IB Business Management Unit 4/Section 4.4 Market Research

4.4 MARKET RESEARCH On completing this chapter you should be able to Analyze the primary market research methods. Comment on the secondary market research methods. Discuss the ethical considerations of market research. Distinguish between quantitative and qualitative research. Explain the various sampling methods.

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Market research Definition Market research involves gathering and interpreting data from customers and others in order to identify and satisfy the needs of customers. Why/Role: It helps to reduce the risk of product failure by helping businesses to make the right marketing decisions. Marketing decisions cannot be based on hindsight but on research.    

Other Purposes of market research Market research will provide data that can be used: To identify the current needs and wants of customers To identify new market opportunities To improve the marketing mix of existing products To decide on the appropriate mix of new products To segment the market To understand the marketing strategies of competitors

When? Market research is frequently carried out when a firm plans to launch a new product or to enter a new market. It is also conducted to make changes to existing marketing strategies.

How? Marketing research data comes in two basic forms: Primary data obtained through field research Secondary data obtained through desk research

Primary data can be gathered in 4 main ways: 1. Surveys through questionnaires 2. Interviews 3. Focus groups 4. Observations

The main sources of secondary data can be: Internal : Profit and loss accounts Balance sheet Stock records Sales statistics Customers database External: Market analyses - specialist reports - banks publications - publications by trade associations - company reports Academic journals Government publications Media and websites articles

Qualitative vs. Quantitative research Qualitative research is used to obtain information on the motivation behind consumers behavior. Example: What additional features customers would like in a product? Usually carried out through interviews or focus groups. Is subjective. Researcher is part of the process. Focus is broad. Quantitative research is used to obtain factual and measurable information which can be represented on charts Example: What percentage of the population prefers brand x to brand y? Usually carried out through surveys or observations Is objective. The researcher is separate. Focus is narrow.

Sampling methods In marketing research, it will be impossible to obtain data from everyone in the market. A sample is a small group of people to represent the population. Sampling is simply the process of selecting the appropriate sample. To make a sample we need a sample frame and decide on a sample size. A sample frame is a list of all members of the target population together with their different characteristics. Sample size is the number of people to be included in the survey.

Stratified Random sample In a random sample every member of the population has an equal chance of being selected. Under the stratified method, the population is subdivided into segments or strata. A random sample is then chosen from each strata in the same proportion as the population. For example: if a manufacturer knows that his sales are 40% from area A, 35% from area B and 25% from area C, then the sample must obtained respondents from each area in the same proportion in random way .

Non-random sample A non-random sample is one where every member of the population does not have an equal chance of being selected. Some characteristics are missing in the sample. Non-random sampling include: Quota sampling Cluster sampling Snowballing

Quota sampling Quota sampling involves dividing a population into segments with similar characteristics (e.g. sex) and then interview everyone in the segment up to a quota (a target number of people). Example: In a school with 200 boys and 300 girls, a researcher may target 20 boys and 30 girls to interview without considering other characteristics.

Cluster sampling Cluster sampling is used when the population is too dispersed and getting feedback from respondents involves too much time, or money. Therefore a few areas or clusters are chosen (e.g. north and west only). A sample in each chosen cluster is selected and interviewed.

Snowballing Snowballing refers to surveys or interviews carried out with individuals who then suggest other names to increase the sample, with a snowball effect. This is common in financial services, insurances and other services where the population is unknown

Convenience sampling Convenience sampling is a technique where respondents are selected based on their easy access and proximity. Example: a researcher may interview the first ten customers coming out of a supermarket to make a sample. A student may choose ten classmates to make a sample. It is the fastest way of sampling. It is far from representing the population.