Market research

1. Market research • Market research involves gathering and interpreting data from customers and others in order to identify and satisfy the needs of customers.

2. Role or purpose of market research Market research will provide the business with data that can be used: • To describe the current situation in the market place: • To identify new market opportunities; • To decide on the appropriate mix of new products; • To improve the marketing mix of existing products; • To segment the market; • To understand the marketing strategies of competitors; and • To predict what will likely happen in the future in the marketplace

3. When and how ? • Market research is frequently carried out when a business plans to launch a new product. • It helps to reduce the risk of failure by helping to make the right marketing decisions. • Marketing decisions cannot be based on hindsight but on research. • Marketing research data come in two basic forms: • Primary data obtained through field research • Secondary data obtained through desk research

4. Secondary (desk) research This is the collection of secondary data, which has previously been collected by others for another purpose but which may be still relevant. Someone sitting in an office can gather such data and hence is referred as desk research.

5. The main sources of secondary data can be: Internal : profit and loss a/c., balance sheet, stock records, sales statistics, etc. External: reference books, company reports govt statistics, external publications of banks , websites, etc.

6. Advantages of desk research • It is easier and quicker to gather as the data already exist. • It is cheaper as it costs less to collect • There is a huge range of sources making secondary data more accessible

7. Disadvantages • The data collected may become outdated quickly and therefore less reliable. • The data was collected for another purpose and may no longer be relevant • Unlike primary data, secondary data is also available to competitors.

8. Primary research This is research to gather new (primary) data directly from the persons concerned (customers, competitors and others) by going out on the field. Advantages of primary research Primary data is up to date and more reliable whereas secondary data is often outdated Primary data is more relevant as it is collected for a specific purpose unlike secondary data which is collected for another purpose The primary data is unique as the research is done first hand and no rivals has access to them.

9. Disadvantages of primary research • It is a difficult and time consuming task as the process has to • be properly designed . • Primary research can be more expensive than secondary research as • it is a more time consuming process • Biases can arise in selecting a wrong sample or from non-response

10. Primary data can be gathered in 4 main ways: • Surveys (questionnaires and interviews) • Observation • Experimentation (test marketing) • Psychological test (consumer panel or focus group)

11. Surveys through Questionnaires A questionnaire is a series of questions designed to find out the views and opinions of the target persons (e.g. customers). The data can be obtained through - interviews (face to face or over the phone) - self completed questionnaires

12. Personal interviews involves an interviewer obtaining information • from one person face to face. Questions can be clarified instantly • and it is quick to complete. The questionnaires may contain many • open questions to gather the views of the person. • Telephone interviews is often used as an alternative to personal • interviews. A greater number of people over a wider area can be • reached. However , many people may not be willing to take part

13. Self completed questionnaires These are questionnaires that are completed by a sample of respondents on their own time. They can be sent by and returned to the business personally, via the post or internet. When the post or internet is used a greater number of people over a wider area can be covered. However, there can be a high rate of non-response

14. Advantages of using questionnaires • If well designed, questionnaires can be easy to complete • Surveys allow a wide coverage of respondents • A wide range of questions can be set

15. Advantages of using questionnaires • If well designed, questionnaires can be easy to complete • Surveys allow a wide coverage of respondents • A wide range of questions can be set

16. Characteristics of a good questionnaire Directly relevant to the research objective: irrelevant question should be avoided Comprehensive: should include both open and closed questions. Open questions allow issues to be discussed Simple to understand and easy to answer: the questions should be clear and technical language should be avoided Free from bias: in order to collect meaningful data. E.g. do you prefer Diet Pepsi or Diet Coca? rather than Is Diet Pepsi better than Diet Coca?

17. Observation This involves watching how people behave or respond in different situations. Observations can be carried out by filming, photo taking or watching survey. Observations are often used hotels, restaurants and theme parks. Advantages Observation record people’s actual behavior rather than what they say A great number of people can be observed Disadvantages It does not necessarily reveal why people behave in a certain way. The use of filming or photo taking can be considered unethical

18. Experimentation (Test marketing or piloting) • Experimentation is the process of introducing marketing activities to • a group of people to measure their reactions. It is often used to test • a product in a small area before it is launched on a much larger scale • or abandoned. • For example, an ice cream manufacturer may give samples to • customers in a shopping mall to find out which flavor they prefer. • This can save a lot of time and money to identify errors or areas • which need improvement. It also helps to reduce risks and • uncertainties

19. Consumer panel or focus group • A group of 8 to 10 consumers meet • with a psychologist and general discussion takes place to obtain the • required information on a product

20. Qualitative research vs. Quantitative research Qualitativeresearch Qualitative research is used to obtain information on the motivation behind consumers behavior, such as: What are the product qualities that encourage people to buy brand x rather than brand y? What additional features customers would like in a product? It is usually carried out by the use of group discussion also known as consumer panel or focus group or open questions in a survey..

21. Quantitative research Quantitative research is used to obtain factual information such as: What percentage of the population prefers brand x to band y? What percentage of the target market is likely to buy a new product? Quantitative data concentrate on numbers and they can be statistically analyzed and represented on graphs, charts, etc. Quantitative research is usually carried out by the use of close questions questionnaires and sampling.

22. Sampling (HL) A sample survey is a survey of less than the population. In marketing research, it will be impossible to obtain data from everyone in the market. Therefore, a sample representing the market is used. The method can be: random sampling or non-random sampling

23. Random sample • A random sample is one which is chosen in such a way that every • member of the population has an equal chance of being selected. • It is carefully planned. A sample frame is required. This is a list of all members of the target population. Often this is impractical. • It is a fair representation of the population and may reduce bias • However, it is time consuming and difficult to select such a sample • It may select people not be part of the target group

24. Non-random sample • A non-random sample is one where every member of the population does not have an equal chance of being selected • Non-random sampling include: • Quota sampling • Cluster sampling • stratified sampling • snowballing

25. Quota sampling • Quota sampling involves setting up a quota (a target number of people) and then interview is conducted with everyone met up to the quota. • E.g., if we want to know the percentage of people who prefer a certain ice cream, we set a quota of 50 persons and interview the first 50 coming out of a super-maket. • Some times, we can divide the target population into segments (e.g. sex), and interview a quota in each segment (e.g. 20 males and 30 females)

26. Quota sampling (cont’d) It is easy, quick and cheap to operate However, the sample is not a good representation of the population

27. Stratified random sampling Under this method, the population is divided into segments or strata, based on previous knowledge about how the population is divided up. Then a random sample in each strata is selected for interview. For example, if a manufacturer knows that his sales are 40% from area A, 35% from area B and 25% from area C, then the stratified sample must obtained respondents from each area in the same proportion . Samples are more representative of particular segments It can be difficult and expensive to identify relevant segments

28. Multi stage or Cluster sampling • Cluster sampling is used when getting feedback from respondents • involves too much travelling, time, or money. Therefore a few areas • Or clusters are chosen (e.g. north, south, east and west). A sample • of population in each chosen cluster is selected and interviewed. • It is quicker, easier and cheaper to use than any other method when • the population is widely dispersed. • By selecting just a few locations, the results may be biased because • people living in the same area may share the same views

29. Snowballing Snowballing refers to surveys or interviews carried out with individuals who then suggest other names to increase the sample. Hence, there is a snowball effect. This is common in financial services, insurances and other services where the population is unknown. It is an easy, quick and cheap way to build a sample. However, it may lead to a bias sample as respondent may refer their friends with the same views.

30. Systematic sampling x This may provide an approximation of a random sample, by selecting every nth item after a random start. For example, if a sample of 20 from a population of 800 is decided, then every 40th item is selected after a random in the first 40, should be selected.

31. Sampling errors Sampling errors refer to the difference between the results obtained from the sample and what should have been revealed. They arise because the sample used is not representative of the population. The failure is due to a wrong sample, non response from those chosen or incomplete/ outdated population frame. Non sampling errors Non sampling errors are caused by problems in the designed of the questionnaires and in carrying the survey, e.g. wording of the questions, confusion in data collection and in conducting the survey.

32. Conduct of market research Market research can be conducted by the firm’s own staff. However, More and more research are contracted out to private agencies. Advantages of using market research agencies Agencies have the expertise of selecting an appropriate sample thus reducing the amount of bias in the results of the research. Some agencies have the experience and ability to conduct research in certain areas thus providing more accurate information.

33. Disadvantages The cost of hiring an external agency can be very expensive The use of an external agency may deprive the firm’s staff from being exposed to the needs of customers and therefore better understand them.

34. Hall P56 Q1,2 Sampling: P65 Q3