Market Research Procurement: Best Practices for Success

Do you work in procurement? 

Yes?

Do you run a business?

Yes?

Then, you probably already know how important procurement is for your business’s stability. Maybe, you are a start-up that’s recently starting its journey or perhaps you’ve been for years in the market, whatever the case, the situation is pretty much the same. Procurement begins when you identify the need to acquire materials or services from external parties, like suppliers or vendors, if the choice you make at the end of the process is correct or not will depend on a series of factors.

One of the most relevant?

Market research

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Market Research in Procurement 

What comes to your mind when thinking about researching something? 

Going over information? Analyzing your findings?

Market research for procurement purposes isn't that different and you can see it as the process of gathering, analyzing, and interpreting information about the supply market.

Seen as a strategic approach, market research can help you to understand current trends, identify potential suppliers, and make better decisions for your company.

Some common research findings

• Supplier capabilities: Is that supplier really aligned with your expectations? Do they have a good record working with past clients? 
• Pricing: Check over your budget first to determine what is your current financial status. Now, how much are you willing to invest in a new supplier?
• Market trends: How's your industry behaving?  What sort of economic or political factors could impact your operations?

Market Research and Procurement Strategies 

You can consider market research as the foundation of procurement strategies. Without proper research at the beginning of the process, you wouldn't be aware of what's happening around you, and you could end up missing opportunities or overlooking potential risks. Once you can understand your market dynamics, you'll be able to develop strategies that align with your procurement goals. Market research is useful for…

• Determine the best sourcing strategy.
• Negotiate better contracts.
• Manage suppliers' risks. 

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Types of Market Research

Market segmentation

Imagine that you are carrying out your research and finding a lot of information.

How can you make it more digestible?

Use a segmentation approach, so you can categorize the market into distinct groups based on factors like geography, industry, or supplier capabilities. Market segmentation allows you to tailor your procurement strategies to specific market segments. 

The outcome?

You'll be addressing the unique needs and preferences of different supplier groups.

Market sizing

How can you know if the market you're looking at is ideal for your business?

A good place to start is to begin by determining the total potential of a market, helping you understand the scope and scale of your procurement activities. Market sizing comes in handy to analyze the demand for specific products or services, identify growth opportunities, and allocate resources correctly.

Market forecast

This predicts future trends and demands, enabling you to plan for long-term procurement needs. Market forecasting involves analyzing historical data, industry trends, and economic indicators to anticipate changes in supply and demand. This helps you make proactive decisions and adapt to market changes without suffering losses. 

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How to Perform Market Research?

Okay, so we know that market research is indeed important, but how can you be sure that you're following the right steps?

Let's begin with something simple. 

Identify your goals

Start by defining what you want to achieve. Clear objectives guide the research process and ensure relevant data collection. Consider questions like: What information do you need to make informed decisions? What are your procurement priorities? Setting specific goals helps you focus your research efforts and obtain insights that are really useful for your business. 

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Choosing the right approach.

Yes, there are many types of market research as we've seen above however this point is more oriented to the methods you follow to obtain the final results. 

Depending on your goals, you could go for a qualitative or quantitative methods, or a combination of both. Qualitative research helps you understand supplier behaviors, preferences, and motivations, while quantitative research provides statistical data for analysis. Sticking with the right approach is how you make sure that your research is relevant and covers all the key aspects your company needs. 

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Essential Market Research Techniques and Methods

Qualitative vs. quantitative 

Just like we mentioned in the point before, these are the most common methods available for research purposes.

Qualitative research provides in-depth insights related to…

• Supplier behaviors
• Market dynamics 

Interviews, focus groups, and case studies are some of the ways you can obtain qualitative data.Quantitative research works with numbers so it offers measurable data through surveys, questionnaires, and statistical analysis. Both approaches complement each other, providing a broader view of the market.

Surveys, interviews, and focus groups

These methods help gather firsthand information from suppliers and industry experts. Surveys are useful for collecting data from a large audience, while interviews and focus groups provide detailed information on specific topics. Engaging with suppliers directly helps you understand their capabilities, challenges, and perspectives.

Secondary research

Here's the thing about research, you'll always have to work with primary and secondary sourcesFor procurement this means using existing reports, market studies, and databases to complement your primary research. Secondary research provides valuable context and background information, helping you validate your findings and identify industry benchmarks.

Goals of Market Research

Remember, how we said that it's important to begin by setting your goals?Well, the list below features the most common goals procurement departments go after.

• Evaluate the stability of the market.
• Find competitive prices.
• Search for the best supplier. 
• Create an effective criteria for decision-making.
• Detect risks or threats.
• Discover new opportunities.
• Analyze the financial health of a potential supplier.

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Market Research Procurement Process Flow

Initial planning 

Time to work

Define the scope, resources, and timeline for your research project. 

Consider key factors with clarity, like the market, research main purposes, data sources, and budget.

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Include your stakeholders 

There's a high chance you aren't the only one working in the procurement department of the business, so when it comes to carrying out effective research, it's totally smart to engage with relevant stakeholders. These could include procurement managers, category managers, finance teams, and even your customers. The more open you are to collaborate, the simpler is going to be to diversify your perspective.

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Documentation and reporting.

Alright, so you finally found what you were looking for. Great! 

Now it's time to compile everything so the information makes sense. 

For this, it's better if you use data visualization tools, charts, and graphs to present all that complex data in a friendly and understandable way. Don't forget to finish highlighting key insights or recommendations. 

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Impact of Market Research on Procurement Decisions.

Supplier identification

Market research helps you find potential suppliers who meet your quality and capability requirements. By analyzing supplier databases, industry directories, and trade publications, you can identify new suppliers, assess their capabilities, and expand your supplier network.

Supplier evaluation

Suppliers are so critical to your business that's essential to asses the reliability, financial stability, and performance history of a potential supplier to make informed selections. Market research provides insights into supplier track records, certifications, compliance standards, and reputation. Knowing all of these points will assist you to evaluate supplier risks, negotiate favorable terms, and build strong supplier relationships.

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Cost analysis

Analyze market pricing trends to develop accurate budgets and identify cost-saving opportunities. Gathering data related to these key factors is useful if you want to understand cost drivers, and benchmark prices, and evaluate the total cost of ownership. This enables you to make cost-effective procurement decisions and optimize your spending.

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What’s Next for Market Research in Procurement?

Digital tools streamline data collection and analysis, making market research more efficient. Technologies such as data analytics platforms, procurement software, and online survey tools enhance the accuracy and speed of market research. Automation reduces manual efforts, minimizes errors, and allows you to focus on strategic analysis.

Big data analytics enables real-time monitoring of market conditions, supplier performance, and pricing fluctuations. These technologies help you make data-driven decisions, optimize procurement strategies, and stay competitive in a dynamic market environment.

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