1.2.2 Market Research

Question 1

The purpose of market research:

Answer 1

• to gather information and data which will enable the business to be informed in its decisions and so reduce the risk of failure
• to identify and understand customer needs
• to identify gaps in the market or opportunities
• understands trends in market e.g. market growth
• identify and understand competitors
• understand how well the business is doing e.g. the customers’ opinions of its products

Question 2

What does effective market research provide insights into?

Answer 2

• market (e.g. size, structure, trends)
• competition (e.g. who, market share, USP)
• customers (e.g. who, needs, wants, expectations)
• market segments e.g. existing or new segments offering opportunities

Question 3

Two categories of market research:

Answer 3

• primary market research
• secondary market research

Question 4

Primary market research:

Answer 4

data collected first-hand for a specific research purpose

Question 5

Primary market research methods:

Answer 5

• surveys and questionnaires
• focus groups
• observation

Question 6

Advantages of surveys and questionnaires as a primary market research method:

Answer 6

• Can be done by post, telephone, face to face or online - given to existing and potential customers
• Relatively cheap and can produce good quality data, if the sample size is large enough
• Data collected is usually quantitative and therefore easy to analyse

Question 7

Disadvantages of surveys and questionnaires as a primary market research method:

Answer 7

• Questions need to be well designed to ensure the information collected is reliable
• Reply rates are often low, especially for telephone and postal methods
• Can be expensive and time consuming for a large sample to be obtained that truly represents the views of the general population

Question 8

Advantages of focus groups as a primary market research method:

Answer 8

• Good way of getting detailed information about customer tastes and preferences
• They provide detailed information and opinions i.e. qualitative information

Question 9

Disadvantages of focus groups as a primary market research method:

Answer 9

• Can be costly and time consuming to conduct and therefore need to be careful managed
• Only a small amount of data is collected which may not reflect the viewpoints of others fully

Question 10

Advantages of observation as a primary market research method:

Answer 10

• Works well in retail, for example by observing the footfall outside a shop, reviewing window displays, stock layout etc.
• Can observe consumer behaviours

Question 11

Disadvantages of observation as a primary market research method:

Answer 11

• Expensive and time consuming, though larger businesses will use data from tills which can provide detailed sales records
• Observations may need to be carried out at different times to ensure the results are accurate

Question 12

Benefits of primary market research:

Answer 12

• directly focused to research objectives
• kept private - not publicly available
• more accurate
• up to date
• specific to needs
• effective at collecting qualitative data
• direct customer contact

Question 13

Drawbacks of primary market research:

Answer 13

• time-consuming and costly to obtain
• risk of survey bias
• sampling may not be representative of whole population

Question 14

Secondary market research:

Answer 14

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

Question 15

Secondary market research methods:

Answer 15

• government information/data
• competitor websites
• customer reviews
• trade association, trade press and magazines
• newspaper (printed press)
• market research reports

Question 16

Government information/data:

Answer 16

• Provides detailed insights on the economy and on many industry sectors
• There is also population data published by the government based on the census

Question 17

Competitor websites:

Answer 17

Valuable information on marketing activities of competitors including their products, prices and promotional activities and materials

Question 18

Customer reviews:

Answer 18

• The internet provides data from product users who give ratings and feedback about a particular product
• In some cases these are independent sites e.g. Trip Advisor, in other cases they are provided by the business itself e.g. Amazon

Question 19

Trade associations, trade press and magazines:

Answer 19

Most industries have an industry association - they are a good source of market analysis, which is particularly useful for new businesses which may have little or no experience of the market

Question 20

Newspapers (printed press):

Answer 20

• Financial and economic information is provided on a daily basis
• Newspapers provide local, national and international data which is up to date
• They also provide case studies of other local businesses

Question 21

Market research reports:

Answer 21

Organisations such as Mintel and Keynote produce a wide variety of expensive reports that analyse individual markets

Question 22

Benefits of secondary market research:

Answer 22

• often free and easy to obtain
• good source of market insights
• quick to access and use
• more general
• less time-consuming
• effective at collecting quantitative data

Question 23

Drawbacks of secondary market research:

Answer 23

• can quickly become out of date
• not tailored to business needs
• specialist reports are often quite expensive

Question 24

Quantitative data:

Answer 24

• Data that is normally numerical
• Main methods of obtaining quantitative data are the various forms of survey – i.e. telephone, postal, face-to-face and online

Question 25

Benefits of quantitative data:

Answer 25

• Data relatively easy to analyse
• Numerical data provides insights into relevant trends
• Can be compared with data from other sources e.g. competitors, history

Question 26

Drawbacks of quantitative data:

Answer 26

• Focuses on data rather than explaining why things happen
• Does not explain the reasons behind numerical trends
• May lack reliability if sample size and method is not valid

Question 27

Qualitative data:

Answer 27

• Based on opinions, attitudes and beliefs
• Focus groups and interviews are common methods used to collect qualitative data

Question 28

Benefits of qualitative research:

Answer 28

• Essential for important new product and development launches
• Focused on understanding customer needs, wants, expectations that provide very useful insights for a business to base its decision-making
• Can highlight issues that need addressing e.g. why customers do not buy
• Effective way of testing elements of the marketing mix e.g. new branding, promotional campaigns

Question 29

Drawbacks of qualitative research:

Answer 29

• Expensive to collect and analyse; requires specialist research skills
• Based around opinions; there is always a risk that the sample chosen is not representative of others

Question 30

Benefits of social media to collect market research data:

Answer 30

• Quick - Using Facebook and Twitter, reactions to new products will be live in minutes, providing instant feedback
• Easy to set up surveys and polls
• Provides an insight into the market in which the business is competing
• Free tools available that allow businesses to collect social media statistics
• Users are engaged in the comments process and will interact with the business and each other - comments can be followed up, for example using Facebook private messaging, to gain further data and information

Question 31

Drawbacks of using social medical to collect market research data:

Answer 31

• Feedback provided through social media comments may not be representative of actual opinions and may just represent a small number of comments of people who do not like change or new ideas
• Danger of social media becoming too negative and this message spreading very quickly in a viral fashion. Need for staff training involved in this process, which will increase costs and be time-consuming
• For a small business, the monitoring of social media can again become very time-consuming, which can detract from other important roles in the firm

Question 32

What is the importance of the reliability of market research data?

Answer 32

• Bias: Market research involves taking samples. Samples may involve some bias either through the time, location or type of people chosen. Smaller samples are more likely to be biased, but large samples are expensive and time-consuming to conduct.
• Out of date: Any research will be out of date once it has been collected. But some, especially secondary data, can be very out of date and not a reliable representation of the current situation facing a business. This can result in incorrect decisions being made.
• Inaccurate: Either the question or the answers can result in inaccuracies. If the question is not clear, then the answers given will be of little use.

Question 33

Aspects of market research:

Answer 33

• size and scale
• effective market research
• bias
• reliability

Question 34

How does size and scale affect market research?

Answer 34

• can be expensive and small businesses may only be able to do a little
• larger businesses may pay market research company to carry out extensive primary research
• the greater the sample size (proportion of population) used, the more accurate the research will be

Question 35

What is effective market research likely to link?

Answer 35

effective market research likely to link quantitative and qualitative data together

Question 36

Bias:

Answer 36

the inclination to agree with an idea

Question 37

How can market research data be biased?

Answer 37

• market research data can be biased if customers give the answers that they think the business wants them to give
• bias also occurs by not surveying a representative sample of people

Question 38

How does reliability affect market research data?

Answer 38

in order to make good business decisions, research data should be reliable - it should come from a representative sample and the questions should enable people to give them accurate and relevant answers