Market Research
This chapter explains how businesses gather, analyse and interpret information about a market. It covers product and market orientation, research information, primary and secondary research, sampling, questionnaire design, research accuracy and data presentation.
Topic 1: Market Research and Its Purpose
Market research helps a business understand customers, competitors and the likely demand for a product.
1. Market Research
Businesses use market research to find out:
- Whether customers are likely to buy a product
- What price customers are willing to pay
- Where customers want to buy
- What customers like or dislike about a product
- Who the target customers are
- How strong the competition is
2. Why Market Research Is Important
Market research can help a business:
1. Reduce risk
The business can find out whether there is likely to be demand before spending large amounts developing a product.
2. Understand customers
It helps identify customer needs, preferences and buying behaviour.
3. Make better marketing decisions
Research can influence product design, price, promotion and where the product is sold.
Topic 2: Product Orientation, Market Orientation and Research Information
Businesses may begin with the product or begin with customers. Research can also produce numerical information or opinion-based information.
3. Product-Orientated Business
It produces the product first and then tries to find customers for it.
This approach may be more suitable where:
- The product is a basic necessity
- There is little competition
- A completely new invention is being introduced
4. Market-Orientated Business
Benefits
- Products are more likely to meet customer needs.
- The business can respond to changing consumer tastes.
- New products can be launched with less risk.
5. Types of Market Research Information
Quantitative Information
Information that can be measured using numbers.
Examples
- Number of products sold
- Percentage of customers buying a product
- Market size
Qualitative Information
Information about opinions, attitudes and reasons.
Examples
- Why customers prefer one brand
- What consumers think about a new product
- Reasons customers are dissatisfied
Topic 3: Primary Research Methods
Primary research collects new information directly from existing or potential customers.
6. Primary Research
It is collected specifically for the business carrying out the research.
Advantages
- Information is up to date.
- It is directly relevant to the business's needs.
- Competitors do not automatically have access to it.
Disadvantages
- Can be expensive.
- Can take a long time to collect.
7. Methods of Primary Research
The main methods are:
8. Questionnaires
Questionnaires may be completed:
- Face-to-face
- By telephone
- By post
- Online
Advantages
- Can collect information from many customers.
- Can obtain customer opinions.
- Results can be compared and analysed.
Disadvantages
- Poorly written questions may produce inaccurate answers.
- Collecting and analysing responses can take time and money.
9. Open and Closed Questions
Closed Question
Provides a limited choice of answers.
Example: Would you buy this product?
Closed questions are easy to answer, compare and analyse.
Open Question
Allows the respondent to give their own answer.
Example: Why do you prefer this product?
Open questions provide more detailed information but are more difficult to analyse.
10. Online Surveys
Online surveys require respondents to answer questions over the internet.
Advantages
- Fast.
- Relatively cheap.
- Results can be analysed quickly using computers.
Disadvantages
- People without internet access cannot participate.
- Respondents may not answer carefully or honestly.
- There is no interviewer to explain unclear questions.
11. Interviews
An interview involves asking individuals a series of questions, usually face-to-face or by telephone.
Advantages
- Questions can be explained if the respondent does not understand.
- Detailed answers can be obtained.
Disadvantages
- Time-consuming and expensive.
- The interviewer may influence the respondent's answers. This is called interviewer bias.
12. Focus Groups
They may also test a product and give their opinions.
Advantages
- Provides detailed information about consumer preferences.
- Group discussion can help explain why consumers hold particular opinions.
Disadvantages
- Some members may influence others.
- One or two people may dominate the discussion.
13. Sampling
Businesses usually cannot ask every person in a market because this would be too expensive and time-consuming.
Instead, they select a sample.
14. Random Sample
Advantage
Reduces the researcher's influence over who is selected.
Limitation
The people selected may not accurately represent the target customers.
15. Quota Sample
Examples
- Age
- Gender
- Income
The researcher is told how many people from each group should be included.
Topic 4: Secondary Research
Secondary research uses existing information that has already been collected by somebody else.
16. Secondary Research
Advantages
- Usually cheaper than primary research.
- Usually quicker to obtain.
- Can provide useful information about the overall market or population.
Disadvantages
- Information may be out of date.
- It may not be exactly relevant to the business.
- Competitors may have access to the same information.
17. Sources of Secondary Research
Secondary information can come from inside or outside the business.
Internal Sources
Information already held by the business.
- Sales records
- Customer records
- Pricing information
- Finance department records
- Customer complaints
External Sources
Information obtained from outside the business.
- Government statistics
- Newspapers
- Trade associations
- Market research agencies
- Internet sources
18. Primary Research vs Secondary Research
| Primary Research | Secondary Research |
|---|---|
| New information | Existing information |
| Collected specifically for the business | Originally collected for another purpose |
| Usually more relevant | May be less relevant |
| Usually more expensive | Usually cheaper |
| Takes longer | Usually quicker |
| Examples: surveys, interviews | Examples: government statistics, reports |
Topic 5: Accuracy, Questionnaire Design and Data Presentation
Research results are only useful if the data is accurate, fairly collected and clearly presented.
19. Factors Affecting the Accuracy of Market Research
Research results are not always completely accurate.
1. Sample size
A larger sample is normally more representative and therefore more accurate, although it costs more.
2. Choice of sample
The people selected should represent the target market.
3. Wording of questions
Questions should be clear, easy to understand and unbiased.
4. Age of information
Old secondary data may no longer reflect current consumer behaviour.
5. Bias
The interviewer, source of information or wording of questions may influence the results.
20. Designing a Good Questionnaire
A good questionnaire should:
- Have a clear purpose
- Be aimed at the correct target group
- Use short and clear questions
- Avoid leading questions
- Use a logical order
- Use closed questions where appropriate
- Use open questions when detailed opinions are required
Bad question
Don't you agree that our new burger tastes excellent?
This is a leading question because it encourages the respondent to give a particular answer.
Better question
How would you rate the taste of our new burger?
21. Presenting Market Research Data
Raw research data needs to be organised so that important results can be identified easily.
Common methods include:
Table or Tally Chart
Useful for recording and organising data.
Bar Chart
Useful for comparing different categories.
Pie Chart
Shows how the total is divided into different proportions or percentages.
Line Graph
Useful for showing changes or relationships over time.
Topic 6: Key Definitions and Examination Checklist
Use this final topic to revise the terms and skills students must know for examinations.
Key Definitions
| Term | Meaning |
|---|---|
| Market research | Gathering, analysing and interpreting information about a market |
| Product-orientated | Business mainly focused on producing the product |
| Market-orientated | Business researches customer wants before developing the product |
| Quantitative data | Numerical information |
| Qualitative data | Information about opinions and reasons |
| Primary research | Collection of new, original information |
| Secondary research | Use of information already collected |
| Questionnaire | Set of questions used to collect research data |
| Focus group | Group representative of the target market used for discussion and research |
| Sample | Group selected to participate in market research |
| Random sample | Everyone has an equal chance of selection |
| Quota sample | People selected according to specified characteristics |
What Students Must Know for the Examination
Students should be able to:
- Explain why businesses carry out market research.
- Distinguish between product-orientated and market-orientated businesses.
- Distinguish between quantitative and qualitative information.
- Distinguish between primary and secondary research.
- Explain important benefits and limitations of both.
- Identify appropriate primary research methods.
- Explain the importance of sampling.
- Distinguish between random and quota sampling.
- Identify important sources of secondary information.
- Explain factors that affect the accuracy of market research.
- Design suitable questionnaire questions.
- Interpret information shown in tables, bar charts, pie charts and graphs.
- Recommend and justify an appropriate research method for a particular business.