1.1.2 market research

• market segmentation


  process of splitting customers up into smaller groups with similar characteristics and targeting them
• common methods of market segmentation

  age, income, gender, hobbies/interests, location, ethnic, origin/culture, occupation
• market segmentation allows the business to focus on customer needs of that segment.
• why is marketing segmenting a good idea for the business:

  • targeting specific needs - customer satisfaction
  • charge a premium price - maximising profit
  • all above leads to customer loyalty
  • target promotional activities more effectively
  • USP - helps to stand out, competitive advantage
• why market segmentation is a bad idea for the business:

  • potentially losing sales from other segments - as you havent focused on them
• product orientation

  business focuses on production process and product itself. its puts most of its efforts into developing and making products and then trying to sell it to its customers.

  develop products based on what they are good at making/doing rather than what a customer wants
• market orientation

  a business which continually identifies, reviews and analyses consumer's needs. it is led by the market. likely to be engaged in effective marketing.
• advantages of market orientation rather than product orientation

  • respond quickly to changes in the market
  • stronger position to meet the challenge of new competition entering the market
  • more able to anticipate market changes
  • more confident that the launch of a new product will be a success
• nature of the product


  where a firm operates in an industry at the edge of new innovation such as bio-technology, pharmaceuticals, electronics - must innovate to survive
• policy decisions

  a business will have certain objectives where these are set in terms of technical quality or safety, the emphasis is likely to be on production. where objectives are in terms of market share or turnover, the emphasis is likely to be on marketing.
• the views of those in control

  an accountant or managing director may place emphasis on factors such as cash flow and profit forecast

  a product engineer may give technical quality control and research

  a marketing person may be concerned with market research and consumer relations
• nature and size of market

  if production costs are high = company is market orientated

  in being so they meet consumers' needs and avoid unsold goods and possible losses.
• degree of competition


  a company faced with lack of competition may devote resources to research with little concern about a loss of market share.

  businesses in competitive markets are likely to spend more on marketing for fear of losing their share.
• market research


  gathering information about what people want, need and buy
• identifying customer needs:

  business will benefit if they precisely identify the customers' desires. examples:

  • price
  • quality
  • choice
  • convenience
• quantifying likely demand for product

  qualitative data - important to find out how much a product a business might expect to sell in a market

  involves statistical data
• provide an insight into customer behaviour

  business might be more successful if their market research is it identify and analyse consumer behaviour. getting an insight on how people behave will help meet customer needs more effectively. qualitative data will help identify new opportunities.
• What is primary research?

  Collecting data that has not been collected before
• What are the methods of primary research?

  • Questionnaires/Surveys
  • Telephone Interviews
  • Focus Groups
  • Observation
  • Test Marketing
• What is the purpose of questionnaires/surveys in primary research?

  To find out customers' opinions
• What is an advantage of telephone interviews in primary research?

  They are cheaper and cover a wide geographical area
• What is a disadvantage of telephone interviews?

  Some people do not like to be telephoned by businesses
• What is a focus group in primary research?

  A group of people asked about their opinions and beliefs regarding a certain product
• How does observation work in primary research?

  Market researchers watch customer behavior towards a product under natural conditions
• What is test marketing?

  Involves selling a product in a restricted area before a national launch
• What is the benefit of test marketing over time?

  It allows for feedback to be gathered and modifications to be made, reducing the risk of failure
• secondary research involves collecting already existing data:

  internal data: collecting existing documents/publications:

  • market research reports
  • sales figures
  • annual reports publishes by a business
  • reports from members of sales force resulting in direct contact with customers
  • stock movements - up to date info on patterns of demand in the market
• secondary research:

  external data: available resources from outside of the business eg:

  • information form competitors eg, product specification
  • government publications
  • data from customer services on complaints
  • the EU
  • international publications
  • retail audits - a formal, systematic inspection of the various aspects of a retail business
  • general publications
  • internet website pages
• limitations of market research


  ways primary research doesn't always provide reliable info:

  • human behaviour: while responses of consumers may be honest and truthful, does not mean they will respond in the same manner in the future - human behaviour, to an extent, is unpredictable.
  • sampling and bias: results from samples may different from those who would have obtained if the whole population had been questioned (known as sampling discrepancy) - the greater the discrepancy the less reliable the data.
• use of ICT to support market research

  technology can impact how market research is carried out. ways:

  • company websites
  • social networking
• company websites

  used to provide access to online surveys. they are more sophisticated and can be tailored to responses of individuals.

  review systems allow to write accounts of their experiences

  gather secondary research by gathering data from rivals. by analysing websites of competitors a wide range of info can be gathered easily and cheaply.

  also use comparison websites to identify cheapest supplies.
• social networking

  social media can provide a cost-effective and in-depth tool for gaining insights into a firm's customers, markets, brand appearance and other important research aspects. to obtain proper info you must prepare good questions to ask. with social media info is gained through interactions and observations. howe.ver questions can be left unanswered
• databases


  an electronic filing system. allows great deal of data to be stored. info is set up so it can be updated and recalled when needed. data such as info on market researchers, potential customer is stored.
• Effective market research help business to...

  • Reduce risks
  • Understand customer behaviour (eg, dominoes sell more when its raining)
  • Quantify potential customer demand for a product (forecast sales)
  • Understand how much consumers will pay for a product (pricing)
  • Identify potential competitors (strategy)