Benefits And Drawbacks of Market - Essay Example

The purpose of the market research is to gather helpful information that can be used to solve marketing problems the new products might encounter. Market research is especially encouraged at the initial stage of product introduction. The most valuable information is gathered through market surveys in order to develop the market segmentation and product differentiation. Market information can be gathered through primary and secondary research, qualitative and quantitative research. Each method has advantages as well as disadvantages and as the practice proves it is irrelevant to claim that one method is better than the other – the choice depends on the company size, available funds and the product itself. Secondary Research Secondary research is the easiest and the cheapest way to collect information that already exists. For example, valuable information can obtained from a study, articles, statistical data that was already gathered by somebody else. If the car producer is considering introducing the new model to market, the demographic data about the car owners in the particular region can be enough. The most widespread secondary research activities include review of existing data available from magazines, books, and other publications, evaluation of competitors, social, economic and political factors can be taken into account as well. There is no specific method to collect secondary information because it already exists. The major effort is dedicated to location and gathering of the information about the market from reliable sources. The secondary information can be gathered from the following resources (Birn, 2002, p. 19-22): libraries, business publications, magazines and newspapers, reports of trade associations, seminars on the current trends, local marketing departments (sometimes valuable information can be gained from marketing students), local chambers of commerce, bans and insurance companies (statistics), manufactures (industry standards), governmental information about the population, media representatives, competitor’s brochures and menus of products, small business administration officers, and so on. There are two major advantage of the secondary research – time and money saving. The time saved for company is obvious because it is necessary to locate the provider of the data only rather than performing the research. Even though someone still has to invest time to do the screening of the existing data, the total time is still less. The money is saved because of five reasons (Patzer, 1995, p. 4-5): Multiple buyers (associated costs are shared among all users) Government subsidies (taxes from revenue sources underwrite the generating of government sponsored information) Association dues (membership dues underwrite trade association information) Market sources (provides of information compete with each other to provide the best price) The cost is lower due to experience factors and economies of scale associated with performing larger quantities of research. However, there are three disadvantages as well: recency, relevance and accuracy. When introducing the new product it is desired to have recent, relevant and accurate information while with the secondary research it is hard to reach this objective. Individuals who gather secondary information lack control over the data. For example, when Guinness Brewing Company was considering entering the new market (Hong Kong) the major information was collected through secondary research – they benefited because all necessary information was easy to locate, but they confronted the detriments of using secondary data because it appeared that most of the collected information was not accurate (Patzer, 1995, p. 32). The company was looking for the answers to the following questions: how much beer is consumed in total, what brand is preferred, what are the market shares of different brands and so on. Primary Research It happens that the information the company is looking for is not present anywhere – Internet, library, databases and so on. If it happens, there is the need to conduct the specific primary research. Primary research activities include conducting the surveys to create the information (questionnaires, focus groups, and interviews), first hand observations, experiments. Each methodology uses sampling – making conclusions about the particular group of people with certain degree of accuracy (Birn, 2004, p. 67). The samples does not need to be of a large size (for example, one percent of the target market) is often enough and can provide highly reliable results if analyzed by experienced researchers. When conducting primary research two types of information can be gained – exploratory and specific. Exploratory research is more applicable to the new products because it is open ended and helps to define the specific problem though unstructured interviews from the small group of people. Specific research is broader and is used to solve the existing problem identified through secondary research. Specific research is more expensive but provides more detailed information. Primary research can either quantitative or qualitative: Qualitative research Qualitative research is gathering of the opinions and behaviours of the targeted market segment. This technique is used to collect the following information: background, concepts and positioning of the product, identification of the attitudes shared by the market group, selecting the variables, defining the problem, providing the direction for further questionnaire development. The most common qualitative research techniques are personal interviews and focus groups. Personal interviews are conducted on face-to-face basis and are based on the unstructured survey, the questions are open ended and extensive probing, sometimes the interviews are recorded on the audio tape and last for one hour or less, it is enough to interview up to 50 target group representatives to collect the necessary information. Focus groups consist of 10-15 people and are led by the moderate who has the script, the discussion is recorded and the meeting lasts up to 2 hours, minimum of two groups are selected for each target market (Mariampolski, 2001, p. 115). The key factor is group dynamics. The advantage of the qualitative research is that it is conducted with flexible format and participants can give their opinion and feedback without being limited by the number of choices. The key disadvantage is high costs and most of the start-up businesses are not able to afford this technique to collect the data. However, there are several methods to reduce the cost: conducting qualitative research via Internet or online focus groups and feedback forms. For example, if the set of the focus group would costs more than 10,000 dollars, the online focus group is much more economic. The principles taken for basis is chat session – the experienced moderate leads the group through a pre-set discussion questions and the participants still get paid for their responses. If the company cannot afford the professional service it is possible to conduct the focus group through setting up the chat room and inviting the participants. It happens that people are wiling to share their opinion even for free. Feedback forms are one of the simplest and cheapest ways to collect information about the product and the market in general. For example, visitors can be asked for opinion about the product, the company operations as well as for suggestions on how to improve and what they want to get. Quantitative research Qualitative research is more preferred by the companies because it helps to collect more valid market information. Qualitative research is used to obtain reliable samples for future trends, to prove a theory and minimize the risk. The most qualitative techniques are personal, telephone and mail surveys. Each of these methods has advantages and disadvantages; however, all of them are much cheaper than qualitative research and provide highly reliable information. When the personal survey is conducted the interviewer can observe the reactions, clarify the questions. It is possible to choose location and time for gathering information more flexibly while the percentage of completed surveys is relatively high (Billson, 2004, p. 97). Moreover, interviews can use visual aids and there is the possibility for sampling control. However, it is still quite costly, time consuming and might contain interviewer biases. Telephone surveys are faster and have lower costs than personal surveys; there is a small response bias and possibility for wider geographic reach. However, the length of the survey is limited and it is hard to reach some groups of people, it is difficult to discuss some topics and is still more expensive than mail surveys. When conducting the phone surveys there is the number of procedures to follow to gather more helpful information: at the beginning of the conversation the interviewer should confirm the name of the respondent and avoid long pauses because the interviewed person will lose the interest. The follow up calls should be possible if additional information is required (McQuarrie, 2005, p. 185). Speed is another advantage of phone surveys and it possible to conduct up to ten interviews per hour. Mail surveys are much enjoyed by small companies when they just enter the market and want to gather primary information about the preferences of people. Mail surveys have wide distribution and low costs, the interviewer bias is completely eliminated, and respondents are guaranteed in their anonymity and can answer the survey at any time (Hague, 2004, p. 19). However, the accurate lists are not always available and responses provided does not always fit the target population, the length of the survey is very limited and is not timely, it is impossible to clarify the questions, there is the question order bias present and this technique does not guarantee a specific total sample. In conclusion, when conducting the mail surveys the costs are associated with printing of questionnaires and time taken to analyse the responses. When choosing telephone surveys the company should be ready to pay for phone charges, interviewer’s time and presentation of the results. Personal interviews have the same costs plus payment to interviewee. Group discussion is the most expensive because the payment needs to be done both to interviewer and the group members. Word Count: 1611 References Billson, JM 2004, The Power of Focus Groups--A Training Manual for Social, Policy, and Market Research: Focus on Health (Qualitative Research), 2nd edn, Skywood Press. Birn, RJ 2002, The Handbook of International Market Research Techniques, 2nd edn, Kogan Page Press. Birn, RJ 2004, The Effective Use of Market Research: How to Drive and Focus Better Business Decisions (Market Research in Practice), 4th edn, Kogan Page Press. Hague, P, Hague N & Morgan, CA 2004, Market Research in Practice: A Guide to the Basics (Market Research in Practice), new edn, Kogan Page Press. Mariampolski, H 2001, Qualitative Market Research: A Comprehensive Guide, SAGE Publications. McQuarrie, EF 2005, The Market Research Toolbox: A Concise Guide for Beginners, 2nd edn, SAGE Publications. Patzer, GL 1995, Using Secondary Data in Marketing Research: United States and Worldwide, Quorum Books. Read More