Market size
The total market can be measured by sales value or sales volume. This helps managers judge the scale of the opportunity.
Cambridge International AS & A Level Business · 9609 · AS Level
3.2 Market Research
Market research reduces uncertainty by giving managers evidence about markets, customers and competitors. This topic explains why research is used, how primary and secondary data are collected, how samples are selected, and how research findings should be interpreted.
Exam-focusedComplete Topic 3.2Interactive questions
What you need to know
For high grades, do not simply list research methods. You should be able to choose an appropriate method for the context, explain limitations such as bias and cost, interpret numerical and qualitative evidence, and judge how reliable the findings are before recommending a decision.
High-grade habit: link the research method to the decision. A start-up with little money may begin with secondary data, while a business testing reactions to a new product concept may need tailored primary research.
Subtopics
These subtopics follow the textbook table of contents. Select one to jump directly to it.
3.2.1
Purposes of market research
Market researchThe process of gathering, analysing and producing data relevant to marketing decisions.
The main purpose of market research is to improve decision-making. It gives managers evidence about the market as a whole and about the people who buy or use the product.
Understanding the market
Market growth
Growth shows how quickly the market is expanding or contracting. Faster growth may create more room for sales, but the absolute size of the market still matters.
Competitors
Research can identify competitors, their market shares, positioning and strengths. This helps a business judge the level of competitive threat.
Market growth (%) = change in market size ÷ original market size × 100
Worked example: a market increases from $200,000 to $220,000. Growth = 20,000 ÷ 200,000 × 100 = 10%.
Market share (%) = business sales ÷ total market sales × 100
Worked example: a business sells $40,000 in a market worth $160,000. Market share = 40,000 ÷ 160,000 × 100 = 25%.
Understanding customers and consumers
Customer
The person or organisation that purchases and pays for the product.
Consumer
The person who ultimately uses the product. The customer and consumer may be different people.
Example: if a parent buys a laptop for a student, the parent is the customer and the student is the consumer. Marketing decisions may need to appeal to both.
A customer profile describes characteristics of the customer base, such as age, gender, income, location or lifestyle. Research also distinguishes between needs (things required for survival or essential functioning) and wants (specific products or brands people would like to have).
How businesses use the findings
- Identify market opportunities before launching a business or product.
- Understand customer and consumer needs, wants and behaviour.
- Compare alternative marketing actions, such as different prices or promotional methods.
- Assess whether previous marketing decisions were effective.
- Reduce the risk of wasting money on products or campaigns that do not fit the target market.
Evaluation: market research reduces uncertainty but cannot remove it. Consumer behaviour, competitor actions and the wider environment can change after the research is completed.
3.2.2
Primary research and secondary research
Primary market research
Primary market researchNew data gathered for the first time for a specific research purpose.
Primary research can be designed around the exact decision facing the business, but it can be expensive and time-consuming. Poor question design or an unrepresentative group can also produce biased results.
Observation
Researchers watch behaviour rather than asking questions. A retailer might measure footfall outside a possible store location.
Surveys
Questions can be asked face-to-face, by telephone, post or online. Surveys can gather views from many respondents, but wording and response rates affect quality.
Focus groups
A small group discusses a product, brand or issue in depth. This is useful for understanding attitudes and reasons, but the group may not represent the whole market.
Test marketing
A product or marketing approach is tried in a limited area before a wider launch. This provides realistic evidence but costs money and can reveal plans to competitors.
Designing good primary research: avoid leading questions, select people who represent the target market, and use a sample large enough for the decision being made.
Secondary market research
Secondary market researchUsing data that already exists and was originally collected for another purpose.
Secondary information may come from company records, government publications, industry reports, newspapers, libraries, websites and specialist research organisations. It is usually a sensible starting point because it can reveal what is already known before the business pays to collect new information.
Primary versus secondary research
| Feature | Primary research | Secondary research |
|---|---|---|
| Nature of data | New and collected for the current purpose | Already exists and was collected previously |
| Relevance | Can be tailored precisely to the decision | May not match the exact market, place or question |
| Cost and time | Often more expensive and slower | Often quicker and cheaper |
| Main risk | Bias, poor questions or weak sampling can damage results | Data may be outdated, incomplete or in the wrong format |
Example: a café owner could first use secondary data on local population and competitor prices, then conduct a primary survey to discover which menu ideas local customers prefer.
3.2.3
Sampling
SampleA group selected to represent the population as a whole.
The target population is the full group a business wants information about. Surveying every member is often too expensive or slow, so businesses normally research a sample instead.
Why sample?
- Reduces the cost of research.
- Makes research faster and more practical.
- Allows the business to study a very large population without contacting everyone.
The main limitation is that a sample may not accurately represent the target population. A sample that is too small or selected badly can give misleading findings.
Sampling methods
Random sample
Every member of the target population has an equal chance of selection.
Strength: reduces deliberate selection bias.
Limitation: requires a list of the population and may take time to locate selected people.
Stratified sample
The sample reproduces important proportions in the target population, then people are selected within each group.
Strength: important groups are represented in the correct proportions.
Limitation: the researcher needs accurate information about population structure.
Quota sample
The researcher sets quotas for categories and then finds suitable respondents until each quota is filled.
Strength: relatively quick and practical.
Limitation: selection is not random, so interviewer choice can create bias.
Choosing a method
The best method depends on the time available, the budget, how much is known about the target population, whether clear groups exist within it, and how accurate the information needs to be.
Example: if a college knows its students are 60% female and 40% male and wants the sample to reflect that structure, a stratified sample could reproduce those proportions.
Evaluation: a larger sample usually improves confidence, but size alone does not guarantee good research. A large biased sample can still produce poor conclusions.
3.2.4
Market research data
Qualitative and quantitative research
Qualitative research
Explores opinions, beliefs, attitudes and reasons for behaviour. It often uses focus groups or in-depth interviews and helps explain why customers think or act in a particular way.
Limitation: small groups mean the findings may not be statistically representative.
Quantitative research
Produces numerical evidence, usually from larger samples. It can show how many, how much, when or where and makes comparisons and trends easier to measure.
Limitation: numbers may show what happened without fully explaining why.
Validity and reliability
Validity
How accurately the research measures what it is intended to measure. Poor questions, an unsuitable sample or biased data can reduce validity.
Reliability
The extent to which similar results would be obtained if the research were repeated. Reliable methods should produce reasonably consistent results.
Exam point: valid does not automatically mean reliable, and reliable does not automatically mean valid. A method can consistently produce the same answer while measuring the wrong thing.
Interpreting tables, charts and graphs
Pie chart
Useful for showing proportions such as market share.
Line graph
Useful for showing trends and fluctuations over time.
Bar chart
Useful for comparing categories, regions or competitors.
Always check the axes. Changing the scale of a graph can make the same change look dramatic or minor even when the underlying data is identical.
Index numbers
An index number shows percentage change relative to a base year, which is normally set to 100.
Worked example: if the sales-volume index is 100 in 2021 and 110 in 2024, sales volume is 10% higher than in the base year. If the index is 95, it is 5% lower than the base year.
An index does not tell you the actual level of sales unless the base value is also known.
Before using research data
- Check the source: who produced the information and why?
- Check the date: old data may not reflect a fast-changing market.
- Check the units: thousands and millions, value and volume, sales and profit can easily be confused.
- Check forecasts: understand how estimates were produced and how uncertain they are.
- Look for context: combine numbers with qualitative evidence where possible.
Evaluation: more market research does not automatically produce better decisions. Managers still need to interpret the evidence correctly, and the cost of extra research should be justified by the value of the decision it improves.
3.2 revision checklist
Define market research and explain why businesses use it.
Distinguish market size, market growth and market share.
Calculate market growth and market share.
Distinguish a customer from a consumer.
Explain customer profiles, needs and wants.
Define primary and secondary market research.
Explain observation, surveys, focus groups and test marketing.
Compare the advantages and disadvantages of primary and secondary data.
Explain why businesses use samples.
Compare random, stratified and quota sampling.
Judge which sampling method suits a given situation.
Distinguish qualitative from quantitative research.
Explain validity and reliability.
Interpret pie charts, line graphs, bar charts and tables.
Interpret index numbers relative to a base year.
Check source, date, units and limitations before using market data.
Questions open in a pop-up. Each answer is marked immediately, with an explanation so you know why it is correct or incorrect.