Chapter 33 · Market Research

Purpose of Market Research

Market research involves collecting, presenting and analysing information about the marketing and consumption of goods and services. It helps a business understand what buyers want, examine its competitors, identify opportunities and make marketing decisions using evidence instead of guesswork. Research costs time and money, so managers must decide what information is worth gathering.

Example: Tourism in Sri Lanka

Sri Lanka recovering as a tourist destination after the 2004 tsunami and the end of the civil war in 2009. It reports 1,798,410 tourist arrivals in 2015 and shows tourist arrivals for 2016 and part of 2017 in Figure 33.1. Tourism organisations use arrival data to find busy seasons, choose when to advertise and plan staffing, accommodation and tours. The graph displays available months for 2017 rather than a complete second year.

Sri Lanka also attracts tourists interested in beaches, history, wildlife and adventure holidays. Figure 33.2 reports how adventure travellers prepared for a trip. The highest reported activity was online research (69%), followed by asking friends and family (64%). A tour operator could use these findings to strengthen its website, publish helpful travel information and encourage customer recommendations.

To Identify and Understand Customer Needs

A business needs to find out which features matter to potential buyers. For example, a vacuum-cleaner manufacturer might ask customers about model design, colour, durability, efficiency, ease of handling and ease of storage. It can use the results to design a more suitable product instead of producing an expensive feature that customers do not value.

Good research also helps a business anticipate future customer needs by following changes in fashion, technology, lifestyles and product design. Managers should still test predictions because customer preferences can change.

To Identify Gaps in the Market

A gap in the market is an unmet customer need or a product opportunity that existing competitors have not adequately addressed. Research might reveal that customers want a faster delivery service, a less expensive product or an easier-to-use mapping application. Filling a gap may give a business an advantage, but other firms could enter the market if they see the opportunity.

To Reduce Risk

New products are uncertain: demand can be misjudged, prices may be too high and competitors may react. Research can reduce—but cannot remove—the risk of product failure. For example, Amazon’s Fire Phone was launched in 2014 and withdrawn around a year later after disappointing sales. Even large businesses can misjudge customer needs.

To Inform Business Decisions

Research supports choices about product design, price, promotion and distribution. For instance, the example tests whether a price reduction will actually increase sales revenue. The sales forecast matters because a lower price is only successful in revenue terms if enough extra units are sold.

Working: Original revenue = US$10 × 1,500,000 = US$15,000,000. New sales volume = 1,500,000 × 1.12 = 1,680,000. Forecast revenue = US$8 × 1,680,000 = US$13,440,000. The price cut would reduce revenue by US$1,560,000 (10.4%), so the business decides not to reduce the price. This is an illustration of using research before making a decision, not a guarantee that all buyers would behave as forecast.

Methods of Primary Research

Primary or field research gathers new data that did not previously exist, specifically for the business’s research question. Businesses may ask customers questions or observe their behaviour. This makes primary evidence more relevant and adaptable, but it can be expensive and time-consuming. Some firms hire a research agency to conduct the work.

Questionnaires

A questionnaire is a planned list of written questions used to record respondents’ opinions, needs or behaviour. To obtain useful data, questionnaires should mix open and closed questions, use clear language, avoid leading wording and remain short enough that customers will finish them.

• Closed questions: offer a fixed set of responses, such as yes/no or a rating from 1 to 5. They are easy to count and compare, but may not explain the reasons for an answer.
• Open questions: allow respondents to explain their views in their own words. They often give richer information, but answers take longer to analyse.
• Avoid leading questions: “How much do you love our new product?” suggests a favourable response. “What do you think of our new product?” is more neutral.

Questionnaires can be distributed by post, telephone, face-to-face interviews or online forms. Postal surveys are convenient but may have low response rates. Telephone interviews can reach a wide area but may annoy recipients. Personal interviews allow clarification but take staff time. Online surveys are often inexpensive and quick, although some people ignore invitations and respondents may not represent all consumers.

Focus Groups or Consumer Panels

In a focus group, selected customers discuss a product, service or marketing idea under the guidance of a researcher. A consumer panel may provide feedback over time. Researchers can ask follow-up questions, observe reactions and explore reasons behind preferences. However, small groups may not represent the wider population, and strong personalities can influence other members.

Observation

Researchers watch what people do, such as which supermarket displays attract attention or how long shoppers examine different products. Behavioural evidence may reveal patterns that questionnaires miss. However, watching customers may not explain why they behave in a particular way, because the observers are not asking for their reasons.

Test Marketing

Test marketing means launching a product in a limited geographical area before attempting a full national release. A business studies sales, feedback and product problems, then makes improvements if necessary. This reduces launch risk, but a small test area may be unrepresentative and competitors may learn about the new product.

Example: Manzini Safari Tours

Manzini Safari Tours operated trips around the Mlilwane Wildlife Sanctuary in Swaziland (the country is now called Eswatini). park visitor numbers fell from 21,400 in 2014 to 9,400 in 2015. A research agency conducted 1,000 telephone interviews with randomly chosen potential customers to investigate the fall.

The visitor decline was 12,000 people, or approximately 56.1% of the 2014 level. Only 7% of respondents recalled seeing Manzini advertising and 44% said they might go if the price were lower. Open comments also mention cost, low destination awareness and expectations about animals. These findings could inform promotion, pricing and customer information, but the business must check whether the sample adequately represents people likely to visit.

Methods of Secondary Research

Secondary or desk research uses information that has already been collected, either inside or outside the business. It is often cheaper and faster than primary research, and can help businesses understand the overall market before undertaking their own surveys. However, existing information may be old, incomplete, biased or not exactly suited to the firm’s question.

For example, a supermarket considering a new branch could use government population information and its own previous sales records before paying for a local customer survey. Managers should check the date, original purpose, geographical coverage and accuracy of any secondary data they rely upon.

Qualitative and Quantitative Data

Market research data can be qualitative or quantitative. These refer to the form of the information, rather than whether it is primary or secondary. A business can gather both types through surveys, interviews, observations and existing reports.

For Manzini Safari Tours, the percentages answering “yes” or “no” are quantitative; the customer comments about supervision and price are qualitative. Both matter: numbers help identify how widespread an issue is, while comments help explain why it may occur.

Quantitative findings can be summarised using frequencies, percentages and charts. Qualitative comments often need grouping into themes; different researchers might interpret the same comments differently. Using both types can provide a fuller picture, although neither guarantees that the sample is reliable.

Role of Social Media in Collecting Market Research Data

Businesses can collect research information by studying conversations and trends on social media platforms, blogs and online communities. They may follow product mentions, popular searches, consumer reviews and hashtags to identify emerging needs, reactions and complaints. this is often a fast and low-cost route to customer feedback, though users who post online may not represent the whole market.

Example: Nescafé

the example’s 2015 example describes Nescafé, one of Nestlé’s coffee brands, shifting its websites to the Tumblr social-media platform. The business aimed to strengthen relationships with young consumers, collect information about their attitudes and encourage interaction.

In the historical Nescafé example, sales reportedly rose by US$200,000 over six months, total monthly visits increased by 29%, and users spent 18% longer per visit. These are historical results rather than current figures. Online comments and conversations can reveal attitudes, but managers must check whether the contributors are genuine customers and representative of the intended audience.

Importance of the Reliability of Market Research Data

Research is useful only when the information is sufficiently reliable for the decision being made. If evidence is inaccurate, outdated or biased, the business may invest in a product nobody wants or set an unsuitable price. Research can reduce uncertainty, but human behaviour is not completely predictable.

• Sample size and representativeness: too few respondents or a sample from only one customer group may not reflect the whole market. A larger sample alone cannot solve poor selection.
• Question design: leading, confusing or overly technical questions may produce distorted answers.
• Response and interviewer bias: people may give socially desirable answers or say what they think researchers want to hear. Poorly trained interviewers can also influence responses.
• Age and quality of data: an old report may no longer describe current customer behaviour; figures from uncertain sources may be inaccurate.
• Stated intentions vs actual actions: someone saying they would buy a product does not guarantee they will actually purchase it.

Large vs Small Businesses

Research is important for businesses of all sizes, but the methods, resources and risks may differ. A small shop might speak informally with regular customers, observe shopping habits and use free government statistics. Such approaches cost less and may be appropriate for local decisions, but they often involve small, unrepresentative samples.

Large businesses can afford dedicated marketing departments, research agencies, customer panels, large surveys and detailed statistical analysis. They may need research covering many regions or products, and they could lose substantial sums if they misunderstand a market. However, spending more does not automatically make findings accurate: both large and small firms must check research reliability.