GCSE Business Studies/Market Research

Why do firms conduct market research?

Some reasons that firms conduct market research are:

Finding out if customers like their existing products.
Finding out if customers would be prepared to buy a new product.

If businesses do not conduct market research, they risk producing a product that customers are not interested in. Their marketing will not be effective, and the business will be unsuccessful.

Methods of market research

There are two methods of market research:

Primary (Field) Research involves collecting information directly.
Secondary (Desk) Research involves looking at information that has already been collected and published.

The advantages for desk research is that it saves more time also it has no cost.

Types of data

You can find out two types of information through market research.

Quantitative information is anything that you can measure or reduce to a number. For example, asking "How many chocolate bars do you buy each week?" will give a numerical answer, so this is quantitative data.
Qualitative information is anything about people's opinions. For example, asking "What do you think of this chocolate bar?" will give an answer in words, so this is qualitative data.

Quantitative data is easy to analyse and compare, whereas qualitative data is more difficult, because it is hard to compare people's opinions. However, good market research will use both types of information.

Primary research

Primary research involves things like questionnaires, surveys, product testing, and using consumer groups.

Writing a questionnaire

With questionnaires in particular, it is important to communicate to your respondent exactly what you want them to do. This ensures the information you get is reliable and easy to compare.

Decide what information you want to find out.
Decide what questions you can ask to find out each piece of information that you want to know.
Use both open and closed questions. Closed questions only allow specific answers, e.g."How many bottles of orange juice do you drink each week?". Open questions allow a more detailed answer to be given, e.g. "How do you feel about organic juice drinks?".
Write the questions in an unambiguous way.
Allow the respondent to give their answer. Make sure that they are given an option that reflects their opinion.
Avoid misleading questions. For instance, don't ask "How much do you prefer drinking organic juice to ordinary juice?". Instead, ask which they prefer.
Test the questionnaire first (called a pilot). This gives you the chance to rewrite the questions.

Sample choice

Instead of asking the whole population questions, a business will question a smaller group, known as the sample, that will be representative of the whole population.

Random sampling

With random sampling, the total population is known, and names of people are selected from a list (such as the electoral register) at random. This effectively means that everyone in the population has an equal chance of being selected. This gives a true sample of the population, but is more expensive and time-consuming to conduct.

Quota sampling

With quota sampling, the interviewers will select people who meet certain criteria. They may, for example, choose to interview 100 men and 100 women. This is easier and cheaper than random sampling, but it is not truly random. For example, if the interviewers were asking passers-by in the street, the people there would not necessarily be representative of the whole population - some people would not be there at the time of day that the interviews were being conducted.

Target sampling

With target sampling, the interviewers only want to sample a particular group of the population. This might be because its products are only bought by a particular market segment.

Advantages

It is up to date.
Can be kept private by the company.
It is relevant and specific to what the company needs to find out.
Gives the company an advantage over competitors, since they have more insight into the market.

Disadvantages

Expensive and time-consuming to collect.
Needs a large sample to be accurate, takes time.
The data often has to be analysed by experts to reach meaningful conclusions.

Secondary research

Secondary research involves things like market research reports, government publications, and newspaper and magazine articles.

Advantages

Usually significantly cheaper, to obtain than primary research.
Can be easily found and usually instantly available.
Useful for looking at the whole market, and analysing past trends.

Disadvantages

Not always relevant to what the company wants to find out.
Not specifically about the company's products.
May be out of date.
Other companies have access to it as well, so it does not give the company an advantage.