1.3.5 Understanding the Customer

Question 1

Market research

Answer 1

Any activity that gives a business information about its product or service, its customers, its competitors or the market it operates in

Question 2

Primary research

Answer 2

Gathering information first hand from an original source, that has not been collected before (field research)

Question 3

Secondary research

Answer 3

Finding and using information that has already been gathered by somebody else (desk research) → books/journals, online

Question 4

Quantitative research

Answer 4

Based on numerical data, measures key details and produces statistical information, may use sampling and questionnaires → based on characteristics (race, age, gender etc)

Question 5

Qualitative research

Answer 5

Based on consumer’s attitudes and opinions. Tries to identify why consumers behave as they do, can include focus groups and interviews

Question 6

Sampling

Answer 6

A smaller section of the market chosen to represent the whole population

Question 7

Market segmentation

Answer 7

Dividing the market into groups of consumers with similar characteristics (age, gender, income, interests location)
Products and services can be more effectively produced and targeted for a particular market segment

Question 8

what is the purpose of market research

Answer 8

• The purpose of market research is to market effectively, businesses need information → about customers wants, market demand, competition, distribution channels etc
• Information needs to be updated regularly because businesses operate in a dynamic environment

Question 9

why do businesses need market research

Answer 9

• To explore new possibilities in the market
• Gives information that can be used to make better informed decisions about the business and its future
• Allows business to understand consumer behaviour and makes them more responsive to customer’s needs, leading to increased profits (market orientation)
• Helps to give a business a competitive advantage by improving its products/services and successfully marketing them
• Crucial for any business start up, to reduce the risks involved → if products are tailored to customers, it reduce risk as people will buy the products as they want them
• They can therefore become market oriented through market research (customer demands are provided for, they are more likely to buy it, this reduces risk and increases success)
• Essential for established businesses, to keep up with market trends and remain competitive
• Forecast future trends

Question 10

market vs product orienation

Answer 10

Market orientation: through market research, knowing what a customer wants and selling it to them

Product orientation: concentrating on making the best product and selling it and assuming people will want it (risky)

Question 11

start up market research

Answer 11

• Look initially for a small, local market (local shopping centre needing retailers etc)
• Gap may indicate a profitable market
• How is the market segmented
  Even if there are competitors, there could be profit too
• Close observation of local markets is the key to a successful start up, backed by primary research (interviews) and secondary research (analysis of local population trends)

Question 12

established business market research

Answer 12

• Can put extensive resources into researching the market for a new product
• Looking for gaps in a wider market so researching customer preferences becomes important
• Primary research using focus groups, observation and social media communities can provide valuable information

Question 13

adv and disadv of market research

Answer 13

• Can determine if there is a market
• lowers/mitigates risk as it gives people what they want
• Time consuming for a startup
• businesses still attach a great weight to designers judgement about what is likely to succeed (apple = innocation and creativity > market research)

Question 14

primary and secondary data

Answer 14

• Primary data: collected first hand for a specific purpose by the entrepreneur
• Secondary data: data that already exists which has been collected for a different purpose

Question 15

primary research

Answer 15

• Primary research, Observation, Postal surveys, Telephone interviews, Online surveys, Focus groups , Experimentation
• Can be designed specifically to suit the purpose of the business
• Information will be up to date and directly relevant
  Information gathered is not available to competitors
• Best for startups as they can fill up the gaps of secondary data

but:
- Can be expensive to collect, esp if employing an agency
- Can take a long time
- Can give misleading information, if questions worded weirdly or if there are sampling errors

Question 16

secondary research

benefits and drawbacks

Answer 16

• Secondary research , Google , Government departments, Trade associations, Market research reports
• Can be done very quickly, online
• Can be much cheaper than primary research
• May not be specific to researcher’s needs
  Can be dated
  May not be accurate, esp if source is

Question 17

social media snd new ways for MR

Answer 17

• Telephone calls, email surveys and social media are widely used to build a wider picture of consumer preferences
• Market researchers run online global research communities that can be used to continually generate information + advertising new developments
• These methods of generating qualitative research are much cheaper than local surveys and focus groups

New ways to collect qualitative data include
- Loyalty cards to track spending habits
- Website access to secondary data

Question 18

quantitative research (sampling)

Answer 18

• Concerned with graphical + statistical data
• Based on larger samples and is statistically more valid
• Main methods of obtaining quantitative data are the various fors of survey
• Concerned about people’s behaviour but not reasons

Question 19

qualitative research (forecasting)

Answer 19

• Based on opinions, attitudes, beliefs, and intentions
• Aims to understand why customers behave in a certain way, or how they may respond to a new product or service
• Focus groups and interviews are common methods used to collect qualitative data
• Gives a company in depth insight into the reasons for human behaviour

Question 20

what is forecasting

Answer 20

• Attempting to estimate future outcomes
• Time series, median/mean, extrapolation etc

Question 21

limitations of market research

Answer 21

• Secondary research can be too generalised to be of real value
• Primary research can be costly and qualitative research must be very carefully designed if it is to be reliable
• Even if findings are accurate, market change might make them obsolete before products are ready for distribution → businesses in dynamic markets have to respond quickly to changes in fashion and new technologies

Question 22

random sampling

Answer 22

• Chosen to be representative of the population as a whole
• Can be effective and accurate
• Hard to be genuinely random
• Needs large sample sizes to be free from bias
• Can be expensive

Question 23

stratified sampling

Answer 23

• Draws on specific groups of people that may be identified with particular market segments
• Targets the market effectively
• May be hard to identify appropriate strata
  More complex to organise and analyse results

Question 24

quota sampling

Answer 24

• Selecting evenly from particular groups in the pop (age, gender)
• Cheap and effective
• Need to be careful in drawing up quotas to avoid bias

Question 25

market segmentation and prices/costs

Answer 25

- Markets are split up into segments of consumers with the same wants and needs. They can also be segmented by product . - Catering to the need of small market segments may raise costs and prices → depends on if the customers value the products designed for them, they will pay more - Standardized products with a mass market cost less to produce

Question 26

how can markets be segmented

Answer 26

- Socio economic background - Income, age, gender - Size and composition of households - Geographical location ethnicity/religion - Educational backgrounds of customers - Hobbies and interests

Question 27

adv of M seg

Answer 27

- The more precisely a segment is identified and provided for = increase sales - Segmenting the market reduces direct competition - A premium price may be charged if market segments get exactly what they want - Encourages the development of brand loyalty

Question 28

disadv of M seg

Answer 28

- Can be expensive to research and identify different segments - More costly to develop and market different products for different segments rather than just one standardized product - Targeting on particular segment may mean ignoring others - Even if segments are identified, reaching them may be difficult