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HL IB Business Management Your notes

4.4 Market Research

Contents
Types of Market Research
Sampling Methods

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Types of Market Research

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Why Conduct Market Research?
Market research is the objective collection, compilation and analysis of information about a market
Effective market research will help the business to
Reduce risk when launching new products or entering new markets
Identify and understand the future needs and wants of customers
Determine potential gaps (market niches) in the market which can be exploited to increase the
sales volume
Identify competitors and gauge their potential strengths and weaknesses

Market research helps the business to make informed decisions about the most effective way to use
their valuable resources
Market research enables the firm to develop an appropriate marketing mix
On-going market research helps businesses to keep changing their marketing strategy in line with
customers changing needs and preferences

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Primary Market Research

Primary research is the process of gathering information directly from consumers in the target market Your notes
using field research methods such as surveys or interviews
This gathers information that is new and does not necessarily exist in any format

Primary research methods

Businesses can choose from a range of primary market research methods and may combine a
selection of methods to obtain comprehensive first-hand data

Primary Market Research Methods

Method Explanation Advantages Disadvantages

Surveys The most widely used method A large amount of Poorly-designed

of gathering primary research is data can be and conducted
to conduct surveys collected relatively surveys will result in
quickly poor results
This is where you would ask a
series of questions to a certain Well-designed Poor response rates
number of people surveys can be are typical,
(respondents) completed easily especially when a
by the random sampling
The results from the ‘sample’ respondents, method is used
are used to make inferences in especially online
which the results of the sample surveys
are extrapolated to be true for
the wider population

A wide range of respondents

can be reached using online
survey tools such as Survey
Monkey

Observation This involves hiring someone to A useful method to Observation needs

stand in an appropriate capture data on to be combined
location and study consumer human behaviour with other primary
behaviour in a store or perhaps research methods
judge the potential consumer Large numbers can to understand the
traffic at a particular location be observed in a causes of behaviour

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Researchers may observe short period of

the impact of packaging time
on consumer choice, or the Your notes
impact that the particular
placement of a product in
a store may have on
consumer choice

Interviews The questions may be set up in In-depth question A time-consuming

a very similar way to a survey, provides detailed process as
however, an interviewer asks opinions and interviews are
the questions perceptions from carried out one-to-
participants one
This method takes longer but
does allow the interviewee to High response Interviewer bias can
ask follow-up questions and rates can be affect the validity of
gather the information that can achieved results
easily be missed when
conducting surveys

Test marketing Free samples are provided for a Perceptions and Producing and
limited period to the target opinions can be distributing free
market to gauge their gathered prior to a samples can be
response to the product full product launch expensive

Adjustments to the product or Can attract early Competitors may

other elements of the attention from become aware of
marketing mix can be made potential new products to be
following feedback customers launched

Focus groups Free range discussions led by a Detailed Participants may be

marketing specialist to information on reluctant to share
collect detailed feedback on opinions and their true opinions in
all aspects of the marketing mix perceptions can be a group situation
from the target market gathered
Rewards for
Usually limited to a small group Small groups make participation make
of 12-15 people focus groups focus groups more
relatively easy and expensive than
The group typically meets for inexpensive to other methods such
90 minutes to 3 hours organise as surveys or
observation

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The pros and cons of primary market research Your notes

Traditionally, primary research has been relatively difficult and expensive for businesses to gather
The rise of social media platforms such as Facebook, Twitter, Instagram and TikTok has changed this
and now provides businesses with incredible primary research opportunities
The speed of communication between businesses and customers can be almost instantaneous
e.g. by using online polls thousands of responses can potentially be received in several hours
The cost of gathering this information can be very low e.g. Online polls take a few minutes to set
up and software automatically gathers and analyses the results
Social media helps businesses to generate an interactive relationship with their customers which
helps to strengthen brand loyalty
Customers are also able to feedback quickly on products - or to express innovative ideas about
how they want the products to be changed
This feedback may help the firm to develop extension strategies in their product life cycle

Businesses need to take care to choose a method of primary market research that allows them to
capture the correct form of data that can support decision-making
Analysing the advantages and disadvantages of primary research improves decision making

The Advantages & Disadvantages of Primary Market Research

Advantages Disadvantages

Information gathering is focused on the needs The sample size may be too small and
of the business and will not be available to its unrepresentative of all of the customers leading
rivals to unreliable results

The business can get in-depth information Bias may mean that researchers can guide
from respondents, for example, reasons behind respondents to answer questions in a particular
certain behaviour way
Similarly, respondents may be influenced by
the responses of others, or not provide
accurate information

Primary market research is more up-to-date A business may need to hire a specialist market
and can be used to ask specific questions and research agency to help and the process can be

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so will be more relevant expensive and time-consuming

Your notes

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Secondary Market Research

Secondary research involves the collection, compilation, and analysis of data that already exists Your notes

Diagram Showing the Many Sources of Secondary Research

Businesses can consult a wide range of secondary sources to gather market research data

Government Publications: National governments and trading blocs such as the EU publish reports and
statistics on topics such as the economy, demographics, industry trends and consumer behaviour

Academic Institutions: Universities and research institutions conduct studies and publish research
papers which provide valuable insights and data on specific industries, consumer behaviour and
market trends

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For example, Stanford University is a globally significant research centre for engineering and
medicine
Your notes
Industry Associations: Trade associations and industry-specific organisations provide detailed
information about specific sectors, including market size, growth rates and industry benchmarks
E.g. The International Organisation of Motor Vehicle Manufacturers conducts and collates
research on production and sales statistics

Specialist Market Research Reports: Companies specialising in market research produce and sell in-
depth reports on various industries, markets and consumer trends
E.g. Mintel is one of the leading private companies supplying market research infromation

Financial Reports: Public limited companies are required to publish financial reports, including annual
reports which can provide valuable information about a company's performance, market position, and
future plans

Online Databases: There are various online databases and research platforms that provide access to a
wide range of secondary market research
E.g. Statista and Euromonitor International

Media Sources: Newspapers, magazines and online publications often contain articles, opinion pieces
and investigative reports that can offer insights into market trends, consumer behaviour and industry
developments
E.g. The Financial Times and the Wall Street Journal

Businesses must weigh up the reliability of secondary market research and aspects such as cost,
relevance and availability of data should also be carefully considered

The Advantages & Disadvantages of Secondary Market Research

Advantages Disadvantages

Information is already available and so is quicker Information has been collected for other
to collect than primary research thereby saving purposes and so may lack relevance or may
time not be factually correct e.g. Wikipedia

Information is often free (e.g. government Can be expensive to purchase market

websites and internet sources such as Statista) specific secondary data from specialist
companies e.g. MINTEL reports

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and is cheaper to collect leading to lower costs

compared to primary research
Your notes
Suitable for a small business that lacks a large Information may be out-of-date, especially
marketing budget and/or expertise in dynamic markets

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Quantitative & Qualitative Data

Market research data can be quantitative or qualitative Your notes
Quantitative data is based on numbers and could include financial reports (e.g. sales, costs), market
data (e.g. markets share) or summaries of data gained from primary research (e.g. on a scale of 1-10
rate our customer service)
Qualitative data gathers descriptions or explanations based on conversations, discussions,
impressions, and emotional feelings and is usually gathered through primary research
Both forms are useful and any data analysis should ideally include a combination of the two

The Limitations of Qualitative & Quantitative Research Data

Limitations of Qualitative Data Limitations of Quantitative Data

The sample size used to gather data may be Information has been collected for other
too small and unrepresentative of all of the purposes and so may lack relevance or may not
customers leading to unreliable results be factually correct

Bias may mean that researchers can guide Can be expensive to purchase market specific
respondents to answer questions in a secondary data from specialist companies such
particular way as MINTEL

Respondents in focus groups may be Numerical data may be out-of-date, especially

influenced by the responses of others, or not in dynamic markets
provide accurate information
Data analysis and interpretation is a skill and
A business may need to hire a specialist market individuals within the business may draw
research agency to help gather primary data incorrect conclusions which are then used to
and the process can be expensive and time- guide business strategy
consuming
Looking at a small amount of data and then
extrapolating the results can provide wrong
assumptions from which strategic decisions are
made

Numerical data may provide insights, but does

not provide the reasons for the insights e.g. data
may reveal sales volumes are falling, but not the
reason for the decline

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Exam Tip
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When answering questions about theory-rich topics like market research it is tempting to write down
everything you know about the subject. Instead, try to focus more on weighing up the advantages and
disadvantages of the market research methods presented and justify, in context, which method(s)
might be more appropriate.

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Sampling Methods
Your notes
Primary Market Research Sampling Methods
Sampling involves getting opinions from a selected group of people in order to find out about the
market as a whole
It is expensive and time-consuming to collect data from the whole population of a market
Market researchers use carefully designed sampling methods from which conclusions can be
drawn about the market as a whole
In general, the larger the sample size, the more likely that results from market research activities
will reflect the market as a whole

There are a range of sampling methods a business can use to carry out market research which include:
Quota sampling
The aim is to obtain a representative sample by determining specific proportions of each group of
the population upon which to carry out research
E.g. a researcher carrying out a survey for a family car manufacturer may look to interview a sample
of 25% between the ages of 18-24, 50% between the ages of 25-45 and 25% aged 46 and above

The Pros and Cons of Quota Sampling

Advantages Disadvantages

Quick and easy way of obtaining a sample Not random so there is some risk of bias

Need to understand the population to be able

to apply results to the market as a whole

Random sampling
This method makes sure that every member of the population has an equal chance of selection
E.g. a survey of members of a gym may be sent to a random selection of customers taken from the
membership database

The Pros and Cons of Random Sampling

Advantages Disadvantages

Simple to design and interpret As anyone may be selected, the sample may not
be representative of the market as a whole

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As anyone in the population can be asked bias Researchers need a complete and accurate
should be avoided population listing
Your notes

Convenience sampling
This method uses those who are willing to volunteer and easiest to access in the study
E.g. a cafe owner may ask regular customers during a quiet period of the day to fill in a written
survey regarding their experiences of the menu and customer service

The Pros and Cons of Convenience Sampling

Advantages Disadvantages

Respondents taking part in research are readily The sample is likely to be biased if those known
available to the researcher are chosen
Large amounts of information can be gathered The sample is unlikely to be representative of
quickly the market as a whole

Choosing the sampling method

The choice of sampling method will depend upon a wide range of factors including
The time available
Knowledge of the target population
Skills of researchers

Where little time is available to carry out market research a quota sample may be the most
appropriate sampling method as it is usually very quick and straightforward to organise

Where a business has a good knowledge of the target population a random sample is likely to provide
a set of research data that lacks bias and can be interpreted with insight

Where researchers lack experience or expertise in market research a convenience sample is likely to
provide a useful set of data that can be easily interpreted

Exam Tip
A research population refers to the group of people in whom the business has an interest when
conducting market research - a common mistake is to assume that research focuses on, say, the
whole population of a country or region.

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