0264 · 3.2.1Methods of market research

Market research purposes

0:00Cedar Sip makes bottled fruit drinks. Its owner is considering a new flavour, but ingredients, packaging and production will all require money. Understanding customers before launch can help the business choose a flavour they actually want. By the end of this video, you will understand how businesses collect useful information and judge which decisions that information can support. Market research is the process of gathering, analysing and interpreting information about a market and its customers.

0:26Gathering gives the business evidence, such as customers’ answers or competitors’ prices. The analysis stage then looks for patterns in that evidence. Finally, interpretation links those patterns to a decision, such as which flavour deserves further testing. A target market is the group of customers a business aims to sell its products to. Cedar Sip might aim its new drink at young adults who regularly buy bottled refreshments. Research should therefore include people with those characteristics.

0:52Choosing suitable participants matters because their preferences help the owner understand potential buyers. Businesses use research to identify customer needs, reduce launch risk, understand competitors, help set prices and choose promotion. Discovering customer needs reveals features buyers value, such as convenient packaging or particular flavours. Investigating demand before production reduces the risk of a new product failing. The business can change its plans before committing substantial money. Information about competitors shows managers the alternatives customers already have, so the business can offer something different.

1:25Asking about acceptable prices gives evidence for choosing an amount buyers are willing to pay. Discovering where customers notice advertisements helps the business choose promotion that reaches its intended audience. Each purpose connects information to a specific decision, although research still leaves some uncertainty.

Questionnaires and interviews

1:42Primary research is collecting new, first-hand information for a specific purpose. It is also called field research, and it can happen online as well as in person. Cedar Sip could ask potential buyers about its proposed flavours. Because the owner chooses the questions, the answers can address the business’s exact decision. The main methods are questionnaires or surveys, interviews, focus groups and observation. A questionnaire is a set of questions used to collect information from respondents.

2:09When many people answer the same questions, the research is called a survey. Businesses can collect responses online, by phone or face to face, depending on whom they need to reach. Closed questions offer a fixed set of possible answers. These make comparison straightforward because the business can count how many people select each option. An open question allows respondents to answer in their own words. Asking customers to explain their choice can reveal reasons that the owner had overlooked when preparing the possible answers.

2:38Questionnaires benefit the business because standardised questions make answers easy to compare. An online version can also reach many potential customers at relatively low cost. However, respondents may skip questions or provide little explanation, which limits the detail managers receive. People who choose to respond may also differ from the wider target market. An interview is a conversation in which a researcher asks someone questions to collect information. The interviewer can follow up an answer and clarify anything unclear.

3:06This helps the business understand why a customer prefers a particular feature. However, arranging and conducting individual conversations takes time, so collecting many responses can become expensive. The interviewer’s behaviour can also influence answers. A customer may give a polite response when the owner personally asks about a proposed product. The business then receives a more favourable impression than the customer’s actual opinion supports. Using neutral wording and allowing honest criticism improves the usefulness of the information.

Focus groups and observation

3:35A focus group is a small group of people who discuss a product in depth. Participants can react to one another’s comments, so the business may discover unexpected concerns or ideas. Cedar Sip could use this approach to explore opinions about its packaging. A skilled organiser can encourage quieter participants to explain their views. For the business, this depth is useful when it needs reasons behind preferences. However, arranging the session and paying an organiser can be costly.

4:01A confident participant may influence others, so the conversation may favour that person’s views. Because the group is small, managers should check how well its opinions reflect potential customers more widely. Observation is watching or counting customers’ behaviour to collect information. River Loom sells clothing through an online shop. It could record which product pages visitors open and where they leave the purchasing process. This gives the business evidence about actual behaviour, including actions that customers might struggle to remember accurately.

4:30Observation can help River Loom identify a page where many potential purchases stop. However, a visitor’s actions alone provide limited evidence about their reasons. Interviews could reveal whether delivery charges or unclear product information caused the departure. Recording behaviour also takes resources, so the business must choose which observations are worth collecting. Overall, primary research can give the business current information tailored to its own needs. If the findings remain confidential, competitors cannot directly access those results.

5:00Collecting responses can nevertheless require considerable time and money. Bias can also affect the findings, so carefully designed questions and suitable participants remain important.

Sampling and secondary research

5:10A sample is a group of people chosen to take part in research who represent the target market. Sampling means selecting this group from the larger population being investigated. Asking every potential customer could cost too much and take too long. Using a sample makes research practical, provided the selection reflects the people the business hopes to reach. Think of the sample as a small window into a much larger group.

5:32If that window shows only one kind of customer, the owner receives a narrow view. Including the relevant mix of potential buyers gives a more useful picture. The method of selection therefore matters alongside the number of people who participate. A random sample gives each member of the population an equal chance of selection. Cedar Sip could randomly select customers from a suitable customer list. This reduces the influence of the researcher’s personal choices.

5:55The list itself must cover the intended population adequately, because selection can only include people whose names appear there. A quota sample selects specified numbers of people from groups with particular characteristics. Cedar Sip could set quotas for younger and older buyers that reflect their proportions in its target market. Researchers then recruit enough participants from each group to fill those quotas. This helps include relevant groups, although personal selection within them can still introduce bias.

6:22A larger sample generally gives the business a more dependable picture when participants are selected appropriately. However, increasing its size also raises the resources required to collect responses. A representative sample is one whose characteristics closely match those of the target market. A carefully selected group can therefore be more useful than a larger collection of unsuitable respondents. Secondary research is using information already collected by others. It is also called desk research because much of it can be accessed through documents or websites.

6:52A business can begin with existing information before commissioning its own questions. This helps managers understand the wider market and identify gaps that primary research should investigate. Useful sources include competitor websites, government sources, market reports and trade magazines. Competitor websites show advertised products, prices and promotions, so a business can compare customers’ available choices. Access is often quick and inexpensive. However, these websites present the competitor’s chosen message, so managers should treat promotional claims carefully.

7:24Government sources can provide information about population, income and business activity. Broad coverage helps a business understand the area where it might sell. However, published categories may be wider than the business’s target market. Managers must also check the collection date because changes since then can reduce the information’s usefulness. Market reports bring together information about a particular market, such as its size, customers and trends. These can save the business the considerable expense of collecting large-scale information itself.

7:54Purchasing a detailed report may still be costly. Its coverage must fit the business’s product and location for the findings to support a useful decision. Trade magazines publish information for businesses within a particular industry. Articles about changing customer preferences or new products can help managers recognise developments relevant to their decisions. However, an article may reflect its author’s judgement or a contributor’s commercial interests. Checking supporting evidence helps the reader judge the strength of its claims.

8:22Secondary research is usually cheaper and quicker for the business because the information already exists. Large-scale data can also reveal patterns beyond the reach of a small research budget. However, the original collection may have served a different purpose, and older findings can lose relevance. Competitors may read the same material, so it gives the business no advantage over its rivals.

Improving research quality

8:43The accuracy of market research depends on sample size, who participates, question wording, honesty of answers, and the age and reliability of sources. A very small sample can be strongly affected by a few unusual preferences. Selecting participants from the intended market improves the relevance of the findings. Managers need to examine both the size and composition of their sample. Poorly worded questions can confuse respondents, so their answers may refer to different things.

9:09Asking about price and packaging together makes the response difficult to interpret. Each question should address one clear issue in language participants understand. The business can test its questionnaire with a small group before using it more widely. A leading question encourages a particular answer through its wording. Neutral questions give participants room to express their own views. Anonymous responses may also make customers more comfortable about criticising a proposed product.

9:35These choices improve the business’s evidence because they reduce pressure to give an agreeable or socially acceptable answer. People may also misunderstand their own future behaviour. A customer can genuinely express interest in a product and later choose something else when spending money. Managers should therefore distinguish stated preferences from recorded purchases. Combining questions with observation can provide a fuller picture of what customers say and what they actually do.

10:00For secondary information, check when the data was collected, who produced it and what purpose it served. Older figures may describe circumstances that have since changed. A source with a commercial interest may select favourable evidence. Comparing several credible sources helps the business identify agreement and investigate differences before reaching a conclusion.

Interpreting survey results

10:19In this fictional example, Cedar Sip surveys two hundred people from its intended target market. Each participant selects one preferred flavour from the same four options. Mango receives eighty responses, berry sixty, lemon forty and peach twenty. Before interpreting the pattern, we check that the responses add up to the stated total. Eighty plus sixty gives one hundred and forty respondents. Adding lemon’s forty brings the count to one hundred and eighty.

10:44Peach’s twenty then makes two hundred, so the table accounts for everyone surveyed. This check matters because an incomplete total could distort the comparison or any percentage calculated from it. The bar chart places flavour along the horizontal axis and number of respondents up the vertical axis. Its scale runs from zero through twenty, forty and sixty to eighty. Equal-width bars make the categories easy to compare. Mango has the tallest bar, so it is the most frequently selected option in this sample.

11:11To calculate mango’s percentage, we express its respondents as a share of everyone surveyed. First, one per cent of the sample is two hundred divided by one hundred, which equals two respondents. Mango’s eighty respondents contain forty of these groups of two, so mango’s share is forty per cent. This converts the count into a proportion, so the business can understand how much of its sample preferred mango. Mango’s forty per cent supports choosing it for further testing because it attracted the largest group of respondents.

11:37However, the other three flavours together attracted one hundred and twenty respondents. That is more than half of the sample, so customer tastes are varied and mango is the most popular choice without being a majority. A sensible next step is to investigate whether potential buyers will purchase mango at the proposed price. Flavour preference alone gives limited evidence about actual sales. One limitation is that these responses come from a sample at a particular time.

12:02Their usefulness depends on how closely the participants reflect Cedar Sip’s intended buyers. The questionnaire also offered only four listed flavours, so a flavour nobody was asked about could prove more popular. Managers should interpret the conclusion within those boundaries before committing money to a launch. In Paper One Short Answer and Data Response, stimulus material may provide research results or information about a business’s methods. Paper Two Case Study can require you to apply research choices to a business’s circumstances.

12:30For calculate, work out from given facts, figures or information. Show the relevant steps and give the result with its appropriate unit. Explain means set out purposes or reasons, say why and how, supported with relevant evidence. A useful answer connects the method to a consequence for the named business. To justify, support a case with evidence or argument. Use details from the situation to show why your chosen method suits the decision being made.

12:54Maple Rest provides overnight accommodation. This small business has six rooms, a research budget of three hundred dollars and an aim of increasing weekend bookings. Its owner can contact previous guests online to investigate their preferences. An exam-style question could ask you to justify using an online questionnaire instead of individual interviews. I recommend an online questionnaire because Maple Rest can reach its previous guests directly, and they are the people most likely to book again.

13:20Its three hundred dollar budget favours a method with low distribution costs. Closed questions would make guests’ preferred weekend features easy for the owner to compare. Individual interviews give more detailed explanations, but each conversation takes the owner’s time or a paid interviewer, which the small budget cannot cover for many guests. The questionnaire therefore gives the owner affordable evidence for changes that should attract more weekend bookings. Keep the purpose of each method clear when applying this knowledge.

13:46Primary research involves collecting new information, while secondary research uses material that already exists. Judge a sample by both its size and how well it represents the target market. When interpreting percentages, connect the result to a practical decision and state the conditions that limit your conclusion. Market research is the process of gathering, analysing and interpreting information about a market and its customers. It helps businesses understand needs, reduce launch risk, investigate competitors and make better pricing and promotion decisions.

14:15Primary research is collecting new, first-hand information for a specific purpose. Questionnaires, interviews, focus groups and observation provide different kinds of evidence, each with costs and limitations. For existing evidence, secondary research is using information already collected by others. With sampling, a sample is a group of people chosen to take part in research who represent the target market. Useful findings depend on suitable participants, clear questions, honest answers and relevant sources.

14:44The central skill is connecting evidence to a business decision while recognising the limits of what it shows.