Primary Market Research (AQA A Level Business): Revision Note

Purpose and value of market research

• Market research is the process of collecting and analysing information about customers, competitors and the wider market to support better decision-making

• In the UK, around 60–80% of new products fail within their first two years - good market research can significantly reduce this risk

What is market research?

• Market research involves gathering data about:

  • Customer needs and wants - what people are looking for and what would persuade them to buy

  • Market trends – how demand is changing and what is driving those changes

  • Competitors – what rivals are offering and at what price

  • The wider business environment – economic, social and technological factors shaping the market

The purposes of market research

The value of market research

• Market research gives businesses the information they need to make better-informed decisions

• It helps businesses allocate resources more effectively

  • Directing investment towards products, markets and campaigns that are more likely to succeed

• It can improve competitiveness by helping a business stay ahead of customer trends and rival activity

• However, the value of market research depends on the quality and reliability of the data collected

  • Inaccurate or outdated research can be as damaging as no research at all

• Market research also has costs, in terms of time, money and the expertise needed to collect and analyse data effectively

Primary market research

• Primary research is the process of gathering information directly from consumers in the target market using field research methods such as surveys and interviews

  • The acquired information is new and does not already exist in any format

• Businesses can choose from a range of primary marketing research methods and may combine a selection of methods to obtain comprehensive first-hand data

Surveys

• The most widely used method for gathering primary research data

  • A series of questions is posed to a certain number of people (respondents)

  • The results from the sample are used to make inferences, which are extrapolated to be true for the wider population

• A wide range of respondents can be reached using online survey tools such as SurveyMonkey

Observation

• This involves hiring someone to stand in an appropriate location and study consumer behaviour in a store, or perhaps judge the potential consumer traffic at a particular location

  • Researchers may observe the impact of packaging or the particular placement of a product in a store on consumer choice

Interviews

• The questions may be set up in a very similar way to a survey; however, an interviewer asks the questions

• This method takes longer, but it does allow the interviewee to ask follow-up questions and gather information that might easily be missed when conducting surveys

Test marketing

• Free samples are provided to the target market for a limited period to gauge their response to the product

• Adjustments to the product or other elements of the marketing mix can be made following feedback

Focus groups

• A marketing specialist leads free-form discussions to collect detailed feedback from the target market on all aspects of the marketing mix

• Usually limited to a small group of 12–15 people

• The group typically meets for 90 minutes to 3 hours

• Businesses must choose a primary marketing research method that allows them to capture the correct form of data that can support decision-making

  • Each method has a range of advantages and disadvantages, which must be considered when making this choice

Evaluation of primary marketing research

Confidence levels

• The confidence level is the amount of certainty a business can have that its marketing research data results are accurate

  • E.g. a 95% confidence level means that if the same survey were repeated 20 times, the results would be the same on 19 occasions

• The confidence interval is the range of values possible for a given confidence level

  • E.g. a 98% confidence level that the level of sales will be somewhere between £1.2m and £1.3m

Examples of confidence intervals

• The Office for Budget Responsibility (OBR) publishes regular predictions of economic performance, such as GDP growth, inflation and interest rates

• Here is the actual GDP growth from 2015 to 2024, with a prediction of UK GDP growth up to 2029

  • The lighter the shading, the more confident the OBR is that the actual level of GDP growth will fall between these values

    • In this case, the OBR is confident that GDP growth will be between -2.9% and 5.8% in 2029

    • The confidence interval is

$$\begin{gathered} =5.8\%--2.9\% \\ =\pm 8.7\% \end{gathered}$$

A high confidence level

A lower confidence level

• The darker the shading, the less confident the OBR is that the actual level of GDP growth will fall between these values

  • In this case, the OBR is 80% certain that GDP growth will be between -1.0% and 4.6% in 2029

  • The confidence interval is

$$\begin{gathered} =4.6\%--1.0\% \\ =\pm 5.6\% \end{gathered}$$

Why confidence levels and intervals help businesses

• These show how much to trust the marketing research data

  • Managers see the possible error, not just one headline figure

    • Office for National Statistics (ONS) household surveys publish 95% confidence intervals

    • Marketing planners know where results may vary and can take this into account when making decisions

• Guide the sample size

  • If the interval is too wide, the firm can survey more people to narrow it

  • Bigger samples shrink the interval, giving clearer answers upon which to make marketing decisions

• Support decisions

  • A narrow interval gives managers the confidence to make a key marketing decision, such as launching or dropping a product

Quantitative and qualitative data

• Marketing research data can be quantitative or qualitative

  • Quantitative data is based on numbers

    • It could include financial reports (e.g. sales, costs), market data (e.g. market share) or summaries of data gained from primary research (e.g. on a scale of 1–10, rate our customer service)

  • Qualitative data gathers descriptions or explanations

    • These can be based on conversations, discussions, impressions and emotional feelings and are usually gathered through primary research

Limitations of quantitative and qualitative research data