Market research consists of testing the market to determine the acceptance of a particular product or service, especially amongst different demographics. It is used to establish which portion of the population will or does purchase a product, based on age, gender, location, income level and many other variables. Market research allows companies to learn more about past, current and potential customers, including their specific likes and dislikes.

Based on market research data, businesses can develop a "target audience." A target audience is a specific group of customers that has a distinct need or desire for a product or service. Market research is used to determine how often the target audience will buy a particular item, how much they are willing to pay for it, and their overall satisfaction with it. By analyzing market research information, manufacturers and service providers learn where to focus their resources most effectively.

For example, mature men and women are most likely to buy a hair product that covers gray. Advertising for such a product would obviously target adults, perhaps those 30 and older. It makes no sense to waste money and effort advertising it to teen girls. On the same note, if a product should be popular amongst different demographics, but seems to be selling to only one group, a company may hire a market research team to find out why. Through the market research data collected, the company can learn how to make the product more attractive to other audiences, or how to advertise it better.

Market research also helps companies develop information regarding new products or product lines and learn how well new items will be received. It can also help businesses learn how the public responds to a comparable product already on the market. In this way, business can stay in the loop, keeping in touch with the wants and needs of potential consumers. They can halt production of a product that the public shows little or no interest in, or change it, improve it, or lower the price as necessary based on market research information.