Topic 2 – Market Research

Higher Business Management

1

Learning Intentions / Success Criteria

Learning

Intentions

Market

research

Success Criteria

By end of this topic you will be able to

explain:

• the different methods of field research

and their costs and benefits

• the different methods of desk research

and their costs and benefits

• the use of sampling in market research

• the use of market research information

to a business.

2

Market Research

Market research aims to find out what customers want and what is happening

in the marketplace. It involves looking at what already exists (secondary

information) and finding out something new (primary information). Market

research can find out:

• The types of customers who are making purchases and their buying habits.

• How successful marketing and advertising campaigns are, and whether or

not they are cost effective.

• What changes might need to be made to existing products to improve them.

• What customers would like to see in the future.

• How customers have reacted to, for example different products, prices and

promotions.

• There are two types of market research: field and desk.

3

Field Research

• This involves carrying

out research to gather

new information.

• As this information is

gathered first-hand for a

specific purpose, it is

called primary

information.

Field research methods

include:

• surveys/questionnaires

• interviews

• observations

• hall tests

• focus groups.

4

Advantages/Disadvantages of Field

Research Advantages

• Complete – field information

should have no parts missing.

• Timely – in the respect that the

information is up to date.

• Appropriate – field information

is fit for the purpose it is needed

for.

• Accurate – information should

be correct as it can be validated.

Disadvantages

• Not cost effective –

field information

requires trained and

paid interviewers or

expensive research

companies.

5

Sampling

• When field research is

being carried out, it is

impossible to ask

everyone for their

opinions on something.

• Because of this, people

have to be selected to

take part in a piece of

research.

Different sampling

methods can be used to

select people to take part

in research:

• random sampling

• quota sampling

• stratified random

sampling

• cluster sampling.

6

Random Sampling

The sample is picked randomly, e.g. using a

telephone directory or list of customers.

Advantages Disadvantages

• No bias is

shown by the

researcher.

• Saves time in

selecting the

sample.

• Sample may not reflect the target market.

• Can over represent a certain segment, e.g.

all males could be chosen at random.

• Can be expensive as many calls may have

to be made if customer lists are not up to

date.

7

Quota Sampling

The researcher chooses from a group of people

with certain characteristics.

Advantages Disadvantages

Quick and easy method as

group lists are pre-made.

The exact sample from each

group is not randomised, so

researcher bias could be

involved.

8

Stratified Random Sampling

A sample is selected that is representative of the target

market, e.g. if 75% of the population for a product is

working class, male and aged 20-30, then that’s what

75% of the sample should be.

Advantages Disadvantages

• Sample represents the target

market.

• No researcher bias as the

sample is randomised from

the list of those that meet the

characteristics required.

• Takes time to work through

population lists and select

the exact sample required.

• The sample chosen could be

geographically dispersed,

adding to the costs of

research. 9

Cluster Sampling

The population is split into smaller ‘clusters’,

often geographically, which could represent the

population on a small scale.

Advantages Disadvantages

• Saves time compared to

researching samples spread

across wider areas.

• One of the cheapest methods

of sampling.

Risk of the sample not being

accurate enough to represent

the target market.

10

Methods of Field Research

Once a sample population has been identified,

the filed research method must be chosen.

Methods of field research:

• Personal Interview

• Telephone Survey

• Postal Survey

• Online Survey

• Street Survey.

11

Personal Interview

This is a face-to-face interview. A number of

questions will be asked by the interviewer.

Advantages Disadvantages

• Clarification can be

gained on questions not

understood.

• Body language and

facial expression can be

monitored.

• Information is obtained

instantly.

• Time-consuming and expensive

to carry out.

• Not many people may be able to

be interviewed in this way

compared to other survey

methods.

• Researcher requires training to be

successful (e.g. questioning

techniques). 12

Telephone Survey

People are contacted by telephone and asked to

answer questions.

Advantages Disadvantages

• People spread across large

geographical areas can be

accessed.

• Less expensive than a personal

interview.

• Clarification can be obtained.

• Information is obtained instantly.

• People might not like

taking part in a

telephone survey.

• Large and/or time-

consuming surveys are

unlikely to be suitable

for this method.

13

Postal Survey

A survey is sent through the post, is completed

and then sent back.

Advantages Disadvantages

• People spread across

large geographical

areas can be accessed.

• Surveys can be

completed at a time

that people choose

and is more

convenient to them.

• Relies on people opening the letter

containing the questionnaire in the

first place, completing it and

sending it back.

• Information is not obtained

instantly.

• Clarification cannot be gained; the

survey has to be designed carefully.

14

Online Survey

A website is used to ask questions and people

simply access the website to answer them.

Advantages Disadvantages

• Online software can often be

free of charge.

• No postal or telephone costs.

• People spread across large

geographical areas and

countries can be accessed.

• Online software can often

collect and analyse the results.

• Online software that is free

might limit the number of

questions that can be asked.

• People require access to the

internet.

• Clarification cannot be

gained; the survey has to be

designed carefully.

15

Street Survey

Asking people in the street to complete a survey.

Advantages Disadvantages

• Specific individuals can be

chosen (e.g. based on their

age or gender).

• Clarification can be gained.

Expensive to carry out as

individuals need to be

employed to carry out the

survey.

16

Desk Research

This involves looking at

existing information

(secondary information)

from either within the

organisation (internal

information) or outwith

the organisation (external

information).

Desk research might

involve looking at:

• websites

• newspaper articles and

magazines

• government reports

• textbooks.

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Advantages/Disadvantages of Desk

Research Advantages

• Timely – desk

information is quick to

gather.

• Cost effective – desk

information does not

require trained and paid

interviewers or research

companies.

• Available – desk

information already exits

so is easy to look up.

Disadvantages

• Not objective – desk information

is collected and presented by

someone else, so could be biased.

• Not appropriate – desk

information is not fit for the exact

purpose and may have to be

‘shoehorned’ to fit the businesses’

needs.

• Not concise – the researcher may

have to read through a lot of

information to get what is needed.

18

Types of Desk Research

• Desk research involves

looking at different types

of secondary (existing)

information.

• Some of this information

might be available

electronically through, for

example, the internet.

There are different types

of information that might

be analysed:

• Written

• Oral

• Pictorial

• Graphical

• Numerical.

19

Written

Information that is presented as text, e.g. reports,

text messages, e-mails, written text on web

pages.

.

Advantages Disadvantages

• Can be kept for future

reference.

• Facts can be passed on more

accurately compared to oral

information.

• May be unable to obtain

clarification.

• Requires a degree of literacy

skills.

20

Oral

Information that is spoken and heard by someone

else, e.g. in a meeting or on the telephone or

from a TV programme.

.

Advantages Disadvantages

• Instant response is given.

• Questions can be asked

immediately.

• Body language can be

monitored.

• Points might be

misinterpreted.

• Requires careful listening

skills.

21

Pictorial

Information presented through photographs or

pictures in reports, newspapers or websites.

Advantages Disadvantages

• Information is presented

attractively.

• Significant points can be

highlighted and/or

emphasised.

• Complex information cannot

be communicated.

• Factual information cannot

be communicated as easily

as in written information.

22

Graphical

Information presented through a graph or chart.

Advantages Disadvantages

• Comparisons can be made

easily.

• Complex information can be

presented clearly.

• Requires numeracy skills to

create graphs.

• The user needs to be able to

interpret graphical

information.

23

Numerical

Information presented through numbers, e.g.

sales figures on websites of companies.

Advantages Disadvantages

• Financial information

can be analysed.

• Calculations can be

carried out.

Requires numeracy skills

to handle and interpret

numerical information.

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Sources of Information

Advantages Disadvantages

Primary • Source is known and is therefore more

reliable than secondary information.

• Information is gathered for a specific

purpose and is therefore relevant.

• Time-consuming to collect, which might

delay decision-making.

• Expensive to collect which will reduce

profitability.

Secondary • Easier to obtain than primary

information.

• Usually cheaper to obtain than

primary information.

• It was collected for another purpose so

might not be as useful.

• The information might be biased, which

would lead to wrong decisions being made.

Internal • Unique to the organisation and is

therefore relevant.

• The source is known and therefore

more reliable.

• Information might not be up-to-date or

complete, which means a wrong decision

could be made.

• Computer systems might be required to

store internal information, which would be

expensive.

External • Easy to obtain, saving the organisation

time.

• More information can be accessed

through, for example, the internet

compared to internal information.

• Source might not be known and could be

unreliable.

• The information might not be up-to-date,

meaning it might not be relevant anymore. 25