Section 4: Marketing Flashcards
(8 cards)
What is market research?
Market research is the process of systematically gathering data from consumers, which can be used to influence business decisions. It helps businesses identify products and services they can develop in response to the needs and wants of their customers.
Describe the purpose of market research
- Identify and understand the future needs and wants of customers:
- Market research can identify customer needs before competitors do so, allowing a business to benefit from first mover advantage (a competitive advantage gained by being the first business to introduce a new product/service to the market).
- As customer needs can change rapidly, market research can help a business avoid stocking goods that are no longer in demand. - Recognise potential gaps in the market:
- Detailed market research can identify areas of the market in which customers’ needs are not yet being fully met .
- Appropriate products can then be developed which precisely meet these needs, for which customers may be willing to pay a premium price. - Reduce risk when launching new products or entering new markets:
- Careful market research can clarify the features of products customers desire, the price they are willing to pay, how they respond to promotional activity and appropriate ways to distribute products.
- This is likely to limit marketing mistakes, improve budget decisions and improve the chances of a successful product launch or entry into a new market. - Investigate the potential strengths and weaknesses of competitors:
- Understanding the product range, promotional methods and pricing strategies used by rivals, as well as the ways in which they interact with customers, can help a business make their own products stand out.
Describe the two types of market research
Primary 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 research gathers information which is new and does not already exist in any format. The most commonly used methods of primary market research include the use of surveys, interviews based on questionnaires, observation, focus groups and test marketing.
Businesses usually carry out primary research with a sample of the target market in which they are interested. A sample is a group of respondents that reflects the characteristics of the target market as a whole. The larger the sample size, the more likely it is that research results will reflect the views of the target market as a whole
Secondary Research:
- Secondary research involves the collection, compilation, and analysis of data that already exists
- It usually comes from government publications, financial reports, online databases, media sources, online surveys & polls, academic institutions, market research reports and industry associations. It can also just be from the internet.
Explain five methods of conducting primary market research. You may explore some pros and cons as well.
- Surveys:
- The most widely used method of gathering primary research
- A questionnaire is used to ask a series of questions to a certain number of people (respondents)
- The results from the ‘sample’ are used to 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 - Observation:
- This involves hiring someone to stand in an appropriate location and study consumer behaviour in a store or to 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 - Interviews:
- 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 information which can easily be missed when conducting surveys - Test Marketing:
- Free samples are provided for a limited period of time to the target market in order to gauge their response to the product - Focus Groups:
- Free range discussions led by a marketing specialist with the aim of collecting detailed feedback on all aspects of the marketing mix from the target market
- Usually limited to a small group of 12-15 people who are rewarded for their time
- The group typically meets for 90 minutes to 3 hours
Describe three advantages and disadvantages of primary market research.
Advantages:
- Information gathering is focused on the needs of the business and will not be available to its rivals
- Some primary research methods allow in-depth information to be gathered from respondents such as reasons for certain behaviour or choices
- Primary market research is up-to-date and can be used to ask specific questions and so will be more relevant to business decisions
Disadvantages:
- The sample size may be too small and unrepresentative of target customers leading to unreliable results
- 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 provide inaccurate information
- A business may need to hire a specialist market research agency to help, making the process expensive and time-consuming
Describe six methods of secondary market research.
- 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
- Industry Associations: Trade associations and industry-specific organisations provide detailed information about specific sectors, including market size, growth rates and industry benchmarks. (pro tip: for application in secondary market research state that a source could be ‘international organization of [industry]’)
- Specialist Market Research Reports: Companies specialising in market research produce and sell in-depth reports on various industries, markets and consumer trends. Example: MINTEL
- Financial Reports: Public limited companies are required to publish 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.
- 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
Describe three advantages and disadvantages of secondary market research.
Advantages:
- Information is already available and may be quicker to collect than primary research, thereby saving time
- Information is often free (e.g. government websites and internet sources such as Statista) and cheaper to collect, leading to lower costs compared to primary research
- Suitable for a small business that lacks a large marketing budget and/or expertise
Disadvantages:
- Information has been collected for other purposes and so may be difficult to analyse, may lack relevance or may not be factually correct, e.g. Wikipedia
- It can be expensive to purchase market-specific secondary data from specialist companies, e.g. MINTEL reports
- Information may be out-of-date, especially in dynamic markets
