1.1.2 Market research Flashcards
Define market research
Market research is the objective collection, compilation and analysis of information about a market
How does market research improve businesses?
To reduce risk when launching new products or entering new markets
Anticipate future needs and wants of consumers
To understand consumer behaviour
To identify potential consumer demand
To identify how much consumers are prepared to pay
To identify competitors and gauge their potential strengths and weaknesses
Define quantitative data
Numerical data
Define qualitative data
Data based on thoughts and opinions
Define primary research
Primary research is the process of gathering information directly from consumers in the target market using field research methods such as surveys, interviews, observations, test markets, focus groups
Advantages to primary research
Information gathering is focused on the needs of the business and will not be available to its rivals
The business can get in-depth information from respondents, for example, reasons behind certain behaviour
Primary market research is more up-to-date and can be used to ask specific questions and so will be more relevant
Disadvantage of primary research
The sample size may be too small and unrepresentative of all of the customers leading to unreliable results
Bias may mean that researchers can guide respondents to answer questions in a particular way
A business may need to hire a specialist market research agency to help and the process can be expensive and time-consuming
Define secondary research
Secondary research involves the collection, compilation, and analysis of data that already exists
Secondary research advantage
Information is already available and so is quicker to collect than primary research thereby saving time
Information is often free and is cheaper to collect leading to lower costs compared to primary research
Suitable for a small business that lacks a large marketing budget and/or expertise
What is market segmentation
Market segmentation is the process in which a single market is divided into sub markets or ‘segments’
Each segment represents a slightly different set of consumer characteristics
Firms often segment their markets according to factors such as income, geographical location, religion, gender, or lifestyle
Disadvantage of secondary research
Information has been collected for other purposes and so may lack relevance or may not be factually correct e.g. Wikipedia
Can be expensive to purchase market specific secondary data from specialist companies
Information may be out-of-date, especially in dynamic markets
Advantage of market segmentation
Recognizes that consumers are not all identical - consumer groups do not all share the same tastes and preferences
Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely
Less expensive and wasteful than marketing products at wide market segments
May increase loyalty if the consumer feels that their needs are being met which can lead to repeat purchases
Disadvantage of market segmentation
Not everyone within a segment will behave in the same way
May be difficult to identify a segment and consumers can belong to multiple segments at the same time
Segmentation requires more detailed market research which can prove costly (but beneficial) to the business
A segment may be identified but it may be too small and unprofitable to cater for
