Chapter 18 - Market Research
Learning Objective: To understand the basics 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:
Aids on the understanding of market growth;
Analyzes the competition (how many and how large they are).
There is a strong relationship between the new product development (NPD) process and market research, remember:
NPD vs. Market Research:
Although not 100% guaranteed, market research enables business to assess the likelihood of success of their new products by:
Identifying consumer characteristics so that marketing efforts can be targeted properly;
Explaining patterns in sales of existing products and market trends - market research is not only for new products but also existing ones;
Predicting future demand changes (demand forecast);
Assessing popularity in designs, promotions, styles, packaging.
In other words...
Market Research is an important part of marketing strategy for existing businesses but also crucial for a new business plan.
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.
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.
3. Although not very accurate it can still provide broad, useful information (e.g. population, economy, market conditions, trends).
Secondary Research is usually the first step before a Primary Research is undertaken. If the results from the Secondary Research are positive then it might be worth it to invest time and money on Primary Research.
Sources of Secondary Research Data:
On the other hand, however, Secondary Data comes with its own disadvantages:
It might be outdated and inaccurate;
It might not be as relevant since it's been collected previously for other purposes;
It might not be reliable;
It can be expensive to buy reports from research agencies;
Primary Research in most cases, is still necessary;
It is too vast: difficult to analyze and choose.
Business in Action 18.1 - 2 Minutes Discussion
Primary Data is collected 'first-hand' by the business to fulfill its research aims:
1. Up-to-date and accurate data;
2. Relevant to the company's research;
3. Available only to the company collecting it (not available to competitors)
Primary Data is useful in so many ways:
When secondary data is not available (new markets);
It is specific to the business' research;
It can be targeted to a particular groups of customers;
It is necessary in fast-changing markets.
Primary Data Collection Methods:
As you can see, Primary Research yield both: Quantitative and Qualitative Data:
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 (small businesses may not be able to perform it);
If the company is inexperienced in Market Research it may end up collecting bad data;
New businesses may not have existing customers to collect data from.
Business in Action 18.2 - 2 Minutes Discussion
Which one should businesses choose? Primary or Secondary?
It all depends on the business objectives, financial resources, and time-availability.
To-Do List:
- Emujin: Market Research Developments (p. 297, 298)
- Tuguldur: 18.3 Sampling (p. 298, 299);
- Erkhsaran, +2: 18.4 Market Research Data (p.
Chapter 18 - Market Research
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