Classical economic theorists have argued that supply creates its own demand in a market, Adam Smith’s invisible hand theory. The crisis of 1929, which was a crisis of overproduction, proved the opposite. Therefore, before producing, or increasing production, we must check whether there are takers. This can be done through market research.
WHAT IS A MARKET STUDY?
Market research is a marketing tool for planning and checking the health of a market, whether for goods or services. Before increasing production, or before offering a new good for consumption, it is better to check that the offer can find a taker and that consumers need it. The study is carried out through paper surveys in the first instance, in order to develop the questionnaire, determine the target households or persons, and the study area. Then, it is carried out concretely through survey and sampling techniques. Then it ends with the analysis of the results obtained.
WHY CONDUCT MARKET RESEARCH?
The objectives of a market study are first of all to see whether an increase in supply or the creation of an offer will attract consumers. Then, to see if the proposed product can replace another one (creation of indirect competition to an already existing product). Finally, it aims to see, after analysis, at what price the proposed good or service could be sold. Indeed, even if a product can be placed on a market (observation of a real need), it is also necessary to know how much consumers need it: classification of the good (vital, luxury, etc.).
HOW IS MARKET RESEARCH CARRIED OUT?
Each person or household has a budgetary constraint (salary or sum of their total income). With this (known) constraint, the household consumes several products that form what is called a basket. The composition of this basket is made in such a way that the satisfaction is at the maximum given the budget to be respected (Pareto optimality). During a market study, which is generally carried out through surveys of households consuming the same type of product or service (the same or substitutable good) in its basket, questions are asked. These questions are of the type: do you need this product? If more were produced, or if you were offered this type of product (new product), would you consume it? If so, in what quantity?
The answers to these questions are then processed and analysed to see whether or not it is appropriate to invest in this market.