3.3.2 - Understanding markets and customers Flashcards
What is market research?
The collection, collation, and analysis of data relating to the marketing and consumption of goods and services.
Why is it important to carry out market research?
To identify:
- the target market
- demand for product
- competition
- selling price
To remove:
- guess work (intuition decision making)
What is primary research?
Concerns the collection of new information and data which has not been collected before.
What are some examples of primary market research?
- online/paper-based questionnaire
- interviews
- a focus group
What are advantages of primary market research?
- specific to the business
- detailed information
- relevant and up - to - date
- mix of quantitative and qualitative data
What are the disadvantages of primary market research?
- time consuming
- expensive
- sometimes difficult to collect
What is secondary research?
The gathering of existing data that has already been produced
What are some examples of secondary market research?
- internet research
- market reports
- government reports
What are the advantages of secondary market research?
- quick and easy to gather
- can provide industry-specific information
- often easy to analyse
What are the disadvantages of secondary market research?
- not specific to the business
- could be out of date
- may be biased or inaccurate
What is quantitative research?
Research concerned with numerical data
What are some examples of quantitative research?
- closed question surveys (postal, telephone, online)
What is the aim of quantitative research?
- To gain statistical data which can help businesses to make marketing decisions.
What fundamental issues may market research need to focus on?
- 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.
How is market research involved in making marketing decisions?
It allows a business to forecast sales of the business so it can plan for the future.
Explain why it is important to forecast the sales of a business.
- 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.
Why can marketing research go wrong?
- 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
Why might businesses analyse marketing data?
- 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.
What is a correlation?
An apparent statistical relationship between two variables which can be either positive or negative.
Why are businesses interested in using correlations?
Helps businesses to identify the most significant factors affecting the demand for its product/service (therefore the sales too)
What is a positive correlation?
A direct relationship where as one variable increases the other increases too.
What is a negative correlation?
A direct relationship where as one variable increases the other decreases.
What does it mean if there is no correlation?
There is no identifiable link between two variables.
What is a confidence level?
The probability that the research findings are correct (certainty). E.g 95%
Why do market research findings have a confidence level?
If sampling was not completed across the whole target population then it wont be 100% accurate.
What does the degree of confidence (confidence level) depend on?
- 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)
What is a confidence interval?
The possible range of outcomes for a given confidence level.
What is extrapolation?
The use of trends established by historical data to make predictions about future values.
What are the advantages of extrapolation?
- 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).
What are the disadvantages of extrapolation?
- 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.
What does the price elasticity of demand measure?
How much demand for a product changes following a change.
How do you calculate the price elasticity of demand?
Percentage change in quantity demanded (%)/ Percentage change in price (%)
Why is the price elasticity of demand usually negative?
- A price increase leads to a fall in quantity demanded.
- A price decrease leads to a rise in quantity demanded.
What does it mean if the PED value is greater than 1?
The demand for the product is price elastic.
What does it mean if the PED value is less than 1?
The demand for the product is price inelastic.
Give some examples of elastic products.
- Chocolate bars
- Petrol stations sale of petrol
- Convenience products: milk, bread, fruit, veg.
Give some examples of inelastic products.
- Train tickets
- Iphones
- Tickets for specific sport teams.
Change in price increases, change in quantity demanded decreases = change in total revenue increases.
Inelastic demand
