4.4 Market research

Introduction - market research

• Market research: process of collecting, recording and analyzing data about customers, competitors and the market.

• Why organizations carry out market research?

  • To reduce the risks associated with new product launches
  • To predict future demand changes
  • To explain patterns in sales of existing products and market trends
  • To assess the most favored designs, flavors, styles, promotions and packages for a product

How organizations carry out market research

• Sources of market research data

  • Primary research: collection of first-hand data that are directly related to a firm’s needs.
  • Secondary research: collection of data from second-hand sources.
  • Qualitative research: research into the in-depth motivations behind consumer buying behavior or opinions.
  • Quantitative research: research that leads to numerical results that can be presented and analyzed.

• Methods of primary research

  • Surveys: detailed studies of a market or geographical area to gather data on attitudes, impressions, opinions and satisfaction levels of products or businesses, by asking a section of the population.
  • Interviews
  • Focus groups: groups of people who are asked about their attitude towards a product, service, advertisement or new style of packaging.
  • Observations
  • Observational technique: qualitative method of collecting and analyzing information obtained through directly or indirectly watching and observing others in business environments’ e.g. watching consumers walk round a supermarket.
  • Test marketing: marketing a new product in a geographical region before a full-scale launch.

• Sources of secondary data

  • Market intelligence analysis reports
  • Academic journals
  • Government publications
  • Local libraries and local government offices
  • Trade organizations
  • Media reports and specialist publications
  • Internal company records
  • The Internet

• Sample size and sampling methods

  • Sample: group of people taking part in a market research survey selected to be representative of the target market overall.
  • Sampling errors: errors in research caused by using a sample for data collection rather than the whole target population.
  • Ways of selecting an appropriate sample:
  • Quota sampling: gathering data from a group chosen out of a specific sub-group, e.g. a researcher might ask 100 individuals between the ages of 20 and 30 years.
  • Random sampling: every member of the target population has an equal chance of being selected.
  • Stratified sampling draws a sample from a specified sub-group or segment of the population and uses random sampling to select an appropriate number from each stratum.
  • Cluster sampling: using one or a number of specific groups to draw samples from and not selecting from the whole population, e.g. using one town or region.
  • Snowball sampling: using existing members of a sample study group to recruit further participants through their acquaintances.
  • Convenience sampling: drawing representative selection of people because of the ease of their volunteering or selecting people because of their availability or easy access.