Market research: methods and uses

Last time

Before we start: last time, in Training, redundancy, dismissal and trade unions, you learned these points. Here they are again on one card. Keep them in mind, because today builds on them.

Find out before you spend

Before opening a shop or launching a product, a business needs to know: will people buy it, at what price, and from whom? Guessing is risky. Market research is how businesses find out, and it is one of the most-asked topics in Business.

What market research is

Market research is the process of gathering information about the market, customers and competitors. Product-oriented businesses make a product first and then try to sell it. Market-oriented businesses research first, and make what customers want. Market-oriented businesses are more likely to succeed, because their products match demand.

Primary research

Primary research, or field research, collects new information for the first time, for a specific purpose. Methods: questionnaires, interviews, focus groups, observation, and test marketing. It is up to date and exactly what the business needs, but it is expensive and takes time.

Questionnaires and interviews

A questionnaire is a list of questions given to a sample of people, on paper or online. It can reach many people cheaply. Questions should be clear and unbiased. Closed questions are easy to count; open questions give detail. An interview is face to face, so the interviewer can explain and probe, but it is slow and the interviewer may influence answers.

Other primary methods

A focus group is a small group discussing a product in depth, giving detailed opinions. Observation means watching customers, such as counting people walking past a possible shop location. Test marketing sells a product in one small area first, to see how it sells before a full launch.

Sampling

A business cannot ask every customer, so it asks a sample: a small group that should represent the whole market. A random sample gives everyone an equal chance of being chosen. A quota sample picks set numbers from each group, such as by age. The bigger and more representative the sample, the more reliable the results.

Secondary research

Secondary research, or desk research, uses information already collected by someone else. Sources: government statistics, newspapers, the internet, trade magazines, competitors' websites, and the firm's own sales records. It is cheap and quick, but it may be out of date, not exactly what is needed, and also available to competitors.

Primary or secondary?

Here are the two types compared. Many questions ask you to choose one for a small business.

Accuracy of research

Results may be inaccurate if the sample is too small or not representative. Questions may be leading, so people give the answer they think is wanted. People may not tell the truth. Secondary data may be old, or collected for a different purpose.

Using the results

Results show what customers want, so the business can design the right product. They help set the price customers will pay, and choose the best place and promotion. And they help forecast sales, and spot competitors' strengths and weaknesses.

Mistakes that lose marks

Mistake one: calling a questionnaire secondary research. It collects new data, so it is primary. Mistake two: saying secondary research is always accurate. Mistake three: describing a method without saying how the business in the case would use it. The fix: classify correctly, and say how this business would use it.

The full-marks tip

The full-marks tip: classify the method as primary or secondary, then give its advantage and drawback for this business. When asked how to use results, link them to product, price, place or promotion.

On one card

So, on one card: market research. Keep it for revision.