Market research

Market research: Collection, presentation and analysis of information relating to the marketing and
consumption of goods and services.

Purposes of market research

01. To identify and understand customer needs.

This means that a business has to gather information to identify these needs. These might include:

• model design and style

02. To identify gaps in the market

If a business can spot a gap in the market it is likely to gain a competitive edge for a while. It may be able
to generate higher levels of revenue and profit before a competitor arrives

03. To reduce risk

Setting up a business or launching a new product is risky. As markets get larger, and as competition gets
fiercer, launching new products becomes even riskier. The likelihood of failure is high but investment in
effective market research can help reduce the risk of failure.

04. To inform business decisions

Market research can provide a wide range of information that could be used to improve decision making
– particularly when making marketing decisions.

Methods of primary research

Primary or field research - Gathering of ‘new’ information that does not already exist.

01. Questionnaires: A questionnaire is a list of written questions. They are very common in market
research and are used to record the views and opinions of respondents. A good questionnaire will
have the following features.

• A balance of open and closed questions. Closed questions allow respondents a limited range of
responses. Open questions let people say whatever they want. They do not have to choose from
a list of responses. Open questions are best used if there is a large number of possible
responses.
• Contain clear and simple questions. Questions must be clear, avoiding the use of jargon, poor
grammar and bad spelling.
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 • Not contain leading questions. Leading questions are those that ‘suggest’a certain answer. They
should be avoided because otherwise the results will be biased. An example of a leading
question would be: ‘Do you have any problems with this product?’
• Be short. If questionnaires are too long people may be reluctant to answer them, or may stop
part way through.
Questionnaires can be used in different situations.
a. Postal surveys
b. Telephone interviews
c. Personal Interviews
d. Online surveys

02. Focus groups or consumer panels: A focus group is where a number of customers are invited to attend
a discussion led by market researchers.

The group must be representative of the whole population and be prepared to answer detailed
questions. This is a relatively cost-effective method of collecting information but the group may be
small so generalising from the results may not be reliable.

03. Observation: This is where market researchers ‘watch’ the behaviour of customers. This approach
might be used in retail outlets. Observers might record the amount of time customers spend looking
at particular products and displays in the store.

However, because there is no feedback using this method a lot of questions may go unanswered. The
observers do not ask customers to explain reasons for their behavior.

04. Test marketing: This involves selling a new product in a restricted geographical area to test it and sales
levels before a national launch. After a set period, feedback is gathered from customers. The feedback
is used to modify the product before the final launch. This reduces the risk of failure.

Methods of secondary research

Secondary or desk research: Collection of data that already exist.

It has been collected by someone else and may be available for other users. The information collected
may be internal, which means that it already exists inside the business. It may also be external, which
means it exists outside the business.

Advantages

a. Easy access
b. Cost effective
c. Wide range of information

Disadvantages

The main problem with desk research is that the data collected might not be exactly what the business
needs. It may also be out of date and therefore inaccurate.
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Different sources of secondary data

Qualitative and quantitative data

Qualitative data: Information about attitudes, beliefs and intentions, usually written in words.

Although qualitative data can be quite detailed, which is useful, it is also open to many different
interpretations. This means that there may be disagreements within a business about the usefulness of
qualitative research. It is less easy to analyse statistically than quantitative data.

Quantitative data: information that can be quantified, that is expressed.

Quantitative data is often easier to gather, process and present to readers. It is also regarded as being
open to less interpretation than qualitative data.

Role of social media in collecting market research data

Advantages of using social media for market research

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Importance of reliability of market research data

Although carrying out market research can reduce the risk of products failing in the market, it is important
to ensure that the data gathered is reliable.

✓ If market research data is inaccurate or out of date, any decisions based on the data are likely to
be unsound.

✓ Ideally, information could be gathered from every single person in a market. However, this would
take too long and cost too much money. To overcome this problem, businesses use a sample of
people. A sample is a much smaller group, however, so the behaviour and views of the sample
must be representative of all the people in the market, otherwise the data will be biased and
unreliable.

✓ In Questionnaires, people might change their minds or misunderstand the question. They might
also give answers that they think the interviewers wanted to hear.

✓ Finally, if questionnaires are poorly designed or interviewers have not been trained, the quality
of the research carried out might be poor.

Large vs Small business

Market research may be important for businesses of all sizes. However, small businesses are likely to use
cheaper methods of research or carry out the task informally – such as ‘chatting to customers’.

Large businesses may spend considerably more on market research. This may be because they have more
resources or they need to access to some important and specific information. Large businesses also have
more to lose if they ‘misread’ the market.

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