Market research
Businesses use market research information for several critical reasons:
- Identifying Target Markets: To determine who the potential customers are (demographics, location, habits).
- Product Development: To understand what features, quality, or design customers want before launching a new product.
- Pricing Strategies: To find out the price range customers are willing to pay and how they perceive value.
- Promotion: To decide which media channels (social media, TV, print) are most effective for reaching the target audience.
- Gap Analysis: To identify unmet needs in the market where competitors are not currently providing a solution.
Building on the concept of business orientation, market research shifts a company from being product-oriented (making what they can sell) to market-oriented (making what customers want to buy), thereby reducing the risk of failure.
Secondary Research: Existing data that was collected by someone else for a different purpose but is being reused for the current analysis.
| Method | Description | Benefits | Limitations |
|---|---|---|---|
| Questionnaires / Surveys | A set of written questions distributed to a sample of people. | Quantitative data (easy to analyse statistically); Cost-effective; Can reach a large sample size quickly; Anonymity encourages honest answers about sensitive topics. | Low response rate; Questions may be misunderstood; Cannot probe for deeper reasons behind answers; Rigid structure limits flexibility. |
| Interviews | Direct verbal conversation between the researcher and the respondent. | Qualitative data (deep insights); High response rate; Flexibility to clarify questions or probe for details; Builds rapport with respondents. | Expensive; Time-consuming; Interviewer bias may influence answers; Difficult to generalise results from a small sample. |
| Focus Groups | A small group of people (6-10) discussing a topic under the guidance of a moderator. | Qualitative data; Generates diverse opinions through group interaction; Useful for testing reactions to new ideas/products; Observes social dynamics. | Not representative of the wider market; Groupthink may suppress individual opinions; Expensive and complex to organise; Moderator bias. |
| Observation | Watching and recording consumer behaviour in real-time (e.g., in a store). | Accurate behavioural data (what people do vs. what they say); No reliance on memory; Captures natural behaviour. | Cannot explain 'why' behind the behaviour; Time-consuming; Ethical concerns regarding privacy; Limited to visible actions. |
Sampling is the process of selecting a subset of individuals from a larger population to represent the whole.
The Need for Sampling:
- Cost: Researching an entire population (census) is prohibitively expensive.
- Time: It takes too long to collect data from everyone.
- Accessibility: Some parts of the population are difficult or impossible to reach.
- Destructive Testing: In some cases, testing destroys the product (e.g., food taste tests), so you cannot test every unit.
Secondary research is often the first step in market research because it provides context and background. Methods include:
- Online Sources: Industry reports, competitor websites, social media trends, and blogs. Benefit: Immediate access and low cost. Limitation: Data may be unverified or biased.
- Government Sources: Census data, economic indicators (GDP, inflation), and trade statistics. Benefit: Highly reliable and accurate. Limitation: May be outdated by the time it is published; not specific to the niche market.
- Commercial Market Research Reports: Paid reports from firms like Nielsen or Statista. Benefit: Professional, detailed, and industry-specific. Limitation: Expensive.
The Correction: Secondary research is not specific to the current problem (it was collected for another purpose) and is often outdated. Primary research is specific to the current problem and is up-to-date because it is collected now. Always link 'timeliness' correctly: Primary = Current; Secondary = Potentially Outdated.
The Correction: Sampling is a technique used within a research method, not a method itself. You use questionnaires or interviews to collect data, and you use sampling to decide who to ask. Do not confuse sampling with 'test marketing' (which is a launch strategy).
The accuracy of market research data depends on several factors. Understanding these helps in evaluating the reliability of findings.
- Sample Size: A larger sample size generally increases accuracy and representativeness. Small samples are prone to statistical anomalies.
- Representativeness (Sampling Bias): The sample must reflect the characteristics of the total target market. For example, asking only teenagers about a retirement plan yields inaccurate data for the general population.
- Question Wording: Leading questions (e.g., 'Don't you agree our product is great?') bias responses. Neutral wording is essential for accuracy.
- Timeliness: Data must be current. Secondary data may be accurate historically but irrelevant if market conditions have changed.
- Researcher Bias: The way data is collected or interpreted can skew results. Standardised procedures reduce this risk.
Examiner Expectation: The markscheme accepts recommendations only when they are justified by the context. Do not just list advantages. You must link the advantage to the business's specific situation.
Reasoning: Examiners look for application. A generic answer like 'Questionnaires are cheap' is Level 1. An applied answer like 'Questionnaires are recommended because KE has a limited budget and needs to reach a large number of customers in different regions quickly' is Level 3.
Example:
Bad: 'Focus groups are good for getting opinions.'
Good: 'KE should use focus groups because they are launching a new creative product and need deep qualitative feedback on design preferences from their target demographic, which questionnaires cannot provide.'
Key Phrase to Use: 'This method is most appropriate because it addresses [specific business constraint/need] while minimising [specific risk].'
Examiner Expectation: 'Analyse' means more than describing. You must interpret the data. Look for trends, patterns, outliers, and comparisons.
Reasoning: Describing ('Sales went up') is Level 1. Analysing ('Sales increased by 20% between Q1 and Q2, suggesting a positive impact of the new advertising campaign') is Level 2/3.
Example:
Bad: 'The bar chart shows that Product A is more popular.'
Good: 'Product A has captured 60% of the market share, significantly outperforming Product B (20%). This indicates a strong brand preference for Product A, possibly due to its lower price point as shown in the adjacent table.'
- To identify customer needs and preferences: This ensures the product features match what consumers want, reducing the risk of failure. [2 marks]
- To determine the target market: Research helps define demographics (age, income, location) so marketing efforts can be focused effectively on those most likely to buy. [2 marks]
Primary Research Disadvantages: It is expensive and time-consuming, which may be prohibitive for a small business with limited resources.
Secondary Research Advantages: It is low-cost or free (e.g., government trade stats) and immediately available, allowing for quick initial assessment of market size.
Secondary Research Disadvantages: The data may be outdated or not specific enough to the local nuances of the new country, leading to potential misinterpretation of consumer behaviour.