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Market Research Key Issues
Learn all about the methods of market research and the different challenges businesses may face when carrying out research.
Choice of methods
This essentially depends on what the business wants to find and the practical restrictions of cost and time. Someone starting a new business is unlikely to have the resources to hire a professional market research company so may ask family and friends to test out their idea. They may also be able to do a fair amount of secondary research without too much expense of time and money. They can use the internet to find out about the competition, prices, latest articles about the product etc. This may enable a new business to make decisions on their price, how to differentiate their product and whether it is likely that there is a large enough niche for them.
A large business will have more resources and be prepared to spend them to minimise the risk involved in bringing out a new product or altering an existing one. Only a very large business is likely to have its own in house market research team, so they will probably use an external agency with specialist skills. The business must be clear on what it is trying to find out. If it quantitative data, it is likely to be found out through questionnaires and surveys. The decision on whether to use face to face, phone, internet or mail may come down to cost and the best way to access the particular target market. Quantitative data is more likely to use a focus group. There is an increasing number of ways in which social media can be used to facilitate discussions and discover qualitative data.
A large business which is proposing bringing out a new product that will need heavy promotion may decide on a form of market research known as test marketing. This involves bringing out the product in one TV region only and seeing how it does there before committing even more resources to a national launch. A shop chain may similarly try products in only a limited number of stores.
Essays on Market Research Methods
Market research is about finding out how people think. Rather than ask everyone, market researchers can find out the opinions of a few people and from this extrapolate what the population at large thinks. To do this accurately however, it is important to pick the right sample. For example, to go into a small town on a Wednesday afternoon and conduct interviews, a market researcher is very unlikely to find out what a representative sample of the population thinks so sampling is usually more scientific than this.
Some market research will not want all market segments included in their findings if for instance a product is being aimed at a specific target market. In this case they may find a random sample of a particular group e.g. 100 females under 21 if under 21 females is the target market. Random sampling takes a random sample of all the population and from this extrapolates what the population as a whole thinks. It can still be a little selective e.g. a random sample taken in the small town will only tell you what a representative sample of the population out and about in a small town think. A stratified random sample will decide what number from each of the target groups will need to be interviewed. This should give a fully representative sample of the entire target market.
Market Research Problems
The first problem is the cost. Many businesses do not undertake market research to any great degree but prefer to rely on the intuition and experience of their managers. There are many famous examples of where market research has predicted a big success but a product has still failed while an experienced manager relying on their knowledge of the market has succeeded. The cost of market research will need to be passed on to the customers and it may be that keeping costs down is a better strategy. Market research can be particularly unreliable when it is a brand new product as potential customers will not have a frame of reference from which to decide if they would like that product.
There can also be problems with the research itself. The sample may not be representative or the questions wrongly formulated to encourage a particular response. Someone starting a new business who asks their friends their opinion may get a lot of encouragement but this may not be the best objective opinion. Where the respondents are self-referring e.g. a questionnaire sent through the post or internet, then those who respond are likely to only be those who have had a terrible experience, a great experience or those with too much time on their hands. This is unlikely to be a representative sample. If a business places too much reliance on it, it may be over reacting to the experience of a few people.
Information that comes from secondary research may be cheaper and easier to obtain but may not fit the specific needs of the business and may become rapidly out of date.