Chapter 15: market research
The need for market research
This is the process of collecting, recording and analyzing data about the customer, competitors and the
To reduce the risks associated with new product launches
By investigating potential demand for a new product or service the business should be able to assess
with some degree of accuracy the likely chances of a new product achieving satisfactory sales. No
research can guarantee success, however. Market research is still a key point in new product
development (NPD) and most firms would check market conditions before planning a new product.
To predict future demand changes
A travel firm may wish to investigate social and other changes to see how these might affect the
demand for holidays in the future. For instance, the growth in the number of single-person households
may suggest that there could be a rising demand for “singles”-type holidays
To explain patterns in sales of existing products and market trends
Market research is not just undertaken for new or planned products, it needs to be conducted for
existing products too. Sales at the fashion retailer Gap had by the end of 2009 fallen in 28 of the last 31
months. Unless Gap managers are prepared to find out why this happened, then they will not be able to
take any remedial action to “stop the rot”
To assess the most favoured design, flavours, styles, promotions and packages for a product
Consumer tests of different versions of a product or of the proposed adverts to promote it will enable a
business to focus on the aspects of design and performance that consumers rate most highly. These can
then be incorporated into the final product. Market research can therefore be used to discover
- Market size and consumer tastes and trends
- The product and its perceived strengths and weaknesses
- The promotion used and its effectiveness
- Competitors and their claimed unique selling propositions
- Distribution methods most preferred by consumers
- Consumers´ preferences for packaging of the product
The market research process
Management problem identification If a business doesn’t have a clear idea of the purpose of this research or the problem that needed
investigating, then the money would be wasted. Here are some examples of problems that might be
investigated by market research:
- What size is the potential market for the business?
- Why are our sales falling?
- How can we break into the market in another country?
- How can we most effectively meet the challenge of new competitors?
- What customer groups buy our product and which groups tend not to buy them?
They must be set in such a way that, when they have been achieved, they provide all the information
needed to solve the problem. Here are some examples of research objectives in the form of a question:
- how many people are likely to buy our products in country X
- if the price of good Y is reduced, how much will these increase sale volume
- if we advertise this product on television, what will be the likely impact on sales volume and
- Which new product idea, A or B, will generate more sales
- What would be the impact of new packaging on sales of our product?
- Why are consumer complaints about our products increasing?
Sources of data – primary and secondary research
Primary research is a collection of first-hand data that is directly related to a firm´s needs
Secondary research is a collection of data from second-hand sources
Sources of secondary data
In most countries, sources such as the following from the UK could be referred to:
- Population census
- Social tends
- Economic trends
- annual abstract of statistics
- family expenditure survey
businesses like a furniture would use this type of information
Local libraries and local government offices
If research needed to be about a small area then local, not national, data would be necessary: - local population census returns with details of total numbers and age and occupation
- numbers of households in the area
- the proportions of the local population from different ethnic and cultural groups
They produce regular reports on the state of the markets their members operate in. for example:
- Society of Motor Manufacturers and Traders.
- Furniture Retailers Association
- Engineering Employers Federation
Market intelligence reports
They are very expensive, but they are usually available at local business libraries. Examples are:
- Mintel reports
- Key note reports
If the owner of a hotel planned to expand by opening a hotel in the capital city, one of these reports on
the hotel and catering market would provide lots of details.
Newspaper reports and specialist publications
“the financial times”
Internal company record
If the business has been trading for a long time, then large quantity of secondary data will already be
available for further analysis from:
- Customer sales
- Guarantee claims
- Daily, weekly and monthly sales trends
- Feedback from customers on product, service, delivery and quality
Internet has transformed secondary data collection – but the worldwide web only has access to data
that have already been gathered from sources listed above Methods of primary research
Primary research can itself be divided into quantitative and qualitative research. Qualitative research is a
research into the in-depth motivations behind consumer buying behavior