3.3.2- Understanding markets and customers

Question 1

What are the main reasons for market research?

Answer 1

• It helps businesses spot opportunities: businesses research customers buying patterns to predict what customers will buy in the future. Can spot declining and growing markets
• Helps decide what to do next: can do research before launching a product or an advertising campaign
• It helps see if their plan is working: can have a keen eye on sales figure

Question 2

What is quantitative data?

Answer 2

Data that produces numerical statistics

Question 3

What is qualitative data?

Answer 3

Data that looks into feelings and motivations of consumers

Question 4

What is primary research?

Answer 4

Where a business gathers new data by themselves

Question 5

Whats an advantage of primary researcj?

Answer 5

• Up to date
• More specific to purpose

Question 6

What is a disadvanatage or primary research?

Answer 6

• Can be labour intensive
• Time consuming
• Expensive

Question 7

What is secondary research?

Answer 7

Research done by analysing already available data

Question 8

What is an advantage of secondary research?

Answer 8

• Easy
• Quick
• Cheap

Question 9

What is a disadvantage of seconday research?

Answer 9

• Can contain errors
• Can be out of date
• May not be the data the business is looking for

Question 10

What is a representative sample?

Answer 10

A sample representing the market, which can help keep costs down and save time and resources

Question 11

What are the three types of sample? Explain them.

Answer 11

• Random sample: Names picked randomly from a list
• Stratified sample: The population is separated into groups and people are selected randomly from each group
• Quota sample: People are picked who fit into a category

Question 12

What is extrapolation?

Answer 12

A statistical technique that predicts future trends based on existing data

Question 13

What are the advantages of extrapolation?

Answer 13

Useful in stable environments. E.g. size of the market stays the same

Question 14

What are the disadvantages of extrapolation?

Answer 14

Sudden unexpected events can make extrapolation from past data useless.

Question 15

What is correlation?

Answer 15

Is a measure of how closely two variables are related

Question 16

What is a confidence variable?

Answer 16

A range of values in which we estimate the true mean will lie with a specified probability.

Question 17

What is price elasticity?

Answer 17

How much the price change affects the demand

Question 18

Explain the factors of price elasticity.

Answer 18

• Its always negative
• A product is price elasticity if its greater than 1.
• The % change in demand is greater than the % change in price
• As the price goes down, demand will fall

Question 19

How does price elasticity affect revenue and profit?

Answer 19

• If the product is price elastic, a price increase will make revenue go down.
• If the product is price inelastic, a rise in price will make the revenue go up.

Question 20

What is income elasticity of demand?

Answer 20

When people earn more money, theres more demand for some products and less demand for other products.

Question 21

Explain the factors of income elasticity of demand.

Answer 21

• Normal goods: has positive IEOD thats less than 1. When income rises, demand will rise- but slowly
• Luxury goods: has positive IEOD thats more than 1. When income rises, demand will rise- quickly
• Inferior goods: has negative IEOD thats 0. When income rises, demand falls

Question 22

How can elasticity help a business make choices?

Answer 22

• Price elasticity helps a manufacturer decide whether to raise or lower a price, and see what happens to sales.
• Income elasticity helps a manufacturer see what will happen to sales if the economy grows or shrinks.