3.2 Understanding market and customers
Market research
Definition: the systematic process of collecting, analysing, and interpreting
information about a market, including potential customers and competitors
– collecting data about a market
Quantitative data: numerical information or data that can be expressed as a
value
Qualitative data: non-numerical information that provides insights into the
qualities, characteristics or attributes of a subject
Benefits
– Reduces the risk of making a poor decision
– Helps businesses reach customers before their rivals
– Helps a market-oriented business identify their customers’ needs
Drawbacks
– Research takes time and resources
– depends on how well data is interpreted
– Conditions may change if the market is dynamic
Primary research
Definition: the collection of firsthand data directly from individuals or groups for
a specific research purpose
Examples of primary market research
– Surveys / questionnaires
– Focus groups
– Social media data
– Observations
Benefits
– specific to the business
– meets prices needs of the business
– can discover information that no other business has access to
Drawbacks
– needs specialist knowledge to set up and carry out
– can be expensive
– often time-consuming
– may not be comprehensive enough to make an informed decision: not
, –
enough information
Secondary research
Definition: research which uses data that has already been collected
Benefits
– cheaper
– quick to access
Drawbacks
– not always in the format that the business wants —> not tailored to
specific businesses
– available to competitors
– may only partially answer the specific questions
Market mapping
Definition: the process of visually representing the positions of different
products or brands in a market based on specific criteria such as price and
quality
Benefits
– Easily spot a gap in the market
– Easy comparison from visual representation
– Useful for analysing competitors
– Assess product position to help make decisions on the direction of
their marketing mix
– Chooses two factors to focus on
– Encourages use of market research
Drawbacks
– May be difficult to find information about competitors
– May be time-consuming
, – Ignores external factors
– Basic model —> only able to focus on two factors
– Doesn’t take into account customer reviews
○is based on company’s perspective
– Depends on reliability of market research
– A gap in the market doesn’t mean there is demand
Sampling
Definition: the process of selecting a subset from a larger population to
represent and analyse characteristics of the entire population
Benefits
– removes impracticability of sampling entire population
– using sampling before marketing decisions can reduce risks and costs
– is flexible and relatively quick
Drawbacks
– sample might be unrepresentative of the population —> leading to
incorrect conclusions
– risk of bias in research questions
– less useful in market segments where customer tastes and
preferences are changing frequently (dynamic markets)
Random sampling
Definition: involves selecting individuals entirely by chance, where each
member of the population has an equal chance of being chosen
Benefits:
– reduces bias, as every member has an equal probability of inclusion
– simple to conduct
Drawbacks:
– may not represent certain subgroups adequately
– chance variations can lead to a less accurate representation of the
population
Stratified sampling
Definition: dividing the population into subgroups (strata) based on certain
characteristics, then randomly samples from each stratum
Benefits:
– ensure representation from all relevant subgroups
– increased precision compared to simple random sampling
Drawbacks:
Market research
Definition: the systematic process of collecting, analysing, and interpreting
information about a market, including potential customers and competitors
– collecting data about a market
Quantitative data: numerical information or data that can be expressed as a
value
Qualitative data: non-numerical information that provides insights into the
qualities, characteristics or attributes of a subject
Benefits
– Reduces the risk of making a poor decision
– Helps businesses reach customers before their rivals
– Helps a market-oriented business identify their customers’ needs
Drawbacks
– Research takes time and resources
– depends on how well data is interpreted
– Conditions may change if the market is dynamic
Primary research
Definition: the collection of firsthand data directly from individuals or groups for
a specific research purpose
Examples of primary market research
– Surveys / questionnaires
– Focus groups
– Social media data
– Observations
Benefits
– specific to the business
– meets prices needs of the business
– can discover information that no other business has access to
Drawbacks
– needs specialist knowledge to set up and carry out
– can be expensive
– often time-consuming
– may not be comprehensive enough to make an informed decision: not
, –
enough information
Secondary research
Definition: research which uses data that has already been collected
Benefits
– cheaper
– quick to access
Drawbacks
– not always in the format that the business wants —> not tailored to
specific businesses
– available to competitors
– may only partially answer the specific questions
Market mapping
Definition: the process of visually representing the positions of different
products or brands in a market based on specific criteria such as price and
quality
Benefits
– Easily spot a gap in the market
– Easy comparison from visual representation
– Useful for analysing competitors
– Assess product position to help make decisions on the direction of
their marketing mix
– Chooses two factors to focus on
– Encourages use of market research
Drawbacks
– May be difficult to find information about competitors
– May be time-consuming
, – Ignores external factors
– Basic model —> only able to focus on two factors
– Doesn’t take into account customer reviews
○is based on company’s perspective
– Depends on reliability of market research
– A gap in the market doesn’t mean there is demand
Sampling
Definition: the process of selecting a subset from a larger population to
represent and analyse characteristics of the entire population
Benefits
– removes impracticability of sampling entire population
– using sampling before marketing decisions can reduce risks and costs
– is flexible and relatively quick
Drawbacks
– sample might be unrepresentative of the population —> leading to
incorrect conclusions
– risk of bias in research questions
– less useful in market segments where customer tastes and
preferences are changing frequently (dynamic markets)
Random sampling
Definition: involves selecting individuals entirely by chance, where each
member of the population has an equal chance of being chosen
Benefits:
– reduces bias, as every member has an equal probability of inclusion
– simple to conduct
Drawbacks:
– may not represent certain subgroups adequately
– chance variations can lead to a less accurate representation of the
population
Stratified sampling
Definition: dividing the population into subgroups (strata) based on certain
characteristics, then randomly samples from each stratum
Benefits:
– ensure representation from all relevant subgroups
– increased precision compared to simple random sampling
Drawbacks:
