3.3.2 Understanding markets and customers.

Question 1

What is primary research?

Answer 1

Information that is collected by the researcher. Comes after secondary to fill the gaps.

Question 2

Outline the methods of conducting primary research.

Answer 2

Experiment.

Observation.

Focus group.

Surveys.

Telephone interviews.

Internet surveys.

Question 3

Outline the benefits of an experiment.

Answer 3

Relatively cheap way of finding out customer preferences.

It considers actual customer behaviour rather than opinions given in a questionnaire.

Question 4

Outline the drawbacks of an experiment.

Answer 4

Consumer behaviour may not be the same throughout the country.

May delay the introduction of a potentially successful strategy.

Question 5

Outline the benefits of observation.

Answer 5

Layout of displays can be modified if observation reveals any problems.

Examines actual customer behaviour in detail and can sometimes show what customers are thinking.

Question 6

Outline the drawbacks of observation.

Answer 6

Expensive to employ specialist psychologists to observe relatively limited behaviour.

It shows what is happening rather than why it is taking place.

Question 7

Outline the benefits of focus groups.

Answer 7

Enable a firm to gather detailed information on why consumers react in the way they do - can help a business to modify products according to these comments or identify gaps in the marketplace.

They can help to uncover new ideas on how to market products or services.

Question 8

Outline the drawbacks of focus groups.

Answer 8

Sometimes an element of bias in focus group. Groups consist of people who have particular interests in products and wish to please the company. Consequently, views may be more critical.

Expensive to operate.

Question 9

Outline the benefits of interviews.

Answer 9

Wide range of information can be obtained because questions can be closed or open.

Interviewer can explain any uncertainties in the wording of the questions.

Question 10

Outline the drawbacks of interviews.

Answer 10

Can be time consuming - public members may be reluctant to answer questions.

False answers to please the interviewer.

Interviewer may not select an unbiased cross-section of the public.

Question 11

Outline the benefits of postal surveys.

Answer 11

Cheap - especially if posted by hand.

Allows specific targeting of geographical areas.

May avoid possible bias.

Respondents have longer to answer the questions, so more detailed answers may be given.

Question 12

Outline the drawbacks of postal surveys.

Answer 12

Response rates usually slow.

No guarantee that the responses are representative, as people completing them may have strong opinions.

Businesses often offer gifts or competition entries to encourage replies, adding to their expense.

Question 13

Outline the benefits of telephone interviews.

Answer 13

Cheap to make.

Can direct at known customers.

Question 14

Outline the drawbacks of telephone interviews.

Answer 14

Detailed questions are difficult - interviewees reluctant to spend too much time on the telephone.

Increase of unpopular telesales has led to customer resentment and reluctance to engage in this type of research.

Question 15

Outline the benefits of internet surveys.

Answer 15

Inexpensive.

More likely to be interested - conscious decision to visit website.

Surveys can be updated frequently.

Possible to used detailed questionnaire.

Question 16

Outline the disadvantages of internet surveys.

Answer 16

The sample may be biased towards people with a particular interest in the product or service.

They will be less relevant for organisations whose target market does not use the internet.

Question 17

Define secondary research.

Answer 17

Research that has already been created, already exists.

Question 18

Outline the methods of secondary research.

Answer 18

Government publications.

Newspapers.

Magazines.

Company records.

Competitors.

Market research organisations.

Loyalty cards.

Internet.

Question 19

Outline the benefits of secondary market research.

Answer 19

Information is already available, so quick decisions can be taken based upon it.

Cheaper than primary - for some government research and the businesses own organisation it will be free.

Secondary surveys are often conducted regularly - information obtained is particularly helpful in identifying trends over time.

Question 20

Outline the drawbacks of secondary market research.

Answer 20

Information could be dated - misleading.

Information is available to competitors - gives no advantage.

May be no relevant secondary data to meet the businesses specific needs.

Data collected by other organisations - secondary user may not know the level of accuracy and reliability of the data.

Question 21

What is qualitative market research?

Answer 21

Collection of information about the market based on subjective factors such as opinions and reasons.

Question 22

What are the benefits of qualitative market research?

Answer 22

Examining why consumers behave in a certain way - provide insight into actions needed to appeal to consumers.

Can highlight issues that the business was not aware of, can quickly take action against these.

Can give insight into customers’ thinking processes when buying products. Business can adapt marketing strategies to encourage more purchases.

Question 23

What are the drawbacks of qualitative market research?

Answer 23

Expensive to gather qualitative information, usually requires skilled personnel to interpret it. Therefore, tends to be conducted on a small scale - can lead to bias.

Difficult to tabulate and compare the data with other data, as opinions are often unstructured.

However, if research is too structure, it may inhibit the independence and accuracy of the opinions being expressed.

Question 24

Define quantitative market research.

Answer 24

Collection of information about the market based on numbers.

Question 25

Outline the benefits of quantitative market research.

Answer 25

Summarises data in a concise and meaningful way.

Easier to compare results with other organisations, such as competitors, as it is numerical.

Numerical data can be used to identify trends and project future trends.

Question 26

Outline the drawbacks of quantitative market research.

Answer 26

Only shows ‘what’, doesn’t explain ‘why’. Therefore, data produced are less useful than the qualitative data in helping an organisation to understand the reasons behind trends.

It can lack reliability and validity if the sample is biased or too small.

Question 27

What is market mapping?

Answer 27

A technique that analyses markets by looking at the features that distinguish a product or firm.

Question 28

Why are market maps useful?

Answer 28

They show the position of each product in relation to the market being studied.

Question 29

Outline the benefits of market mapping.

Answer 29

helps identify a firms closest rivals, in order to plan suitable competitive strategies.

Help identify gaps and niches in a market that a firm could fill.

If carried out through market research, it can help a firm to understand the public’s perception of an organisation as a business or brand.

It may help a firm that needs to reposition itself in a market.

Shows the overall level of competition in a market.

Question 30

Outline the drawbacks of market mapping.

Answer 30

Can be an oversimplification of a product or business’s position.

They are very subjective and thus potentially inaccurate or biased, based on the opinions of the person who drew up the market map.

Apparent gaps in the market may exist due to consumer lack of interest in a certain combination of features.

The low price and high quality segment will have gaps because businesses are unlikely to be able to make profit if they offer high quality products at low prices.

Question 31

What are different sampling methods?

Answer 31

Stratified. 
Random.
Quota.
Systematic.
Cluster etc.

Question 32

What is sampling?

Answer 32

Gathering data from a group of respondents whose views should be representative of the target market as a whole.

Question 33

Define what is meant by the confidence level?

Answer 33

Aka the margin of of error.

The plus or minus figure used to show the accuracy of statistical results arising from sampling.

Question 34

What are confidence intervals used for?

Answer 34

To assess the reliability of sampled data when trying to forecast figures such as sales levels.

Question 35

Outline the three statistical techniques used in the interpretation of marketing data.

Answer 35

Confidence intervals.
Correlation.
Extrapolation.

Question 36

Example of a confidence level:

Answer 36

For example, a 95 percent confidence level means that the prediction will be correct 19 out of 20 (95 percent of the time). Many businesses use 95 percent as their choice of confidence level.

Question 37

Outline the factors effecting confidence layers.

Answer 37

Sample size.

Population size.

Percentage of a sample choosing a particular answer.

Question 38

Outline what is meant by sample size (influencing factors).

Answer 38

The larger the sample size, the more sure a business can be that the answer provided by a sample is the true reflection of the opinion of the total population. As sample size increases the confidence interval will fall; however, they are not proportional.

Question 39

Outline what is meant by population size (influencing factors).

Answer 39

This represents the target population for the product/service being surveyed. Population size has only a minor impact on the confidence interval.

Question 40

Outline what is meant by percentage of sample choosing a particular answer (influencing factors).

Answer 40

If very high or low percentages of a sample express a particular opinion, there is a less margin of error and so the confidence interval will be low.

Question 41

Outline what is meant by the positive and negative correlation and an understanding of the strength of the relationship.

Answer 41

Businesses will attempt to forecast sales by examining measurable factors such as price, all of which have an influence on sales levels. The relationship between such data and business’s sales levels is known as correlation.

Question 42

Define correlation.

Answer 42

A statistical technique used to establish the strength of the relationship between two sets of values.

Question 43

Why is correlation a useful technique for sales forecasting?

Answer 43

Can show, statistically or graphically, the degree to which the factor such as price, the advertising budget etc., are linked to the sales of a product.

Question 44

Outline casual links in correlation.

Answer 44

Highly probable that one set of statistics will correlate with another. The set of numbers can change over time however. Before drawing any conclusions that there is a link between two sets of data, it is essential a casual link is discovered. Once discovered, correlation can be useful to identify the extent of the link between the two series of data.

Question 45

Define the term casual link.

Answer 45

A link between two sets of information or types of behaviour.

Question 46

Define extrapolation.

Answer 46

Using previous patterns of numerical data in order to predict values in the future.

Question 47

How can extrapolation be carried out?

Answer 47

Visually or by calculation, the latter is recommended for greater accuracy.

Question 48

What are the strengths of extrapolation?

Answer 48

It is quite common for past trends to continue into the future.

Some consumers adopt new ideas more quickly than others and so products experiencing sales growth steadily build up a large base of customers.

Businesses will often target a rate of steady growth and so their efforts are focused on future figures that are based on past trends. May also help to ensure that steady growth becomes the norm.

Question 49

Outline weaknesses of extrapolation.

Answer 49

Less reliable if there are fluctuations - seasonal and cyclical changes are rarely repeated exactly and random fluctuations are very unpredictable.

Assumes that past changes will continue into the future and so does not take into account changes in the business environment that will influence sales, including changes within the business itself.

Ignores qualitative factors, such as tastes in fashion.

Ignores the product life cycle, which suggests that most products will experience growth but ultimately decline in sales.

Question 50

Outline the aspects of technology that influence gathering data and marketing decisions.

Answer 50

Information from business links.
Internet.
Loyalty cards.
Competitors' websites and data.
Social media.

Question 51

How can computer software reduce time?

Answer 51

Can complete quantitative forecasting calculations almost instantaneously, saving time and money for a business.

Question 52

How can technology allow a business to compare a number of different strategies?

Answer 52

The time saved by technology allows a business to compare a number of different strategies, enabling it to improve its planning.

Question 53

How has technology affected sales?

Answer 53

Can link their sales records to other databases so that every time an idem is sold it is registered immediately. Meaning any sudden changes in trends and patterns can be quickly detected.

Question 54

How has technology effected extrapolation?

Answer 54

The internet allows more data to be stored cheaply and accessed more quickly by a range of individuals. Sophisticated programs enable businesses to draw up correlations between data and extrapolate changes.

Question 55

What can organisations use loyalty cards for?

Answer 55

Use loyalty card data to tailor services or products to individual customer needs.