Market research involves gathering and analysing data from the marketplace (i.e. from consumers and potential consumers) in order to provide goods and services that meet their needs.
This is research designed to gather primary data, that is, information which is obtained specifically for the study in question. It can be gathered in three main ways - observation, questionnaires and experimentation.
Observation involves watching people and monitoring and recording their behaviour (e.g. television viewing patterns, cameras which monitor traffic flows, retail audits which measure which brands of product consumers are purchasing).
Questionnaires are a means of direct contact with consumers and can take a variety of forms. Personal questionnaires (such as door-to-door interviewing), postal questionnaires, telephone questionnaires and group questionnaires (such as asking for the attitudes of a group of consumers towards a new product). Questionnaires can be a very expensive and time-consuming process and it can be very difficult to eliminate the element of bias in the way that they are carried out. It is important that every respondent must be asked the same questions in the same order, with no help or emphasis being placed on certain questions / responses.
Experimentation involves the introduction of a variety of marketing activities into the marketplace and then measuring the effect of each of these on consumers. For example, test marketing, where a new product is launched in a small, geographical area and then the response of consumers towards it will dictate whether or not the product is launched nationally.
This is the collection of secondary data, which has previously been collected by others and is not designed specifically for the study in question, but is nevertheless relevant. Secondary data is far cheaper and quicker to gather than primary data, but it can be out-of-date by the time that it is researched. The main sources of secondary data are reference books, government publications and company reports.
The primary and the secondary research will provide the business with much data relating to its markets and its consumers. This data can then be used to describe the current situation in the marketplace, to try to predict what will happen in the future in the marketplace, and to explain the trends that have occurred.
The business may also use the market research data to segment the market. This involves breaking the market down into distinct groups of consumers who have similar characteristics, so as to offer each group a product which best meets their needs. The main ways of segmenting a market are:
By consumer characteristics: this involves investigating their attitudes, hobbies, interests, and lifestyles.
By demographics: their age, sex, income, type of house, and socio-economic group.
By location: the region of the country, urban -v- rural, etc.
Effective segmentation of the market can lead to new opportunities being identified (i.e. gaps in the market for a product), sales potential for products being realised and increased market share, revenue and profitability.
Quantitative vs Qualitative research