Market research

• the process of finding out about customers, competitors and market conditions

Why market research is important:

• understand their competition

• make your company stand out from the competition (USP)

• narrow down target market

• know what customers are looking for - in the market’s current position

• get a better knowledge of product (costs/pricing)

Primary - field research

• carrying out your own research specifically for your business

  • focus groups

  • test marketing

  • questionnaires

• advantages:

  • data collected is relevant to specifics

  • reliable research

• disadvantages:

  • takes longer to collect

  • bias may occur

Sampling bias

bias - a factor that causes research findings to be unrepresentative of the whole demographic (population)

• sampling involves collecting data from a group of people who will be representative of the target market or population as a whole

• choosing a sample size is a ‘trade off’

  • large sample = more accurate

  • small sample = quicker + cheaper

Primary research methods

• focus groups - an in-depth discussion with a small group of consumers

  + explores ideas in-depth = find out attitudes + motives behind purchasing decisions

  + encourage creative ideas from participants = deepens understandings of what they want

  - expensive

  - not everyone is AS involved = lack of detail given in answers

  - people may not be honest about their answers = false understanding of what is going right + wrong with a product

• test marketing - a form of product trial

  + launching a product in a small proportion of the market gives the ability to evaluate the response to it

  + ability to gauge potential demand

  the test market must be similar to the ultimate target market in order for this method to be effective

→ product trial - where customers buy it once to see if they like it

+ successful product trials lead to repeat purchases

→ repeat purchases - customers deciding to buy a product on a regular basis

• questionnaire/survey - a set of questions designed to discover information relating to a product/service

  + cheap

  + quick

  + can be both/either qualitative + quantitative

  - it’s only as good as what’s in the questionnaire

  - hard to get people to return the questionnaire

  - people may not take it seriously

• observation - when you study people’s behaviour in relation to your business (purchasing product)

  + can see who is buying your products most (demographic)

  + find out which product is best-selling, look at their USP

  + look at what

Secondary - desk research

• looking at research that has already been made (carried out for another purpose)

  • market reports

  • government data (demographic + economics)

  • internet

  • trade publications/sites

• advantages:

  • easy to get + use

  • sample size is likely to be larger than primary research

  • lots of readily available info that can be accessed

• disadvantages:

  • unsure about reliability or accuracy of research

  • accounts must be accurate to give valid results

  • bias may occur

Quantitative research

• results are numerical and can be statistically analysed

• advantages:

  • easy to display data visually through graphs

• disadvantages:

  • difficult to place appropriate value towards numbers

Qualitative research

• results are based on opinions and feelings

• advantages:

  • ability to grasp how customers feel about product

• disadvantages:

  • difficult to represent statistical analysis

Market segmentation

the process of dividing up the market into different groups and studying their particular needs + wants

• this enables firms to differentiate their product + their marketing strategies to meet each segments needs

ways a firm can segment a market:

• age

• gender

• income

• religion/ethnicity

• lifestyles

• location

• interests

• qualifications

advantages:

• you can have a product which is very well suited to your target audience

• you are able to carry out specific research on people who you have selected as your target audience (differentiate from the competition)

• customer satisfaction leads to loyalty

disadvantages:

• market segmentation can be a very lengthy + expensive process

• if carried out incorrectly it is a large waste of money

• might have to narrow down the market too much