Business (9609) | Market research

Market Research (AS Level Topic 3.2)

Hello future Business leaders! This chapter is all about becoming a market detective. Before any business launches a new product, changes a price, or decides where to sell, it needs information. This is where Market Research comes in.

Think of market research as the process of gathering, recording, and analysing data about customers, competitors, and the market. Why is this so vital? Because in Business (9609), every decision carries risk, and research is your best tool for reducing that risk and making smart choices!

Key Term Alert!

Market Research: The systematic process of collecting, analysing, and interpreting data relevant to marketing decisions.

3.2.1 The Purposes of Market Research

Why do businesses spend time and money on research? They are trying to answer crucial questions that help them develop a successful Marketing Mix (the 4Ps).

1. Understanding the Market Structure

• Identification of Market Size: How many potential customers are there? Knowing this helps a business estimate potential revenue and required production capacity.
  Example: If you plan to sell luxury coffee mugs, you need to know the total number of households that purchase similar high-end items, not just the total population.
• Identification of Market Growth: Is the market expanding (growing) or shrinking (declining)? Businesses prefer markets with high growth potential.
• Identification of Competitors: Who are the rivals? What are their strengths and weaknesses? Research helps businesses spot gaps (opportunities) or major threats.

2. Understanding the Customer

This is often the most important purpose. Businesses need to know who they are selling to and what they want.

• Identification of Customer Characteristics and Profiles: This involves gathering demographic data (age, gender, income) and psychographic data (lifestyle, values, interests) to build a precise picture of the target audience.
• Identification of Customer Wants and Needs: What features do they actually value? What problems are they trying to solve? Research ensures the product offers the right benefits.

3.2.2 Primary Research and Secondary Research

Market data can be collected in two main ways. It’s essential to know the difference, as exam questions frequently ask you to compare their usefulness.

Primary Research (Field Research)

Definition: The gathering of new data that has not been collected before. It is collected first-hand for a specific purpose defined by the business.

• Analogy: Primary research is like cooking a meal from scratch. It takes time, but you control every ingredient and it perfectly suits your taste.

Usefulness and Main Features of Primary Research:

• Direct Relevance: The data gathered is precisely tailored to the company's specific objectives (e.g., finding out if local teenagers would use a new skate park).
• Up-to-date: The information is current and reflective of the present market situation.
• Confidentiality: The data is owned by the business, giving them a competitive edge as rivals cannot access it.

Common Methods of Primary Research:

1. Surveys/Questionnaires: Asking customers direct questions (in-person, phone, or online).
2. Focus Groups: Bringing a small, representative group of customers together to discuss a product or idea. This provides rich, detailed qualitative data.
3. Observation: Watching how customers behave (e.g., using security cameras to see which products they touch first in a store).
4. Test Marketing: Launching a product in a small, controlled area before a full national launch to gauge reaction.

Secondary Research (Desk Research)

Definition: The gathering of existing data that has already been collected by someone else for another purpose.

• Analogy: Secondary research is like buying a ready-made meal. It's fast and easy, but it might not have the specific ingredients you wanted.

Usefulness and Main Features of Secondary Research:

• Quick and Cheap: Data is readily available, often instantly via the internet, and involves little cost.
• Wide Range: It provides a large overview of the whole market, economy, or industry trends.

Sources of Secondary Research:

1. Internal Sources: Data found within the business itself (e.g., past sales figures, customer accounts, financial records, customer complaints).
2. External Sources: Data found outside the business (e.g., government publications, trade association reports, newspapers, market research reports bought from external agencies).

3.2.3 Sampling: The Need and Limitations

The population is the entire group of people or businesses a company is interested in (e.g., all teenagers in a country). Trying to interview every person is usually impossible or too expensive.

This is why businesses use Sampling: selecting a representative group (the sample) of the population to participate in the research. The findings from this small group are then used to make conclusions about the entire population.

The Need for Sampling

• Cost Reduction: Significantly cheaper than surveying the whole population.
• Time Efficiency: Results can be gathered much faster.
• Manageability: It is physically possible to conduct research when the population is very large.

Types of Sampling (Know the difference!)

1. Random Sampling: Every person in the population has an equal chance of being selected.
   Example: Picking names out of a hat.
2. Quota Sampling: Researchers select a sample that reflects the population's demographic structure (e.g., ensuring the sample includes 50% women and 20% over-60s if the population does).
3. Stratified Sampling: The population is divided into important segments (strata), and then a random sample is taken from *each* segment (often proportional to the segment's size). This provides the most representative sample.

Limitations of Sampling (Crucial for Evaluation)

Sampling reduces cost, but it introduces the risk of error.

• Non-Representative Sample (Bias): If the sample is not truly reflective of the population (e.g., only interviewing people outside a gym when researching general fitness trends), the results will be misleading.
• Sampling Error: Even with a well-chosen sample, the people selected may not perfectly represent the views of the entire population.
• Sample Size: If the sample size is too small, the results will not be statistically valid or reliable.

3.2.4 Market Research Data: Reliability and Analysis

Once the data is collected (whether primary or secondary), it must be assessed and interpreted to inform decision-making.

1. The Reliability of the Data Collected

How much can the business trust the data? Reliability is judged based on:

• Methodology: Was the sample size large enough? Was the sample representative?
• Date: Is the information recent? (Especially important for rapidly changing markets like technology).
• Source: Is the source credible? (Government statistics are usually more reliable than a random website blog).
• Respondent Bias: Did interviewees give honest answers, or did they say what they thought the interviewer wanted to hear?

2. Analysis of Quantitative and Qualitative Data

All data falls into two key categories. You need to distinguish between them clearly:

A. Quantitative Data

• What it is: Data expressed in numbers, figures, or statistics. It answers questions like 'how many?' or 'how often?'.
• Features: Objective, measurable, and often used for calculating market share or forecasting sales.
• Example: 75% of respondents use social media daily.

B. Qualitative Data

• What it is: Data expressed in words, opinions, and descriptive statements. It focuses on the reasons behind the numbers. It answers questions like 'why?' or 'how?'.
• Features: Subjective, insightful, and gathered through focus groups or open-ended survey questions.
• Example: Customers said they dislike the product because the packaging feels cheap.

Crucial Point: Businesses need both. Quantitative data tells you *what* is happening (e.g., sales are falling), while Qualitative data tells you *why* it is happening (e.g., customers prefer the competitor's design).

3. Interpretation of Information Presented

Market research data is often presented in tables, charts (bar, pie), and graphs (line graphs). Your job is to move beyond simply reading the numbers and apply analysis (AO3).

1. Identify Trends: What patterns emerge? (e.g., "Sales have been rising steadily over the last four quarters.")
2. Identify Comparisons: How does one figure relate to another? (e.g., "Competitor A consistently spends 50% more on promotion than our company.")
3. Draw Business Conclusions: What does this mean for the business decision? (e.g., "Because 80% of our customers are aged 18–30, our promotion strategy should focus heavily on TikTok advertising.")