Market research provides businesses with information about their customers, their competitors, and their overall industry. It is commonly used to identify marketing problems and opportunities, as well as to develop and evaluate the effectiveness of marketing strategies. Small business owners, because of their usually limited financial resources, have a particular need for adequate, accurate, and current information to aid them in making decisions. Market research can help entrepreneurs evaluate the feasibility of a start-up venture before investing a great deal of time and capital, for example, as well as assist them in effectively marketing their goods and services. Employing such marketing strategies as market segmentation and product differentiation would be nearly impossible without first conducting market research.

Although market research can be costly, it is often even more costly to make erroneous decisions based upon bad or inadequate information. In fact, an average business spends between 25 and 50 percent of its annual marketing budget on research activities. Conducting large-scale market research in-house is not possible for many small businesses, since it requires a comprehensive understanding of the problem to be addressed, the market, and the application of research procedures.