The Role of Market Research

Market research refers to marketing activities designed to discover

the opinions, beliefs and preferences of potential and existing
customers.
It serves to identify & anticipate the wants & needs of existing
customers.
Market research can involve collecting data & information on
competitors & market trends to gain insight into a specific market.
Market research can be ad hoc or continuous:
1. Ad hoc research takes place on an “as and when necessary” basis.
The focus of the research is on specific marketing problems or issues, & tends
to be on a one-off basis.
2. Continuous research takes place on a regular and ongoing basis.
Example: Market research firms report annual league tables containing
information such as the most popular brands in a certain country, region or the
world.
The role of market research serves several purposes:
1. Gives businesses up-to-date information.
This is particularly important in fast-paced industries that are always changing
(consumer electronics industries).
2. Enables businesses to improve their marketing strategies by using
a distinct marketing mix for each customer target market.
3. Assesses customer reactions to a new product by testing it on a
small group of customers.
This can prevent huge losses had it been unsuccessfully launched on a large
scale.
4. Gives businesses an understanding of the activities & strategies
used by their rivals.
5. Helps businesses to predict what is likely to happen in the future.
Understanding the likely trends will enable businesses to react accordingly in
order to maximize future opportunities.
Effective market research helps to reduce the risk of failure, by
investigating the needs & wants of customers.
If the research findings show that customers react negatively to the
product, then the business can either make necessary adjustments
or scrap the project altogether.
Market research can be used to answer questions such as:
1. Are customers likely to buy the product?
2. Which market segments are interested in the product?
3. How much are customers willing to pay?
Ultimately, as a strategic planning tool, market research helps
businesses to reduce risks. Being able to accurately forecast future
market trends gives businesses a greater chance of success, despite
the limitations of market research.
Market research can be conducted in two broad ways: primary &
secondary research.
1. Primary Market Research
Primary research is market research that involves gathering new
data first-hand for a specific purpose.
If an organization wants to know how staff feel about the working
environment then it would use primary research.
Primary research ( field research/ bespoke research) is often used to
gather data & information from customers to identify their buying
patterns & to anticipate changes in market trends.
A. Surveys (or Questionnaires)
A survey or questionnaire is a document that contains a series of
questions used to collect data for a specific purpose.
This is the most common method of primary research.
There are several types of surveys, such as:
1) Self-completed surveys are completed by a sample of people. The
information can help to identify problems, trends & suggestions
for improvement.
2) Personal surveys are conducted face-to-face, rather like an interview.
The interviewer can address any questions that might arise from the
questionnaire (such as clarifying what certain questions mean).
It is also quicker for the interviewer to complete the survey due to
familiarity with the questions.
3) Telephone surveys are similar to personal surveys but use
telecommunications technology.
The benefit of this is that a larger number of people in a wider
geographical spread can be covered.
The main drawbacks are the relatively higher costs & the low response
rate as a large number of people are not willing to take part in telephone
surveys.
4) Online surveys (such as Google Forms) are an increasingly popular
way of gathering primary data.
They are much cheaper than other forms of primary research such
as paper-based surveys or telephone surveys.
Computer software can also help researchers to collate quantitative
research data, thereby saving a lot of time & resources.
5) Postal surveys are sent to people’s home or office address for
them to complete in their own time.
A draw back is that people might treat the surveys as junk mail &
ignore them. To create incentives for people to respond businesses
often offer prizes & gifts (which adds costs)
An effective survey design should;
a) Avoid bias. The wording of questions should not distort answers
from respondents.
b) Avoid Jargon (technical language).
c) Include both closed & open ended questions.
d) Be tried and tested.
e) Allow the objectives of the survey to be met by gathering only
relevant data.
Benefits:
1) A major benefit of surveys is the ability to generate quantitative &
qualitative answers specific to the needs of the researcher.
2) If designed properly, they can also be very simple to complete thereby
making the process easier to gather market research data.
Drawbacks:
1) Using surveys for market research can be very costly & time-consuming as
it is necessary to use a large sample to get statistically representative
findings.
2) There might also be reservations about the results due to bias or dishonest
answers from respondents.
B. Interviews
Interviews involve one-to-one discussions between an interviewer &
interviewees, such as individual customers, to investigate their
personal circumstances & opinions.
Beliefs, attitudes & feelings can also be examined in detail.
Interviews are usually carried out in person (face-to-face) although
telephone interviews can also be used.
The findings from all interviews are analyzed to identify the views
that respondents share.
Identifying the differences can also be important as it can help a
business to refine its marketing strategies.
In-depth interviews are often used when a business is planning to
introduce change & new initiatives as they can be used to investigate
the views of respondents to a new proposal.
However, interviews often provide a range of non-quantifiable
information that might prove to be difficult to analyze or to make
any extrapolations from.
In addition, such interviews tend to be very time consuming.
There is huge scope for interviewer bias which can have an impact
on the way in which respondents answer.
C. Focus groups
Focus groups involve forming small discussion groups to gain insight into
the opinions, attitudes & behavior of respondents.
The group is typically made up of participants who share a similar
customer profile.
They can provide important information to help a business to devise &
refine its marketing strategies.
They are often used when a business plans to launch a new product.
To aid market research analysis, audio-visual recordings of the discussions
& observations of the behavior of the participants are often used.
One drawback of using focus groups is that only extroverts tend to
take part; those who shy from group discussions & debates are
unlikely to participate & therefore their views are unregistered.
In an open forum, there might also be some pressure for group
members to conform to the majority view rather than to express
their own opinions.
Another potential limitation is that focus group participants often
have to be paid, either in cash or in lieu (such as a meal voucher) for
their time & input. This expense raises the overall cost of market
research.
A variation of focus groups is the use of consumer panels; small
groups of consumers within a business’s target market who are used
for regular market research.
By using the same group, it saves the business from having to find
new respondents (as in the case of focus groups).
Also, as panelists are usually specialists, such as food critics (food
tasters), they are particularly useful for conducting market research
that requires specialist knowledge rather than using a random
sample.
D. Observations
This method involves watching how people behave & respond in different
situations.
It can be done under controlled conditions or as real-life situations.
Observations can be carried out using surveillance filming, photographic
evidence or in person.
A benefit of using observations is that they record people’s actual
behavior rather than what people say they would do.
However, observations do not necessarily reveal why a person behaves or
responds in the way they do.
The only way to establish the reasons behind a person’s motivation is to
asked them, either directly or indirectly.
2. Secondary Market Research
Secondary research (desk research) involves the collection of
second-hand data & information that already exists.
Secondary research can be collected from internal & external
sources.
Internal sources are those that have already been gathered by the
organization itself (company annual reports or sales records).
External sources come from outside the business (market analyses,
academic journals, government publications).
A. Market Analyses
A market analysis reveals the characteristics & the outlook (trends)
for a particular product or industry (market size, market share,
market growth rates).
It can help to measure how well a business is doing compared with
its rivals.
New businesses often rely on market analyses to formulate their
business plans & strategies.
Market analysis data & information can be found in commercial
sources & public information sources, such as;
1. Market research firms.
2. Competitors.
3. Trade publications
The main advantage of using market analyses is that they enable
businesses to access up-to-date & detailed market data & trends.
However, it can be very expensive to use market analyses, as they
usually have to be paid for.
Data & information from market analyses can become outdated
quickly, unless the source provides regular & ongoing updates.
B. Academic Journals
Academic journals are periodical publications from educational &
research institutions.
Data & information relating to a particular academic discipline are
published in these journals.
Academic journals publish educational, peer-reviewed articles &
findings written by industry experts & academics.
The purpose is to distribute & share theoretical work & market
research findings, rather than to sell the information for profit.
An advantage of using academic journals is that the articles contain
the most up-to-date research in an academic discipline.
The source is likely to be reliable as it has been authored by
academic scholars in a rigorous way (the articles will have been
proofread & checked by academic peers & editors).
Disadvantages include the fact that information or data are not
always relevant to the researcher & can become outdated quickly.
C. Government Publications
Governments publish a broad range of data, such as: population
census, social trends, labor market developments, trade statistics,
unemployment figures, inflation rates,etc….
Government websites are popular sources of secondary market
research data.
Advantages:
1) The data & statistics are usually comprehensive, reliable & up-to-date.
2) Government publications cover a wide range of topics, thus providing
researchers with a wealth of data, statistics & information.
3) Many government publications are available free of charge.
Disadvantages:
1) The challenge in identifying & locating the information required, due to
vast amount of information available.
2) There is often a fee for researchers to obtain specialist & detailed
information from government publications.
D. Media Articles
The general media can contain valuable data & information as part
of secondary market research.
Media articles are widely available online, making them a useful
source of secondary market research.
Examples:
1. Newspapers (The Financial Times).
2. Business-related journals (The Economist).
3. Television documentaries.
4. Books.
5. The world wide web.
Advantages:
1) As media articles are released frequently, the data & information are up to
date.
2) Many media sources do not require people to take out a subscription in
order to access their resources (a lot of this is funded by advertising
revenues).
Disadvantages:
1) Potential bias from the reporters, journalists & authors of the media
articles.
2) Articles can become out of date, & therefore irrelevant rather quickly.
3) Many media articles require users to subscribe in order to access the
information.
E. The Internet
All of the other methods of secondary market research can be
conducted via the internet.
Online providers of secondary market research data & information
often charge for their services, although careful & tactful use of the
Internet can reap plenty of useful information without cost to the
researcher.
A major advantage of the Internet is that online sources & articles
are readily available, 24 hours a day, every day.
Ethical Considerations of Market Research
Ethical market research requires investigators to be reasonable,
objective & accurate in the process of planning, collecting,
processing & reporting research information.
Unethical market research can be remembered by the 5Ds, these
form the guiding principles to avoid when carrying out market
research:
1) Damage. Market researchers must protect the people in their
samples by ensuring the information collected is never used in
such a way to harm them.
2) Dishonesty. Market researchers need to be trustworthy in their
attempt to obtain usable data for marketing purposes.
Distorting market research findings to misrepresent numerical data
is an example.
3) Deception. (not telling customers that phone interviews are
recorded, hidden cameras, Facebook)
4) Disclosure. Researchers have the ability to collect, store, share (or
sell) customer information that can infringe a customer’s privacy
rights.
5) Detachment. Market researchers need to be detached from
personal biases & be objective in their work.
Qualitative & Quantitative Market
Research
Qualitative market research involves getting non-numerical answers
& opinions from respondents.
It is commonly used as part of primary research.
The main purpose of using qualitative data is to understand the
behavior, attitudes & perceptions of customers, employees or other
respondents.
Soft answers (views & opinions) are sought by researchers, the two
main types of qualitative research methods are focus groups & in-
depth interviews.
Quantitative market research relies on a much larger number of
responses to get hard answers (factual & measurable information).
Two quantitative techniques found in primary research (such as
surveys & questionnaires) are;
Closed questions.
Ranking or sliding scales.
Secondary research methods can also supply a wealth of
quantitative data, such as market share, sales trends, etc…..
The advantages & disadvantages of quantitative market research are
the opposite of those for qualitative methods.
Sampling Methods
All potential customers of a particular market make up what
researchers call the population.
Sampling is the practice of selecting a small group (or sample) of
the population for a particular market for primary research
purposes.
The best sampling method will entail research from a large enough
sample to generate representative responses.
The are six main methods of sampling.
1. Quota Sampling
Quota sampling is the most commonly used sampling method,
whereby a certain number of people (known as the quota) from
different market segments is selected.
The sample is grouped according to shared characteristics such as
age, gender or occupation.
Advantages: A relatively representative sample can be obtained
quickly, findings are more reliable than asking anyone randomly.
Disadvantage: The number of people interviewed in each segment
& how randomly they are chosen for interview are not always
representative of the population.
2. Random Sampling
Random sampling involves giving everyone in the population an equal
chance of being selected for the sample.
The respondents are often randomly chosen by a computer using
information from a database.
Random sampling is useful when all members of a population have the
same or very similar characteristics.
Advantages: Quite easy to get a sample, everyone has a chance of being
selected (minimize bias or unrepresentative samples).
Disadvantage: It is indiscriminate, i.e it might select people who are not
part of the target group due to the randomness of selection, so sample
size needs to be large enough to get representative results.
3. Stratified Sampling
Stratified sampling is similar to quota sampling in that it involves
segmentation.
The population is likely to be heterogeneous so needs to be
subdivided into segments (known as strata) that are homogenous or
very similar characteristics.
The stratified sampling chooses a number of respondents from each
stratum that is proportional to the population & then randomly
selects them as the sample.
Advantages:
1) Samples are more representative of a particular market segment as it
involves only using those with key characteristics required for the sample.
2) Sampling is usually random (stratified random sampling) but with clearer
focus so the findings will be more relevant & with less sampling errors.
Disadvantage:
1) It can be difficult to select relevant strata, especially if the subgroups of a
population are largely homogeneous.
2) It can be expensive to generate accurate information about the population
& then to further subdivide this into representative subgroups.
4. Cluster
Cluster sampling is used when getting feedback from respondents
involves too much time, travelling or money.
Advantages: It is quicker, easier & cheaper than other methods of
sampling if the population is widely dispersed over different geographical
areas. In particular, where characteristics of customers are homogeneous.
Disadvantages: Bias & sampling error. (by using just few locations, the
results might be biased as people living in the same area likely have similar
characteristics).
Increasing the number of clusters in the sample would reduce bias &
sampling errors but will clearly add to costs & prolong data analysis.
5. Snowballing
Snowballing refers to market research carried out with individuals who
then suggest other friends, family members or colleagues to increase the
sample size.
Businesses use snowballing when they are unable to get hold of
appropriate respondents as the population is not clear.
Snowballing is common in the financial services sector (ex. Health
insurance, life assurance).
Snowballing uses “word of mouth” to enlarge the sample size.
Advantages: It is cheap & quick to get hold of relevant contacts for
enlarging the sample.
Disadvantages: Due to the nature of such respondent-driven sampling, it
is often difficult to determine unbiased findings from the sample.
6. Convenience Sampling
Convenience sampling uses subjects that are easy (convenient) to
reach.
Convenience sampling relies on ease of reach & volunteers because
of their availability.
Advantages: Ease of data collection. It is particularly useful when
time or cost is a factor for market researchers or if they want to
quickly determine whether further market research is necessary.
Disadvantages: Market researchers inadvertently exclude a large
proportion of the population, so results are unrepresentative.
Results from Data Collection
Types of Potential Errors in the Results from Data Collection:
1) Non Sampling Errors: Caused by human error or human behavior.
They arise from the researcher’s mistakes in recording, processing
or analyzing data.
They can also occur because respondents do not always give
truthful & honest answers.
Such errors distort the final results of the research.
Statisticians use confidence levels to allow for a margin of error.
2) Sampling Errors: Caused by mistakes made in the sample design
such as:
The sample size is too small to get statistically valid answers within
desired confidence levels.
The sample selected is not representative of the population,
perhaps due to poor sample design.
An inappropriate sampling method is used.
There is bias in the research.
Limitations of market research;
1) Findings are only as good as the research methodology used.
(garbage in garbage out)
2) Data & information can also be inaccurate or unreliable due to
bias. (company website will report positive aspects of
performance).
3) The cost of good market research is often very high.