3.2 MARKET RESEARCH

• Market research


  The process of collecting, recording and analysing data about the customers, competitors and the market

  
• The data collected from market research impacts on most business decisions

  
• Market research is not just about finding out whether consumers will buy a particular product or not
• Market research


  It is also used to establish the characteristics of customers, what products they buy and why they buy them

  
• Common uses of market research

  • Measure customer reaction to new products
  • Measure customer reaction to different price levels
  • Measure customer reaction to alternative forms of promotion
  • Measure customer reaction to new types of packaging
  • Measure customer reaction to online distribution

  
• Purposes of carrying out marketing research

  • Identify the main features of the market
  • Reduce the risks of new product launches
  • Identify consumer characteristics
  • Explain patterns in sales of existing products and market trends
  • Predict future demand changes
  • Assess the most popular designs, promotions, styles and packaging for a product

  
• Identify the main features of the market

  Before entering a new market, a business will need to establish its overall size, growth, and competitors
• Reduce the risks of new product launches


  Researching potential demand for a new product allows a business to assess its likely chances of success

  
• New product development process

  1. Identify consumer needs and tastes

  2. Primary and secondary research into consumer needs and competitors

  3. Product idea and packaging design

  4. Testing the product and packaging with consumer groups

  5. Brand positioning and testing of advertising

  6. Pre-testing the product image and advertisements

  7. Monitoring sales and consumer response after product launch

  
• Identify consumer characteristics


  It is important to establish who the consumers of a product are likely to be, their wants and needs
• Explain patterns in sales of existing products and market trends
• Predict future demand changes
• Assess most popular designs, promotions, styles and packaging for a product
• Primary research


  The gathering of first-hand data that is tailor-made to a firm's own products, customers or markets
• Secondary research


  The use and analysis of data that already exists, originally collected by another organisation for a different purpose
• The market research process

  1. Management problem identification

  2. Research objectives

  3. Sources of data (primary and secondary research)

  
• Problem statement


  A device used in problem solving, which concisely defines the problem, whose problem it is, the limitations on possible solutions, and the form that the resolution can take
• Research objective


  A statement of purpose that outlines a specific result that a person aims to achieve within a specific time frame and with available resources
• Examples of research objectives


  • How many people are likely to buy our products in country X?
  • If the price of good Y is reduced, how much will this increase sales volume?
  • Which new product idea, A or B, is more likely to generate sales?
  • Why are consumers complaints about our products increasing?
• Data sources


  • Primary data collection (quantitative research, qualitative research)
  • Secondary data compilation (print or electronic, observation, test marketing, consumer surveys, focus groups)
• Primary data is information collected for the specific purpose that is directly related to a firm's needs
• Secondary data is information that already exists somewhere, having been collected for another purpose
• Usefulness of secondary research data

  • It can provide information about the population, the economy, the market conditions that a business operates in or plans to operate in and major trends in that market
  • It can help identify the key areas of market information that primary research needs to focus on
  • It provides evidence that can be used as a baseline against which primary research data can be compared
  • Large samples are often used, which increases accuracy and reliability
  • Many of the sources of secondary data can be accessed via the internet
  • If time or finance is very limited, secondary research might be the only option
  • There is so much of this data, which opens up new business possibilities if it is analysed carefully
• Limitations of secondary research data

  • Data may be out of date
  • Data is unlikely to have been collected for the specific needs of the business
  • Not all secondary data is available to all potential users
  • Secondary data might indicate the potential for a new market, but primary research will be needed to gather specific information for potential consumer profiles and their product preferences
  • Big data is so vast that it is not easy to analyse and to make useful for an individual business

  
• Usefulness of primary research data

  • To find out about completely new markets
  • To collect data for the specific purposes of the business
  • To gather qualitative data which supports and helps to explain quantitative data
  • To focus research on market reaction to specific changes made by the business
  • To gain information from a particular target group of consumers
  • When up-to-date data is essential
• Limitations of primary research data

  • The selection of a sufficiently large and representative sample greatly influences the accuracy of data
  • Business start-ups may not be able to finance detailed primary research
  • Newly formed businesses have no customers yet to gain important data from
  • It can be time-consuming to collect and analyse primary research data
• Sampling


  The selection of a small number of elements from a larger defined target group of elements, to allow information gathered from the small groups to be used to draw conclusions about the larger group
• Types of sampling methods

  • Probability samples (simple random, systematic, stratified, cluster)
  • Non-probability samples (convenience, snowball, judgement, quota)
• Simple random sample


  Every individual or item from the frame has an equal chance of being selected
• Systematic sample


  Decide on sample size, then select every nth element from the population
• Stratified sample


  Population divided into two or more groups according to some common characteristic, then a simple random sample selected from each group
• Cluster sample


  Population divided into several "clusters," each representative of the population, then a simple random sample selected from each cluster
• Quota sample


  Interviewers choose respondents to fulfill certain pre-agreed criteria, relevant to the population being researched
• Non-probability sampling


  Sampling approach where the probability of any particular sample being selected cannot be calculated, so results cannot be used to make inferences or judgements about the total population
• Non-probability sampling methods


  • Convenience sampling
  • Snowball sampling
  • Judgemental sampling
  • Ad hoc quotas
• Compared to probability results, non-probability sampling methods are likely to lead to less accurate results which are less representative of the whole population
• Non-probability sampling


  Sampling methods that do not involve random selection, so the results cannot be used to make inferences or judgements about the total population
• Convenience sampling


  Sampling based on easy access, i.e., friends, fellow workers or shoppers in just one location
• Snowball sampling


  The first respondent refers to a friend who then refers another friend... and so on. This is a cheap method of sampling & is often used by insurance companies
• Judgemental sampling


  Sampling based on who the researchers think would be more appropriate to study. This is used by experienced researchers who may be short of time