3.3.2 Flashcards
what is market research
involves gathering and analysing qualitative and quantitative market data. Market research is the key indicator of customer needs, which drives decision making across all business functions, not just marketing.
market research process
define problem /question
develop market research plan
collect data
analyse data
interpret and report findings
advantages of primary market research
- specific to the needs of the business
- more up to date and reliable - gives more opportunity for two-way communication and follow up questions
- often better if you want to collect qualitative data
- sampling provides an insight into the market, but saves money as the whole population is not needed; a sample must be representative, unbiased and large enough to represent the whole market
disadvantages of primary market research
- can be more time-consuming and therefore more costly
- difficult to conduct a large sample size.
examples of primary market research
questionnaires, consumer panels, interviews, focus groups and customer observations
what is primary market research
research collected first hand
what is secondary market research
research that already exists conducted by another organisation
advantages of secondary market research
- easily accessible and a good starting point
- fast and less time-consuming
- often better if you want to collect quantitative data
disadvantages of secondary market research
- some data can be free but detailed reports can be expensive to purchase
- not always up to date or specifically tailored to the business’s needs
examples of secondary market research
market research reports, competitors, websites, government statistics and newspaper articles.
what is market mapping
a technique used to understand how products/businesses are viewed relative to competitors based on two relevant characteristics.
why is market mapping useful
- helps businesses decide whether to set up in a market
- a useful process for comparing similarities and differences between businesses - market positioning
- helps a business gain a better understanding of its competition
- useful as a market research tool to gain an understanding of customer perceptions.
a limitation of market mapping
it only considers two main variables - markets and customer perceptions are often very complex.
what is correlation
Correlation helps businesses understand the relationship between two factors. If a business can understand the key factors determining demand for its products, then it can manipulate them to achieve greater sales.
positive correlation
+0.9
customer satisfaction
negative correlation
-0.8
price
no correlation
0
value between -1 and +1
what is sampling
Sampling involves selecting a representative group of people from the target population.
advantages of sampling
It is quicker and easier than trying to collect research from everyone
- this is often impossible
The bigger the sample size, the more representative it will be.
The sample size and the method of conducting the research will determine
accuracy and reliability
Anything less than the whole population cannot be
100% accurate
what is a confidence interval
an indication of how accurate the research findings are, for example 80% = 80% confidence that the results are accurate.
what is a confidence interval
the possible range of outcomes for a given confidence. As the interval narrows the confidence level will fall.
what does extrapolation mean
Extrapolation means predicting future trends, for example sales trends based on past results.
is extrapolation reliable
Extrapolation is reliable when conditions remain the same.
The further into the future we extrapolate
the less confidence we have in the certainty of the prediction.
factors influencing elasticity
number of substitutes/competitors
relative effort/costs of switching to another
product
extent to which the product is considered a necessity
perceived value of the brand.
what is price elasticity
effect of a change in price on the quantity demanded.
what is income elasticity
effect of a change in consumer income on the quantity demanded.
price/income elastic - pricer increase
Leads to a bigger
percentage decrease in demand.
Revenues fall.
price/income elastic - price decrease
Leads to a bigger percentage increase in demand.
Revenues rise.
price/income inelastic - price increase
Leads to a smaller percentage decrease in demand.
Revenues rise.
price/income inelastic - price decrease
Leads to a smaller percentage increase in demand.
Revenues fall.
when do you ignore the negative
when calculating PED. Just focus on the decimal number. An inelastic PED means price has little impact on demand - not that demand will not change at all.
PED
-ve correlation
always negative
-4 = elastic - qty demanded greater than change in price - sensitive
inelastic = -0.2 less than 1
qty demanded smaller than change in price - not very sensitive
elastic - opposite
increase price decreases revenue
decrease price increase revenue
inelastic - same
increase price and increase revenue
decrease price and decrease revenue
use PED
staffing
stock control
international sales - SPICED
cash flow/income forecast increase accuracy
exports dear
inelastic
brand loyalty
fewer rivals
cheap product
someone else paying
limited time to consider
YED
positive - +2
0-1 = normal good
more than 1 = luxury
higher YED = increase responsiveness
negative correlation = -2
less than 0 = inferior
reduce inventory
reduce workforce
decrease cash flow
market size =
Expressed in terms of units sold or value (£)
market share =
total company sales/total market sales x100
market and sales growth =
increase in market size/sales (the difference)/original size/sales
uses of market research
product development
budgeting
production forecast
sales forecasting
developing marketing activities - such as promotional campaigns
workforce forecast
cash flow forecasting
