Types of Market Research (DP IB Business Management)

Revision Note

Flashcards

Written by: Lisa Eades

Reviewed by: Steve Vorster

Why Conduct Market Research?

Market research is the objective collection, compilation and analysis of information about a market
Effective market research helps a business to:
- Reduce risk when launching new products or entering new markets
- Identify and understand the future needs and wants of customers
- Determine potential gaps (market niches) in the market which can be exploited to increase the sales volume
- Identify competitors and gauge their potential strengths and weaknesses
Market research helps the business make informed decisions about the most effective way to use their valuable resources and develop an appropriate marketing mix
On-going market research helps businesses keep their marketing strategy in line with customers changing needs and preferences

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, interviews, etc
- This gathers information that is new and does not necessarily exist in any format
Businesses can choose from a range of primary market research methods and may combine a selection of methods to obtain comprehensive first-hand data

Primary Market Research Methods

Surveys

The most widely used method of gathering primary research is to use sampling by using surveys
This is where you would ask a series of questions to a certain number of people (respondents)
The results from the ‘sample’ are used to make inferences in which the results of the sample are extrapolated to be true for the wider population
A wide range of respondents can be reached using online survey tools such as Survey Monkey

Advantages and Disadvantages of Surveys

Advantages	Disadvantages
A large amount of data can be collected relatively quickly Well-designed surveys can be completed easily by the respondents, especially online surveys	Poorly-designed and conducted surveys will result in poor results Poor response rates are typical, especially when a random sampling method is used

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 on consumer choice or the impact that the particular placement of a product in a store may have on consumer choice

Advantages and Disadvantages of Observation

Advantages	Disadvantages
A useful method to capture data on human behaviour Large numbers can be observed in a short period of time	Observation needs to be combined with other primary research methods to understand the causes of behaviour

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 does allow the interviewee to ask follow-up questions and gather the information that can easily be missed when conducting surveys

Advantages and Disadvantages of Interviews

Advantages	Disadvantages
In-depth question provide detailed opinions and perceptions from participants High response rates can be achieved	A time-consuming process as interviews are carried out one-to-one Interviewer bias can affect the validity of results

Test marketing

Free samples are provided for a limited period to the target market to gauge their response to the product
Adjustments to the product or other elements of the marketing mix can be made following feedback

Advantages and Disadvantages of Test Marketing

Advantages	Disadvantages
Perceptions and opinions can be gathered prior to a full product launch Can attract early attention from potential customers	Producing and distributing free samples can be expensive Competitors may become aware of new products to be launched

Focus groups

Free range discussions led by a marketing specialist to collect detailed feedback on all aspects of the marketing mix from the target market
Usually limited to a small group of 12-15 people
The group typically meets for 90 minutes to 3 hours

Advantages and Disadvantages of Focus Groups

Advantages	Disadvantages
Detailed information on opinions and perceptions can be gathered Small groups make focus groups relatively easy and inexpensive to organise	Participants may be reluctant to share their true opinions in a group situation Rewards for participation make focus groups more expensive than other methods such as surveys or observation

Businesses need to take care to choose a method of primary market research 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 Market Research

Advantages	Disadvantages
Information gathering is focused on the needs of the business and will not be available to its rivals	The sample size may be too small and unrepresentative of all of the customers leading to unreliable results
The business can get in-depth information from respondents, for example, reasons behind certain behaviour	Bias may mean that researchers can guide respondents to answer questions in a particular way Similarly, respondents may be influenced by the responses of others or not provide accurate information
Primary market research is more up-to-date and can be used to ask specific questions, so will be more relevant	A business may need to hire a specialist market research agency to help and the process can be expensive and time-consuming

Traditionally, primary research has been relatively difficult and expensive for businesses to gather
The rise of social media platforms such as Facebook, Twitter, Instagram and TikTok has changed this and now provides businesses with incredible primary research opportunities
- The speed of communication between businesses and customers can be almost instantaneous, e.g. by using online polls thousands of responses can potentially be received in several hours
- The cost of gathering this information can be very low e.g. Online polls take a few minutes to set up and software automatically gathers and analyses the results
- Social media helps businesses generate an interactive relationship with their customers, which helps to strengthen brand loyalty
- Customers are also able to feedback quickly on products - or to express innovative ideas about how they want the products to be changed
- This feedback may help the firm to develop extension strategies in their product life cycle

Secondary Market Research

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

Diagram: sources of secondary research

Sources of secondary research include market research reports, government publications, financial reports, online databases, the media, online surveys, academic institutions and industry associations — **Businesses can consult a wide range of secondary sources to gather market research data**

Government publications: National governments and trading blocs such as the EU publish reports and statistics on topics such as the economy, demographics, industry trends and consumer behaviour
Academic institutions: Universities and research institutions conduct studies and publish research papers which provide valuable insights and data on specific industries, consumer behaviour and market trends
- For example, Stanford University is a globally significant research centre for engineering and medicine
Industry associations: Trade associations and industry-specific organisations provide detailed information about specific sectors, including market size, growth rates and industry benchmarks
- E.g. The International Organisation of Motor Vehicle Manufacturers conducts and collates research on production and sales statistics
Specialist market research reports: Companies specialising in market research produce and sell in-depth reports on various industries, markets and consumer trends
- E.g. Mintel is one of the leading private companies supplying market research information
Financial reports: Public limited companies are required to publish financial reports, including annual reports which can provide valuable information about a company's performance, market position, and future plans
Online databases: There are various online databases and research platforms that provide access to a wide range of secondary market research
- E.g. Statista and Euromonitor International
Media sources: Newspapers, magazines and online publications often contain articles, opinion pieces and investigative reports that can offer insights into market trends, consumer behaviour and industry developments
- E.g. The Financial Times and the Wall Street Journal
Businesses must weigh up the reliability of secondary market research and aspects such as cost, relevance and availability of data should also be carefully considered

Evaluation of Secondary Market Research

Advantages	Disadvantages
Information is already available and so is quicker to collect than primary research, thereby saving time	Information has been collected for other purposes and so may lack relevance or may not be factually correct, e.g. Wikipedia
Information is often free (e.g. government websites and internet sources such as Statista) and is cheaper to collect, leading to lower costs compared to primary research	Can be expensive to purchase market specific secondary data from specialist companies, e.g. MINTEL reports
Suitable for a small business that lacks a large marketing budget and/or expertise	Information may be out-of-date, especially in dynamic markets

Quantitative & Qualitative Data

Market research data can be quantitative or qualitative
- Quantitative data is based on numbers and could include financial reports (e.g. sales, costs), market data (e.g. markets 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 based on conversations, discussions, impressions, and emotional feelings and is usually gathered through primary research
Both forms are useful and any data analysis should ideally include a combination of the two

Limitations of Qualitative & Quantitative Research Data

Limitations of Qualitative Data	Limitations of Quantitative Data
The sample size used to gather data may be too small and unrepresentative of all of the customers, leading to unreliable results Bias may mean that researchers can guide respondents to answer questions in a particular way Respondents in focus groups may be influenced by the responses of others or not provide accurate information A business may need to hire a specialist market research agency to help gather primary data and the process can be expensive and time-consuming	Information has been collected for other purposes and so may lack relevance or may not be factually correct It can be expensive to purchase market specific secondary data from specialist companies such as MINTEL Numerical data may be out-of-date, especially in dynamic markets Data analysis and interpretation is a skill and individuals within the business may draw incorrect conclusions which are then used to guide business strategy Looking at a small amount of data and then extrapolating the results can provide wrong assumptions from which strategic decisions are made Numerical data may provide insights, but does not provide the reasons for the insights e.g. data may reveal sales volumes are falling, but not the reason for the decline

Limitations of Qualitative Data

Limitations of Quantitative Data

The sample size used to gather data may be too small and unrepresentative of all of the customers, leading to unreliable results
Bias may mean that researchers can guide respondents to answer questions in a particular way
Respondents in focus groups may be influenced by the responses of others or not provide accurate information
A business may need to hire a specialist market research agency to help gather primary data and the process can be expensive and time-consuming

Information has been collected for other purposes and so may lack relevance or may not be factually correct
It can be expensive to purchase market specific secondary data from specialist companies such as MINTEL
Numerical data may be out-of-date, especially in dynamic markets
Data analysis and interpretation is a skill and individuals within the business may draw incorrect conclusions which are then used to guide business strategy
Looking at a small amount of data and then extrapolating the results can provide wrong assumptions from which strategic decisions are made
Numerical data may provide insights, but does not provide the reasons for the insights e.g. data may reveal sales volumes are falling, but not the reason for the decline

Examiner Tips and Tricks

When answering questions about theory-rich topics like market research, it is tempting to write down everything you know about the subject.

Try to focus more on weighing up the advantages and disadvantages of market research methods and justifying which method(s) might be more appropriate - and explain why in context.

Last updated: 29 October 2024

You've read 0 of your 5 free revision notes this week

Sign up now. It’s free!

Join the 100,000+ Students that ❤️ Save My Exams

the (exam) results speak for themselves: