Market Research 1.2

Question 1

Market research

Answer 1

The systematic process of gathering, analysing, and interpreting information about a market, including information about the product or service being offered, the consumers, competitors, and the overall market environment.

Question 2

Market Research importance

Answer 2

Businesses invest in market research to reduce the risk of product failure. By understanding market conditions and consumer preferences, businesses can make informed decisions about product development, marketing strategies, and resource allocation.

Research results can lead to more successful products and marketing campaigns.

Question 3

Key Purposes of Market Research
Identifying and Anticipating Customer Needs and Wants:

Answer 3

Understanding consumer preferences is crucial for product design and marketing strategies.

Businesses need to clarify which specific features consumers desire in a product.

Automobiles: Potential customers may value features like fuel efficiency, safety ratings, aesthetic appeal, and technological integrations (e.g., infotainment systems).

Consumer Electronics: A company may want to know preferred screen size, battery life, or brand loyalty when developing smartphones or laptops.

This qualitative data helps in tailoring products to meet customer demands.

Question 4

Key Purposes of Market Research- Quantifying Likely Demand:

Answer 4

Estimating how much of a product will sell is critical for production planning.

Quantitative research involves numerical data that helps assess market size, growth potential, and sales forecasts.

For instance, if market research indicates strong demand for electric vehicles, a manufacturer can justify investing in production capacity.

If demand appears inadequate, businesses can reconsider launching the product, saving significant costs associated with production and marketing.

Question 5

Key Purposes of Market Research— Gaining Insights into Consumer Behaviour

Answer 5

Analysing consumer behaviour patterns can help businesses adjust their strategies effectively.

Important questions might include:
When do consumers typically make purchases?
What factors influence their purchasing decisions?
How much are they willing to spend?

For example, a travel company might analyse data to understand peak booking times or preferred payment methods (online vs. in-person).

Insights gained can also uncover new market opportunities or trends, leading to innovative product development or marketing approaches.

Question 6

Primary Research (Field Research)

Answer 6

-Primary research involves collecting data that has not been previously collected. It can be done by the business itself or by hiring a market research agency.

Question 7

Methods of primary research

Answer 7

Surveys/Questionnaires:
Surveys are designed to collect consumers’ opinions and experiences.

Open vs. Closed Questions:
Closed Questions: Offer limited options for answers (e.g., Yes/No, multiple choice). Easier to analyze but may miss nuances.
Open Questions: Allow for detailed responses, providing richer qualitative data (e.g., “What features do you value most in a smartphone?”).
Surveys can be conducted via postal mail, online platforms, telephone, or in-person.

Focus Groups:
A moderated discussion with a group of consumers providing feedback on a product, concept, or advertisement.
Groups should be representative of the target market.
Useful for obtaining in-depth qualitative data and understanding consumer sentiments.

Interviews:
One-on-one discussions that can be in-depth and detailed, allowing for probing questions and clarifications.
Can be conducted in person or over the phone.

Observation:
Researchers observe consumer behaviour in natural settings, such as retail environments.
Useful for understanding actual purchasing behaviour but may not reveal the reasons behind actions

Test Marketing:
Launching a product in a limited geographic area to gauge consumer response before a broader rollout.
Allows for adjustments based on feedback, reducing the risk of a nationwide failure.

Question 8

Secondary Research (Desk Research)

Answer 8

Secondary research involves analysing existing data that has already been collected for other purposes. It can be internal or external.

Question 9

Types of Secondary Data: internal

Answer 9

Internal Data:
Sales Reports: Data on previous sales can help predict future trends and identify successful products.
Customer Feedback: Complaints and suggestions gathered from customer service can provide insights into areas needing improvement.
Market Trends from Past Data: Historical sales data can reveal patterns over time.

Question 10

Types of Secondary Data: External

Answer 10

Competitor Analysis: Studying competitors’ promotional materials, pricing strategies, and product offerings can reveal market positioning.

Government Publications: Statistical data from government sources (e.g., census data, economic reports) can provide insights into market demographics and trends.

Industry Reports: Organisations like the World Bank or trade associations provide valuable market data and trends.

Commercial Research Firms: Companies like Mintel or Dun & Bradstreet offer specialised market research reports on various industries.

Retail Audits: Monitoring sales data from retail outlets through electronic point-of-sale (EPoS) systems helps track sales patterns and customer preferences.

Question 11

Qualitative Research:

Answer 11

Focuses on collecting data about attitudes, beliefs, and intentions.
Common methods: Focus groups and interviews.
Data is often open to interpretation, leading to disagreements about its significance

Question 12

Quantitative Research:

Answer 12

Involves collecting measurable data, often statistical (e.g., sales figures, market share).

Common methods: Surveys and government publications.

Data is generally considered less open to interpretation compared to qualitative data.

Question 13

Limitations of Market Research

Answer 13

Despite thorough market research, about 90% of new products fail after launch.
Failures may stem from inadequate research or from products that consumers initially favoured but did not perform well in the market.

Question 14

Reliability Issues within MR

Answer 14

Data reliability can be questioned. If the same information were collected again, would the results be similar?

Human behaviour is unpredictable; consumer responses may vary over time.
Sampling discrepancies can lead to unreliable data, as sample results may differ from those of the entire population.
Questionnaires must be carefully constructed to avoid leading questions.

Question 15

Use of ICT in Market Research

Answer 15

Company Websites: Facilitate online surveys, allowing flexible and cost-effective data collection. They can be tailored to individual responses and are accessible 24/7.

Review Systems: Websites like TripAdvisor enable businesses to gather feedback from customers and analyse competitors’ reviews.

Secondary Research: Businesses can collect data from competitors’ websites, gathering information on pricing, product ranges, and promotions easily and cheaply.

Social Media:
A growing tool for market research, allowing businesses to gain insights into customer opinions and market trends in real-time.
Examples include hashtag searches on Twitter to monitor brand-related discussions.

Question 16

Databases in Market Research

Answer 16

Databases serve as electronic filing systems to store and manage data, allowing easy updates and retrieval.

Question 17

Key features of a good database include:

Answer 17

User-definable record formats.
File-searching facilities for specific information retrieval.
File-sorting capabilities.
Calculation functions for reports.

Question 18

Market Segmentation

Answer 18

Market segmentation is a crucial marketing strategy that involves dividing a broader market into smaller, distinct groups of consumers who share similar needs, preferences, or characteristics. By understanding and targeting these segments, businesses can tailor their products and marketing efforts to better meet the specific demands of each group.

Answer 19

Geographic segmentation categorises consumers based on their location. This approach recognises that individuals in different regions may have varying needs due to factors such as climate, culture, and local preferences.
Examples:

Consumers living in hot climates (e.g., Australia, South Africa) may require different products (like air conditioning or summer apparel) compared to those in temperate climates (e.g., the UK), where warmer clothing and heating solutions are more relevant.

Even within a single country, such as India, regional preferences can differ significantly, leading to varied tastes in cuisine and lifestyle.

Question 20

Demographic Segmentation

Answer 20

Demographic segmentation divides the market based on specific characteristics of the population, such as age, gender, income, social class, ethnicity, and religion. This method allows businesses to tailor products to meet the unique needs of each demographic group.

Question 21

Demographic Segmentation— age, gender, income

Answer 21

Age: Different age groups exhibit distinct preferences. For instance, clothing manufacturers design specific styles for infants, teenagers, young adults, and seniors to cater to their unique fashion needs.

Gender: Men and women often have different product requirements. For example, toiletries, clothing lines, and even marketing campaigns are frequently designed specifically for either men or women (women products are typically pink - e.g Gillette razor.

Income: Income levels significantly influence purchasing behaviour. Luxury brands, such as high-end watchmakers (Patek Phillipe), target affluent consumers, while discount retailers cater to lower-income groups, offering more affordable products.

Question 22

Demographic Segmentation— social class, ethnicity

Answer 22

Social Class: Social class is determined by occupation and can affect buying patterns. The classification, often divided into categories such as upper middle, middle, lower middle, skilled working class, working class, and the poor, helps businesses target specific consumer groups.

Ethnicity: As countries become more diverse, businesses must recognise that different ethnic groups have unique cultural needs. For instance, in Canada, where over 200 ethnic groups coexist, Chinese consumers might spend significantly more on specific categories like leather goods and electronics.

Religious beliefs can impact purchasing decisions. For example, Muslims do not consume pork or alcohol, influencing the market for halal products. In the U.S., the kosher food market for Jewish consumers is estimated to be worth around $100 billion.

Question 23

Psychographic Segmentation

Answer 23

This approach provides a deeper understanding of consumer motivations and behaviours.

Examples:
Lifestyle: Products for extreme sports enthusiasts may be marketed differently than those for leisure activities.

Attitudes: Chocolate manufacturers have identified different consumer types, such as “Depressive” chocolate lovers who consume chocolate for comfort versus “Energetic” eaters who see it as a quick snack.

Fashion: Clothing brands might target consumers interested in “retro” styles, appealing to nostalgic feelings.

Travel: Companies may focus on families with young children for specific holiday packages.

Political Views: Newspapers may cater to specific political affiliations, tailoring content to either Labour or Conservative voters.

Despite its advantages, psychographic segmentation can pose challenges, as collecting data about consumer beliefs and lifestyles often requires specialised research.

Question 24

Behavioural Segmentation

Answer 24

Behavioural segmentation classifies consumers based on their interactions with a product, including how often they use it and their brand loyalty. This method helps businesses tailor their marketing strategies effectively.

Usage Rate: Consumers can be segmented according to their purchase frequency. For example, British Airways established the Executive Club to reward frequent business travellers, encouraging loyalty.

Loyalty: Brands like Sephora use loyalty programs, such as the Gold-card, to reward repeat customers, fostering a sense of loyalty to the brand.

Time and Date of Consumption: Understanding when consumers use certain products allows businesses to optimise marketing strategies.

Example: Bars may target different demographics on different nights, with Thursdays often catering to older singles and Fridays attracting younger crowds.

Question 25

Benefits of Market Segmentation

Answer 25

Market segmentation offers numerous advantages to businesses, enabling them to better meet diverse consumer needs:
Increased Revenue: By offering tailored products at different price points (e.g., airlines charging significantly more for first-class tickets), businesses can enhance their revenue streams.

Enhanced Customer Loyalty: Consumers are more likely to remain loyal to brands that cater specifically to their needs, fostering long-term relationships.

Efficient Marketing: Segmentation helps avoid wasteful spending on promotions targeting uninterested consumers, allowing for more precise and effective marketing strategies.

Broader Product Range: Companies can develop a diverse array of products to appeal to various segments, as seen in the car industry, where manufacturers offer multiple models designed for distinct consumer groups.