Marketing and market research
Marketing identifies and satisfies customer needs. Market research, segmentation and sampling help businesses understand their customers and markets.
📌 Key points
- The role of marketing is to identify customer needs, satisfy them, keep customer loyalty, build relationships with customers and gain information about them.
- Markets change because of changing consumer tastes and incomes, new technology and more competition; businesses must respond to survive.
- A mass market sells to a large number of customers, allowing high sales and economies of scale; a niche market is a small, specialised part of a market, with less competition and often higher prices.
- Market segmentation divides a market into groups of customers with similar features, e.g. age, gender, income, location and lifestyle, so products can be targeted.
- A market-orientated business researches customer needs before making products; a product-orientated business makes a product first and then tries to sell it.
- Primary research (field research) collects new data first-hand: questionnaires, interviews, focus groups, observation. It is specific and up to date but costly and slow.
- Secondary research (desk research) uses data already collected: government statistics, newspapers, the internet, trade associations and company records. It is cheaper but may be out of date or not specific.
- A sample is a group chosen to represent the target market. In a random sample everyone has an equal chance of being chosen; a quota sample picks set numbers from particular groups.
- Accuracy of research depends on sample size, how the sample is chosen, how questions are written (avoid leading questions) and the age and source of secondary data.
📖 Key terms
- Market segment
- An identifiable sub-group of a whole market in which consumers have similar characteristics.
- Niche market
- A small, usually specialised, segment of a much larger market.
- Mass market
- Where there is a very large number of sales of a product.
- Market orientation
- An approach in which a business carries out research before developing products.
- Primary research
- The collection of original data first-hand for a specific purpose.
- Secondary research
- The use of information that has already been collected by someone else.
- Focus group
- A small group of people who discuss a product or idea with a researcher.
✏️ Worked example
A business surveys a random sample of 200 adults in a town of 50,000 adults. 30% say they would buy its new smoothie. Estimate the number of potential customers in the town and comment on the result.
- In the sample: 30% × 200 = 60 people would buy.
- Scale up to the town: 30% × 50,000 = 15,000 adults.
- The sample is random, which helps it represent the town.
- But 200 is a small sample and people do not always buy what they say they will.
- Answer: about 15,000 potential customers, but the estimate should be treated with caution.
When asked about the reliability of research, mention sample size, how the sample was chosen, question design and who collected the data and when.
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