Chapter 11 - Market Research
Lesson Objective: To understand the benefits of market research
What is Market Research?
"Market research is the action or activity of gathering information about consumers' needs and preferences, competitors, and the market itself."
Market Research reveals important information about customers, competitors, and the market in which the business competes.
It is useful for various reasons:
It helps businesses understand what customers like and dislike regarding their existing products:
- It allows for improvements to be made.
It helps businesses to identify customers' changing preferences so that the launch of a new product can be more successful.
It provides information that helps businesses to decide on the best type of promotion, packaging, distribution, and pricing.
It makes it possible for businesses to recognize the size of the market by identifying how many customers are there.
In addition to all of that, Market Research also:
Helps companies identifying the reasons why their sales are decreasing;
Aids on predicting how the demand for a product might change in the future;
Provides information regarding the strengths and weaknesses of competitors' products making it possible to develop better solutions.
Companies that base their decisions on Market Research data are called Marketing Oriented Businesses:
Being Market Oriented bring businesses a variety of different benefits to companies:
It lowers their risk when introducing new products:
- They make new products based on customers' needs and preferences and therefore have higher chances of succeeding.
Market Oriented businesses have products that stay longer in the market:
- Such products are successful for a long time as they meet customers preferences;
- Long-lasting products reduce the need for new products and therefore reduce costs.
In general, Marketing Oriented businesses enjoy of lower costs, higher revenues, and therefore increased profits.
Businesses performing Market Research will gather two types of data:
Primary Data, which is collected through Primary Market Research;
Secondary Data, which is collected through Secondary Market Research.
Primary Data is collected 'first-hand' by the business to fulfill its research aims:
1. Up-to-date data;
2. Relevant to the company's research;
3. Available only to the company collecting it (not available to competitors).
Primary data, therefore, is accurate and precise. The problems?
It's expensive and time-consuming since the company will prepare and collect the data by itself - needs people and resources;
If the company is inexperienced in Market Research it may end up collecting bad data.
Secondary Data is the type of data that has already been collected before: either by the company itself (with other purposes - e.g. sales records) or by other resources (e.g. internet, government data, newspapers, magazines, libraries, market research companies):
1. It's cheap/free to collect as the data is already available elsewhere;
2. Easier and quicker to collect as the data has already been collected before.
On the other hand, however, Secondary Data comes with its own disadvantages:
It might be outdated since it's been collected before;
It might not be as relevant since it's been collected previously for other purposes other than the Market Research;
It might not be reliable and come with mistakes depending on the source (e.g. internet).
Which one should businesses choose? Primary or Secondary?
It all depends on the business objectives, financial resources, and time-availability.
To-Do List:
Term 2 - Chapter 11, Market Research Questions:
What is Market Research? [2]
What is the difference between primary and secondary research? [4]
Identify one advantage and one disadvantage of secondary research. [2]
Explain how and why a manufacturer of ice-cream products should be 'market oriented'.
Chapter 11 - Market Research
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