1.1.2 Market Research

Market Orientation

🔗 Market orientation is when businesses do market research to develop products that focus on customer needs and preferences

Benefits and drawbacks:

• Close fit with customer expectations, high customer satisfaction
• Greater confidence that new products are meeting customer needs, responsive to consumer trends, reduces risk
• High cost of market research, opportunity cost if inaccurate
• May reduce innovation and creativity, struggle to keep up with product-orientated businesses The success of market orientation depends on the accuracy of the market research

Product Orientation

🔗 Product orientation is when businesses produce products that focus on their strengths, rather than responding to customer needs and preferences

Benefits and drawbacks:

• High-quality products
• Focusing on strengths may lead to greater innovation, could develop a product the market didn't know it wanted
• Less confident that products will be received well by customers, risk no demand for products, customers shop elsewhere where needs are met eg, market-orientated businesses.
• High costs of product development Successfulness of product orientation depends on how well-received products are by customers, despite not matching their usual needs and preferences.

🔑 Market research can be used to…

• Identify and anticipate customer needs and wants
• Quantify likely demand
• Gain insight into consumer behaviour

Primary market research

🔗 Research collected first-hand, specifically for your business

• Tailored to the needs of your business, more likely to meet customer needs
• Information is up-to-date, reduces risk
• Expensive to collect
• Time-consuming to collect The success of primary market research depends on the accuracy of the data collected, risk of wasting finance and time if the data is inaccurate.

Secondary market research

🔗 Research collected from existing sources, not specific to your business

• Cheap to collect
• Less time-consuming to collect than primary market research
• Not tailored to the needs of your business, risk of not meeting customer needs or demand being lower than expected
• May be out of date, customer needs and wants may have changed, fall behind, struggle to keep up with the competition The success of secondary market research depends on the accuracy and relevance of the data collected

Types of data collected

Quantitative Data

🔗 Research based on numerical data, such as closed-ended questionnaires

• Less time consuming to gather and analyse
• Cheaper to collect than qualitative data (e.g, a questionnaire can easily be printed and sent out)
• Unhelpful for in-depth data, more difficult to understand issues and consumer needs in-depth
• A risk that if the sample is too small and unrepresentative of the target market, results may not be valid, less reliable

Qualitative Data

🔗 Research expressed in words to collect opinions of customers, such as interviews

• More in-depth data, a better understanding of consumer needs and wants
• More expensive to collect than qualitative data (e.g, need to hire an interviewer)
• More time-consuming to collect and analyse responses
• Based on consumer opinions, risk that if the sample is too small and unrepresentative of the target market, results may not be valid, less reliable

ICT can be used to support market research

Social media

🔗 Provides interactivity between consumer and brand, helps to build a strong

relationship, higher customer loyalty

Can access consumer comments and reviews. This feedback can help the business gain a fuller understanding of customer opinions

Databases

🔗 Can generate valuable information on customer behaviour and preferences.

Market Segmentation

🔗 Dividing potential customers into different groups based on certain characteristics eg, age, gender and income.

• More likely to meet customer needs
• Make the business more efficient, resources focused on part of the market the business can succeed e.g, promotion and advertising targeted at the right customers Expensive, high costs of research and development
• Market segments are increasingly dynamic, segments may change, if data becomes outdated, easy to lose competitiveness