3.2 markets and customers

primary research

data collected first hand for a specific research purpose

secondary research

data that already exists and which has been collected for a different purpose

reasons for market research

• ensures business produce goods/services customers demand

• establish a USP

• choosing the right marketing mix (7 Ps)

• to stay competitive / increase market share

• increase sales revenue / volume

sources of primary research

• surveys

• interviews

  focus groups

• test marketing

• experiments

sources of secondary research

• websites

• government departments - insights on the economy

• trade associations

• trade press and magazines - industry and market insights

• market research reports

customers differ in terms of

• benefits they want

• amount they can spend

• quantities

• time and place they want to buy

insights produced by MR

• size and growth of market

• competitor strategies

• needs, wants, expectations

• market segments - opportunities to enter new markets

market research process

1. define problem / objective

2. develop research plan

3. implement plan, collect and analyze data

4. interpret data and report findings

market research on the customer

• who buys

• where do they buy

• what factors influence their decision to buy

• when do they buy

• what do they buy

• why do they buy

marketing ethics

there is growing pressure on businesses to fulfil their social responsibilities and to consider all stakeholders in their decisions

ADV primary research

• can tailor to own needs

• qualitative

• more detailed response

• target certain groups

• kept private

• provides direct insights from the target audience

• offers detailed information about consumer preferences and behaviors

DIS primary research

• expensive

• prone to bias

• time consuming

ADV secondary research

• cheap and easy to obtain

• easy to access

• more quantitative data

• lots of sources

• valuable for understanding market trends, benchmarking against competitors, and saving time and resources,

DIS secondary research

• some are inaccurate

• more quantitative

• not specific to business needs

• can become quickly outdated

quantitative data

• data / numbers

• gathered through surveys

• closed questions (multiple choice)

qualitative data

• based on opinions

• focus groups and interviews

• aims to understand why customers behave in a certain way

ADV quantitative data

• easy to argue

• insight to relevant trends

• can be compared easily

DIS quantitative data

• focuses on data rather then explaining why

• may lack reliability if sample size or method is not valid

ADV qualitative data

• essential to development of new products

• focuses on understanding customer wants

• can highlight issues

• effective way of testing marketing mix

DIS qualitative data

• expensive to collect

• opinion based - room for bias

focus groups

• form of qualitative research in which groups of people are asked about their perceptions and attitudes towards a product or service

  • packaging, concept, functionality

sampling def

gathering data from a sample of reconsents to represent a larger population, allowing for insights and analysis of trends or behaviors

random sampling

a method where each member of a population has an equal chance of being selected to ensure a representative sample

stratified sampling

a method of sampling that involves dividing a population into subgroups and selecting samples from each subgroup to ensure representation of key characteristics

quota sampling

a method where researchers ensure that specific characteristics are represented in the sample by setting quotas for each subgroup

ADV sampling

• quick and flexible

• using sampling can help make marketing decisions and reduce cost and risk

• even a small sample can still provide useful research

DIS sampling

• can be unrepresentative of whole population leading to incorrect decisions

• risk of bias

• less useful if customers are frequently changing

market mapping

• to visually show where a product stands relative to its competitors

• should aim to identify areas where groups of competitors exist and avoid these areas

confidence intervals

• a statistical tool that provides a range of values, derived from sample data, that is likely to contain the true population parameter with a specified level of confidence

• confidence intervals are essential in market research to assess the reliability of estimates and inform decision-making

use of market mapping

can help identify the gaps in the market which will enable them to make their product unique

extrapolation

• estimating unknown values by extending known data points

• used in market analysis to predict future trends based on current information

strong correlation

little room between data points

weak correlation

data points are spread far apart

ADV extrapolation

• simple

• not much data required

• quick and cheap

DIS extrapolation

• unreliable if there are significant fluctuations in historical data

• assumes past trends will continue into the future

• ignores qualitative factors (changes in fashion)

PED def

measures how quantity demanded responds to price changes

PED formula

% change in QD / % change in price

value of PED

• elastic - more than -1

  • change in demand is more than the change in price

• inelastic - less than -1

  • change in demand is less than the change in price

• unitary - -1

  • change in price = change in demand

factors affecting PED

• brand strength

  • high brand loyalty and reputation = inelastic PED

• necessity

  • inelastic if yes

• habit forming

  • PED more inelastic if yes

• availability of substitutes

  • more substitutes = more elastic PED

price increases and PED

• elastic

  • increase in price leads to a bigger decrease in demand - revenue falls

• inelastic

  • increase in price leads to a smaller decrease in demand - revenue rises

price decrease in PED

• elastic

  • decrease in price leads to a bigger percentage increase in demand - revenue rises

• inelastic

  • decrease in price leads to a smaller percentage increase in demand - revenue falls

income elasticity of demand (YED)

measures how the quantity demanded of a good responds to changes in consumer income

YED formula

% change in quantity demanded / % change in income

luxury goods

• YED is more than 1

• as incomes rise, demand rises

necessity goods

• YED less than 1 but more than 0

• as income rises, demand rises at a slower rate

normal goods

• 0 to 1

• rise in income = rise in demand

• fall in income = fall in demand

inferior good

• YED less than 0

• income rises = demand falls

• consumers which to better alternatives

• substitute products become more affordable

YED less than 1

• inelastic

• % change in QD is less than % change in income

YES more than 1

• elastic

• % change in QD is more then the % change in income