Market Research

This section explains market research covering, product and market innovation, primary and secondary market research data, the limitations of market research, the use of ICT to support market research and market segmentation. 

Product and Market Orientation

Product Orientation: A product-oriented approach focuses primarily on the quality, features, and innovation of the product. Businesses that adopt this strategy believe that customers will naturally prefer their product, assuming that the product itself is of high quality or is innovative enough to create demand. For example, businesses like Apple focus heavily on the features and design of their products, assuming that customers will desire the product based on its inherent characteristics.

Market Orientation: A market-oriented approach, on the other hand, prioritises understanding and meeting the needs and wants of customers. Companies that are market-oriented focus on customer feedback and market trends to drive product development and marketing strategies. They research and adapt to changes in consumer preferences, aiming to meet customer demands and deliver value. For example, companies like Tesco gather customer insights to offer products tailored to specific customer needs, such as offering more plant-based options as demand for such products increases.

Primary and Secondary Market Research Data

Primary Market Research (Field Research): Primary market research involves gathering new, first-hand data directly from sources such as customers, focus groups, surveys, and interviews. This data is highly relevant and specific to the business’s needs, and it can help to identify and anticipate customer needs and wants, quantify likely demand, and provide insights into consumer behaviour.

• Quantitative Data: This refers to numerical data that can be used to quantify demand and customer preferences. It is typically gathered through surveys, questionnaires, and polls that allow businesses to collect measurable data, such as how many customers prefer a particular product or how much they are willing to pay for it.
• Qualitative Data: This refers to descriptive data that provides insights into consumer opinions, attitudes, and motivations. This type of data is often collected through interviews, focus groups, or open-ended survey questions. It helps businesses understand the "why" behind consumer behaviour, such as why a customer prefers a certain brand or what factors influence their purchasing decision.

Secondary Market Research (Desk Research): Secondary market research involves collecting data that has already been gathered and published by others. This could include industry reports, academic research, government statistics, or data from market research firms. Secondary research is useful for gaining general insights about the market or industry and can help businesses to identify trends, estimate the size of a market, or understand broader consumer behaviour patterns.

• Secondary Quantitative Data: This can include existing market reports that provide numerical data such as market size, sales figures, and demographic breakdowns of consumers.
• Secondary Qualitative Data: This may involve analysing case studies, reviews, and articles to understand customer perceptions, trends, and opinions.

Purpose of Market Research

• Identify and Anticipate Customer Needs and Wants: Market research helps businesses understand what customers want, what drives their purchasing decisions, and how their needs change over time.
• Quantify Likely Demand: By using primary and secondary research, businesses can estimate how many customers are likely to purchase a product and at what price.
• Gain Insight into Consumer Behaviour: Market research offers businesses an in-depth understanding of consumer behaviour, including factors like motivations, preferences, and how customers interact with brands and products.

Limitations of Market Research, Sample Size, and Bias

Limitations of Market Research: While market research is essential for understanding customers, it has several limitations:

• Costly and Time-Consuming: Primary research, particularly, can be expensive and take a significant amount of time to collect and analyse.
• Accuracy: Even well-designed research may not always provide accurate results, especially if the data is not properly analysed or if the sample size is too small.
• Changing Market Conditions: Consumer preferences and market conditions can change rapidly, so research findings may become outdated quickly.

Sample Size: The sample size refers to the number of people or units included in a survey or research study. A small or unrepresentative sample size can distort the findings and lead to inaccurate conclusions. For instance, surveying only a small group of customers may not provide a true reflection of the wider market.

Bias: Bias occurs when the data collected is not representative of the entire market, leading to skewed results. This can happen in various ways:

• Sampling Bias: If the sample is not diverse or representative of the target market, the results may not reflect the broader customer base.
• Response Bias: This happens when participants answer questions in a way that they think is socially acceptable or desirable, rather than honestly. For example, customers may exaggerate their satisfaction or purchase intentions in a survey.

Use of ICT to Support Market Research

Websites: Many businesses use websites as a tool for conducting market research. Websites can provide valuable data about customer behaviour, such as:

• Tracking user visits, time spent on pages, and what products customers are looking at or purchasing.
• Conducting surveys or collecting customer feedback via online forms.
• Offering product reviews and ratings, which can provide insights into consumer opinions and preferences.

Social Media: Social media platforms like Facebook, Instagram, TikTok, and LinkedIn provide a wealth of data and insights for businesses. By monitoring online conversations and engaging with customers, companies can:

• Analyse customer sentiment and feedback through comments and interactions.
• Run targeted ads and track engagement to understand which messages resonate with the audience.
• Use social listening tools to monitor trends and track competitors.

Databases: Databases contain structured and organised information that can help businesses with market research. Companies can access customer databases to segment customers, track buying patterns, and identify trends. Data from CRM (Customer Relationship Management) systems can offer insights into customer preferences, purchasing history, and demographics, allowing businesses to personalise their marketing efforts and target the right audience.

Market Segmentation

Market segmentation is the process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into sub-groups of consumers based on some type of shared characteristics. Businesses use market segmentation to tailor their products and marketing strategies to meet the specific needs of different customer groups.

Types of Market Segmentation:

Demographic Segmentation: Dividing the market based on demographic factors like age, gender, income, education, occupation, and family size.

• Example: A company may market luxury cars to high-income individuals and budget cars to middle-income families.

Geographic Segmentation: Segmenting the market based on location, such as region, city, or climate.

• Example: A clothing brand may offer heavier coats in colder regions and lighter fabrics in warmer areas.

Psychographic Segmentation: Dividing the market based on lifestyle, values, interests, and attitudes.

• Example: A fitness brand may target customers who are health-conscious and interested in wellness.

Behavioural Segmentation: Based on consumer behaviour such as purchasing habits, product usage, and brand loyalty.

• Example: A company might target frequent buyers with loyalty programmes or special offers.

Benefits of Market Segmentation

• Helps businesses focus their marketing efforts on the most profitable and relevant customer groups.
• Allows for the development of targeted products that meet specific customer needs.
• Improves customer satisfaction and loyalty by providing tailored offerings.

This guide provides a comprehensive understanding of the role of market research in business decision-making. Market research is essential for identifying and meeting customer needs, understanding market dynamics, and adapting to changing consumer preferences. Using both primary and secondary data, businesses can gain valuable insights to support effective marketing strategies and enhance their competitive edge.