4.4 Market Research Flashcards
A03 & A04s
BM Tool- BCG Matrix: Decision Making Tool
Why and how organizations carry out market research
BCG Matrix image
Relative Market Share & Market Growth
1. Star ( is growing quickly and one where the product(s) have a high market share.
- Cash Cow (stable products that bring in money)
- Dog (are products at the end of their product life cycle so operate in low growth markets yet have low market share. Hence, dogs drain cash from the organization.)
- Question Mark (products that have low market share in a high growth market. Managers try to convert these products into stars, although this requires investment.)
Boston Consulting Group Matrix
(BCG) Matrix
- “product portfolio analysis”, evalutes the products in a business
- products that are more profitable lead to more investments in them and weaker products are likely to be phased out.
- The BCG Matrix measures the market growth rate on the vertical axis and market share on the horizontal axis.
- Then a product can be assessed on its strength in the market.
BCG Matrix (Star)
are products with high or increasing market share in a high growth market. They have yet to become market leaders but have the potential to become cash cows.
BCG Matrix (Question Marks)
are products that have low market share in a high growth market. Managers try to convert these products into stars, although this requires investment.
BCG Matrix (Cash Cow)
are products with high market share in a low growth (mature) market, so are the greatest earners of cash for a business.
BCG Matrix (Dogs)
are products at the end of their product life cycle so operate in low growth markets yet have low market share. Hence, dogs drain cash from the organization.
BCG Matrix Strategies
Holding Strategy, Building Strategy, Harvesting Strategy, Divesting
Holding Strategy
focus on products with a high market share, ensuring that they maintain their current position. Some investment needed to ensure sustaining consumer demand
Building Strategy
turning Question Marks into Stars. Money from Cash Cows could be invested in promoting or distributing the product to increase market share.
Harvesting Strategy
milking the benefits of products with a positive cash flow. These products provide the necessary finance for investment in other areas.
Divesting
poor performing products are phased out or sold off. Freeing up resources to boost the performance of other products.
Limitations of BCG Matrix
- focuses on current market position of the products with no future looked at
- may be time consuming and complex for business to define and classify their products
- high market share does not mean high profits. sales revenue could be gained using competitive pricing that has a downward effect on profitability
Market Research
is the systematic process of collecting, combining, analysing and interpreting data and information about existing and potential consumers, competitors and markets. It is used by businesses to aid their marketing planning and marketing strategies.
Market research (Primary Research)
i- s the process of collecting, recording, analysing and interpreting new data and information about a specific issue or direct interest to the business.
- This is done through surveys/questionnaires, interviews, focus groups, and observations.
- Data is first-hand, provides some in-depth data, is not always objective, requires certain ‘checks’ to ensure reliability and it is expensive & time consuming to conduct.
Reasons for Primary Research
Determine customer preferences about a product e.g. design, colour, size, smell, taste, etc.
Discover the likelihood of customers buying their products
Assess customer sensitivity to different price levels
Discover new market trends
Reduce the risk of marketing activities connected to new product releases
Investigate various market demographics and their reactions
How are Primary researches done
A survey, often connected with a free promotion, is done to get data on new menu items for a chain restaurant.
Interview of someone from a specific market segment about how they liked a new shampoo
Focus group who just screened a new movie to see which of the actors scored the best prior to the release of a marketing campaign
Videoed observation of riders during a new section of a roller coaster/themed ride
Secondary Market Research (or Desk Research
Is the collection, combination, and interpretation of existing data and information from previously available sources such as market analyses, academic journals, government publications, and media articles
Draws their findings from large representative samples
Often uses data collected by others but for a different purpose (such as government budgets or census data)
Examples of Secondary Market Research
Market Analyses: Usually done by new businesses (who lack previous data) by looking at a competitor’s website or a trade journal focused on the market that they want to break into.
Academic Journals: Not to be confused with Business Magazines (such as Forbes) but true academic works such as The Cambridge Journal of Economics. These are likely focused on a specific discipline or area such as Economics or Human Resources
Government Publications: A company looking at a new 2024 government budget which has millions earmarked for new tech research.
Media Articles & Online: Business magazines and newspapers. A company might use these to see new trends (beware of bias and reliability of information)
3 Sampling Methods
(Quota sampling, Random sampling, Convenience Sampling)
Quota sampling
involves segmenting a market into segments with certain characteristics & setting targets on the proportion to be sampled
Random sampling
each sample has an equal probability of being chosen
Ad: reduces biases, easy to sample population
Dis: could be small, may not consist of target population
Convenience Sampling
groups are selected on their easy access and proximity to the researcher. E.g. research on a street.
Ad: fast, easy and cheap
Dis: the sample may be biased and not represent whole population
Results from data collection
interested in the range of results they get from research. It is then of prime importance that they ensure that they use appropriate methods and that they have a high degree of accuracy
Benefits from properly collected data
Ability to answer the research question
Ability to repeat and validate a particular study
Increased accuracy of findings
Good opportunities for other researchers-for further research
