Reasons for Conducting Market Research
- Market research is the process of systematically gathering data from consumers, which can be used to influence business decisions
- It helps businesses identify products and services they can develop in response to the needs and wants of their customers.
- It enables the firm to develop the correct marketing mix
- On-going market research is especially important in dynamic markets where there is significant competition and frequent changes in customer preferences
- On-going market research is especially important in dynamic markets where there is significant competition and frequent changes in customer preferences
- Effective market research helps a business in several ways
Diagram: The Purpose of Market Research
Market research helps businesses identify customer needs and wants, recognise gaps in the market, reduce risk and investigate competitors
1. Identify and understand the future needs and wants of customers
- Market research can identify customer needs before competitors do so, allowing a business to benefit from first mover advantage
- As customer needs can change rapidly, market research can help a business avoid stocking goods that are no longer in demand
2. Recognise potential gaps in the market
- Detailed market research can identify areas of the market in which customers' needs are not yet being fully met
- Appropriate products can then be developed which precisely meet these needs, for which customers may be willing to pay a premium price
3. Reduce risk when launching new products or entering new markets
- Careful market research can clarify the features of products customers desire, the price they are willing to pay, how they respond to promotion activity and appropriate ways to distribute products
- This is likely to limit marketing mistakes, improve budget decisions and improve the chances of a successful product launch or entry into a new market
4. Investigate the potential strengths and weaknesses of competitors
- Understanding the product range, promotional methods and pricing strategies used by rivals, as well as the ways in which they interact with customers, can help a business make their own products stand out
Exam Tip
In the exam you could be asked to outline a reason why a given business might conduct market research. 'Outline' questions require the answer to be in context, so give a clear reason and relate it to the business in the question.
Example
Denhams Ltd should carry out market research to find out about the specific needs of its target market [1] so that the new product it is currently developing [1] has a greater chance of success.
