1.3.5 Understanding the Customer Flashcards
Market research
Any activity that gives a business information about its product or service, its customers, its competitors or the market it operates in
Primary research
Gathering information first hand from an original source, that has not been collected before (field research)
Secondary research
Finding and using information that has already been gathered by somebody else (desk research) → books/journals, online
Quantitative research
Based on numerical data, measures key details and produces statistical information, may use sampling and questionnaires → based on characteristics (race, age, gender etc)
Qualitative research
Based on consumer’s attitudes and opinions. Tries to identify why consumers behave as they do, can include focus groups and interviews
Sampling
A smaller section of the market chosen to represent the whole population
Market segmentation
Dividing the market into groups of consumers with similar characteristics (age, gender, income, interests location)
Products and services can be more effectively produced and targeted for a particular market segment
what is the purpose of market research
- The purpose of market research is to market effectively, businesses need information → about customers wants, market demand, competition, distribution channels etc
- Information needs to be updated regularly because businesses operate in a dynamic environment
why do businesses need market research
- To explore new possibilities in the market
- Gives information that can be used to make better informed decisions about the business and its future
- Allows business to understand consumer behaviour and makes them more responsive to customer’s needs, leading to increased profits (market orientation)
- Helps to give a business a competitive advantage by improving its products/services and successfully marketing them
- Crucial for any business start up, to reduce the risks involved → if products are tailored to customers, it reduce risk as people will buy the products as they want them
- They can therefore become market oriented through market research (customer demands are provided for, they are more likely to buy it, this reduces risk and increases success)
- Essential for established businesses, to keep up with market trends and remain competitive
- Forecast future trends
market vs product orienation
Market orientation: through market research, knowing what a customer wants and selling it to them
Product orientation: concentrating on making the best product and selling it and assuming people will want it (risky)
start up market research
- Look initially for a small, local market (local shopping centre needing retailers etc)
- Gap may indicate a profitable market
- How is the market segmented
Even if there are competitors, there could be profit too - Close observation of local markets is the key to a successful start up, backed by primary research (interviews) and secondary research (analysis of local population trends)
established business market research
- Can put extensive resources into researching the market for a new product
- Looking for gaps in a wider market so researching customer preferences becomes important
- Primary research using focus groups, observation and social media communities can provide valuable information
adv and disadv of market research
- Can determine if there is a market
- lowers/mitigates risk as it gives people what they want
- Time consuming for a startup
- businesses still attach a great weight to designers judgement about what is likely to succeed (apple = innocation and creativity > market research)
primary and secondary data
- Primary data: collected first hand for a specific purpose by the entrepreneur
- Secondary data: data that already exists which has been collected for a different purpose
primary research
- Primary research, Observation, Postal surveys, Telephone interviews, Online surveys, Focus groups , Experimentation
- Can be designed specifically to suit the purpose of the business
- Information will be up to date and directly relevant
Information gathered is not available to competitors - Best for startups as they can fill up the gaps of secondary data
but:
- Can be expensive to collect, esp if employing an agency
- Can take a long time
- Can give misleading information, if questions worded weirdly or if there are sampling errors
secondary research
benefits and drawbacks
- Secondary research , Google , Government departments, Trade associations, Market research reports
- Can be done very quickly, online
- Can be much cheaper than primary research
- May not be specific to researcher’s needs
Can be dated
May not be accurate, esp if source is
social media snd new ways for MR
- Telephone calls, email surveys and social media are widely used to build a wider picture of consumer preferences
- Market researchers run online global research communities that can be used to continually generate information + advertising new developments
- These methods of generating qualitative research are much cheaper than local surveys and focus groups
New ways to collect qualitative data include
- Loyalty cards to track spending habits
- Website access to secondary data
quantitative research (sampling)
- Concerned with graphical + statistical data
- Based on larger samples and is statistically more valid
- Main methods of obtaining quantitative data are the various fors of survey
- Concerned about people’s behaviour but not reasons
qualitative research (forecasting)
- Based on opinions, attitudes, beliefs, and intentions
- Aims to understand why customers behave in a certain way, or how they may respond to a new product or service
- Focus groups and interviews are common methods used to collect qualitative data
- Gives a company in depth insight into the reasons for human behaviour
what is forecasting
- Attempting to estimate future outcomes
- Time series, median/mean, extrapolation etc
limitations of market research
- Secondary research can be too generalised to be of real value
- Primary research can be costly and qualitative research must be very carefully designed if it is to be reliable
- Even if findings are accurate, market change might make them obsolete before products are ready for distribution → businesses in dynamic markets have to respond quickly to changes in fashion and new technologies
random sampling
- Chosen to be representative of the population as a whole
- Can be effective and accurate
- Hard to be genuinely random
- Needs large sample sizes to be free from bias
- Can be expensive
stratified sampling
- Draws on specific groups of people that may be identified with particular market segments
- Targets the market effectively
- May be hard to identify appropriate strata
More complex to organise and analyse results
quota sampling
- Selecting evenly from particular groups in the pop (age, gender)
- Cheap and effective
- Need to be careful in drawing up quotas to avoid bias
market segmentation and prices/costs
- Markets are split up into segments of consumers with the same wants and needs. They can also be segmented by product .
- Catering to the need of small market segments may raise costs and prices → depends on if the customers value the products designed for them, they will pay more
- Standardized products with a mass market cost less to produce
how can markets be segmented
- Socio economic background
- Income, age, gender
- Size and composition of households
- Geographical location
ethnicity/religion - Educational backgrounds of customers
- Hobbies and interests
adv of M seg
- The more precisely a segment is identified and provided for = increase sales
- Segmenting the market reduces direct competition
- A premium price may be charged if market segments get exactly what they want
- Encourages the development of brand loyalty
disadv of M seg
- Can be expensive to research and identify different segments
- More costly to develop and market different products for different segments rather than just one standardized product
- Targeting on particular segment may mean ignoring others
- Even if segments are identified, reaching them may be difficult
