Market research is the process of systematic gathering, recording and analyzing of data about customers, competitors and the market. Market research can help create a business plan, launch a new product or service, fine tune existing products and services, expand into new markets etc. It can be used to determine which portion of the population will purchase the product/service, based on variables like age, gender, location and income level. It can be found out what market characteristics your target market has. With market research, companies can learn more about current and potential customers.We can split it into:
- Priamry research;
- Secondary research;
- Purpose;
- Sampling methods.
Primary research is research that's tailored to a company's particular needs. By customizing tried-and-true approaches — focus groups, surveys, field tests, interviews or observation — you can gain information about your target market. For example, you can investigate an issue specific to your business, get feedback about your Web site, assess demand for a proposed service, gauge response to various packaging options, and find out how much consumers will shell out for a new product.
Secondary research is based on information gleaned from studies previously performed by government agencies, chambers of commerce, trade associations, and other organizations. This includes Census Bureau information and Nielsen ratings.
Although secondary research is less expensive than primary research, it's not as accurate, or as useful, as specific and customized research. For instance, secondary research will tell you how much teenagers spent last year on basketball shoes, but not how much they're willing to pay for the shoe design your company has in mind.
The purpose of market research is to help companies make better business decisions about the development and marketing of new products. Market research represents the voice of the consumer in a company.
Sampling methods - within any of the types of frame identified above, a variety of sampling methods can be employed, individually or in combination.
-Random sampling. Also known as probability sampling, every combination of items from the frame, or stratum, has a known probability of occurring, but these probabilities are not necessarily equal. With any form of sampling there is a risk that the sample may not adequately represent the population but with random sampling there is a large body of statistical theory which quantifies the risk and thus enables an appropriate sample size to be chosen. Furthermore, once the sample has been taken the sampling error associated with the measured results can be computed. With non-random sampling there is no measure of the associated sampling error. While such methods may be cheaper this is largely meaningless since there is no measure of quality. There are several forms of random sampling. For example, in simpl random sampling, each element has an equal probability of being selected. It may be infeasible in many practical situations. Other examples of probability sampling include stratified sampling and multistage sampling.
-Systematic sampling. Selecting (say) every 10th name from the telephone directory is called an every 10th sample, which is an example of systematic sampling. It is a type of nonprobability sampling unless the directory itself is randomized. It is easy to implement and the stratification induced can make it efficient, but it is especially vulnerable to periodicities in the list. If periodicity is present and the period is a multiple of 10, then bias will result. It is important that the first name chosen is not simply the first in the list, but is chosen to be (say) the 7th, where 7 is a random integer in the range 1,...,10-1. Every 10th sampling is especially useful for efficient sampling from databases.
-Convenience sampling. Sometimes called grab or opportunity sampling, this is the method of choosing items arbitrarily and in an unstructured manner from the frame. Though almost impossible to treat rigorously, it is the method most commonly employed in many practical situations. In social science research, snowball sampling is a similar technique, where existing study subjects are used to recruit more subjects into the sample.
-Sample size. Where the frame and population are identical, statistical theory yields exact recommendations on sample size. However, where it is not straightforward to define a frame representative of the population, it is more important to understand the cause system of which the population are outcomes and to ensure that all sources of variation are embraced in the frame. Large number of observations are of no value if major sources of variation are neglected in the study. In other words, it is taking a sample group that matches the survey category and is easy to survey
A list of questions that can be answered through market research:
- What is happening in the market? What are the trends? Who are the competitors?
- How do consumers talk about the products in the market?
- Which needs are important? Are the needs being met by current products?
A simple example of what market research can do for a business is the following. At the company Chevrolet they brought several disciplines together in a cross-functional team to develop a concept for a completely new Corvette. This team enabled the marketers to come up with an alternative concept, one that balanced 4 attributes: comfort and convenience, quality, styling, and performance. This was considered radical because comfort and convenience were not traditional Corvette values. However, market research demonstrated that consumers supported the alternative concept. As a result the new Corvette was a huge success in the market.
With market research you can get some kind of confirmation that there is a market for your idea, and that a successful launch and growth are possible.
