Market research
From WikiTextbook
If a business is mainly product orientated it risks spending large amounts of money launching a product that turns out to be a failure. By researching the market the business will have a better idea of what consumers want at that moment in time. It is likely that a business that releases a market orientated has already carried out a high level of market research. Market research can either be desk or field research.
Contents |
Desk research
It involves the use of secondary data; this is information that is already available both within and outside the business.
Information From Within The Business Businesses collect information all of the time, e.g., invoices will tell the business how much they are selling and who they are selling to.
Information From Outside The Business Can come from a number of sources:
- Government published statistics
- The media, e.g. newspapers, magazines, television
- Trade Associations statistics and reports, e.g. TUC, CBI.
- Research Organisations, e.g. Mintel, Mori, Gallop.
Field research
Involves collection of primary data; this is information that nobody has yet collected. It can be collected in a number of ways.
- Observation and Experiments - Looking at and recording, how people behave in certain conditions.
- Survey - A number of people are asked questions. This can be done by post, telephone or face to face.
Market Research and Customer Satisfaction
Businesses will attempt to satisfy the needs of their customers. Satisfied customers will return in the future and make further purchases. Businesses will try and measure levels of customer satisfaction so they can make improvements to the goods or services in the future. There are various different ways in which businesses measure customer satisfaction:
- analysing sales performance (e.g. sales levels, numbers of customers, loyalty card records);
- recording the number of complaints and/or returned goods;
- making comparisons with competitors.
Businesses may choose to analyse their sales performance. Tesco, for example, could use a number of different methods to analyse the sales performance of one of their Tesco Express stores:
- sales levels - high levels of sales implies that customers are satisfied with the store. If customers were dissatisfied they would not return and spend their money, therefore the sales levels would be low;
- numbers of customers - it is fairly simple to count the number of customers who visit the store. Similarly to sales, if customers are dissatisfied they will not return and the number of customers will be low.
- loyalty card records - it is possible to analyse the use of Tesco's reward card. Tesco will be able to tell how often customers with reward cards visit the store and how much money they spend. If customers visit the store irregularly and spend little amounts of money, the managers of the Tesco Express will try and devise a way to encourage customers to visit the store more regularly and spend more money.
Methods of Market Research
The business may carry out market research to collect feedback from customers. Some businesses spend very large amounts of money on market research in the hope of improving their goods or services. It is possible for the business to carry out market research in a number of different ways.
Some customers may be asked on the spot questions from staff. Immediately after making a purchase the customer may be asked questions about various aspects of the business, for example, the friendliness of staff, efficiency of service and overall level of satisfaction.
Observation is often used by retail businesses to view the actions of customers in the store. It allows many people to be observed in a relatively short amount of time. The business can see how many people are attracted to a particular window display or count how many people go down a particular aisle in a supermarket. Observation will give the business results but it may not give it any answers, for example, the business can observe that one window display is very popular, but it may not know why it is so popular.
Businesses frequently use questionnaires to get feedback from customers. Customers are usually approached in the street, or in a shop, by a researcher with a clipboard. Questionnaires can also be completed by post, on a website or over the telephone. A respondent is a person or organisation which answers questions in a questionnaire.
Questionnaires can contain two types of question: open and closed. Closed questions only allow the respondent to choose from a limited number of answers, for example, multiple choice and scales. Examples of closed questions are as follows
- Two answer choice, YES or NO.
- Multiple Choice questions.
- Statement which respondent disagrees or agrees on a scale, e.g.: Strongly disagree, Disagree, Neither, Agree, Strongly Agree
- A scale which shows the direction of respondents feelings, e.g.:
Large....................X.................................................................Small
Experienced.............................................X.................Inexperienced
- A scale which shows importance, e.g.:
1________ Very Important
2________ Somewhat Important
3________ Not Very Important
4________ Not At All Important
- A scale that rates some attribute or feature, e.g.:
Excellent Very Good Good Fair Poor
Open questions allow the respondent to think of an answer themselves, for example:
- Unstructured. A question that can be answered in an unlimited number of ways, e.g.:
What is your opinion of.............
- Word association. Words are given one at a time and the respondent mentions the first word that comes into their head.
- Sentence completion. Respondents have to complete a sentence, e,g,:
In buying Pepsi my most important consideration is............
- A picture presentation. Respondents are asked their response to a picture.
Questionnaires may also be completed during a face to face interview. During an interview the interviewer will write down the responses provided by the respondent. Interviews provide the opportunity for more detailed questions to be asked and explained, however they can be costly for the business as they are very time consuming.
Customer panels can also be used by a business to judge the reaction of customers to a good or service over a period of time. The main disadvantage of customer panels is that it can become expensive to keep the panel for a long period of time.
A business could set up a focus group. The focus group will be made up from around 10 people who will be asked to discuss a new product. They will let the business know what they think of the new product and suggest changes that could be made to improve it.
Groups of customers may also be asked to take part in tasting and testing trials. Customers will taste or test the product, depending upon what it is, and then report their reactions back to the business.
Many businesses now invite feedback from customers via e-mail. This provides a cheap and quick way for the customer to give feedback to the business.
Use of ICT in Market Research
A very important development in market research is the use of ICT to collect and collate customer information. Businesses can use ICT in the following ways:
- Mail merges can be used to automatically produce letters to customers from a list of names and addresses. These letters can form a mail drop that can ask for feedback from past or potential customers.
- Spreadsheets of sales patterns can be produced that show which days or times during the day that are the busiest. Businesses can then increase their staffing levels during these periods in an attempt to improve customer satisfaction.
- Web feedback is increasingly being used to ask customers their opinion on a wide variety of issues, for example, people owning DVD players are asked to comment on which X-Men 2 DVD cover they prefer.
- Automated telephone and recording systems are used to ask customers questions. Customers are asked questions by a recorded voice. Their answers are then recorded and can be inputted into an ICT system.
- Databases can be used to hold information such as:
- customer tastes
- the frequency of purchases made by customers
- patterns of spending taken from bar code readers and scanners.
Methods of Sampling
When a business carries out market research it is unable to ask every single customer in the country. The business will therefore only ask a sample of customers. The business will hope that the sample will be representative of the whole population. There are different types of sampling the business can do.
When a random sample is used, everybody has an equal chance of being chosen for the questionnaire. This sounds very easy, but in reality it can be very difficult, for example, if the business tries to contact respondents during the day those who work will not answer therefore the market research will have a bias towards the unemployed. Respondents can be chosen by using random numbers, picking names out of a hat or simply picking names out of a phonebook.
When using a quota sample the business will select respondents in proportion to the market segment that buys its goods or services, for example, if 65% of Next’s customers are female then it will ensure that 65% of its respondents are female. This is a common form of sampling as it allows researchers to ask the first people that they see as long as they end up with the correct quota.
Targeted samples are used where the business identifies a specific age, gender or socio-economic group for sampling. The business will do this in the hope that the targeted sample represents the views of its customers.
Links
British Market Research Association's Glossary of Terms
