Product-oriented business: such firms produce the product first and then tries to find a market for it. Their concentration is on the product – its quality and price. Firms producing electrical and digital goods such as refrigerators and computers are examples of product-oriented businesses.
Market-oriented businesses: such firms will conduct market research to see what consumers want and then produce goods and services to satisfy them. They will set a marketing budget and undertake the different methods of researching consumer tastes and spending patterns, as well as market conditions. Example, mobile phone markets.
Market research is the process of collecting, analysing and interpreting information about a product.
Why is market research important/needed?
Firms need to conduct market research in order to ensure that they are producing goods and services that will sell successfully in the market and generate profits. If they don’t, they could lose a lot of money and fail to survive. Market research will answer a lot of the business’s questions prior to product development such as ‘will customers be willing to buy this product?’, ‘what is the biggest factor that influences customers’ buying preferences- price or quality?’, ‘what is the competition in the market like?’ and so on.
Market research data can be quantitative (numerical-what percentage of teenagers in the city have internet access) or qualitative (opinion/ judgement- why do more women buy the company’s product than men?)
Market research methods can be categorized into two: primary and secondary market research.
Primary Market Research (Field Research)
The collection of original data. It involves directly collecting information from existing or potential customers. First-hand data is collected by people who want to use the data (i.e. the firm). Examples of primary market research methods include questionnaires, focus groups, interviews, observation, and online surveys and so on.
The process of primary research:
- Establish the purpose of the market research
- Decide on the most suitable market research method
- Decide the size of the sample (customers to conduct research on) and identify the sample
- Carry out the research
- Collate and analyse the data
- Produce a report of the findings
Sample is a subset of a population that is used to represent the entire group as a whole. When doing research, it is often impractical to survey every member of a particular population because the number of people is simply too large. Selecting a sample is called sampling. A random sampling occurs when people are selected at random for research, while quota sampling is when people are selected on the basis of certain characteristics (age, gender, location etc.) for research.
Methods of primary research
- Questionnaires: Can be done face-to-face, through telephone, post or the internet. Online surveys can also be conducted whereby researchers will email the sample members to go onto a particular website and fill out a questionnaire posted there. These questions need to be unbiased, clear and easy to answer to ensure that reliable and accurate answers are logged in. (The first part of this wikiHow article will give you the basic idea of how a questionnaire should be prepared.)
- Detailed information can be collected
- Customer’s opinions about the product can be obtained
- Online surveys will be cheaper and easier to collate and analyse
- Can be linked to prize draws and prize draw websites to encourage customers to fill out surveys
- If questions are not clear or are misleading, then unreliable answers will be given
- Time-consuming and expensive to carry out research, collate and analyse them.
- Interviews: interviewer will have ready-made questions for the interviewee.
- Interviewer is able to explain questions that the interviewee doesn’t understand and can also ask follow-up questions
- Can gather detailed responses and interpret body-language, allowing interviewer to come to accurate conclusions about the customer’s opinions.
- The interviewer could lead and influence the interviewee to answer a certain way. For example, by rephrasing a question such as ‘Would you buy this product’ to ‘But, you would definitely buy this product, right?’ to which the customer in order to appear polite would say yes when in actuality they wouldn’t buy the product.
- Time-consuming and expensive to interview everyone in the sample
- Focus Groups: A group of people representative of the target market (a focus group) agree to provide information about a particular product or general spending patterns over time. They can also test the company’s products and give opinions on them.
- They can provide detailed information about the consumer’s opinions
- Opinions could be influenced by others in the group.
- Observation: This can take the form of recording (eg: meters fitted to TV screens to see what channels are being watched), watching (eg: counting how many people enter a shop), auditing (e.g.: counting of stock in shops to see which products sold well).
- Only gives basic figures. Does not tell the firm why consumer buys them.
Secondary Market Research (Desk Research)
The collection of information that has already been made available by others. Second-hand data about consumers and markets is collected from already published sources.
Internal sources of information:
- Sales department’s sales records, pricing data, customer records, sales reports
- Opinions of distributors and public relations officers
- Finance department
- Customer Services department
External sources of information:
- Government statistics: will have information about populations and age structures in the economy.
- Newspapers: articles about economic conditions and forecast spending patterns.
- Trade associations: if there is a trade association for a particular industry, it will have several reports on that industry’s markets.
- Market research agencies: these agencies carry out market research on behalf of the company and provide detailed reports.
- Internet: will have a wide range of articles about companies, government statistics, newspapers and blogs.
Accuracy of Market Research Data
The reliability and accuracy of market research depends upon a large number of factors:
- How carefully the sample was drawn up, its size, the types of people selected etc.
- How questions were phrased in questionnaires and surveys
- Who carried out the research: secondary research is likely to be less reliable since it was drawn up by others for different purpose at an earlier time.
- Bias: newspaper articles are often biased and may leave out crucial information deliberately.
- Age of information: researched data shouldn’t be too outdated. Customer tastes, fashions, economic conditions, technology all move fast and the old data will be of no use now.
Presentation of Data from Market Research
Different data handling methods can be used to present data from market research. This will include:
- Tally Tables: used to record data in its original form. The tally table below shows the number and type of vehicles passing by a shop at different times of the day:
- Charts: show the total figures for each piece of data (bar/ column charts) or the proportion of each piece of data in terms of the total number (pie charts). For example the above tally table data can be recorded in a bar chart as shown below:
The pie chart above could show a company’s market share in different countries.
- Graphs: used to show the relationship between two sets of data. For example how average temperature varied across the year.
Notes submitted by Lintha
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