4.4 - Market Research

Question 1

What is market research?

Answer 1

process of collecting, recording and analysing data about customers, competitors and the market.

Analyse reactions to:
Different price levels
Alternate forms of promotion
New packaging
Different methods of distribution

Question 2

Why do organisations carry out market research?

Answer 2

Reduce risks associated with new product launches
Predict future demand changes
Explain patterns in sales of existing products and market trends
Assess the most favoured designs, flavours, styles, promotions and packages for a product

Question 3

What information does market research discover?

Answer 3

Market size and consumer tastes and trends
The product and its perceived strengths and weaknesses
The promotion used and its effectiveness
Competitors and their claimed unique selling points
Distribution methods most preferred by customers
Consumers preferences for packaging a product

Question 4

What is primary research?

Answer 4

The collection of first-hand data that are directly related to a firm’s needs

Question 5

What is secondary research?

Answer 5

Collection of data from second-hand sources

Question 6

What is quantitative research?

Answer 6

Research that leads to numerical results that can be presented and analysed

Question 7

What is qualitative research?

Answer 7

Research into the in-depth motivations behind consumer buying behaviour or opinions

Question 8

Describe the methods of primary research.

Answer 8

Surveys
- Detailed study of a market or geographical area to gather data on attitudes, impressions, opinions and satisfaction levels of products or businesses, by asking a section of the population

Questionnaire design

• Open questions: those that invite a wide-ranging or imaginative response
• Closed questions: questions to which a limited number of preset answers is offered

Interviews

Focus groups
- A group of people who are asked about their attitude towards a product, service, advertisement or new style of packaging

Observations

• Direct observation of people
• observational technique: a qualitative method of collecting and analysing information obtained through directly or indirectly watching and observing others in business environments’ e.g. watching consumers walk round a supermarket

Test marketing
- Marketing a new product in a geographical region before a full-scale launch

Question 9

What are the advantages and disadvantages of primary research?

Answer 9

Advantages:

• up to date
• relevant: collected for a specific purpose and directly catered to the business
• confidential, no other business has access to it

Disadvantages:

• costly
• time consuming
• doubts over accuracy and validity

Question 10

What are sources of secondary data?

Answer 10

Market intelligence and analysis reports
Academic journals
Government publications
Population census
Social trends
Annual abstract of statistics
Living costs and food survey
Local libraries and local government offices
Trade organisations
Media reports and specialist publications
Internal company records
The internet

Question 11

What are the advantages and disadvantages of secondary data?

Answer 11

Advantages:

• cheap to get
• identifies nature of the market and can assist with planning of primary research
• obtained quickly
• allows comparison of data from different sources

Disadvantages:

• may not be up to date
• might not be suitable for your company (not specific)
• accuracy may be unknown
• might not be available for completely new developments

Question 12

What are the ethical considerations of market research?

Answer 12

Researchers should have permission from people they are studying
Data collections should not cause harm to people
Objectivity vs. subjectivity - no personal biases and opinions used to interpret research results
Findings of surveys and observations remain anonymous
Researchers should not take advantage of easy to access people (such as children outside of school)
Accurately present the data gathered, not taken out of context

Question 13

Define sample

Answer 13

Group of people taking part in a market research survey selected to be representative of the target market overall

Question 14

Define sampling error

Answer 14

Errors in research caused by using a sample for data collection rather than the whole target population

Question 15

Describe quota sampling

Answer 15

Gathering data from a group chosen out of a specific sub-group
e.g. a researcher might ask 100 individuals between the ages of 20 and 30 years
Population first segmented into mutually exclusive sub groups (eg. male and female)
Researchers select a number of candidates from different market segments and then group them together according to various characteristics
Example: interviewer may be told to sample 200 females and 300 males ages 45 to 60 years

Advantages:
Gives you representative data from sub groups
Detect relationships between sub groups
Researcher has control

Disadvantages:
Selection of the sample is non scientific → may be biased as interviewers look for people who look most helpful / attractive
Main weakness: not everyone gets a chance of selection

Question 16

Describe random sampling

Answer 16

Every member of the target population has an equal chance of being selected
To select a random sample the following are needed:
List of people in target population
Sequential numbers given to all members of population
List of random numbers generated by a computer

Advantages:
Random → no researcher bias
Easier to perform

Disadvantages:
It may take time to contact specific people
Potential that it is not representative of the whole group

Question 17

Describe stratified sampling

Answer 17

Draws a sample from a specified sub-group or segment of the population and uses random sampling to select an appropriate number from each stratum
Recognizes that target population may be made up of many different groups with different intentions
Groups = strata or layers of a population
For a sample to be accurate → should contain members of all these stratas
Example:
100 people in the school about soft drink preferences
Split school up into strata (class groups, age, gender)
If school is 1000 students and 50 are girls in year 8, an accurate sample of 100 people would contain 5 girls from year 8
Process then repeated with all year groups until required sample of 100 is reached
People surveyed in each stratum → chosen randomly

Question 18

Describe cluster sampling

Answer 18

Using one of a number of specific groups to draw samples from and not selecting from the whole population
E.g. using one town or region
When full list of potential sample members is not available / too geographically dispersed
May be just one town or region
Will help reduce costs
May not be representative of the whole population
Multinational company wanting to research global attitudes towards its product would save time and money by concentrating on a few areas for research

Question 19

Describe snowball sampling

Answer 19

Using existing members of a sample study group to recruit further participants through their acquaintances
First respondent refers to friend → refers to next friend → etc.
Cheap
Can be operated through social networking sites
Likely to lead to a biased sample
Friends have the same lifestyle and opinions

Question 20

Describe convenience sampling

Answer 20

Drawing representative selection of people because of the ease of their volunteering or selecting people because of their availability or easy access

Advantages:
Availability and quickness with which the data can be gathered

Disadvantages:
Risk that the sample might not represent the population as a whole
Might be biased by volunteers

Question 21

Describe focus groups

Answer 21

a group of people assembled to participate in a discussion about a product before it is launched, or to provide feedback on a political campaign, television series, etc.

Question 22

What are the advantages and disadvantages of focus groups?

Answer 22

advantages:
- can provide detailed information about customers feelings, perceptions and opinions
- cheaper than performing individual interviews
- provide opportunities to clarify issues or problems

Disadvantages:

• can be hard to control or manage
• the results are difficult to analyse (can be contradictory or inconsistent)
• members may be biased as they are influenced by majority view (peer pressure)
• may not represent the target market as a whole