Target Market and Market Research (Junior Cert Business Studies): Revision Notes
Market Research
What is market research?
When businesses want to launch a new product or service, they need to understand their customers first. This process of finding out what customers want, need, and prefer is called market research.
Market research is the process of collecting, recording, and examining information about consumer wants and needs. It involves gathering data from both potential and existing customers to help businesses make informed decisions about their products or services.
Market research helps businesses discover valuable information such as:
- Which products or services customers currently use
- What customers like and dislike about existing offerings
- How much customers are willing to spend on new products
- How frequently customers would purchase or use new products
- Customer opinions about proposed new products or services
This information allows businesses to develop products that better meet customer needs, increasing the chances of commercial success.
Types of market research
There are two main approaches to conducting market research, each with distinct advantages.
Desk research
Desk research, also called secondary research, involves examining information that already exists from various sources. Businesses can access data from the internet, published reports, books, and government organisations. For example, the Central Statistics Office conducts a population census every five years, providing valuable demographic information.
Modern businesses might also examine social media platforms and online customer reviews to understand what people think about competitor products. This approach allows companies to gather background information quickly and cost-effectively.
Field research
Field research, also known as primary research, involves collecting fresh information directly from the target audience. Businesses use various methods including observation, consumer interviews, surveys, questionnaires, and focus groups.
The key advantage of field research over desk research is that it provides current, specific information tailored to the business's particular product or service and target market. This makes the data more relevant and actionable for decision-making.
Conducting field research
Selecting a sample
When conducting field research, businesses work with a group of people called the sample. This group must accurately represent the target market for the product or service being researched.
The sample size needs to be large enough to provide reliable insights. For instance, if Supermac's wanted to research a new menu item for teenagers aged 13-15, surveying only five teenagers wouldn't provide sufficient data to understand the broader market's preferences.
If the target market is diverse, the sample must reflect this diversity. For example, when researching a new fitness app, the sample should include people of various ages, backgrounds, and fitness levels to ensure comprehensive market understanding.
Asking questions
Once researchers select their sample, they must carefully design questions to gather useful information. Poor questioning can result in products that fail to meet market needs.
Open questions
Open questions allow respondents to express their own views and provide detailed opinions.
Worked Example: Open Question
"What features would you find most valuable in a new banking app?"
This question allows customers to suggest specific features like budgeting tools, instant notifications, or biometric security, providing rich insights for product development.
Advantages of open questions:
- Can generate useful suggestions for product improvements
- Allow customers to express thoughts freely
- Provide rich, detailed feedback
Disadvantages of open questions:
- Responses are difficult to convert into charts and graphs
- Results don't provide easily measurable data
- Harder to analyse statistically
Closed questions
Closed questions require specific answers, typically yes/no responses or choosing from given options.
Worked Example: Closed Questions
"Would you use a contactless payment feature? Yes or no?"
"How much would you pay for premium app features: €2, €5, or €10 per month?"
These questions provide clear, measurable data that can be easily analysed and compared.
Advantages of closed questions:
- Provide data that can be easily represented in charts and graphs
- Results can be analysed statistically
- Allow for clear comparisons, such as "70% of respondents would pay €5 for premium features"
Disadvantages of closed questions:
- Don't allow respondents to elaborate on their answers
- May not capture the full range of customer opinions
- Can limit the depth of feedback received
Effective surveys typically combine both open and closed questions to gather focused, measurable data while also capturing detailed market opinions.
Benefits of market research
Market research provides businesses with valuable insights that support better decision-making. The main benefits include:
Understanding customers
Market research helps businesses identify who their customers are, what influences their purchasing decisions, and what they value most. This knowledge is essential for creating products and services that truly meet customer needs.
Through market research, businesses can also identify different market segments - groups of consumers with similar characteristics, needs, or behaviours. This segmentation allows companies to develop targeted marketing strategies for each specific group.
Market segmentation involves dividing a larger market into smaller groups based on shared characteristics, needs, or behaviours. This helps businesses better understand customer preferences and create tailored marketing approaches.
Some businesses focus on niche markets - highly specific, specialised segments with unique requirements.
A niche market is a specialised segment targeting customers with very specific needs, preferences, or characteristics. For example, Aran Sweater Market focuses on the niche market of traditional Irish knitwear enthusiasts.
Identifying opportunities
Market research helps businesses spot gaps in the market, emerging trends, and new customer needs. This information enables companies to develop innovative products or improve existing offerings, and to establish their unique selling point.
A unique selling point (USP) is a special feature or benefit that distinguishes a product or service from competitors. For example, Kerrygold butter uses its grass-fed Irish cows as a USP to stand out from other butter brands.
Reducing risks
By gathering information about market conditions, competition, and consumer preferences, businesses can make more informed decisions. This reduces the risk of launching unsuccessful products or services that customers don't want.
Improving marketing strategies
Understanding customer preferences and behaviour enables businesses to develop more effective marketing approaches. Market research provides insights into how to reach and engage the target market more successfully.
The target market consists of people who the business specifically aims to sell its products or services to. These individuals share similar characteristics, needs, and preferences. For example, TikTok targets young people who want short-form entertainment content.
Key Points to Remember:
- Market research involves gathering and analysing customer information to make better business decisions
- Desk research uses existing information sources, while field research collects new data directly from customers
- Effective sampling requires groups large enough and diverse enough to represent the target market accurately
- Combining open and closed questions provides both detailed insights and measurable data
- Market research helps businesses understand customers, identify opportunities, reduce risks, and improve marketing strategies