3.2.1 Methods of Market Research – Why Businesses Use Market Research
Purpose / Role of Market Research
Market research provides the information a business needs to make informed decisions. Each purpose is linked to a functional area of the company.
- Identify customer needs and preferences – guides product development (Operations).
- Assess market size and growth potential – informs strategic planning (Management).
- Test the feasibility of new products or services – reduces the risk of product failure (R&D).
- Monitor competitor activity and market trends – shapes competitive strategy (Marketing). Example: A soft‑drink company withdrew a planned launch after research showed a rival’s new sugar‑free range would dominate the same market segment.
- Support pricing, promotion and distribution decisions – aids finance (pricing), marketing (promotion) and logistics (place).
- Reduce the likelihood of costly mistakes – improves overall business performance.
Primary vs. Secondary Research
Primary research collects data that does not already exist. It is chosen when existing information does not answer the specific decision‑making need.
Secondary research uses information that has already been published. It is useful for background, benchmarking or when time and budget are limited.
| Research Type |
Definition |
Typical Methods (examples) |
Benefits (pros) |
Limitations (cons) |
| Primary – Qualitative |
New, non‑numerical data that explores attitudes, motivations and feelings. |
Focus groups, in‑depth interviews, participant observation. |
Deep insight; flexible; can uncover hidden reasons. |
Time‑consuming; small samples; results may be subjective. |
| Primary – Quantitative |
New, numerical data that can be statistically analysed. |
Online/postal questionnaires, telephone or face‑to‑face surveys, structured interviews. |
Measures trends; large, representative samples; objective results. |
May miss underlying reasons; can be expensive for very large samples. |
| Secondary – Qualitative |
Existing non‑numerical information such as opinions, descriptions or case studies. |
Industry reports, expert commentaries, case studies, trade‑magazine articles. |
Quick, inexpensive; broad perspective; useful for background. |
May be outdated, biased, or not specific to the business. |
| Secondary – Quantitative |
Existing numerical data that can be analysed statistically. |
Government publications, online databases, commercial market‑research reports, trade statistics. |
Cost‑effective; often large data sets; good for benchmarking. |
Limited control over relevance, accuracy and timeliness. |
Sampling – Why a Sample is Needed & Common Issues
- Most markets are too large to survey every individual; a sample provides a manageable, cost‑effective way to obtain information.
- Random sampling – each member of the population has an equal chance of being selected; gives the most reliable results.
- Convenience (or judgment) sampling – selects respondents who are easy to reach; quicker but can introduce bias.
- Sample size must be large enough to give a reliable margin of error.
Rule‑of‑thumb: for a 95 % confidence level with a 5 % margin of error, a sample of ≈ 384 respondents is sufficient for an infinite population; smaller populations require a slightly lower figure.
- Potential sources of bias: non‑response, leading questions, unrepresentative sample.
Factors That Influence the Accuracy of Data
Use this checklist when planning or evaluating research:
- ✓ Question wording – avoid ambiguous or leading phrasing.
- ✓ Respondent honesty – consider social desirability bias.
- ✓ Timing of data collection – watch for seasonal or economic cycles.
- ✓ Source reliability – prefer up‑to‑date, reputable publications.
- ✓ Method of administration – face‑to‑face, online, telephone may yield different results.
Presenting & Interpreting Research Findings
Examiners look for clear, correctly labelled visualisations.
- Bar chart – compare quantities (e.g., preference for three product colours).
- Pie chart – show proportion of a whole (e.g., market‑share percentages).
- Line graph – illustrate trends over time (e.g., sales growth).
- Table – give exact figures for quick reference.
Labeling tip: every chart must have a concise title, clearly labelled axes (including units), and a legend if more than one data series is shown.
Example interpretation (bar chart): A bar chart shows that 60 % of 200 respondents prefer a low‑sugar version of a drink, 25 % prefer the regular version and 15 % have no preference.
Conclusion: The business should develop a low‑sugar variant and allocate most of its marketing budget to promote it.
Steps in the Market‑Research Process
- Define the research problem and objectives. What decision will the research inform?
- Choose the most appropriate research method(s). Primary vs. secondary; qualitative vs. quantitative; sampling technique.
- Design the research instruments. Draft questionnaires, interview guides or observation checklists.
- Collect the data. Conduct surveys, interviews, or retrieve secondary sources.
- Analyse the data and interpret the findings. Use statistical tools, charts and graphs to identify patterns.
- Present the results and make recommendations. Summarise key points, link to business decisions and suggest actions.
Mini flow‑chart placeholder: Problem → Method selection → Instrument design → Data collection → Analysis → Recommendations.
Linking Research to the Four Ps of Marketing
| Marketing Decision (4 Ps) |
Typical Research Required |
How the Findings are Used |
| Product |
Customer‑needs surveys, focus groups, product‑concept testing. |
Identify features, design specifications and potential improvements. |
| Price |
Price‑sensitivity studies, willingness‑to‑pay questionnaires. |
Set a price that maximises profit while remaining acceptable to customers. |
| Promotion |
Audience‑segmentation research, media‑usage surveys, ad‑recall tests. |
Choose the most effective advertising channels and craft messages that resonate. |
| Place (Distribution) |
Location analysis, retail‑outlet surveys, logistics questionnaires. |
Decide where to sell the product and which distribution partners to use. |
Mini‑case (new beverage launch): A company wants to introduce a flavored sparkling water.
- Product: Focus groups reveal a strong preference for citrus flavour and recyclable cans.
- Price: A price‑sensitivity survey shows most target customers are willing to pay £1.20 per can.
- Promotion: Media‑usage data indicate Instagram and TikTok are the best channels for the 18‑30 age group.
- Place: Retail‑outlet surveys show supermarkets in urban areas have the highest footfall for similar drinks.
Evaluation of Research Methods – Benefits and Limitations
When answering exam questions, always discuss both sides and finish with a short judgment.
Template:
- Benefit: What does the method enable the business to achieve?
- Limitation: What practical or reliability problem could affect the results?
- Overall judgment: Summarise when the method is most suitable and when it should be avoided.
Example – Online Survey (Primary‑Quantitative):
- Benefit: Fast collection of large samples at low cost; easy to analyse with software.
- Limitation: Excludes people without internet access; risk of low response rates and self‑selection bias.
- Overall judgment: Suitable for tech‑savvy target markets and when speed is essential, but not ideal if the product also targets older or low‑internet users.
Practice Items (AO2 / AO3)
- Sample‑size calculation: A company needs a 95 % confidence level with a 5 % margin of error for a market of 10 000 potential customers. Using the rule‑of‑thumb (≈ 384 for an infinite population) and the finite‑population correction, calculate the required sample size.
Answer outline: n = (N × 384) / (384 + N – 1) = (10 000 × 384) / (384 + 9 999) ≈ 370 respondents.
- Chart interpretation: The bar chart below shows the proportion of respondents who would buy a new smartwatch at three price points: £199 (40 %), £249 (35 %), £299 (25 %). What recommendation should the business make?
Answer outline: Recommend setting the price at £199 to maximise market uptake, while noting that a £249 price still captures a substantial share and may increase profit per unit.
Summary
Market research is essential for reducing risk, spotting opportunities and shaping the four Ps of marketing. By selecting the appropriate primary or secondary method, using a suitable sampling technique, ensuring data accuracy, and presenting findings clearly (with proper labels), businesses can turn information into effective strategic decisions.