Businesses use market research to identify consumer needs/wants.
This could be as simple as asking your restaurant customers to fill in a questionnaire commenting on the quality of the food, or the service they received etc. This will allow the restaurant owner to identify any areas of weakness that can be improved on – and thereby satisfy the customers so that they continue to return to the restaurant.
Market research can also help identify gaps in the market, ie, come up with a new idea for a new product or service to satisfy consumer wants.
Types of Market Research
Market research can be split into two main types:
- Field
- Desk.
Desk Research
This is looking at research that already exists. There is a wide range of secondary data which is available from within (internal) the organisation and from out with (external) the organisation.
Field Research
This involves carrying out research and obtaining the information first-hand. An organisation may collect this information or they may pay a market research company to do it for them.
The use of Information from Market Research
Information gathered from market research can be used for many purposes:
- To provide information on how much customers are willing to pay for a product. This means the product or service can be sold for the best price.
- To provide information about competitors, such as their special offers and pricing strategies.
- To confirm where and when customers require the service. This ensures the company provides the goods or services at the time and place that customers need it.
- To reduce risk to the business. They can use market research to make sure there is demand for their product or service before they launch it.
- To provide information on whether people like the product. This means changes can be made to the product to meet the needs of the customer.
- To provide the information needed to develop new versions of the product.
- To provide the company with information on what products customers might want in the future
Methods of Market Research – Field Research
Interviews – a researcher asking questions verbally face to face or over the telephone.
Advantages – the interviewer can ask more complex questions and if interviewees are uncertain, the interviewer can explain. The interviewer can ask follow-up questions to get a more detailed response.
Disadvantages – it is time-consuming and expensive as interviews are only conducted with one person at a time and the interviewer may have to travel to carry out the interview (if face-to-face). In the case of a telephone interview, the travel time is removed but it can be more difficult to get people to cooperate over the phone.
Questionnaire/Survey – written questions are handed out, posted out, e-mailed out, or set up through a hyperlink.
Advantages – questionnaires can be sent out to large numbers of people at a relatively low cost – particularly if sent by email. They can be completed at a time that suits the customer best.
Disadvantages are that questions cannot be too detailed as they cannot be clarified by an interviewer. Many people ignore questionnaires so an incentive may be needed eg a prize draw entry.
Test Marketing – trialling a product in a restricted location or target market to get an idea of whether the product will sell before entering into mass production.
Advantage – changes may be made to the product based on feedback before a full-scale product launch.
Disadvantage – test marketing can still be costly to carry out and the findings may accurately represent the wants and needs of all possible customers.
Focus Groups – a group of customers take part in a focused discussion about the product, under the guidance of a trained interviewer.
Advantage – detailed feedback can be gathered.
Disadvantages – still need to pay an interviewer, and some people in the group may dominate the discussion.
Observation – monitoring consumer behaviour by watching eg counting people using a particular shop or product.
Advantages – it is relatively cheap to operate as a trained researcher is not needed and does not intrude on customers.
Disadvantage – information can be of limited value as it does not explore reasons behind customer behaviours.
Methods (Sources) of Desk Research
Internal desk research sources include information from sales figures gained from EPOS (Electronic Point of Sale) and loyalty cards.
This keeps track of individual customers’ shopping habits and helps the organisation adapt its marketing activities.
Other internal sources include staff reports which can give employee opinion on what is happening in the market and why.
The organisation may also review customer complaints made directly to the business to get feedback on what customers are dissatisfied with.
External desk research sources include:
Viewing competitors’ web sites to compare products and prices.
This type of research is free to access and immediately available allowing decisions to be made quickly.
Organisations will not get details on all their competitors’ decisions as not everything is on the web site.
Government statistics can provide information on income and employment levels which can help an organisation decide if, where or when to launch new products.
Information is available free of charge. Information may not be up-to-date if statistics were collected some time ago, however it should be free from bias as the government is a trusted source.
Newspaper or magazine articles can give an insight into customer preferences as they may review products and provide updates on lifestyle changes.
Information is cheap to collect but may be biased as it reflects the opinions of the writer.
On-Line Reviews – such as those posted on social media, Trip Advisor, Trust Pilot or Amazon – allow the organisation to monitor what is being said about its products and therefore can allow it to make improvements to their product, price, place and promotions.
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