The Purpose Of Market Research aqa

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Exam code:8132

Why carry out market research?

Market research is the process of systematically gathering data from consumers, which can be used to inform business decisions
- It helps businesses identify products and services they can develop in response to the needs and wants of their customers
- It can establish the level of demand for its products
- It can determine the level and nature of competition in the target market
- It enables the firm to develop the correct marketing mix
  - On-going market research is especially important in dynamic markets where there is significant competition and frequent changes in customer preferences

The purpose of market research

1. Identify customer needs and wants

Market research can identify customer needs before competitors do so, allowing a business to benefit from first mover advantage
As customer needs can change rapidly, market research can help a business avoid stocking goods that are no longer in demand

2. Recognise gaps in the market

Detailed market research can identify areas of the market in which customers’ needs are not yet being fully met
Appropriate products can then be developed which precisely meet these needs, for which customers may be willing to pay a premium price

3. Reduce risk when launching new products or entering new markets

Careful market research can clarify the features of products customers desire, the price they are willing to pay, how they respond to promotion activities, and the best ways to distribute products
This is likely to limit marketing mistakes, improve budget decisions and improve the chances of a successful product launch or entry into a new market

4. Investigate the potential strengths and weaknesses of competitors

Understanding the product range, promotional methods and pricing strategies used by rivals, as well as the ways in which they interact with customers, can help a business make their own products stand out

Quantitative and qualitative research

Market research data can be quantitative or qualitative
- Quantitative data is based on numbers and could include financial reports (e.g. sales, costs), market data (e.g. markets share) or summaries of data gained from primary research (e.g. on a scale of 1-10 rate our customer service)
- Qualitative data gathers descriptions or explanations based on conversations, discussions, impressions, and emotional feelings and is usually gathered through primary research

Limitations of quantitative and qualitative data

Limitations of quantitative data	Limitations of qualitative data
Numerical data may be out-of-date, especially in dynamic markets Data analysis and interpretation is a complex skill that is likely to be lacking in smaller businesses Looking at a small amount of data and then extrapolating results can provide wrong assumptions on which to base decisions Numerical data does not provide reasons for outcomes e.g. data may reveal sales volumes are falling, but not the reason for the decline	Bias may mean that analysts can interpret responses in a particular way Respondents may lack awareness or language skills to explain preferences accurately Respondents in focus groups may be influenced by the responses of others, or not provide accurate information Qualitative data is difficult to present in graphs and charts so may not be easily understood

Limitations of quantitative data

Limitations of qualitative data

Numerical data may be out-of-date, especially in dynamic markets
Data analysis and interpretation is a complex skill that is likely to be lacking in smaller businesses
Looking at a small amount of data and then extrapolating results can provide wrong assumptions on which to base decisions
Numerical data does not provide reasons for outcomes e.g. data may reveal sales volumes are falling, but not the reason for the decline

Bias may mean that analysts can interpret responses in a particular way
Respondents may lack awareness or language skills to explain preferences accurately
Respondents in focus groups may be influenced by the responses of others, or not provide accurate information
Qualitative data is difficult to present in graphs and charts so may not be easily understood

Examiner Tips and Tricks

In the exam, you could be asked to explain a reason why a given business might conduct market research. ‘Explain’ questions require the answer to be developed, so give a clear reason and develop the impact. You will not be given any marks for defining market research.

Example

Denhams Ltd should carry out market research to find out about the specific needs of its target market [1] so that the new product it is currently developing has a greater chance of success [1].

Business GCSE AQA