18. Market Research Flashcards
Market research
It is used to establish the characteristics of customers, what products they buy and why they buy them.
Market research can be used to measure customer reactions to:
* new products
* different price levels
* alternative forms of promotion
* new types of packaging
* online distribution.
The purpose of market research
Identify the main features of the market
* Before entering a new market, a business need to establish some of its key features:
* Overall size
* Growth
* Competitors
Reduce risk of new product launches
Identify consumer characteristics
* establish who the consumers of a product are likely to be, their wants and needs. By being aware of the profile of potential consumers
Explain patterns in sales of existing products and market trends
Predict future demand changes
* Unless a business tries to forecast these changes with
market research, it may overproduce or underproduce a product.
Assess the most popular designs, promotions, styles and packaging for a product
* Consumer testing of products, or the promotions used to sell them, is constantly undertaken by some businesses. Consumer responses can then be incorporated into the final product.
The differences between primary and secondary research
Primary research is the first-hand collection of data by an organisation for its own needs. In contrast, secondary research is the use and analysis of data that already exists. Secondary research data was originally collected by another organisation, often for a different purpose.
Perhaps surprisingly, when a business is considering entering a new market or launching a new product, it will often undertake secondary research first, for these reasons:
* It is lower cost and obtainable more quickly than primary data.
* It can be used to assess the main features of a market. If this appears too small or has too many competitors, it might not be worthwhile proceeding with primary research.
If the results of secondary research are positive, then a detailed programme of primary data collection is likely to be paid for.
Secondary research data
* Uses
- provide information about the population, the economy, the market conditions plans to operate in and major trends in that market.
- identify the key areas of market information that primary research needs to focus on.
- provides evidence that can be used as a baseline against which primary research data can be compared.
- Large samples are often used, which increases accuracy and reliability.
- Many of the sources of secondary data can be accessed via the internet.
- If time or finance is very limited, secondary research might be the only option.
- There is so much of this data, which opens up new business possibilities if it is analysed carefully. available data on websites, social media posts, retail purchase records and healthcare records.
Secondary Research Data
* Limitations
- Data may be out of date as not all sources update every year. This could lead to inaccurate conclusions based on old data.
- Data is unlikely to have been collected for the specific needs of the business. It might not be directly relevant or may not use the population samples that the business really wants.
- Not all secondary data is available to all potential users. Even if it is available, it can be expensive to obtain, for example, from market research agencies.
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Big data is so vast that it is not easy to analyse and to make useful for an individual business. Data
analysis businesses will do this, but at a high cost.
Secondary Research Data
* Sources
- Government (e.g. population censuses; vehicle registrations; social trends; family expenditure patterns).
- Local government (e.g. number of local households; occupations; ethnic origins of local population).
- Trade organisations often produce industry-specific publications, for example in the hotel and car retailing industries.
- Market research agencies (e.g. Mintel; Euromonitor) produce detailed market intelligence reports.
- Internal company records are low cost and immediately available.
- Company reports and accounts (e.g. competitors’ end of year accounts).
Primary Reasearch Data
* Uses
- To find out about completely new markets, for example, for innovative products for which no secondary data exists.
- To collect data for the specific purposes of the business. The information gathered will provide direct answers to the questions the business is asking.
- To gather qualitative data which supports and helps to explain quantitative data. For example, if a business has falling sales in one market, it can question consumers about why they have changed their buying patterns.
- To focus research on market reaction to specific changes made by the business, such as lower prices or increased advertising.
- When up-to-date data is essential, such as in rapidly changing markets.
- When data needs to be cross checked for accuracy
Primary Reasearch Data
* Limitations
- The selection of a sufficiently large and representative sample greatly influences the accuracy of data.
- Business start-ups may not be able to finance detailed primary research.
- Newly formed businesses have no customers yet to gain important data from.
- It can be time-consuming to collect and analyse primary research data.
Primary Reasearch Data
* Sources
- Questionnaire – postal, in-store, online, mobile (cell) phone
- Interview – face to face or mobile (cell) phone
- Observation (e.g. in a large shop to see which displays and promotions attract shoppers)
- Test marketing – in a specific geographical area
- Focus groups – discussions with potential or existing consumers, with the aim of gaining qualitative data
Market research development
Businesses are increasingly using electronic means to gather the data needed before deciding on their
marketing strategies.
Online marketing allows firms to conduct research projects for just a few thousand dollars, taking advantage of pre-prepared questionnaires, with the results coming in within a few days. Giving people the opportunity to respond conveniently by using their mobile (cell) phones increases the chance that they will respond to a survey request – especially if it is on a freephone number. These results are then automatically presented and analysed electronically
Businesses can also access the vast quantity of information that electronic data retrieval methods offer them. By collecting data on the number and type of goods bought by each consumer, retailers can have a complete picture of what each consumer purchases, how often they buy, each consumer’s age, gender and possibly their income (via the details initially provided to obtain the loyalty card). This allows retailers to target each consumer with advertisements and special offers about the goods they are most interested in. This form of targeted marketing is cost-effective. Money is not wasted on promoting products that consumers are not interested in.
Social media platforms are also transforming market research. Specially developed software makes use of social media, chat apps and behavioural data. It combines this data with software that learns to understand a respondent’s thoughts, ideas and emotions. Inputs take the form of videos, images, text and sound, so that behavioural and emotional research reaches an advanced level.
Sampling
s, it is impossible to seek evidence from the total population – that is, the total potential target market. This is either because that market is so extensive that contacting everyone in it would be too expensive or time-consuming. Therefore, a sample of the total potential market will need to be chosen. The larger the sample, the more representative of the total population it is likely to be. Greater confidence can then be placed in the final results.
Sampling
* Limitations
1. Sample may be too small
* To save on costs, a very small sample might be researched. This is likely to be too small to represent a true cross-section of the whole target population. Cost and time are the two major constraints. The cost of research increases greatly with the sample size, especially when a specialist firm of market research analysts is used. The results of a survey might be needed quickly to assist managers in making rapid decisions, but a sample size of 1 000 will take much longer to organise. Costeffectiveness is an important consideration in market research.
2. Risk of sampling bias
The only really accurate method of primary research is to ask the entire target population, but this is expensive and time consuming. Results from a sample may be different from those that would have been obtained if the whole target population had been questioned. This is called sampling bias
3. Researchers may not use the most appropriate methods of sampling
Researchers need to know the best and most statistically accurate methods of selecting samples. If only convenience sampling is used (i.e. asking those people who are most conveniently and easily contactable), the research results are most unlikely to be accurate.
