Market Research

What is market research?

Market research is the process of collecting information and data about a business’s customers, the market place and the activities of competitors within that marketplace.

What information would businesses like to discover when carrying out market research?

1. Discover the needs of customers – who are these customers and how many are there likely to be? What motivates them to purchase the product? How much are they willing to spend?

2. Understand the structure of the market- Is it segmented? Is the market seperared by geographical, socioeconomic etc. differences?

3. Discover whether or not market demand is increasing.

4. Test consumer response to new products or services.

5. Assess the effectiveness of previous promotion campaigns- does target market knows of the product, its uses, brand values and purpose?

6. Monitor competition and understand the activities of existing, new and potential competitors- What are their strengths and weaknesses in relation to their products/services, finances, pricing, distribution and packaging?

What are the benefits to a business for carrying out extensive market research? (1)

1. An aid to decision making – helps to make informed decisions especially important in fast changing markets.

2. To find out about customer wants and expectations.

3. To suggest introduction of new products, modification of existing products.

4. To find out how much customers are willing to pay/developing pricing strategies.

5. To gain competitive advantage/keep pace with competitors/find out what they are doing.

What are the benefits to a business for carrying out extensive market research? (2)

6. Predictive reasons – what is likely to happen in the future.

7. Exploratory reasons – investigating new possibilities in a market.

8. Descriptive reasons – what is happening in the market? Who is buying which products in our portfolio?

9. Explanatory reasons – for example to find out why have sales fallen in the last six months. Carrying out market research means that consumers may feel that their views are being considered.

10. Reduces risk – without market research a business may spend large sums of money developing and launching unsuccessful products.

What are the drawbacks to a business for carrying out extensive market research?

1. Market research may predict that an idea/product will succeed but this is not always the case - primary research depends upon responses of consumers who may not respond in the same manner in the future.

2. Data can be based on an unrepresentative sample – sampling discrepancies caused by statistical bias. A poorly constructed questionnaire can also lead to bias.

3. In secondary research, data does not always meet specific needs of a business.

4. Primary research can be expensive to gather and businesses may have to pay for secondary research.

5. Secondary data can be outdated – especially problematic in fast-changing industries.

6. Research data, especially primary can be time consuming to gather.

What are the two main types of market research?

1. Primary research

2. Secondary research

What is primary research?

Primary research involves gathering first-hand information. The data gathered is new (primary data), and should be directly relevant to the needs of the business.

When is primary research carried out?

When there is a need to collect information which is specific to the business and its products or services.

Primary research is also known as…

Field research.

List some methods of carrying out primary research.

1. Questionnaries- a set of questions given to find out customers’ opinions.

2. Observations

3. Focus groups

4. Consumer panels

5. Test marketing

What does observation involve?

Observations involve watching customers to study consumer behaviour or to find their reactions to certain products or services.

What is a focus group?

A small group of customers brought together to discuss and provide feedback regarding a business’ product / service.

What is a consumer panel?

A group of individuals recruited by research companies to represent the views of consumers in a particular sector.

What is test marketing?

Involves providing free samples of a business’ product for a limited period to the target market in order to gauge consumers' responses.

What are the advantages of primary market research?

• The information collected is specifically tailored to the business’needs and will not be available to their competitors.

• The business can gather in-depth information from their respondents.

• The research is more up-to-date and can be used to ask specific questions and so will be more relevant.

What are the disadvantages of primary market research?

• The sample size may be too small and unrepresentative of all of the customers leading to unreliable results.

• A business may need to hire a specialist market research agency to help and the process can be expensive and time-consuming.

• Can have problems of bias- researchers can guide respondents to answer questions in a particular way / respondents may be influenced by the responses of others,

What is secondary research?

Secondary research involves the use of previously collected information. The information used has not been gathered specifically for the business, but is instead adapted for its use.

Secondary research is also known as…

Desk research.

List some methods of carrying out secondary research.

• Official publications- census reports

• Industry magazines

• Yellow pages

• Online desk research

• Competitors’ reports & accounts

What are the advantages of secondary market research?

• Information is readily available and so is quicker to collect than primary research thereby saving time.

• Lower costs than primary research- information is often free.

• Suitable for a small business that lacks a large marketing budget and/or expertise

What are the disadvantages of secondary market research?

• Information has been collected for other purposes and so may lack relevance or may not be factually correct.

• Information may be out-of-date.

• In some cases it can be costly.e.g marketing firm reports.

What is quantitative research?

Involves the collection of data that can be measured. This means the collection of statistical data such as sales figures and market share.

What is qualitative research?

Involves collection of data about attitudes, beliefs and intentions.

Focus groups, participant observation and interviews are common methods used to collect qualitative data.

What is a sample?

A sample is a group of respondents to a market research exercise who are selected to be representative of the views of the target market as a whole.

How may the sample size affect the way in which a business is able to carry out its market research?

• If sample size is large, the research will take a long time and may be very expensive.

• If the sample size is too small, then there is a greater chance that random factors will make the results inaccurate.

Define bias.

Something that may cause data within a sample to be weighted towards one side.

How can a business avoid bias?

To avoid bias and collect data that is statistically valid, sampling methods, such as random sampling and quota sampling, must be used to determine the market research sample.

What is random sampling?

When every member of the population has an equal chance of being interviewed.

Describe a method research companies may use to carry out a random sample.

• Pick names at random from the electoral register (e.g. every 50th name).

• Send an interviewer to the address given in the register.

• If the person is out, visit up to twice more before giving up (this is to maximise the chances of catching those who lead busy lives and are rarely home).

This method is effective, but slow and expensive.

What is quota sampling?

The population is segmented into a number of groups that share specific characteristics.