3.3.2 - Understanding markets and customers

Question 1

What is market research?

Answer 1

The collection, collation, and analysis of data relating to the marketing and consumption of goods and services.

Question 2

Why is it important to carry out market research?

Answer 2

To identify:
- the target market
- demand for product
- competition
- selling price
To remove:
- guess work (intuition decision making)

Question 3

What is primary research?

Answer 3

Concerns the collection of new information and data which has not been collected before.

Question 4

What are some examples of primary market research?

Answer 4

• online/paper-based questionnaire
• interviews
• a focus group

Question 5

What are advantages of primary market research?

Answer 5

• specific to the business
• detailed information
• relevant and up - to - date
• mix of quantitative and qualitative data

Question 6

What are the disadvantages of primary market research?

Answer 6

• time consuming
• expensive
• sometimes difficult to collect

Question 7

What is secondary research?

Answer 7

The gathering of existing data that has already been produced

Question 8

What are some examples of secondary market research?

Answer 8

• internet research
• market reports
• government reports

Question 9

What are the advantages of secondary market research?

Answer 9

• quick and easy to gather
• can provide industry-specific information
• often easy to analyse

Question 10

What are the disadvantages of secondary market research?

Answer 10

• not specific to the business
• could be out of date
• may be biased or inaccurate

Question 11

What is quantitative research?

Answer 11

Research concerned with numerical data

Question 12

What are some examples of quantitative research?

Answer 12

• closed question surveys (postal, telephone, online)

Question 13

What is the aim of quantitative research?

Answer 13

• To gain statistical data which can help businesses to make marketing decisions.

Question 14

What fundamental issues may market research need to focus on?

Answer 14

• How big the market is (measured by volume and value)
• How fast the market is growing/ the market growth potential
  -Who the existing competitors are and their share of the market
• How the market is divided up into segments
• What kind of customer there are in the market.

Question 15

How is market research involved in making marketing decisions?

Answer 15

It allows a business to forecast sales of the business so it can plan for the future.

Question 16

Explain why it is important to forecast the sales of a business.

Answer 16

• HR needs to know what staffing requirements will be
• The finance function will be able to estimate future cash inflow and profits
• Operations need to know the expected levels of sales so that the department can be sure to meet demand.

Question 17

Why can marketing research go wrong?

Answer 17

• Changes in the market can mean data is out of date quickly
• Information may be gathered in a way which may not reflect the population accurately
• If managers do not spend enough money required for a good investment then there is a lack of information
• If businesses do not consider ethics when conducting market research

Question 18

Why might businesses analyse marketing data?

Answer 18

• Gathering evidence for a new strategy/ strategic decision making.
• Highlighting that a marketing strategy needs to change due to competitor behaviour or technological developments.
• Identifying patterns in sales to predict future sales.

Question 19

What is a correlation?

Answer 19

An apparent statistical relationship between two variables which can be either positive or negative.

Question 20

Why are businesses interested in using correlations?

Answer 20

Helps businesses to identify the most significant factors affecting the demand for its product/service (therefore the sales too)

Question 21

What is a positive correlation?

Answer 21

A direct relationship where as one variable increases the other increases too.

Question 22

What is a negative correlation?

Answer 22

A direct relationship where as one variable increases the other decreases.

Question 23

What does it mean if there is no correlation?

Answer 23

There is no identifiable link between two variables.

Question 24

What is a confidence level?

Answer 24

The probability that the research findings are correct (certainty). E.g 95%

Question 25

Why do market research findings have a confidence level?

Answer 25

If sampling was not completed across the whole target population then it wont be 100% accurate.

Question 26

What does the degree of confidence (confidence level) depend on?

Answer 26

• the size of the sample
• how the sample was constructed (the type of sampling used, how big the sample is)
• the margin of error (confidence interval)

Question 27

What is a confidence interval?

Answer 27

The possible range of outcomes for a given confidence level.

Question 28

What is extrapolation?

Answer 28

The use of trends established by historical data to make predictions about future values.

Question 29

What are the advantages of extrapolation?

Answer 29

• Allows a business to predict future sales
• Allows a business to organise their business and inform other functional areas (e.g operational areas like suppliers who may need to increase production to meet demand).

Question 30

What are the disadvantages of extrapolation?

Answer 30

• There is a risk the average line will be inaccurate
• External factors may disrupt the reliability of the chart as the market is subject to change.

Question 31

What does the price elasticity of demand measure?

Answer 31

How much demand for a product changes following a change.

Question 32

How do you calculate the price elasticity of demand?

Answer 32

Percentage change in quantity demanded (%)/ Percentage change in price (%)

Question 33

Why is the price elasticity of demand usually negative?

Answer 33

• A price increase leads to a fall in quantity demanded.
• A price decrease leads to a rise in quantity demanded.

Question 34

What does it mean if the PED value is greater than 1?

Answer 34

The demand for the product is price elastic.

Question 35

What does it mean if the PED value is less than 1?

Answer 35

The demand for the product is price inelastic.

Question 36

Give some examples of elastic products.

Answer 36

• Chocolate bars
• Petrol stations sale of petrol
• Convenience products: milk, bread, fruit, veg.

Question 37

Give some examples of inelastic products.

Answer 37

• Train tickets
• Iphones
• Tickets for specific sport teams.

Question 38

Change in price increases, change in quantity demanded decreases = change in total revenue increases.

Answer 38

Inelastic demand