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In order to make sure that it is doing the right things, a business will carry out market research. Now that we have looked at the purpose of this research, we will move on to explore how to carry out this research and the various methods that may be used. The two main types of research are primary and secondary, with the majority of businesses using a combination of the two in order to plan new activity.
Primary market research
Primary research is when you collect information yourself. It is called primary because it has not been collected previously by someone else. Types of primary research include:
- Observations – businesses will record the interactions they have with customers and look at ways that these can be improved. They may also observe the methods of other businesses and look for ways that they can work with customers in order to meet their needs.
- Surveys and questionnaires – asking existing or potential customers their opinion is very important when carrying out market research on customers’ needs. This will require the business to ask specific questions and gather feedback that will inform its decisions in the future.
- Focus groups – focus groups are small groups of people that are invited to discuss a potential new product or service. The researcher will then record the responses of each individual in order to understand if the product is understood and will be popular with the intended customer
- Experimentation and testing – testing and experiments are most popular as a form of research with innovative products. A small batch of goods might be created (these are called ‘prototypes’) which are then tested in a variety of situations. Products might be tested for their quality, durability, safety or features
Primary research can have many different advantages. Firstly, it can be done in any manner that the business sees as appropriate with questions and analysis specifically designed to test the individual products that a company offers. Some of the drawbacks are that it can be expensive, time-consuming and hard to ensure that answers are gathered fairly. Since a business is biased when it comes to its own products, questionnaires can often contain leading answers, focus groups made up of people that do not cover the whole population and observations interpreted in a way that is good for the business. All of these things can lead to research that is unreliable and expensive.
Secondary market research
Secondary research (also known as desk research) is when data that has already been collected is used to inform a decision. This means that information is gathered from sources (these can be inside the business or outside) that has been collected previously for a different purpose. This information has not been collected specifically for the market research currently being carried out but can still be vital when making decisions. Typical types of secondary research include:
- Using resources to gather data – the internet is one of the main resources now used in secondary research. This allows a business to research what is already on the market, the demand for products, what its competitors offer and the key features of other products or services. Some other resources that can be used include business directories, magazines, newspapers or reviews by customers
- Market reports – finding reports that contain information on different markets can be great sources of data. These can be free but can also be purchased and will help a business to understand the demand for goods and what companies already operate in the market.
- Financial data – information can be gathered about running and manufacturing costs for new ventures, returns that other companies have seen and the prices that are charged for similar items
- Information the business already has – many businesses will carry out primary research. In the future, this research may be used again for another purpose. Since the data was not specifically collected for this new purpose, it is now secondary research. However, this information can still be very useful to inform business decisions
Secondary research is usually easy to carry out and cheap (often it is free) for a business. The time taken to collect this type of research is often much less than with primary research. There are several drawbacks to consider though – one of the main ones being reliability. Because the research has not been conducted by the researcher personally, it is hard to know if the data is accurate, as there could be other factors that had an influence over results. Businesses can also run into issues with secondary research as the data that is needed might not be available. This will mean that the company might be unable to carry out this method of research or that it has to use data that is not right for the situation.
Collecting and using data
Data comes in many different styles. Understanding the types of data and how each should be used is key to getting the most from information that is gathered.
Qualitative and quantitative data
All data can be split down into two categories: qualitative and quantitative. The difference between the two is that qualitative data is information that cannot necessarily be counted. It includes opinions and attitudes that are hard to count and focuses on finding trends, since a number cannot be assigned to this type of information.
Quantitative data can be counted easily. This type of data will include a lot of numbers such as the number of people who answered ‘yes’ to a question, the breaking point of a prototype during product testing or the number of potential customers in a market. This type of data can be used to create graphs and charts; making it easier to spot trends and form opinions.
Customer contact when collecting data
When collecting data, a business must work with customers to ensure that information collected is accurate. It is customers that keep a business making money so they must be fully understood to ensure products are desirable. The way that customers work with companies changes over time and the rise of social media has changed the way data is collected massively. Using social media sites, businesses can generate reviews and collect data in a way that is quick and easy for customers. Doing this means that the amount of data collected is much wider and people are more likely to be honest since data is not collected face to face. However, since younger people use social media more, data collected can be skewed and not reflect the full range of customers that a company has.
Data reliability
When information is collected by a company, it simply must be accurate. If data is unreliable then business decisions could be made based on this information with catastrophic consequences. Basing a business decision on incorrect data will dramatically decrease the chances of the change being a success. Incorrect data that influences a business decision may include:
- Opinions from customers that have not been truthful
- Poor estimations of financial data
- Not accounting for all costs or possible earnings
- Using a data collection method that is biased
- Using data from secondary research that is incorrectly collected
All information that is collected should be thoroughly checked by a business to ensure it is valid. Many businesses have made errors in the past due to information being incorrect and invested heavily in something that seems like a good idea, only to find out later that the information they initially collected was incorrect.
