3.3.2 Understanding markets and customers Flashcards
Primary research
-Data collected first hand for specific research purpose
-Collected through focus groups, surveys and questionnaires
Primary research advantages
-Gives a real customer view (accuracy)
-Relevant to the business
-Competitive advantage
-Kept private (not publicly available)
Primary research disadvantages
-not fully representative of everyone
-time consuming
-costly
-risk of survey bias
Secondary research
-Data that already exists and which has been collected for a different purpose
-Collected through google, Government departments, trade associations
Secondary research advantages
-Access for all
-Quick to obtain
-Possible cheaper option
Secondary research disadvantages
-Unreliable
-Vague (not specific to your business)
-Specialist reports often quite expensive
Market mapping
Used to help identify gaps in the market (an opportunity where no business operates in that area/no product in that area)
Extrapolation
Uses trends established from historical data to forecast the future
Extrapolation advanatges
-Gives a clear projection
-Makes sense to use past data
-Not much data required
-Simple
Extrapolation disadvantages
-Might not be accurate/unreliable (its a prediction)
-No consideration of charge
-Only works for older business
Sampling
Gathering of data from a sample of respondents, the results of which should be representative of the population as a whole
Random sampling
Each individual is chosen entirely by chance and has an equal chance of being selected
Quota sampling
Segmented into subgroups before a judgement is made in selecting respondents that are representative of that subgroup
Stratified sampling
Segmented into subgroups before respondents are randomly selected
Quantitative
-Concerned with data
-Based on larger samples
-Collected through surveys
Quantitative benefits
-More accurate
-More reliable/trustworthy
-Easier to analyse/trend
-Quicker to collect
Quantitative drawbacks
-Might not apply to everyone
-Accuracy
-Less informative
-Doesn’t explain why
Qualitative
-Based on opinion
-Why? Would? or How?
-Aims to understand why customers behave in a certain way
Qualitative benefits
-More specific
-Gathering of opinions
-More informative
Qualitative drawbacks
-Not collecting as much data (small amount for the market)
-Time consuming
-Harder to make trends/analyse
The value of sampling depends on…
-Sample technique used
-How the sample was carried out
-Size of the sample
Size of the sample depends on…
-Budget available
-Importance of accuracy
-Degree of confidence in results
P.E.D
-Price Elasticity of demand
-Measures the extent to which the quantity of a product demanded is affected by a change in price
Elasticity
Measures the responsiveness of demand to a change in a relevant variable (such as price or income)
Price Elastic
-More than 1
-Change in demand is more than the change in price
-Very responsive
Price inelastic
-Less than 1
-Change in demand is less than the change in price
Factors influencing P.E.D
-Brand loyalty
-Necessity (more demand for the more necessary products)
-Habit (demanded and consumed as a matter of habit)
-Availability of substitutes
-Time (price change tend to have less impact on demand than over longer periods)
Income elasticity of demand
Measures the extent to which the quantity of a product demanded is affected by a change in income
Normal products
-A rise in consumer income will result in a rise in demand
-A fall in consumer income will result in a fall in demand
Luxury products
-Income elasticity is more than 1
-As income grows, more people spend their money on luxuries
-e.g Designer products, cars, holidays
Necessities/inferior products
-Income elasticity is more than 1
-As income grows, less people spend their money on necessities
-e.g staple groceries (i.e milk), own label goods
