CHAPTER 11: MARKET RESEARCH

Market Research is the process of collection, analysing and interpreting information about a market.

Product Oriented and Market Oriented businesses

Product orientated business is one whose main focus of activity is on the product itself.
On the other hand, Market orientated businesses carries market research to find out consumer wants
before developing a product. The business must have a marketing budget. A marketing budget is a
financial plan for the marketing of a product or product range for some specified period of time. It specifies
how much money is available to market the product so that the Marketing department know how much to
spend. It helps businesses to remain competitive as well as maintain loyalty and sales.

Accurate market research helps provide information:

➢ About market and competitors
➢ To identify the needs of current and potential customers
➢ To help reduce the risk of launching new or improved products
➢ To help plan marketing campaigns
➢ To help solve business problems such as falling sales.

Information

Quantitative Qualitative.

Quantitative information is numerical: it does not provide the reasons behind the information, but it is
easy to present as a graph or chart. E.g. questionnaires and surveys.

Qualitative information is factual, based on opinions and reasons. It can provide detailed information,
but it is difficult to present in chart as it is hard to compare opinions. E.g. interviews and focus groups.

Market Research

Primary Secondary

PRIMARY MARKET RESEARCH

Primary market research is the collection and collation of original data via direct contract with potential or
existing customers.

Advantages of Primary market research

1. Updated and relevant to the business undertaking it
2. Data is first-hand and it is usually planned and carried out by the enterprise itself
3. Most appropriate to gather information which will help a business to solve a specific problem
4. Not available to other businesses

Disadvantages of primary market research

1. Expensive especially if individually interviewing many people
2. Time consuming and not available immediately

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Methods of primary market research
❖ Questionnaire - uses a list of set questions and can be conducted face-to-face, by telephone or by
post.
Advantages Disadvantages
✓ Easier to compare results  If questions are not well thought out then the
answers to them might not be accurate
✓ Detailed qualitative information may  Can take long time and money to collect
be gathered and analyse
✓ Customers’ opinions about the  Risk of bias
product can be obtained.

While writing the questionnaire, it is important to take into consideration some factors:
⚫ It is advisable to ask no more than 12 questions
⚫ Keep the questions short and clear
⚫ Give a choice of age group e.g 18-25
⚫ Avoid open-ended questions unless people’s opinions are sought
⚫ Be careful not to lead the interviewee into an answer that may not be true by asking too direct a
question.
⚫ Be logical and think of the order of the questions

❖ Online survey - carried out on specialist websites using any internet-connected device, including
mobile phones. The researcher can design their own survey and post this on their website.
Advantages Disadvantages
✓ Fast and quicker response time  Might not be able to explain open-ended
questions since there is absence of the
interviewer
✓ Data collected can be quickly  Cannot reach potential customers who do
presented and analysed using IT not have access to the internet
tools
✓ Cheaper than interview and postal  Scope for fraud - filling in the survey just to
questionnaire gain incentives being offered.
✓ Easy to complete for the participant

❖ Interviews- this is where the interviewer (the person asking the questions) will have ready-prepared
questions for the interviewee (the person answering the questions)
Advantages Disadvantages
✓ Allow for detailed information-  Risk of bias- the interviewer could lead the
interviewees likes and dislikes interviewee into answering in a certain way
✓ The interviewer is able to explain  Interviews are very time consuming and
questions that the interviewee does expensive
not understand

❖ Observation- watching or recording what people do or buy

Advantages Disadvantages
✓ Relatively cheap  The information only gives basic figures

❖ Consumer panels/focus groups- a selection of people who have similar characteristics to target
market who give their opinions on a product/service.
Advantages Disadvantages
✓ Detailed information about  Expensive and time consuming if conducted
customers’ opinions are obtained by a specialist marketing agency
✓ Interactions between people of the  Could be biased if some people on the
group can help the business panel are influenced by the opinions of
understand the reasons for people’s others
opinions
✓ Quicker and cheaper than individual  Can be dominated by a few people so the
interview researcher should be an experience one to
deal with this.

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The need for sampling
It would take too much money and time to ask everyone for their views and opinions. Businesses can only
ask a small number of the population (sample). The business tries to create a sample which will represent
the views of all potential customers. A larger sample size should reduce the chance of bias.

Sampling refers to research based on a small number of the population.

A sample refers to the group of people who are selected to respond to a market research.
Types of sampling
1. Random sample: This means that every member of the population has an even chance of being
selected. People are selected at random (often by computer). E.g. 100th name in a telephone
directory.
Advantages Disadvantages
✓ Everyone has an equal chance of  Not everyone in the population may
being picked be a consumer of the product being
investigated.

2. Quota sample: This is when people are selected on the basis of certain characteristics (such as age,
gender or income) as a source of information for market research. Researchers ask for a certain
number of people. For example, interview 20 people from the age group 10-25, 30 people from the
age group of 26-45 and 20 people from the age group 46-60.

SECONDARY MARKET RESEARCH

Secondary market research uses information that has already been collected and is available for use by
others.

Advantages of secondary market research

1. Cheaper than primary research since data has already been collected by others
2. Information can be quickly and easily obtained
3. Help to assess the total size of a market by finding out the size of the population and its age structure
4. Newspapers may carry vital economic forecasts which will help to know the end of a particular
recession

Disadvantages of Secondary Market research

1. Data may not always be relevant since it was not collected with the needs of one business in mind
2. Data might be outdated since it may have been collected years ago
3. Data is available for all businesses - not just collected for the sole use of one business

Methods of secondary research

Internal sources means information which may be readily and cheaply available from the business’s own
records. Other examples includes:
⚫ Sales department records- records of previous years’ sales
⚫ Finance department
⚫ Customer service departments

External sources is when information is obtained from outside the business

⚫ Government statistics- information about population, income, economic data
⚫ Newspaper/internet articles- general information on markets or trading conditions/trends in the
market
⚫ Trade organisations- industry-specific data for its members
⚫ Market research agencies- these agencies carry out research for other people. Results are available
for a fee.

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Differences between primary and secondary market research
Primary Secondary
Meaning Involves collecting new information Involves using information that
that did not exist before, for a already exists and was collected
specific purpose for another purpose
Alternative name Field research Desk research
Type of information New Existing
Cost Relatively expensive Relatively cheap as information
either free or available for a small
fee
Time taken to collect Time consuming as new Quick/easy to access as it is
information already available
Access to results Only available to business Anyone can see it, including
competitors
Focus of research Specific to individual requirements May not be relevant for current
purposes
Relevance High as collected for specific Can be out of date
purpose
Useful for Specific issues, for example, General information, for example,
product changes population
Other points to Not always feasible, as might not Could include additional helpful
consider be able to access target customers information not previously
considered

Note: The choice of methods depends on time available, cost and what the business wants to
know.

Factors affecting accuracy of market research data

Any market research can produce information that is unreliable or inaccurate. Biased information can lead
to the wrong decisions being made which could result in higher costs and lost revenue.
Factors include:
1. Cost and time- The more accurate and relevant the research, the longer and more expensive it will be
to collect. Does the business have enough time to collect ‘perfect’ data?
2. Methodology- Is there any bias? Will people just say what they think researcher wants to hear?
3. How carefully the sample was drawn
4. The sample selected - sample chosen should be as near as is possible
5. Way in which the questions were phrased to ensure honest responses
6. Wording of the questions - should try out the questionnaire on a small group before using it to identify
any misinterpretations.
7. People’s views change over time- What the customers were happy to buy in the past could be
different now. Income, tastes and other factors can affect their opinions.
8. Who carried out the research?
9. Age of the information

Presentation of market research data

It is important to display the information in a form that is easy to understand. The method chosen depends
on what information needs to be presented and whom it is for:
⚫ Tables
They are a simple record of facts and figures presented in rows and columns. They are useful to show a
lot of detailed information but it is not easy to see trends quickly.

⚫ Charts
Charts are used to present a group of related facts graphically.
Charts

Bar charts Pie charts Line graphs

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 ➢ Bar charts
These show data in bars or columns. The higher the column height, the greater the value. Bar charts are
a useful method when there is a single variable, for example, revenue each month.
Advantages Disadvantages
✓ Easy to construct  Only show a small number of simple
figures

➢ Pie charts
These show proportions- how much one part is of the whole.
Pie charts are useful for simple comparisons between different options for the same questions.
Advantages Disadvantages
✓ Easy for seeing results quickly  Only present percentages- no actual
totals

➢ Line graphs
These show the relationship between two sets of numbers. Line graphs are useful for showing trends over
time, for example, between value of sales or between country.
Advantages Disadvantages
✓ Make it easy to spot trends quickly  Only give a limited amount of
information

➢ Pictograms
Data is represented by symbols of the item being displayed.
Advantages Disadvantages
✓ Good for visual impact  Difficult to represent numbers