities and cross-price elasticities are other important market structures, however, even though they are not often mentioned in this way. There are other, more specialized views of what belongs in a market structure analysis. Trying to summarize them can get complicated. We will pass on tackling many of the more specialized definitions, then, and hope that you can tolerate the disappointment this causes.

Market segments usually are not considered market structures. This is one of the less intuitively appealing aspects of most definitions. Segments and structures can have some fairly complicated relationships, and we indeed will this discuss later.

Now let’s take a very brief view of economic approaches. The list of topics that these cover is broad and, as mentioned, somewhat different from those covered by the marketing approaches. Aspects of markets that seem to have received the most attention from the economists include:

• numbers of buyers and sellers;
• extent to which products are substitutable;
• analysis of comparative costs;
• ease of entry and exit for competitors;
• extent of mutual interdependence or (as they seem to mean) the extent to which buyers and sellers must depend on each other.

The concepts here may appear somewhat rudimentary, and lacking in appreciation of consumer psychology. One important point that the economists have in common with marketers is that they include demand elasticities and cross-demand elasticities (or words meaning the same thing) in market structures. How economists get to their answers may be very different from marketing practices, though.

Indeed, economists can do much of their work without ever talking to an actual person. Some even act as if asking people what they do or think is superfluous to understanding what is happening in a marketplace. This may seem slightly ridiculous, but we should remember that these fellows win Nobel prizes while humble marketers and market researchers do not. Perhaps they are onto something.

The secret of their success may lie in the mathematics they use. This can range from the highly sophisticated to the truly hair-raising. Indeed, as long as people are ancillary to the equations, the concepts can get highly elaborate. You are invited to draw your own conclusions about that.

Back to the marketing approach: a path for getting to market structures

Let’s start with something that may seem self-evident, but which we still need to think about carefully. The basic consideration for all marketing analyses is reaching a definition of exactly what constitutes the market. (We did warn you that this sounds foolish. Still, just reaching a definition can be quite difficult.)

The hardest part of setting this definition is that you need to set some limits on the “competitive set” of products.

Looking at just one example, let’s consider the market for diabetes care products. Most authorities say that there are two basic types of diabetics: Type I (sometimes called “juvenile,”) and Type II (sometimes called “adult onset.”) Type I diabetics always need insulin injections to live - their bodies typically produce none that they can use. Type II diabetics usually produce some insulin, and so often only require medications that help them use their insulin more effectively. (Also, exercise and healthier eating habits help too, as does keeping one’s weight down to a reasonable level.) However, some Type II diabetics require insulin, and now many Type I diabetics are taking medications that help them use insulin better along with their insulin. This has led some authorities to say that what we really need to look at is whether a diabetic is taking insulin or not - never mind the traditional medical division of diabetes into two types. Also, there are some new medications coming out that are aimed at treating “pre-diabetic” conditions - or to prevent the disease from taking hold.

Looking at all this, how do you define the structure of the marketplace? Which products are competing with each other, and how? Do you include the new pre-diabetic products in your analysis? How do you divide the universe of diabetic people? Where does exercise and diet figure in all this? Do they compete with products in the marketplace? If so, how?

Some method for setting limits on the market must be chosen, then. Traditionally, this was done by focusing at one these factors:

• the degree to which products can substitute for each other, based on consumer perceptions;
• the extent to which products are intended to serve similar purposes;
• the actual impact of products on each other, as measured by elasticity of demand and effects of products on each other, or cross-elasticity.

Note that the impact products have on each other and degree to which they can be substituted are highly similar ideas. The key point underlying this distinction, it seems, is that impact can be measured without considering perceptions at all. Therefore, different types of studies could be the focus of each of these options.

For instance, elasticity of demand, and related ideas, bring to mind choice-based modeling, or perhaps conjoint. (Whichever one, the same constraints hold, so we will discuss choice-based studies here.) In choice-based studies, we typically look at what people select in some set of competitive marketplaces. The focus here is on what people do, and not on their explanations of why they do it. If perceptions are addressed at all in a choice-based study, they are not part of the choosing that study participants do. What we learn comes from measuring study participants’ choices among the differing product configurations that they see in the interview and applying this to many alternative product configurations not tested.

Similarly, studies that focus on perceptions and opinions rarely have a choice-based exercise in them. Some of the reasons for separating these types of studies are very practical. For instance, most study participants are nearly worn out after they finish a typical choice-based exercise. Since most of us want to know everything about everything when we do a study (of course), the lucky respondent may get to make choices in up to 21 market scenarios in a choice study. (The general rule here is that the more factors we want to analyze in a choice study, the more marketplaces we need to show to get the required information.) In any event, choice-based studies usually run to the known limits of a human being’s ability to do a good job in the interview.

Most of us are likely are more familiar with studies of attitudes and opinions. Therefore, we know that by the time everybody involved has added his or her pet question(s), these get to be real monsters also. Asking a person to do one of these and - at the same time - one of those (a choice-based model or full-blown conjoint task) is just too much. We need to decide which we want - or if we want both, whether we can afford to interview two sets of people.

One key unresolved issue in defining markets

One key issue remains largely unresolved if we start our definitions of markets by looking at substitutability or market impact. That is, neither does particularly well in studying some types of competitive behavior. The same holds if we look just at consumers’ perceptions. Of course, a set of remedies has been proposed for a largely self-imposed problem. These sometimes go under the heading of hybrid forms of structure analysis.

Hybrid methods combine behavior-based and judgment-based methods of defining markets, as well as other approaches in later stages of the analysis. (As you may have expected, we will discuss this.) In more practical terms, you might need to do all sorts of studies, such as perceptions and usage studies, and choice models, and somehow put all the information together. You might even include other topics, depending on what you need to know. Different ways of putting these approaches together almost certainly will yield different ideas about market structures. Hybrid approaches underscore the notion that the search for a “true” market structure is one of those great and endless quests. No one answer about what is “true” exists here, just as is the case in the rest of life.

Getting to an overall market structure

In marketing approaches, we almost always start with people - or as we like to call them, consumers. To reach an overall market structure, individual consumer market structures need to be aggregated. Individual structures are simply each consumer’s behaviors and/or perceptions about key marketing variable(s). If you have kept your eyes open most of the time so far, you will not be surprised to learn that two main aggregation methods are used:

• behavioral aggregation (linked to studying market impact);
• subjective aggregation (linked to the extent to which products can substitute for each other, ratings, opinions, and perceptions).

Aggregation is problematic. One main question that gets asked — in some quarters, at least — has to do with what happens when we “roll up” a lot of idiosyncratic opinions. That is, how do we meaningfully aggregate individual consumer choices or opinions when these often reflect great diversity?

An aggregate market structure that we choose may NOT represent any individual’s structures well. In fact, any overall market structure gives only an average view of consumer diversity. We have numerous pundits to remind us that these averages can hide information, and may even be misleading.

In fact, this is one of the charges leveled against choice-based modeling as it has been traditionally done, at the aggregate (or group) level. Unless you really torture the data from a choice-based model, you never learn anything about what individuals are doing. (The torture method of choice today is something called Hierarchical Bayesian analysis, and generally requires squeezing the numbers for days — or “just hours” for a simpler problem, as some put it — even with the latest monster Pentium IV. But Hierarchical Bayesian analysis is another story.) The point of this is that some experts will go to great lengths to alleviate their discomfort in looking at aggregate (or group) level data.

However, these complaints about looking at groups may not be that well-founded. These are some reasons. (Just remember that you read this here first.) We almost never look at a market solely in its entirety — that is, without having some groups in mind. For instance, if our goal is to study the market for (say) diet colas, we almost certainly will not interview everybody who walks into a supermarket. This might be fun, and if not, certainly very expensive, but nobody outside the further reaches of academia is likely to find this useful.

The secret about whole marketplaces vs. study of important groups

Rather, a useful study would focus on groups of users, such as heavy vs. moderate vs. light users - or on brand-loyal users vs. frequent switchers. Then we would observe any market structures within each group. If we have defined the groups properly, the question of diversity becomes less important. That is, heavy users are typically defined along these lines: “the 20 percent of users who consume 80 percent of our wonderful product.” If heavy users are diverse, it may be nice to know this, but knowing may not help encourage them to use more of our great stuff, or even how to keep them from using less. In this case, the diversity of the group just is part of the way the world runs.

Some of you may then say something like this: “But what if some heavy users are more likely to become moderate users than others?” Or, as it more usually gets asked, “What if some heavy users are more vulnerable than others?” (This shifting of vulnerability from the product, which will suffer no recognizable losses if people decide they don’t need it, to the people themselves, is one of those wonders of modern marketing.)

One appropriate answer to a question like this is to structure the study so that it can isolate those more and less vulnerable among heavy users. That is, the study would find market structures among two or more types of heavy users, and not assume that they are all the same. Here we encounter some of the real complexity that can be found in market structure analysis. To do this accurately, we need to have some good ideas about the groups we are likely to find in the market. If groups are truly different, they will have different market structures. Just lumping these together will lead to gross inaccuracies.

In just a short note, practical marketing approaches move furthest away from (and perhaps beyond) economic approaches, by including the idea that you need to think about groups in the marketplace and to prepare to analyze them separately. In one way, then, the practitioners in marketing and market research routinely take a more sophisticated approach to market structures than their learned brethren.

Below is a flow chart summarizing this step in the process.

Developing a working picture of the market structure

Once individual consumer behavior is aggregated, the next step is devising some working representation of the overall (aggregate) structures. The goal here is showing how products compete, in ways that convey the research and managerial implications effectively. Following the discussion from earlier sections, market structures may never get aggregated up to the whole market level. The analysis may look (for instance) at heavy users, moderate users and light users separately, and go into some depth about each. It may compare and contrast groups that are important to understand. Finally, it may include some communalities, especially areas where strengths and weaknesses appear across the groups studied. It almost never would try to extract some global view and leave it at that.

Methods for depicting market structures

We can divide approaches for representing market structures into two main classes, namely, the spatial and the non-spatial. Spatial techniques are used often with data based on judgments (opinions, perceptions, ratings). These work well with various maps, or as they are known in formal circles, “continuous dimensional market structures.”

The simplest spatial techniques give a picture of market boundaries as separate clusters of products in two-dimensional space. Some judgment then is made about distance between clusters as determining where a market stops and starts.

Other maps are quite familiar to many of us - for instance, the type showing how products relate to ratings. This type of map often is called a perceptual map - as are many other types of maps. Not all maps that show attributes arrayed in space show market structures, though, as the figures below show us.

The top chart shows one type of market. This map represents brands and perceptions about them. The really basic idea behind the map is: “What appears together goes together.” Attributes that fall close to a brand are strongly associated with that brand. Attributes that fall together have similarities with each other. Brand that fall closest to each other have similar patterns in ratings.

The map on the bottom shows groups in the marketplace, and possibly even market segments (if we can find them and reach them selectively in some way). Showing what is important to various groups of buyers (or even segments) typically does not count as market structure analysis — at least when we are being pure and right about things.

Sometimes, mapping - at least various maps like the one on the top - is most of what gets called market structure analysis. So if somebody who can make life difficult (e.g., a client, a boss, or a boss’s boss) asks for a market structure analysis, you do not need to panic immediately. They may just want some maps. Of course, they might even want something entirely different that is not market structure analysis at all according to the generally accepted rules. (Then you can panic.)

Non-spatial approaches can work well to show behavioral data, as may be readily apparent. For example, analyses of product or price cross-elasticities often lead to displays that are not at all like maps, such as the simulator programs that you can create based on a choice-based modeling study. Simulators can look very impressive if you have a good programmer working on them - and can do great things with “what-if” types of questions about changing product configurations. However, they have nothing faintly map-like about them.

More on showing structures: mixed and other methods

Data based on behaviors and data based on judgments data are not, of course, mutually exclusive. They often provide important insights when combined. For instance, brand-switching studies typically involve both behavioral and opinion-based data. Brand switching, by the way, can be considered as falling under either “product substitution” or under “market impact.” (As you may recall, those were mentioned as two of the possible bases for organizing market structures a few sections ago.)

More academically-oriented practitioners have investigated various “latent” structures presumed to exist in markets. Sometimes these are latent classes, which in some ways resemble market segments. Sometimes, these are causal models or path diagrams. Because there can be diagrams involved, some call these forms of mapping. Others do not. How to categorize these method remains problematic.

A flow chart summarizing this step is shown above.

A few factors sometimes overlooked

In addition to price elasticities, many other factors aside from judgments can enter into market structure analysis. These sometimes are overlooked, and include:

• purchasing time or purchasing cycles;
• intermediaries between sellers and buyers (not just outlets, but such specialized groups as formulary committees for pharmaceuticals, regulators, insurance companies, and so on);
• geographic distribution;
• so-called exogenous or environmental variables such as the state of the economy; publicity and public opinion; governmental activity outside regulation, etc.

Also, models can be explicitly dynamic (attempting to predict change over time) or static (a snapshot of a given situation). Different methods are more suited to each basic approach. Dynamic approaches that take just a step or two into the future include market simulator programs. Other dynamic approaches that try to peer further into the future include product diffusion models, and an incredible array of forecasting techniques, probably even including the crystal ball.

More about market structures versus market segments

Most authorities do not consider market structures to be the same as market segments. In fact, doing a thorough job with market segmentation generally requires so much time and effort that you cannot get the full story on market structures in the same interview.

Here’s the mantra on segmentation, in case you are wondering why this tends to fill most of an interview. Finding segments almost always is taken to mean looking for groups that fit these three criteria:

• each has defined product-related needs different from those of all other groups;
• each can be characterized or identified;
• each can be reached selectively (or “targeted”) with communications and marketing efforts. (Or at the very least, the segments you care about have to be groups you can reach selectively.)

Here we are putting aside the idea of “a priori segments,” which are defined before looking at any data. Sometimes groups defined in this way in fact turn out to be segments, and many times not.

For instance, many banks used to segment customers based on the area of the bank that handled their business. There could be various lobby areas for the more indigent, some executive and professional areas, and finally the “upstairs,” where all the big-money people got to visit. One major bank had seven such “customer centers,” and they solemnly believed that each served a segment of the market. They believed this, that is, until they did a fairly thorough analysis of their customers’ needs. When they did, they found only three distinct groups. Their segments were convenient and supported a long tradition, but they were wasting a lot of time developing separate sets of services for all of them.

In any event, if you do find segments, market structures may exist within market segments, just as they can within any group. Different segments of a market may structure a market differently - and indeed we would expect them to do precisely this, since their needs are different.

Many other structural concerns can differ for various segments, as well. For instance, different structural constraints may apply to some market segments, and not others. We need only think of such examples as different groups having differences in insurance coverage, or different groups having access to different public services (like transportation) to see that these environmentally-imposed limitations may be crucial factors in understanding how segments work.

For these reasons, market segmentation and market structure analysis can appear in the same study. As we said earlier, though, given the capacity of most human beings to endure interviews without certain illegal recreational substances, it is hard to do justice to both issues at the same time. Almost invariably, all-in-one studies will skimp in some way on segments or on structures. Just to be fair, we should add that a few academics now claim that both segmentation and marketing structure analysis can be done at the same time, and everything comes out fine. This may happen sometimes, but how often it works remains to be proven.

Finally, as many of you have observed, some practitioners confuse segments and structures so much that the line between them is nearly obliterated. You can have a conversation with some of these people and, at the end, not only will you not know what they are talking about, but you will feel confused about both subjects. We only hope that we have left you in somewhat better condition by the time you have reached this point of the article.

Review: basic steps in getting to market structures

It all seems simple when summed up in a nice diagram like the one above, but the problem of market structures is both large and complex. As the reference list at the end of this article suggests, you may get an entirely different answer about what market structure analysis absolutely needs to include, depending on the experts you consult.

Writing this article, your author tried as much as possible to keep to a central path, and not follow anybody’s pet theories to the exclusion of others. This also represented an earnest effort not to make your feet fall asleep from the sheer excitement of reading about the topic. Tastes vary, though, and if that is just what you wanted, taking a careful look at the reference list below may provide just what you expected.

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How to Do Market Research: The Complete Guide

Learn how to do market research with this step-by-step guide, complete with templates, tools and real-world examples.

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Market research is the systematic process of gathering, analyzing and interpreting information about a specific market or industry.

What are your customers’ needs? How does your product compare to the competition? What are the emerging trends and opportunities in your industry? If these questions keep you up at night, it’s time to conduct market research.

Market research plays a pivotal role in your ability to stay competitive and relevant, helping you anticipate shifts in consumer behavior and industry dynamics. It involves gathering these insights using a wide range of techniques, from surveys and interviews to data analysis and observational studies.

In this guide, we’ll explore why market research is crucial, the various types of market research, the methods used in data collection, and how to effectively conduct market research to drive informed decision-making and success.

What is market research?

The purpose of market research is to offer valuable insight into the preferences and behaviors of your target audience, and anticipate shifts in market trends and the competitive landscape. This information helps you make data-driven decisions, develop effective strategies for your business, and maximize your chances of long-term growth.

Why is market research important? 

By understanding the significance of market research, you can make sure you’re asking the right questions and using the process to your advantage. Some of the benefits of market research include:

• Informed decision-making: Market research provides you with the data and insights you need to make smart decisions for your business. It helps you identify opportunities, assess risks and tailor your strategies to meet the demands of the market. Without market research, decisions are often based on assumptions or guesswork, leading to costly mistakes.
• Customer-centric approach: A cornerstone of market research involves developing a deep understanding of customer needs and preferences. This gives you valuable insights into your target audience, helping you develop products, services and marketing campaigns that resonate with your customers.
• Competitive advantage: By conducting market research, you’ll gain a competitive edge. You’ll be able to identify gaps in the market, analyze competitor strengths and weaknesses, and position your business strategically. This enables you to create unique value propositions, differentiate yourself from competitors, and seize opportunities that others may overlook.
• Risk mitigation: Market research helps you anticipate market shifts and potential challenges. By identifying threats early, you can proactively adjust their strategies to mitigate risks and respond effectively to changing circumstances. This proactive approach is particularly valuable in volatile industries.
• Resource optimization: Conducting market research allows organizations to allocate their time, money and resources more efficiently. It ensures that investments are made in areas with the highest potential return on investment, reducing wasted resources and improving overall business performance.
• Adaptation to market trends: Markets evolve rapidly, driven by technological advancements, cultural shifts and changing consumer attitudes. Market research ensures that you stay ahead of these trends and adapt your offerings accordingly so you can avoid becoming obsolete. 

As you can see, market research empowers businesses to make data-driven decisions, cater to customer needs, outperform competitors, mitigate risks, optimize resources and stay agile in a dynamic marketplace. These benefits make it a huge industry; the global market research services market is expected to grow from $76.37 billion in 2021 to $108.57 billion in 2026 . Now, let’s dig into the different types of market research that can help you achieve these benefits.

Types of market research 

• Qualitative research
• Quantitative research
• Exploratory research
• Descriptive research
• Causal research
• Cross-sectional research
• Longitudinal research

Despite its advantages, 23% of organizations don’t have a clear market research strategy. Part of developing a strategy involves choosing the right type of market research for your business goals. The most commonly used approaches include:

1. Qualitative research

Qualitative research focuses on understanding the underlying motivations, attitudes and perceptions of individuals or groups. It is typically conducted through techniques like in-depth interviews, focus groups and content analysis — methods we’ll discuss further in the sections below. Qualitative research provides rich, nuanced insights that can inform product development, marketing strategies and brand positioning.

2. Quantitative research

Quantitative research, in contrast to qualitative research, involves the collection and analysis of numerical data, often through surveys, experiments and structured questionnaires. This approach allows for statistical analysis and the measurement of trends, making it suitable for large-scale market studies and hypothesis testing. While it’s worthwhile using a mix of qualitative and quantitative research, most businesses prioritize the latter because it is scientific, measurable and easily replicated across different experiments.

3. Exploratory research

Whether you’re conducting qualitative or quantitative research or a mix of both, exploratory research is often the first step. Its primary goal is to help you understand a market or problem so you can gain insights and identify potential issues or opportunities. This type of market research is less structured and is typically conducted through open-ended interviews, focus groups or secondary data analysis. Exploratory research is valuable when entering new markets or exploring new product ideas.

4. Descriptive research

As its name implies, descriptive research seeks to describe a market, population or phenomenon in detail. It involves collecting and summarizing data to answer questions about audience demographics and behaviors, market size, and current trends. Surveys, observational studies and content analysis are common methods used in descriptive research. 

5. Causal research

Causal research aims to establish cause-and-effect relationships between variables. It investigates whether changes in one variable result in changes in another. Experimental designs, A/B testing and regression analysis are common causal research methods. This sheds light on how specific marketing strategies or product changes impact consumer behavior.

6. Cross-sectional research

Cross-sectional market research involves collecting data from a sample of the population at a single point in time. It is used to analyze differences, relationships or trends among various groups within a population. Cross-sectional studies are helpful for market segmentation, identifying target audiences and assessing market trends at a specific moment.

7. Longitudinal research

Longitudinal research, in contrast to cross-sectional research, collects data from the same subjects over an extended period. This allows for the analysis of trends, changes and developments over time. Longitudinal studies are useful for tracking long-term developments in consumer preferences, brand loyalty and market dynamics.

Each type of market research has its strengths and weaknesses, and the method you choose depends on your specific research goals and the depth of understanding you’re aiming to achieve. In the following sections, we’ll delve into primary and secondary research approaches and specific research methods.

Primary vs. secondary market research

Market research of all types can be broadly categorized into two main approaches: primary research and secondary research. By understanding the differences between these approaches, you can better determine the most appropriate research method for your specific goals.

Primary market research 

Primary research involves the collection of original data straight from the source. Typically, this involves communicating directly with your target audience — through surveys, interviews, focus groups and more — to gather information. Here are some key attributes of primary market research:

• Customized data: Primary research provides data that is tailored to your research needs. You design a custom research study and gather information specific to your goals.
• Up-to-date insights: Because primary research involves communicating with customers, the data you collect reflects the most current market conditions and consumer behaviors.
• Time-consuming and resource-intensive: Despite its advantages, primary research can be labor-intensive and costly, especially when dealing with large sample sizes or complex study designs. Whether you hire a market research consultant, agency or use an in-house team, primary research studies consume a large amount of resources and time.

Secondary market research 

Secondary research, on the other hand, involves analyzing data that has already been compiled by third-party sources, such as online research tools, databases, news sites, industry reports and academic studies.

Here are the main characteristics of secondary market research:

• Cost-effective: Secondary research is generally more cost-effective than primary research since it doesn’t require building a research plan from scratch. You and your team can look at databases, websites and publications on an ongoing basis, without needing to design a custom experiment or hire a consultant. 
• Leverages multiple sources: Data tools and software extract data from multiple places across the web, and then consolidate that information within a single platform. This means you’ll get a greater amount of data and a wider scope from secondary research.
• Quick to access: You can access a wide range of information rapidly — often in seconds — if you’re using online research tools and databases. Because of this, you can act on insights sooner, rather than taking the time to develop an experiment. 

So, when should you use primary vs. secondary research? In practice, many market research projects incorporate both primary and secondary research to take advantage of the strengths of each approach.

One rule of thumb is to focus on secondary research to obtain background information, market trends or industry benchmarks. It is especially valuable for conducting preliminary research, competitor analysis, or when time and budget constraints are tight. Then, if you still have knowledge gaps or need to answer specific questions unique to your business model, use primary research to create a custom experiment. 

Market research methods

• Surveys and questionnaires
• Focus groups
• Observational research
• Online research tools
• Experiments
• Content analysis
• Ethnographic research

How do primary and secondary research approaches translate into specific research methods? Let’s take a look at the different ways you can gather data: 

1. Surveys and questionnaires

Surveys and questionnaires are popular methods for collecting structured data from a large number of respondents. They involve a set of predetermined questions that participants answer. Surveys can be conducted through various channels, including online tools, telephone interviews and in-person or online questionnaires. They are useful for gathering quantitative data and assessing customer demographics, opinions, preferences and needs. On average, customer surveys have a 33% response rate , so keep that in mind as you consider your sample size.

2. Interviews

Interviews are in-depth conversations with individuals or groups to gather qualitative insights. They can be structured (with predefined questions) or unstructured (with open-ended discussions). Interviews are valuable for exploring complex topics, uncovering motivations and obtaining detailed feedback. 

3. Focus groups

The most common primary research methods are in-depth webcam interviews and focus groups. Focus groups are a small gathering of participants who discuss a specific topic or product under the guidance of a moderator. These discussions are valuable for primary market research because they reveal insights into consumer attitudes, perceptions and emotions. Focus groups are especially useful for idea generation, concept testing and understanding group dynamics within your target audience.

4. Observational research

Observational research involves observing and recording participant behavior in a natural setting. This method is particularly valuable when studying consumer behavior in physical spaces, such as retail stores or public places. In some types of observational research, participants are aware you’re watching them; in other cases, you discreetly watch consumers without their knowledge, as they use your product. Either way, observational research provides firsthand insights into how people interact with products or environments.

5. Online research tools

You and your team can do your own secondary market research using online tools. These tools include data prospecting platforms and databases, as well as online surveys, social media listening, web analytics and sentiment analysis platforms. They help you gather data from online sources, monitor industry trends, track competitors, understand consumer preferences and keep tabs on online behavior. We’ll talk more about choosing the right market research tools in the sections that follow.

6. Experiments

Market research experiments are controlled tests of variables to determine causal relationships. While experiments are often associated with scientific research, they are also used in market research to assess the impact of specific marketing strategies, product features, or pricing and packaging changes.

7. Content analysis

Content analysis involves the systematic examination of textual, visual or audio content to identify patterns, themes and trends. It’s commonly applied to customer reviews, social media posts and other forms of online content to analyze consumer opinions and sentiments.

8. Ethnographic research

Ethnographic research immerses researchers into the daily lives of consumers to understand their behavior and culture. This method is particularly valuable when studying niche markets or exploring the cultural context of consumer choices.

How to do market research

• Set clear objectives
• Identify your target audience
• Choose your research methods
• Use the right market research tools
• Collect data
• Analyze data 
• Interpret your findings
• Identify opportunities and challenges
• Make informed business decisions
• Monitor and adapt

Now that you have gained insights into the various market research methods at your disposal, let’s delve into the practical aspects of how to conduct market research effectively. Here’s a quick step-by-step overview, from defining objectives to monitoring market shifts.

1. Set clear objectives

When you set clear and specific goals, you’re essentially creating a compass to guide your research questions and methodology. Start by precisely defining what you want to achieve. Are you launching a new product and want to understand its viability in the market? Are you evaluating customer satisfaction with a product redesign? 

Start by creating SMART goals — objectives that are specific, measurable, achievable, relevant and time-bound. Not only will this clarify your research focus from the outset, but it will also help you track progress and benchmark your success throughout the process. 

You should also consult with key stakeholders and team members to ensure alignment on your research objectives before diving into data collecting. This will help you gain diverse perspectives and insights that will shape your research approach.

2. Identify your target audience

Next, you’ll need to pinpoint your target audience to determine who should be included in your research. Begin by creating detailed buyer personas or stakeholder profiles. Consider demographic factors like age, gender, income and location, but also delve into psychographics, such as interests, values and pain points.

The more specific your target audience, the more accurate and actionable your research will be. Additionally, segment your audience if your research objectives involve studying different groups, such as current customers and potential leads.

If you already have existing customers, you can also hold conversations with them to better understand your target market. From there, you can refine your buyer personas and tailor your research methods accordingly.

3. Choose your research methods

Selecting the right research methods is crucial for gathering high-quality data. Start by considering the nature of your research objectives. If you’re exploring consumer preferences, surveys and interviews can provide valuable insights. For in-depth understanding, focus groups or observational research might be suitable. Consider using a mix of quantitative and qualitative methods to gain a well-rounded perspective. 

You’ll also need to consider your budget. Think about what you can realistically achieve using the time and resources available to you. If you have a fairly generous budget, you may want to try a mix of primary and secondary research approaches. If you’re doing market research for a startup , on the other hand, chances are your budget is somewhat limited. If that’s the case, try addressing your goals with secondary research tools before investing time and effort in a primary research study. 

4. Use the right market research tools

Whether you’re conducting primary or secondary research, you’ll need to choose the right tools. These can help you do anything from sending surveys to customers to monitoring trends and analyzing data. Here are some examples of popular market research tools:

• Market research software: Crunchbase is a platform that provides best-in-class company data, making it valuable for market research on growing companies and industries. You can use Crunchbase to access trusted, first-party funding data, revenue data, news and firmographics, enabling you to monitor industry trends and understand customer needs.

• Survey and questionnaire tools: SurveyMonkey is a widely used online survey platform that allows you to create, distribute and analyze surveys. Google Forms is a free tool that lets you create surveys and collect responses through Google Drive.
• Data analysis software: Microsoft Excel and Google Sheets are useful for conducting statistical analyses. SPSS is a powerful statistical analysis software used for data processing, analysis and reporting.
• Social listening tools: Brandwatch is a social listening and analytics platform that helps you monitor social media conversations, track sentiment and analyze trends. Mention is a media monitoring tool that allows you to track mentions of your brand, competitors and keywords across various online sources.
• Data visualization platforms: Tableau is a data visualization tool that helps you create interactive and shareable dashboards and reports. Power BI by Microsoft is a business analytics tool for creating interactive visualizations and reports.

5. Collect data

There’s an infinite amount of data you could be collecting using these tools, so you’ll need to be intentional about going after the data that aligns with your research goals. Implement your chosen research methods, whether it’s distributing surveys, conducting interviews or pulling from secondary research platforms. Pay close attention to data quality and accuracy, and stick to a standardized process to streamline data capture and reduce errors. 

6. Analyze data

Once data is collected, you’ll need to analyze it systematically. Use statistical software or analysis tools to identify patterns, trends and correlations. For qualitative data, employ thematic analysis to extract common themes and insights. Visualize your findings with charts, graphs and tables to make complex data more understandable.

If you’re not proficient in data analysis, consider outsourcing or collaborating with a data analyst who can assist in processing and interpreting your data accurately.

7. Interpret your findings

Interpreting your market research findings involves understanding what the data means in the context of your objectives. Are there significant trends that uncover the answers to your initial research questions? Consider the implications of your findings on your business strategy. It’s essential to move beyond raw data and extract actionable insights that inform decision-making.

Hold a cross-functional meeting or workshop with relevant team members to collectively interpret the findings. Different perspectives can lead to more comprehensive insights and innovative solutions.

8. Identify opportunities and challenges

Use your research findings to identify potential growth opportunities and challenges within your market. What segments of your audience are underserved or overlooked? Are there emerging trends you can capitalize on? Conversely, what obstacles or competitors could hinder your progress?

Lay out this information in a clear and organized way by conducting a SWOT analysis, which stands for strengths, weaknesses, opportunities and threats. Jot down notes for each of these areas to provide a structured overview of gaps and hurdles in the market.

9. Make informed business decisions

Market research is only valuable if it leads to informed decisions for your company. Based on your insights, devise actionable strategies and initiatives that align with your research objectives. Whether it’s refining your product, targeting new customer segments or adjusting pricing, ensure your decisions are rooted in the data.

At this point, it’s also crucial to keep your team aligned and accountable. Create an action plan that outlines specific steps, responsibilities and timelines for implementing the recommendations derived from your research. 

10. Monitor and adapt

Market research isn’t a one-time activity; it’s an ongoing process. Continuously monitor market conditions, customer behaviors and industry trends. Set up mechanisms to collect real-time data and feedback. As you gather new information, be prepared to adapt your strategies and tactics accordingly. Regularly revisiting your research ensures your business remains agile and reflects changing market dynamics and consumer preferences.

Online market research sources

As you go through the steps above, you’ll want to turn to trusted, reputable sources to gather your data. Here’s a list to get you started:

• Crunchbase: As mentioned above, Crunchbase is an online platform with an extensive dataset, allowing you to access in-depth insights on market trends, consumer behavior and competitive analysis. You can also customize your search options to tailor your research to specific industries, geographic regions or customer personas.

• Academic databases: Academic databases, such as ProQuest and JSTOR , are treasure troves of scholarly research papers, studies and academic journals. They offer in-depth analyses of various subjects, including market trends, consumer preferences and industry-specific insights. Researchers can access a wealth of peer-reviewed publications to gain a deeper understanding of their research topics.
• Government and NGO databases: Government agencies, nongovernmental organizations and other institutions frequently maintain databases containing valuable economic, demographic and industry-related data. These sources offer credible statistics and reports on a wide range of topics, making them essential for market researchers. Examples include the U.S. Census Bureau , the Bureau of Labor Statistics and the Pew Research Center .
• Industry reports: Industry reports and market studies are comprehensive documents prepared by research firms, industry associations and consulting companies. They provide in-depth insights into specific markets, including market size, trends, competitive analysis and consumer behavior. You can find this information by looking at relevant industry association databases; examples include the American Marketing Association and the National Retail Federation .
• Social media and online communities: Social media platforms like LinkedIn or Twitter (X) , forums such as Reddit and Quora , and review platforms such as G2 can provide real-time insights into consumer sentiment, opinions and trends. 

Market research examples

At this point, you have market research tools and data sources — but how do you act on the data you gather? Let’s go over some real-world examples that illustrate the practical application of market research across various industries. These examples showcase how market research can lead to smart decision-making and successful business decisions.

Example 1: Apple’s iPhone launch

Apple ’s iconic iPhone launch in 2007 serves as a prime example of market research driving product innovation in tech. Before the iPhone’s release, Apple conducted extensive market research to understand consumer preferences, pain points and unmet needs in the mobile phone industry. This research led to the development of a touchscreen smartphone with a user-friendly interface, addressing consumer demands for a more intuitive and versatile device. The result was a revolutionary product that disrupted the market and redefined the smartphone industry.

Example 2: McDonald’s global expansion

McDonald’s successful global expansion strategy demonstrates the importance of market research when expanding into new territories. Before entering a new market, McDonald’s conducts thorough research to understand local tastes, preferences and cultural nuances. This research informs menu customization, marketing strategies and store design. For instance, in India, McDonald’s offers a menu tailored to local preferences, including vegetarian options. This market-specific approach has enabled McDonald’s to adapt and thrive in diverse global markets.

Example 3: Organic and sustainable farming

The shift toward organic and sustainable farming practices in the food industry is driven by market research that indicates increased consumer demand for healthier and environmentally friendly food options. As a result, food producers and retailers invest in sustainable sourcing and organic product lines — such as with these sustainable seafood startups — to align with this shift in consumer values. 

The bottom line? Market research has multiple use cases and is a critical practice for any industry. Whether it’s launching groundbreaking products, entering new markets or responding to changing consumer preferences, you can use market research to shape successful strategies and outcomes.

Market research templates

You finally have a strong understanding of how to do market research and apply it in the real world. Before we wrap up, here are some market research templates that you can use as a starting point for your projects:

• Smartsheet competitive analysis templates : These spreadsheets can serve as a framework for gathering information about the competitive landscape and obtaining valuable lessons to apply to your business strategy.
• SurveyMonkey product survey template : Customize the questions on this survey based on what you want to learn from your target customers.
• HubSpot templates : HubSpot offers a wide range of free templates you can use for market research, business planning and more.
• SCORE templates : SCORE is a nonprofit organization that provides templates for business plans, market analysis and financial projections.
• SBA.gov : The U.S. Small Business Administration offers templates for every aspect of your business, including market research, and is particularly valuable for new startups. 

Strengthen your business with market research

When conducted effectively, market research is like a guiding star. Equipped with the right tools and techniques, you can uncover valuable insights, stay competitive, foster innovation and navigate the complexities of your industry.

Throughout this guide, we’ve discussed the definition of market research, different research methods, and how to conduct it effectively. We’ve also explored various types of market research and shared practical insights and templates for getting started. 

Now, it’s time to start the research process. Trust in data, listen to the market and make informed decisions that guide your company toward lasting success.

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What Is Market Research?

• How It Works
• Primary vs. Secondary
• How to Conduct Research

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Market research examines consumer behavior and trends in the economy to help a business develop and fine-tune its business idea and strategy. It helps a business understand its target market by gathering and analyzing data.

Market research is the process of evaluating the viability of a new service or product through research conducted directly with potential customers. It allows a company to define its target market and get opinions and other feedback from consumers about their interest in a product or service.

Research may be conducted in-house or by a third party that specializes in market research. It can be done through surveys and focus groups, among other ways. Test subjects are usually compensated with product samples or a small stipend for their time.

Key Takeaways

• Companies conduct market research before introducing new products to determine their appeal to potential customers.
• Tools include focus groups, telephone interviews, and questionnaires.
• The results of market research inform the final design of the product and determine how it will be positioned in the marketplace.
• Market research usually combines primary information, gathered directly from consumers, and secondary information, which is data available from external sources.

Market Research

How market research works.

Market research is used to determine the viability of a new product or service. The results may be used to revise the product design and fine-tune the strategy for introducing it to the public. This can include information gathered for the purpose of determining market segmentation . It also informs product differentiation , which is used to tailor advertising.

A business engages in various tasks to complete the market research process. It gathers information based on the market sector being targeted by the product. This information is then analyzed and relevant data points are interpreted to draw conclusions about how the product may be optimally designed and marketed to the market segment for which it is intended.

It is a critical component in the research and development (R&D) phase of a new product or service introduction. Market research can be conducted in many different ways, including surveys, product testing, interviews, and focus groups.

Market research is a critical tool that companies use to understand what consumers want, develop products that those consumers will use, and maintain a competitive advantage over other companies in their industry.

Primary Market Research vs. Secondary Market Research

Market research usually consists of a combination of:

• Primary research, gathered by the company or by an outside company that it hires
• Secondary research, which draws on external sources of data

Primary Market Research

Primary research generally falls into two categories: exploratory and specific research.

• Exploratory research is less structured and functions via open-ended questions. The questions may be posed in a focus group setting, telephone interviews, or questionnaires. It results in questions or issues that the company needs to address about a product that it has under development.
• Specific research delves more deeply into the problems or issues identified in exploratory research.

Secondary Market Research

All market research is informed by the findings of other researchers about the needs and wants of consumers. Today, much of this research can be found online.

Secondary research can include population information from government census data , trade association research reports , polling results, and research from other businesses operating in the same market sector.

History of Market Research

Formal market research began in Germany during the 1920s. In the United States, it soon took off with the advent of the Golden Age of Radio.

Companies that created advertisements for this new entertainment medium began to look at the demographics of the audiences who listened to each of the radio plays, music programs, and comedy skits that were presented.

They had once tried to reach the widest possible audience by placing their messages on billboards or in the most popular magazines. With radio programming, they had the chance to target rural or urban consumers, teenagers or families, and judge the results by the sales numbers that followed.

Types of Market Research

Face-to-face interviews.

From their earliest days, market research companies would interview people on the street about the newspapers and magazines that they read regularly and ask whether they recalled any of the ads or brands that were published in them. Data collected from these interviews were compared to the circulation of the publication to determine the effectiveness of those ads.

Market research and surveys were adapted from these early techniques.

To get a strong understanding of your market, it’s essential to understand demand, market size, economic indicators, location, market saturation, and pricing.

Focus Groups

A focus group is a small number of representative consumers chosen to try a product or watch an advertisement.

Afterward, the group is asked for feedback on their perceptions of the product, the company’s brand, or competing products. The company then takes that information and makes decisions about what to do with the product or service, whether that's releasing it, making changes, or abandoning it altogether.

Phone Research

The man-on-the-street interview technique soon gave way to the telephone interview. A telephone interviewer could collect information in a more efficient and cost-effective fashion.

Telephone research was a preferred tactic of market researchers for many years. It has become much more difficult in recent years as landline phone service dwindles and is replaced by less accessible mobile phones.

Survey Research

As an alternative to focus groups, surveys represent a cost-effective way to determine consumer attitudes without having to interview anyone in person. Consumers are sent surveys in the mail, usually with a coupon or voucher to incentivize participation. These surveys help determine how consumers feel about the product, brand, and price point.

Online Market Research

With people spending more time online, market research activities have shifted online as well. Data collection still uses a survey-style form. But instead of companies actively seeking participants by finding them on the street or cold calling them on the phone, people can choose to sign up, take surveys, and offer opinions when they have time.

This makes the process far less intrusive and less rushed, since people can participate on their own time and of their own volition.

How to Conduct Market Research

The first step to effective market research is to determine the goals of the study. Each study should seek to answer a clear, well-defined problem. For example, a company might seek to identify consumer preferences, brand recognition, or the comparative effectiveness of different types of ad campaigns.

After that, the next step is to determine who will be included in the research. Market research is an expensive process, and a company cannot waste resources collecting unnecessary data. The firm should decide in advance which types of consumers will be included in the research, and how the data will be collected. They should also account for the probability of statistical errors or sampling bias .

The next step is to collect the data and analyze the results. If the two previous steps have been completed accurately, this should be straightforward. The researchers will collect the results of their study, keeping track of the ages, gender, and other relevant data of each respondent. This is then analyzed in a marketing report that explains the results of their research.

The last step is for company executives to use their market research to make business decisions. Depending on the results of their research, they may choose to target a different group of consumers, or they may change their price point or some product features.

The results of these changes may eventually be measured in further market research, and the process will begin all over again.

Benefits of Market Research

Market research is essential for developing brand loyalty and customer satisfaction. Since it is unlikely for a product to appeal equally to every consumer, a strong market research program can help identify the key demographics and market segments that are most likely to use a given product.

Market research is also important for developing a company’s advertising efforts. For example, if a company’s market research determines that its consumers are more likely to use Facebook than X (formerly Twitter), it can then target its advertisements to one platform instead of another. Or, if they determine that their target market is value-sensitive rather than price-sensitive, they can work on improving the product rather than reducing their prices.

Market research only works when subjects are honest and open to participating.

Example of Market Research

Many companies use market research to test new products or get information from consumers about what kinds of products or services they need and don’t currently have.

For example, a company that’s considering starting a business might conduct market research to test the viability of its product or service. If the market research confirms consumer interest, the business can proceed confidently with its business plan . If not, the company can use the results of the market research to make adjustments to the product to bring it in line with customer desires.

What Are the Main Types of Market Research?

The main types of market research are primary research and secondary research. Primary research includes focus groups, polls, and surveys. Secondary research includes academic articles, infographics, and white papers.

Qualitative research gives insights into how customers feel and think. Quantitative research uses data and statistics such as website views, social media engagement, and subscriber numbers.

What Is Online Market Research?

Online market research uses the same strategies and techniques as traditional primary and secondary market research, but it is conducted on the Internet. Potential customers may be asked to participate in a survey or give feedback on a product. The responses may help the researchers create a profile of the likely customer for a new product.

What Are Paid Market Research Surveys?

Paid market research involves rewarding individuals who agree to participate in a study. They may be offered a small payment for their time or a discount coupon in return for filling out a questionnaire or participating in a focus group.

What Is a Market Study?

A market study is an analysis of consumer demand for a product or service. It looks at all of the factors that influence demand for a product or service. These include the product’s price, location, competition, and substitutes as well as general economic factors that could influence the new product’s adoption, for better or worse.

Market research is a key component of a company’s research and development (R&D) stage. It helps companies understand in advance the viability of a new product that they have in development and to see how it might perform in the real world.

Britannica Money. “ Market Research .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

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Market Structure: The Analysis of Markets and Competition - Knight, B. and McGee, J. (2015). Market Structure: The Analysis of Markets and Competition. In Wiley Encyclopedia of Management - Volume 12 Strategic Management (eds C. L. Cooper, J. McGee and T. Sammut‐Bonnici)

2015, Wiley Encyclopedia of Management

A market is, in its general sense, the group of suppliers and buyers who are in sufficiently close contact for market transactions to take place and for those transactions to effect the terms of trade (the price). The structure of the markets indicates the relative number of buyers and sellers in the market and therefore the nature of competition that will take place. Market conditions can vary from the perfectly competitive to the monopolistic, and the consequences of these can be seen in market conduct and performance outcomes.

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Market Structure

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Since antiquity, a distinction between monopoly and competitive market structures has been recognized. Aristotle (Book I, 5) characterized ‘monopoly’ [ μ ó ν os (alone), \( \pi \omega \lambda \upepsilon \iota \overset{\frown }{\nu } \) (sell)] as a situation in which a single trader engrossed the entire supply. He recounted how one such iron ore monopolist had been expelled from Syracuse by its ruler, Dionysius. Adam Smith (1776, Book I, chapter VI) advanced somewhat beyond the Aristotelean schema, contrasting the price under monopoly (‘the highest which can be got’) to that of free competition (‘the lowest which the sellers can commonly afford to take, and at the same time continue their business’). The most important single step toward a modern theory of how market structure matters was taken by Cournot (1838). He perceived correctly that a monopolist confronts the downward-sloping demand function for its product, and he derived the mathematical conditions (essentially, equality of marginal revenue with marginal cost) by which the monopolist maximized its profits. He then showed how market prices fell with increasing numbers of competitors, converging in the many-seller case toward a zero-profit condition. Thus Cournot provided among other things the first theory of oligopoly, that is, of markets with only a few sellers.

This chapter was originally published in The New Palgrave: A Dictionary of Economics , 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman

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Degree of Monopoly

Monopolistic competition and general equilibrium.

Perfect Competition

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Cournot, A. 1838. Recherches sur les principes mathématiques de la théorie des richesses . Paris: Hachette.

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Smith, A. 1776. An inquiry into the nature and causes of the wealth of nations . London: W. Strahan & T. Cadell.

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Scherer, F.M. (1987). Market Structure. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_960-1

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Market Research: A How-To Guide and Template

Discover the different types of market research, how to conduct your own market research, and use a free template to help you along the way.

MARKET RESEARCH KIT

5 Research and Planning Templates + a Free Guide on How to Use Them in Your Market Research

Updated: 02/21/24

Published: 02/21/24

Today's consumers have a lot of power. As a business, you must have a deep understanding of who your buyers are and what influences their purchase decisions.

Enter: Market Research.

Whether you're new to market research or not, I created this guide to help you conduct a thorough study of your market, target audience, competition, and more. Let’s dive in.

Table of Contents

What is market research?

Primary vs. secondary research, types of market research, how to do market research, market research report template, market research examples.

Market research is the process of gathering information about your target market and customers to verify the success of a new product, help your team iterate on an existing product, or understand brand perception to ensure your team is effectively communicating your company's value effectively.

Market research can answer various questions about the state of an industry. But if you ask me, it's hardly a crystal ball that marketers can rely on for insights on their customers.

Market researchers investigate several areas of the market, and it can take weeks or even months to paint an accurate picture of the business landscape.

However, researching just one of those areas can make you more intuitive to who your buyers are and how to deliver value that no other business is offering them right now.

How? Consider these two things:

• Your competitors also have experienced individuals in the industry and a customer base. It‘s very possible that your immediate resources are, in many ways, equal to those of your competition’s immediate resources. Seeking a larger sample size for answers can provide a better edge.
• Your customers don't represent the attitudes of an entire market. They represent the attitudes of the part of the market that is already drawn to your brand.

The market research services market is growing rapidly, which signifies a strong interest in market research as we enter 2024. The market is expected to grow from roughly $75 billion in 2021 to $90.79 billion in 2025 .

Free Market Research Kit

• SWOT Analysis Template
• Survey Template
• Focus Group Template

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Why do market research?

Market research allows you to meet your buyer where they are.

As our world becomes louder and demands more of our attention, this proves invaluable.

By understanding your buyer's problems, pain points, and desired solutions, you can aptly craft your product or service to naturally appeal to them.

Market research also provides insight into the following:

• Where your target audience and current customers conduct their product or service research
• Which of your competitors your target audience looks to for information, options, or purchases
• What's trending in your industry and in the eyes of your buyer
• Who makes up your market and what their challenges are
• What influences purchases and conversions among your target audience
• Consumer attitudes about a particular topic, pain, product, or brand
• Whether there‘s demand for the business initiatives you’re investing in
• Unaddressed or underserved customer needs that can be flipped into selling opportunity
• Attitudes about pricing for a particular product or service

Ultimately, market research allows you to get information from a larger sample size of your target audience, eliminating bias and assumptions so that you can get to the heart of consumer attitudes.

As a result, you can make better business decisions.

To give you an idea of how extensive market research can get , consider that it can either be qualitative or quantitative in nature — depending on the studies you conduct and what you're trying to learn about your industry.

Qualitative research is concerned with public opinion, and explores how the market feels about the products currently available in that market.

Quantitative research is concerned with data, and looks for relevant trends in the information that's gathered from public records.

That said, there are two main types of market research that your business can conduct to collect actionable information on your products: primary research and secondary research.

Primary Research

Primary research is the pursuit of first-hand information about your market and the customers within your market.

It's useful when segmenting your market and establishing your buyer personas.

Primary market research tends to fall into one of two buckets:

• Exploratory Primary Research: This kind of primary market research normally takes place as a first step — before any specific research has been performed — and may involve open-ended interviews or surveys with small numbers of people.
• Specific Primary Research: This type of research often follows exploratory research. In specific research, you take a smaller or more precise segment of your audience and ask questions aimed at solving a suspected problem.

Secondary Research

Secondary research is all the data and public records you have at your disposal to draw conclusions from (e.g. trend reports, market statistics, industry content, and sales data you already have on your business).

Secondary research is particularly useful for analyzing your competitors . The main buckets your secondary market research will fall into include:

• Public Sources: These sources are your first and most-accessible layer of material when conducting secondary market research. They're often free to find and review — like government statistics (e.g., from the U.S. Census Bureau ).
• Commercial Sources: These sources often come in the form of pay-to-access market reports, consisting of industry insight compiled by a research agency like Pew , Gartner , or Forrester .
• Internal Sources: This is the market data your organization already has like average revenue per sale, customer retention rates, and other historical data that can help you draw conclusions on buyer needs.
• Focus Groups
• Product/ Service Use Research
• Observation-Based Research
• Buyer Persona Research
• Market Segmentation Research
• Pricing Research
• Competitive Analysis Research
• Customer Satisfaction and Loyalty Research
• Brand Awareness Research
• Campaign Research

1. Interviews

Interviews allow for face-to-face discussions so you can allow for a natural flow of conversation. Your interviewees can answer questions about themselves to help you design your buyer personas and shape your entire marketing strategy.

2. Focus Groups

Focus groups provide you with a handful of carefully-selected people that can test out your product and provide feedback. This type of market research can give you ideas for product differentiation.

3. Product/Service Use Research

Product or service use research offers insight into how and why your audience uses your product or service. This type of market research also gives you an idea of the product or service's usability for your target audience.

4. Observation-Based Research

Observation-based research allows you to sit back and watch the ways in which your target audience members go about using your product or service, what works well in terms of UX , and which aspects of it could be improved.

5. Buyer Persona Research

Buyer persona research gives you a realistic look at who makes up your target audience, what their challenges are, why they want your product or service, and what they need from your business or brand.

6. Market Segmentation Research

Market segmentation research allows you to categorize your target audience into different groups (or segments) based on specific and defining characteristics. This way, you can determine effective ways to meet their needs.

7. Pricing Research

Pricing research helps you define your pricing strategy . It gives you an idea of what similar products or services in your market sell for and what your target audience is willing to pay.

8. Competitive Analysis

Competitive analyses give you a deep understanding of the competition in your market and industry. You can learn about what's doing well in your industry and how you can separate yourself from the competition .

9. Customer Satisfaction and Loyalty Research

Customer satisfaction and loyalty research gives you a look into how you can get current customers to return for more business and what will motivate them to do so (e.g., loyalty programs , rewards, remarkable customer service).

10. Brand Awareness Research

Brand awareness research tells you what your target audience knows about and recognizes from your brand. It tells you about the associations people make when they think about your business.

11. Campaign Research

Campaign research entails looking into your past campaigns and analyzing their success among your target audience and current customers. The goal is to use these learnings to inform future campaigns.

• Define your buyer persona.
• Identify a persona group to engage.
• Prepare research questions for your market research participants.
• List your primary competitors.
• Summarize your findings.

1. Define your buyer persona.

You have to understand who your customers are and how customers in your industry make buying decisions.

This is where your buyer personas come in handy. Buyer personas — sometimes referred to as marketing personas — are fictional, generalized representations of your ideal customers.

Use a free tool to create a buyer persona that your entire company can use to market, sell, and serve better.

Don't forget to share this post!

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Table of Contents

What is market structure, types of market structures, monopolistic markets characteristics, oligopoly characteristics, perfectly competitive market characteristics, final thought, market structure: definition, types, features and fluctuations.

You all must have read about the immense scope of markets in economics textbooks. But what does market structure look like in the real world? Market structure can be categorized based on the competition levels and the nature of markets. Let’s look into the details of market structure in this article. 

Market structure refers to the way that various industries are classified and differentiated in accordance with their degree and nature of competition for products and services. It consists of four types: perfect competition, oligopolistic markets, monopolistic markets, and monopolistic competition.

According to economic theory, market structure describes how firms are differentiated and categorized by the types of products they sell and how those items influence their operations. A market structure helps us to understand what differentiates markets from one another.

In economics, market structure is the number of firms producing identical products which are homogeneous. The types of market structures include the following:

• Monopolistic competition, also called competitive market, where there is a large number of firms, each having a small proportion of the market share and slightly differentiated products.
• Oligopoly, in which a market is by a small number of firms that together control the majority of the market share.
• Duopoly, a special case of an oligopoly with two firms.
• Monopsony, when there is only one buyer in a market.
• Oligopsony, a market in which many sellers can be present but meet only a few buyers.
• Monopoly, in which there is only one provider of a product or service.
• Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms.
• Perfect competition, a theoretical market structure that features no barriers to entry, an unlimited number of producers and consumers, and a perfectly elastic demand curve.

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The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size distribution of firms, entry conditions, and the extent of differentiation.

These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. Competition is useful because it reveals actual customer demand and induces the seller (operator) to provide service quality levels and price levels that buyers (customers) want, typically subject to the seller’s financial need to cover its costs. In other words, competition can align the seller’s interests with the buyer’s interests and can cause the seller to reveal his true costs and other private information. In the absence of perfect competition, three basic approaches can be adopted to deal with problems related to the control of market power and an asymmetry between the government and the operator with respect to objectives and information: (a) subjecting the operator to competitive pressures, (b) gathering information on the operator and the market, and (c) applying incentive regulation.

Monopolistically competitive markets have the following characteristics:

• There are many producers and many consumers in the market, and no business has total control over the market price.
• Consumers perceive that there are non-price differences among the competitors' products.
• There are few barriers to entry and exit.
• Producers have a degree of control over price.

The long-run characteristics of a monopolistically competitive market are almost the same as a perfectly competitive market. Two differences between the two are that monopolistic competition produces heterogeneous products and that monopolistic competition involves a great deal of non-price competition, which is based on subtle product differentiation. A firm making profits in the short run will nonetheless only break even in the long run because demand will decrease and average total cost will increase. This means in the long run, a monopolistically competitive firm will make zero economic profit. This illustrates the amount of influence the firm has over the market; because of brand loyalty, it can raise its prices without losing all of its customers. This means that an individual firm's demand curve is downward sloping, in contrast to perfect competition, which has a perfectly elastic demand schedule.

• Profit maximization conditions: An oligopoly maximizes profits by producing where marginal revenue equals marginal costs.
• Ability to set price: Oligopolies are price setters rather than price takers.
• Entry and exit: Barriers to entry are high. The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. Additional sources of barriers to entry often result from government regulation favoring existing firms making it difficult for new firms to enter the market.
• Number of firms: "Few" – a "handful" of sellers. There are so few firms that the actions of one firm can influence the actions of the other firms.
• Long run profits: Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering the market to capture excess profits.
• Product differentiation: Product may be homogeneous (steel) or differentiated (automobiles).
• Perfect knowledge: Assumptions about perfect knowledge vary but the knowledge of various economic factors can be generally described as selective. Oligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. Buyers have only imperfect knowledge as to price, cost and product quality.
• Interdependence: The distinctive feature of an oligopoly is interdependence. Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm's market actions and will respond appropriately. This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firm's countermoves. It is very much like a game of chess or pool in which a player must anticipate a whole sequence of moves and countermoves in determining how to achieve his or her objectives. For example, an oligopoly considering a price reduction may wish to estimate the likelihood that competing firms would also lower their prices and possibly trigger a ruinous price war. Or if the firm is considering a price increase, it may want to know whether other firms will also increase prices or hold existing prices constant. This high degree of interdependence and need to be aware of what other firms are doing or might do is to be contrasted with lack of interdependence in other market structures. In a perfectly competitive (PC) market there is zero interdependence because no firm is large enough to affect market price. All firms in a PC market are price takers, as current market selling price can be followed predictably to maximize short-term profits. In a monopoly, there are no competitors to be concerned about. In a monopolistically-competitive market, each firm's effects on market conditions is so negligible as to be safely ignored by competitors.
• Non-Price Competition: Oligopolies tend to compete on terms other than price. Loyalty schemes, advertisement, and product differentiation are all examples of non-price competition
• Infinite buyers and sellers – An infinite number of consumers with the willingness and ability to buy the product at a certain price, and infinite producers with the willingness and ability to supply the product at a certain price.
• Zero entry and exit barriers – A lack of entry and exit barriers makes it extremely easy to enter or exit a perfectly competitive market.
• Perfect factor mobility – In the long run factors of production are perfectly mobile, allowing free long term adjustments to changing market conditions.
• Perfect information - All consumers and producers are assumed to have perfect knowledge of price, utility, quality and production methods of products.
• Zero transaction costs - Buyers and sellers do not incur costs in making an exchange of goods in a perfectly competitive market.
• Profit maximizing - Firms are assumed to sell where marginal costs meet marginal revenue, where the most profit is generated.
• Homogenous products - The qualities and characteristics of a market good or service do not vary between different suppliers.
• Non-increasing returns to scale - The lack of increasing returns to scale (or economies of scale) ensures that there will always be a sufficient number of firms in the industry.
• Property rights - Well defined property rights determine what may be sold, as well as what rights are conferred on the buyer.

The correct sequence of the market structure from most to least competitive is perfect competition, imperfect competition, oligopoly and pure monopoly. The main criteria by which one can distinguish between different market structures are the number and size of producers and consumers in the market, the type of goods and services being traded and the degree to which information can flow freely.

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Market Structure, Product Differentiation, and Industrial Research

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William S. Comanor, Market Structure, Product Differentiation, and Industrial Research, The Quarterly Journal of Economics , Volume 81, Issue 4, November 1967, Pages 639–657, https://doi.org/10.2307/1885583

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Research and firm size within industries, 640. — Research elasticities and average firm size, 644. — Market structure and the level of research, 645. — The role of technical entry barriers, 652. — Conclusions, 656.

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Quantitative Research Intern, Bachelor’s or Master’s Degree

As a Quantitative Research Intern, you will work side-by-side with our Research Team of mathematicians, scientists and technologists, to develop and enhance the models that drive Optiver’s trading. You will tackle a practical research challenge that has real-world impact and directly influences Optiver’s trading decisions. In our business, where the markets are always evolving, you will use your skills to predict its movements.

What you’ll do:

Led by our in-house education team, you will delve into trading fundamentals and engage in research projects that make a real difference. You will be paired with one of Optiver’s seasoned researchers, providing you exposure to a variety of research areas, including:

• Using statistical models and machine learning to develop trading algorithms.
• Leveraging big data technologies to analyze high-frequency trading strategies, market microstructure, and financial instruments to identify trading opportunities.
• Building stochastic models to determine the fair value of financial derivatives.
• Combining quantitative analysis and high-performance implementation to ensure the efficiency and accuracy of pricing engines and libraries.

Based on your performance during the internship, you could receive an offer to join our firm full-time after your studies.

What you’ll get:

You’ll join a culture of collaboration and excellence where you’ll be surrounded by curious thinkers and creative problem solvers. Motivated by a passion for continuous improvement, you’ll thrive in a high-performing environment alongside talented colleagues working collectively to tackle the toughest challenges in the financial markets.

Additionally, you’ll receive:

• A highly-competitive internship compensation package
• Optiver-covered flights, living accommodations and commuting stipends (where applicable)
• Office perks, including fully paid commuting expenses, daily breakfast and lunch, social events and clubs

Who you are:

• Currently pursuing a Bachelor’s or Master’s degree in Mathematics, Statistics, Computer Science, Physics or a related STEM field with outstanding academic performance
• Expected graduation date between  December 2025 and June 2026
• Availability to commence full-time employment upon graduation in 2026
• Must be available to intern during Summer 2025

Diversity statement

Optiver is committed to diversity and inclusion .

For answers to some of our most frequently asked questions, refer to our Campus FAQs .

Optiver is supportive of US immigration sponsorship for this role.

*We accept one application per role per year. If you have previously applied to this position during this season and have been unsuccessful, you can reapply once the next recruitment season begins in 2025. 

At Optiver, we are committed to creating a diverse and inclusive environment of mutual respect. Optiver recruits, employs, trains, compensates and promotes regardless of race, religion, color, sex, gender identity, sexual orientation, age, physical or mental disability, or other legally protected characteristics.

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