Chapter 11

Market Research

Methods of Market Research

Why do businesses use market
research?
 Market research is the collection, compilation and analysis of information
about a market

 Effective market research helps a business

o Reduce risk when launching new products or entering new markets

o Identify and understand the future needs and wants of customers

o Understand consumer behaviour

o Identify how much consumers are prepared to pay

o Identify potential gaps in the market which can be exploited to increase

sales

o Identify competitors and gauge their potential strengths and

weaknesses

 With effective market research businesses are well-placed to make informed

decisions about the most effective way to use their valuable resources
and develop a suitable marketing mix

 On-going market research helps businesses to update

their marketing strategy in line with customers' changing needs and
preferences

Primary market research

 Primary market research is the process of gathering information directly from
consumers in the target market

o This process gathers information that does not already exist and is
specific to the needs of the business collecting it

 Surveys, interviews and focus groups are common primary market research
methods
 o These methods make use of questionnaires to organise research
questions and responses

Primary market research methods

Surveys
 A series of questions are posed to a defined number of people using a
questionnaire

 Surveys can be conducted face-to-face, online, by phone or by post

Advantages Disadvantages
 Responses may be rushed or
 Can reach a wide audience quickly dishonest

 Data is easy to compare and analyse  Limited opportunity for follow-up or

clarification

Interviews
 A formal meeting between a researcher and a customer using structured or
semi-structured questions

 Interviews allow detailed responses and observation of body language

Advantages Disadvantages
 In-depth and detailed  Time-consuming and
responses expensive

 Can explore topics  Results may be harder to

further through follow- compare due to open-
up questions ended answers

Observation
 A market researcher watches consumer behaviour in real time, such as
shopping patterns, product placement, or packaging influence

Advantages Disadvantages
 Shows actual behaviour  Cannot always
rather than reported understand reasons
behaviour behind actions

 Useful for identifying  Can be intrusive or affect

trends or problems natural behaviour
Focus groups
 Small group discussions led by a specialist to gather detailed feedback from
target customers on products, services, or marketing strategies

Advantages Disadvantages
 Provides deep  A small sample size may not
insights and opinions represent wider market

 Can test ideas before  Dominant voices may skew

wider launch the discussion

Sampling
 Primary market research is conducted with a small representative sample of
the market as a whole

o Market researchers use carefully designed sampling methods from

which accurate conclusions can be drawn about likely customer
preferences and behaviour

o In general, the larger the sample size, the more likely it is that results of
market research activities will reflect the market as a whole

Why is sampling useful?

 It saves time and money

o It is usually too expensive and time-consuming to collect data from

every potential customer

o Sampling allows the business to get useful information quickly and at a

lower cost

 It can provides reliable insights

o If the sample is chosen carefully, it can represent the larger market

o This means the business can still learn about customer preferences,
buying habits, or opinions without needing to ask everyone

 It helps a business make better decisions

o Sampling allows a business to test ideas, such as new products or

adverts, before launching on a larger scale

o This helps reduce risk

 It is useful for identifying trends

 o By asking a smaller group of people from different segments, a
business can spot patterns in customer behaviour or preferences

Secondary market research

 Secondary research involves the collection, compilation, and analysis of data
that already exists

o It helps businesses make informed decisions without carrying out their

own primary market research

 Businesses must weigh up the reliability of secondary market research and

aspects such as cost, relevance and availability of data when making a
decision on which secondary data to use

Sources of secondary market research

Competitor websites
 Businesses can visit the websites of their competitors to gather useful
information about their products, pricing, promotions, customer service and
branding

Why are they useful?

 Comparing prices and features

 Identifying current marketing strategies

 Understanding how competitors position themselves in the market

Government sources
 Governments publish a wide range of free and reliable data, including
statistics on population, employment, income, business activity
and economic growth

Why are they useful?

 Spotting demographic trends (e.g. ageing population)

 Analysing the economic climate (e.g. inflation, interest rates)

 Understanding changes in consumer spending or regional business

conditions

Market reports
 Market research companies, such as Mintel or Euromonitor, produce in-depth
reports on industries, consumer trends and market performance
  These are usually detailed and may be expensive to access

Why are they useful?

 Assessing market size and growth

 Understanding consumer behaviour and preferences

 Identifying future opportunities or threats in a market

Trade magazines
 Magazines focused on a specific industry, often published by trade
associations or business groups

 They include news, expert opinions and case studies

Why are they useful?

 Staying up-to-date on trends, new products, and innovations

 Monitoring competitor activity within the industry

 Gaining insight into best practices and future developments

Evaluating secondary market research

Advantages Disadvantages
 Cost-effective  It may be outdated

o Secondary research is often o Information might not reflect

cheaper than conducting primary current market trends or customer
research since the data already preferences
exists
 Lack of relevance
 Time-saving
o Data might not be specific enough
o Information can be accessed for the business’s needs, so
quickly without needing to collect primary market research may also
new data be needed

 Wide range of data  Unknown accuracy

o It covers many topics and often o The reliability of the data can be
has large sample sizes, offering uncertain if the original source is
valuable insights unclear or biased
Examiner Tips and Tricks
Be careful not to confuse primary and secondary research – primary gathers new
data (e.g. surveys), while secondary uses existing data (e.g. reports). Mixing these
up is a common exam mistake

Factors influencing the accuracy of

market research data
 The reliability and accuracy of market research depends upon a large number
of factors, including:

1. Question phrasing
 How questions are phrased in questionnaires or other tools used to conduct
surveys

o Questions should be written in such a way that they do not encourage

a predetermined response

2. Sample selection
 How carefully the sample is selected

o Including its size, types of respondent chosen and how closely these
reflect the intended target market

3. Skills of interviewer
 Who conducts the research including their experience,
research skills and source (primary or secondary?)

 Potential for bias when conducting research or analysing results

o The research and its analysis should be as objective as possible

4. Time and place of research

 When and where the research is conducted

o Customer tastes, fashions, economic conditions and technology

change, giving data a relatively short period of usefulness

o Customers in different geographic areas can have very different

opinions

Analysis of Market Research Data

Quantitative and qualitative data
 Once market research data has been gathered, it need to be converted into a
form which is easy to understand and capable of being used to support
business decision-making

 Quantitative data is statistical numeric data that can be used to support

decision making

o Quantitative data needs to be accurate and interpreted correctly if it is

to be useful

o It may be collected from primary or secondary sources

o Sources of quantitative data include

 Financial reports

 Survey findings

 Marketing or sales data

 Statistical research from the government or research

organisations

 Qualitative research data often requires considerable skill and insight to be

interpreted appropriately

o It involves comparing and drawing conclusions from opinions, insights,

feelings and preferences

o It is mainly collected from primary sources such as focus groups,

detailed surveys/interviews and test marketing

 Both forms of data can help business managers forecast

sales, identify trends and make decisions about product development,
promotional planning, pricing tactics and other important marketing
mix elements

Analysis of graphs and charts

 Information presented in graphs and charts is often easy to
understand because it is presented visually

 Common methods of presenting data include:

o Tally charts
 o Bar charts

o Pie graphs

o Scatter graphs

Tally charts
 A table or tally chart, is a simple method used to record data in its original
form

o It is particularly useful for recording frequency of an event as it is

happening

 E.g., It may be used to record the number of customers entering

a retail store

o Each time a particular event happens, a small vertical line is drawn

 Groups of five occurrences are recorded with a diagonal

line through four vertical lines

 These groups of five can be easily totalled to identify frequency

 In many cases, tally chart data is converted into a chart or graph to make it
more visually appealing

Worked Example
Susie asks her friends to select their favourite type of pet.

Dog Cat Dog Dog Dog

Rabbit Dog Rabbit Cat Cat
Cat Dog Dog Rabbit Dog
Cat Cat Dog Dog Dog
Represent the data in a frequency table. You can use a tally chart to help

Total the tally data and add to the frequency column

Type of pet Tally Frequency

Dog 11

Cat 6

Rabbit 3
Bar charts
 This bar graph provides a clear picture of umbrella sales between January
and April and allows a manager to compare sales month by month

Pie charts
 This pie chart breaks down all umbrella sales into those achieved by different
models

 It shows that more than half of sales were 'Ultra' umbrellas

Pi
e chart showing the sales of umbrellas over four months

Examiner Tips and Tricks

Practise calculations such as percentages and averages – errors in simple maths
can cost easy marks, so always double-check your working and units
Scatter graphs
 Scatter graphs allow relationships between two variables to be identified

 The scatter graph below shows that there is a positive correlation between
temperature and sales of barbecues

o As the temperature increases, sales of barbecues increase

A scatter graph showing the correlation between the temperature and the sale of
umbrellas
 A line of best fit allows known data to be extrapolated to identify likely sales of
barbecues at other temperatures
 Scatt
er graph showing a line of best fit