Marketing: The Purpose and Methods of Market Research
Hello future business leaders! Welcome to one of the most exciting and practical chapters in business studies: Market Research. Think of market research as the detective work a business does before launching a product or making a big decision.
If you skip this step, it’s like trying to bake a cake without knowing the ingredients—you’re highly likely to fail! This chapter will teach you how businesses gather crucial information to reduce risk and succeed.
1. The Purpose of Market Research
Market research is the process of systematically gathering, recording, and analysing data about customers, competitors, and the market.
Why Market Research is Essential (The 5 Main Purposes)
The main reason businesses spend time and money on research is to reduce uncertainty and risk. If you know what customers want, you are much less likely to launch a product that fails.
- To identify Customer Needs and Wants: This is the most important purpose! What features do customers value? What problems are they trying to solve?
- To analyse the Competition: What are rivals charging? What are their strengths and weaknesses?
- To assess Demand: How many units are customers likely to buy? This helps the business decide how much to produce.
- To determine Pricing: Research helps the business find the price that customers are willing to pay.
- To check the Success of Marketing: After an advertising campaign, research can show if it actually encouraged people to buy the product.
Analogy: Imagine you want to sell customised phone cases. Without market research, you might guess that everyone wants purple cases with flowers. But research might tell you that 80% of teenagers actually want clear cases with simple logos. Research stops you from wasting time and money on the wrong idea.
Key Takeaway: Market research helps a business make decisions based on facts, not just guesses, making the business much stronger.
2. Methods of Market Research: Primary vs. Secondary
There are two main ways to collect information. It is crucial that you understand the difference between them.
A. Primary Research (Field Research)
Primary Research (also called Field Research) involves gathering new data directly from the source for a specific purpose. You are the detective collecting fresh evidence.
Methods of Primary Research:
1. Surveys and Questionnaires:
Description: Asking a set of prepared questions to a group of people.
Tip: Questions must be clear and simple. Avoid leading questions (questions that encourage a specific answer).
Description: One-on-one conversations. These allow for deeper, more detailed answers.
Did You Know? Face-to-face interviews can lead to richer qualitative data (feelings and opinions).
Description: A small group of potential customers (usually 6–10) are brought together to discuss a product or service. A moderator guides the discussion.
Benefit: They help the business understand *why* people feel the way they do.
Description: Watching how customers behave in a real-life situation. This can be watching how they navigate a website or how long they spend looking at a specific shelf in a supermarket.
Primary Research: Advantages and Disadvantages
| Advantages | Disadvantages |
Specific: The data is collected exactly for your business problem. |
Time Consuming: Designing surveys, finding participants, and analysing results takes a long time. |
Up-to-Date: You are collecting current information right now. |
Expensive: Paying interviewers, printing questionnaires, and offering incentives costs money. |
Confidential: Your competitors cannot access your unique findings. |
Bias: If the sample group is not representative, the results will be misleading. |
B. Secondary Research (Desk Research)
Secondary Research (also called Desk Research) involves using data that already exists and was collected by someone else for a different purpose.
Analogy: Primary research is cooking a meal from scratch. Secondary research is ordering a pre-cooked meal.
Sources of Secondary Research:
1. Internal Sources (Data found within the business):
- Sales Records: What sold best last year? Which colours are most popular?
- Customer Feedback/Complaints: What problems do customers keep reporting?
- Loyalty Card Data: This shows spending habits and patterns of existing customers.
- Government Reports: Data on population size, income levels, and demographics (who lives where).
- Newspapers and Magazines: Articles and industry reports about current trends.
- Competitor Websites and Annual Reports: Information on their performance and strategies.
- Market Research Agencies: Reports sold by companies that specialise in research (e.g., reports on the global soft drink market).
Secondary Research: Advantages and Disadvantages
| Advantages | Disadvantages |
Cheap and Fast: The data is already collected and easily accessible. |
Out-of-Date: Some statistics might be years old, especially government census data. |
Wide Range: Access to massive amounts of data, sometimes globally. |
Not Specific: The data was collected for a different reason, so it might not perfectly fit your current problem. |
Primary (Field) Research is Relevant (specific to you) but Risky (expensive/slow).
Secondary (Desk) Research is Rapid (fast/cheap) but often Removed (not specific/out-of-date).
3. Understanding Data: Quantitative vs. Qualitative
Once you’ve collected the information, you need to categorise it. Data generally falls into two types:
A. Quantitative Data
Quantitative Data deals with numbers and can be measured objectively. Think "quantity."
- Examples: Sales figures, the percentage of people who prefer Product X, the average income of customers, or the number of people who walk past a shop every hour.
- Purpose: To answer questions like "How many?" or "How much?"
- Advantage: Easy to analyse, present in graphs, and measure statistically.
B. Qualitative Data
Qualitative Data deals with opinions, feelings, attitudes, and reasons. Think "quality."
- Examples: Responses from a focus group about why they dislike the new packaging, comments in an interview about what inspires them to buy expensive clothing.
- Purpose: To answer questions like "Why?" or "How do you feel about...?"
- Advantage: Provides depth and helps the business understand the underlying customer motivation.
Encouraging Phrase: Both types of data are important! Quantitative data tells you *what* is happening, and Qualitative data tells you *why* it is happening.
4. The Importance of Sampling
When a business wants to research a market, it is usually impossible (and too expensive) to ask *everyone* in that market. This is where Sampling comes in.
What is a Sample?
A Sample is a small group of people whose views and purchasing habits are chosen to represent the entire target market (the Population).
Analogy: If you are cooking soup, you don't eat the whole pot to check the seasoning. You take a small spoonful (the sample) and if it tastes good, you assume the whole pot is seasoned correctly.
The Goal of Sampling
The goal is to choose a sample that is representative. This means the sample group should reflect the key characteristics of the larger market. If your target market is 50% male and 50% female, your sample should ideally be the same proportion.
Simple Sampling Methods (Focus on the Concept)
1. Random Sampling:
Every person in the population has an equal chance of being selected. This usually means picking names randomly from a list.
2. Quota Sampling:Researchers select a certain number (a 'quota') of people based on specific characteristics (e.g., 20 people aged 18–25, 30 people who earn over $50,000, etc.). This ensures the sample mirrors the target market structure.
Common Mistake to Avoid: If your sample is too small or not representative (e.g., you only ask your friends), the results will be biased, and any decision you make based on that research will be flawed.
Key Takeaway: Effective market research uses a mix of Primary and Secondary data, collects both Quantitative and Qualitative information, and relies on a carefully selected, representative sample.