11 Researching the market with a limited budget - the purpose and methods of market research

10/10 key term test on market research

1. Market research - research that enables a firm to find out about its market, its customers and its potential customers
2. Primary research - gathering new information specifically for the purposes identified by the business
3. Secondary research - research that uses information that has already been gathered for another purpose
4. Internet survey - using information published on the Internet to gather information about the market for a firms product's or services.
5. Telephone survey - a series of set questions delivered over the telephone to customers as a method of primary research
6. Supplier feedback - gathering information from companies that supply products or services on their forcast of what is likely to happen in the markets in the future
7. Customer feedback - formal or informal responses from customers about the product or service offered by the business i.e. on experience of recent visit to hotel or restaurant
8. Focus group - a small selection of customers approx (8-10) invited to an in depth discussion about their feelings towards a companies products or services  
9. Questionnaire - a selection of questions designed to discover what customers and potential customers think about the product or service. These can be asked face to face, over the phone, be completed by the customer or posted out randomly to households in a certain post code
10. Marketing mix - The four major variables for which decisions must be made when marketing a product or service.  The information that is collected from the market research will determine what these decisions are

In the news The Vegetarian Society can be found here What help do you think organisations can give to particular businesses? Read the article here If you were setting up a food business what information from this would be useful to you?  

Market research 

• purpose - to find out if a product or service or idea is viable in the market.  It is important that the business does not confuse promotion with research.  Research requires feedback in other words there must be a response in terms of data collected.  Handing out flyer's or putting up posters is promotion.  Secondly both sides of a market need researching:
• looking at demand: if there is high demand for a good or service, it is likely that there are already many competitors.  If research shows good levels of demand and few competitors, then there is a gap in the market.
• looking at supply: if there are few or no competitors in a market, this could mean that there is a gap in the market.  Equally it could mean that there is little demand.  It could also mean that the existing businesses are able to stop others from entering the market.  Maybe they have all the supply tied up? Or are able to keep customers loyal?
• methods A small business is limited in the market research it can carry out.  It would be pointless (and expensive) for example, to conduct a survey in several cities.  To find out about the supply side, the business could use the local telephone directory and other directories to see if competition existed.  It could also obtain information from its suppliers ( a supplier survey) to find out who else they supplied and to see if any of these were local and likely to be competitors.  It could also use Internet search engines.  If competitors are found this does not mean that there is no room for the business and a visit to a competitor could give good information about the best way to compete.  Finding out the DEMAND is harder.  This is because to be accurate the research needs to target the right customers.  One method could be to telephone a selection of customers ( a telephone survey) but they would need help in identifying who to telephone.  Other methods could include door to door surveys or approaching people on the street where they intend to locate the business.
• new technology Small businesses have the problem of a limited budget for research and a difficulty in targeting it effectively.  New technology can be a great help in collecting information and keeping down costs. professional market research information is available on the Internet but it is costly to collect and present. The small business can however carry out competitor surveys using Internet search engines.  It can also for free visit the websites of competitors to compare prices, product ranges, special offers etc.  Research will be much more accurate if competitors websites are actually visited.  The business can then see exactly what is offered, how it is priced, and judge levels of customer service.  
• continuing research - Market research should continue once the business has started trading.  It helps the business to decide not only what to sell but also what direction its products should take.  What changes or developments should attract customers and or help the business to compete more effectively.  Comment sheets should be used for customers to give feedback.  By collecting customers email addresses companies can carry out email surveys at a fraction of the cost.

Did you know? That there is a difference between data and information.  Data is raw facts, figures etc.  Information is when this data has been turned into a form that can be easily understood. 

Group activity

Web based activity Reviews of V2Go in Manchester (and other restaurants) can be read here How helpful do you think such review sites are to the business, to other customers, to competitors? Would such reviews form part of market research?

Discussion Draw up a map of your local village centre or shopping centre.  Shade in the different types of businesses, e.g. hairdressers, newsagents, estate agents, different types of retail outlets.  Decide what you think is missing from the area and would therefore be a good business to set up. Try to convince the other members of your class or group that this is a good business idea for the area by collecting appropriate evidence.

Summary 

• Market research is used to find out if a product will sell
• Market research needs to look at possible demand and at competition
• Research may be either primary (first hand) or secondary (already published)
• Small businesses can carry out only limited market research
• Some research information, such as directories, is freely available.
• New technology can help small businesses to find out about competition
• Research needs to be ongoing, to check if customer demand or competition is changing 

Researching the market -  typical exam questions

1. What is the purpose of market research?
2. What are the TWO general areas that should be researched?
3. Suggest three ways for a small business to carry out research.
4. What could a business research using the Internet?
5. Name one problem that small businesses have with market research?
6. Give TWO circumstances where a business should carry out market research.
7. What is meant by 'primary' research?
8. Give three examples of primary research methods
9. What is meant by 'secondary' research?
10. Give one example of secondary market research that is free. 

Extension Worksheet  - market knowledge click here

Nine mark questions