Market Research Flashcards

Market Research

Learning Objectives

• The purpose of market research is to:
  • Identify and understand customer needs.
  • Identify gaps in the market.
  • Reduce risk.
  • Inform business decisions.
• Methods of primary market research include:
  • Surveys
  • Questionnaires
  • Focus groups
  • Observation
  • Test marketing
• Methods of secondary research include:
  • Internet
  • Market reports
  • Government reports
• Data in market research:
  • Qualitative and quantitative data.
  • The role of social media in collecting market research data.
  • The importance of the reliability of market research data.

Purpose of Market Research

• Main purposes:
  • To identify and understand customer needs.
  • To identify gaps in the market.
  • To reduce risk.
  • To inform business decisions.
• Market research is expensive but brings benefits to a business.
• It involves gathering, presenting, and analyzing information regarding the marketing and consumption of goods and services.

Identifying and Understanding Customer Needs

• Businesses must gather information to identify customer needs.
• Once data is gathered, a product can be designed specifically to meet these needs.
• Businesses must try to anticipate customer needs – predict what customers will want in advance and respond to changes quickly.
• Businesses must keep up with changing trends, fashion, technology, and design.

Identifying Gaps in the Market

• Spotting a gap can give a competitive edge, potentially generating higher revenue and profits.
• Finding untapped products isn't easy, but gathering information helps.
• People look for better, faster, and smarter ways to complete everyday tasks.
• New apps might fill these gaps, e.g., mapping apps.
• Many apps are designed to speed up access to a range of services, saving people time.

Reducing Risk

• Setting up a business or launching a new product is risky, especially as the market grows and the number of competitors increase.
• Investment in market research reduces this risk.
• Example: Amazon's mobile phone market failure due to a design too focused on Amazon services and incorrect pricing, costing the company US170 million.

Informing Business Decisions

• One of the most important decisions companies must make is on the price of their product or service.
• Example: A business considering reducing the price of their product to increase sales volume.
  • Research on 1000 people showed sales would increase by 12% with a 20% decrease in price.
  • This would mean a reduction in revenue from US15 million to US$$13.4 million; therefore, the decision was taken not to reduce the price.
• Market research can provide this information.
• The decision-making process can be improved if managers have access to meaningful information.

Methods of Primary Research

• Also known as field research – gathering information together that does not already exist.
• Advantage – new data that can be adapted to meet the needs of a business.
• Disadvantages – costly and time-consuming.
• Some businesses might employ a market research agency – however, they are expensive, and many businesses cannot afford them.
• Methods of gathering information include:
  • Questionnaires
  • Focus Groups or Consumer Panels
  • Observations
  • Test Marketing

Questionnaires

• List of written questions – records views and opinions of respondents.
• Balance of open and closed questions.
• Contain clear and simple questions – no jargon, poor grammar, or bad spelling.
• Not contain leading questions.
• Be short.
• Good questionnaires can be:
  • Postal surveys
  • Telephone interviews
  • Personal interviews
  • Online surveys
• Can be used in different situations.

Focus Groups or Consumer Panels

• Used for detailed information from customers.
• A number of customers are invited to attend a discussion led by market researchers.
• The group must be representative of the whole population and be prepared to answer questions.
• Relatively cost-effective - however, groups are small, so generalizing from the results may not be reliable.

Observation

• Researchers watch the behavior of customers – used in retail outlets.
• Might record the time looking at products or displays.
• No feedback in this method – so questions may remain unanswered.

Test Marketing

• Selling a new product in a restricted geographical area – test sales levels before a national launch.
• After a set period, feedback is given from the customers.
• This feedback is used to modify the product before the final launch – reduces the risk of failure.

Methods of Secondary Research

• Also known as desk research – collect information that already exists.
• Could be internal – already exists inside the business; or external – already exists outside the business.
• It is quicker & easier to gather – however, the data gathered may not be exactly what the business needs, out of date, and inaccurate.
• Examples of secondary data sources:
  • Business websites
  • Competitors
  • Media
  • Internal data
  • Commercial publications
  • Government publications

Qualitative Data

• About the attitudes, beliefs, and intentions of the consumer.
• Usually written down in words or recorded.
• Focus groups, interviews, and social media can be used to gather qualitative data.
• Advantages – data can be detailed; however, can be open to different interpretations – less easy to analyze statistically.

Quantitative Data

• Expressed in numbers and can be measured.
• Surveys and government publications are common sources.
• Advantages – easier to gather, process, and present, and open to less interpretation than qualitative data.

Role of Social Media in Collecting Market Research Data

• Businesses are increasingly using social media platforms and blogs to gather information.
• Social media can be a cheap way to gather information about a firm's customers, market, brand appearance, and other market issues.
• Most social media platforms offer a way to analyze trends & conduct market research.
• Searching latest posts and popular terms makes it possible to gather information on emerging trends and to see what customers are talking about.

Importance of the Reliability of Market Research Data

• Although market research can reduce the risks of failure – it is vital that the data is reliable.
• Reliability depends on – the number of people questioned and whether they represent everyone’s views – businesses use a sample of people which is representative of the people in the market.
• Human behavior is unpredictable – what they actually do is very different to what they say they are going to do – they may misunderstand the question or change their minds.
• If researchers are poorly trained and the questions asked are poorly designed, the quality of the research may be poor.