The purpose and methods of market research

What is market research?

The collection and analysis of information about customers, demand and competitors.

Why do businesses conduct market research?

To understand customer needs, assess demand, identify opportunities and reduce the risk of business decisions.

What is demand in market research?

The quantity of a product or service customers are willing and able to buy at a given price.

Why should a business research its competitors?

It can compare prices, products and promotional methods to identify ways to compete effectively.

How can market research identify market opportunities?

It may reveal unmet customer needs, new trends or groups of customers that are not being served well.

What is primary market research?

New information collected directly by a business for a specific purpose.

What is secondary market research?

Information that has already been collected by another person or organisation, or previously collected for another purpose.

What is quantitative market research?

Research that produces numerical data, such as percentages, ratings or numbers of customers.

What is qualitative market research?

Research that explores opinions, reasons and feelings, usually using descriptive responses.

What is a questionnaire?

A set of written questions used to collect information from respondents.

What is one advantage of questionnaires?

They can collect comparable answers from many people relatively cheaply.

What is one disadvantage of questionnaires?

Respondents may misunderstand questions or give answers that do not reflect their true opinions.

What is a survey?

A method of collecting information from a sample of people, often using a questionnaire or structured questions.

What is one advantage of surveys?

They can gather information from many customers and reveal patterns in preferences.

What is one disadvantage of surveys?

The findings may be unreliable if the sample is too small or does not represent the target market.

What is an interview in market research?

A conversation in which a researcher asks a respondent questions to collect information.

What is one advantage of interviews?

The researcher can ask follow-up questions to understand customers’ reasons and opinions.

What is one disadvantage of interviews?

They can take a long time and cost more per respondent than questionnaires.

What is a focus group?

A small group discussion led by a researcher to explore opinions about a product, service or idea.

What is one advantage of focus groups?

Participants can explain their views and respond to other people’s ideas, producing detailed feedback.

What is one disadvantage of focus groups?

A few outspoken participants may influence others, so the discussion may not represent the wider market.

What is internet research as a secondary research method?

Using online sources such as industry reports, competitor websites, customer reviews and published statistics.

What is one advantage of internet research?

It can provide large amounts of information quickly and at relatively low cost.

What is one disadvantage of internet research?

Information may be outdated, inaccurate or irrelevant to the business’s specific target market.

How can newspapers and printed press be used for market research?

They can provide industry news, reports, advertisements and information about competitors or market trends.

What is one drawback of using printed press for market research?

Information may not be current, and relevant reports can be difficult or expensive to obtain.

What is a sample in market research?

A smaller group of people selected to represent the wider target market.

Why is a representative sample important?

It makes the findings more likely to reflect the views and characteristics of the target market.

What is sampling bias?

When the people selected for research do not fairly represent the target market, making the results misleading.

Why should a business avoid leading questions?

They encourage particular answers and can distort the research findings.

What is one advantage of primary research over secondary research?

It can be designed specifically around the business’s product, customers and research questions.

What is one disadvantage of primary research?

It often requires time, money and staff to collect and analyse the information.

What is one advantage of secondary research over primary research?

It is often quicker and cheaper because the information already exists.

What is one disadvantage of secondary research?

The information may not match the business’s needs or may be out of date.

When might a questionnaire be suitable?

When a business needs comparable answers from a relatively large number of customers at low cost.

When might a focus group be suitable?

When a business wants detailed opinions about a new product design, packaging or advertising idea.

When might interviews be suitable?

When a business needs to understand why customers behave in a particular way or wants detailed feedback.

Why might a business combine primary and secondary research?

Secondary research can provide background information, while primary research can investigate specific questions that remain unanswered.

What is market size?

The total sales of a particular market, measured by value or volume over a specified period.

How can market size be calculated by value?

Add together the sales revenue of all businesses in the market over the specified period.

How can market size be calculated by volume?

Add together the number of units sold by all businesses in the market over the specified period.

What is market share?

The percentage of total market sales earned by one business.

How is market share by value calculated?

Business sales revenue ÷ total market sales revenue × 100.

How is market share by volume calculated?

Business units sold ÷ total market units sold × 100.

A business has sales of £200,000 in a market worth £1,000,000. What is its market share by value?

£200,000 ÷ £1,000,000 × 100 = 20%.

A market sells 50,000 units and a business sells 10,000 units. What is its market share by volume?

10,000 ÷ 50,000 × 100 = 20%.

A market grows from £2 million to £2.5 million. What is the increase in market size?

£500,000.

How is percentage change calculated?

(Change ÷ original value) × 100.

Why should businesses interpret charts and tables carefully?

They need to identify patterns, compare results and use reliable evidence to make appropriate decisions.

How can market research results influence pricing?

Research into customers’ willingness to pay and competitors’ prices can help a business set a suitable price.

How can market research results influence product decisions?

Customer feedback may show which features to add, change or remove.

How can market research results influence promotion?

Research can identify which advertising channels and messages are most likely to reach the target market.

Why might market research results be misleading?

The sample may be biased, questions may be poorly worded, or the information may be outdated or inaccurate.