Conducting different types of market research can help the business to effectively reduce risks.
As a strategic planning tool for marketers, market research is the process of investigating data, information, insights, opinions, beliefs and preferences of existing and potential customers.
It is done to design and manufactures goods and services to fulfill human needs and wants.
Different types of market research
The following four types of market research can be used to answer questions such as:
- Are customers likely to buy the product?
- Which market segments are interested in purchasing the product?
- How much are customers willing to pay for it?
- How often are they likely to purchase the product?
- Which brands do customers see as being rivals to the marketed product?
- What are the most effective methods of promotion?
- Where and how should the products be sold?
Despite the limitations of market research results, it is extremely useful for sales forecasting and identifying future market trends.
1. Primary Market Research & Secondary Market Research
This classification is about time when data and information were collected. Market research can be conducted in two broad ways as primary market research and secondary market research.
A. Primary Market Research
Primary research (field research) collects new data for the first time. This primary data gives up-to-date information to answer the business’s specific research purpose. Primary market research is especially useful for businesses in fast changing industries such as daily fashion or consumer electronics.
Common methods of primary market research include:
1. Questionnaire / Survey, e.g. surveying customers what features of the product they like the most and the least.
2. Interview, e.g. interviewing people on the streets about their opinions about local dining facilities.
3. Observation / Tracking, e.g. looking at the customers’ shopping patterns.
4. Focus group, e.g. meeting in the room with employees to discuss how they feel about the working environment.
Additionally, a business can also use some other research methods such as:
5. Consumer panel, e.g. taking to a selected group of current customers about their opinions on products.
6. Test marketing, e.g. a chain of coffee shops replacing plastic straws with paper straws only in one country instead of globally.
7. Experimentation, e.g. trying to invent new drinks with better taste but using less raw materials.
8. Case Study, e.g. to fully understand the outcomes of the new marketing strategy and depict its impact on the firm.
Advantages of primary market research include:
- The answers are relevant to the research purpose.
- New data and information are collected so it is up to date and unique as no other business had conducted identical research in the past.
- Confidential as no other business organizations have access to the research.
Disadvantages of primary market research include:
- It is time-consuming as preparing questions and carrying out the research itself will take much time.
- Costly, especially when the sample size is large and research must be done face to face.
- There are always issues with validity of insights as not all respondents tell the truth.
B. Secondary Market Research
Secondary research (desk research) gathers second-data that already exists. This secondary data and information have already been collected by someone else – usually another company for a different research purpose.
Common methods of secondary market research include:
1. Financial reports, i.e. Cash Flow Statement, Profit and Loss Account (P&L), Balance Sheet.
2. Industry trade information.
3. Market analyses / Market intelligence reports.
4. Government publications & Government statistics.
5. Media articles.
6. Academic journals.
7. Market research agencies.
8. Internal company documents.
9. Information from competitors.
10. The Internet.
Advantages of secondary market research include:
- It is faster as time only needs to be spent on finding the right publication.
- Much cheaper than primary research. There are always issues with validity of insights as not all respondents tell the truth.
- It is more accessible as more sources are publicly available to anybody, so managers can see a bigger picture.
Disadvantages of secondary market research include:
- It is out of date as data and information were collected some time ago already – there is a time gap between collecting the information and when it is published.
- The answers may be irrelevant, incomplete or inappropriate for the research purpose.
- Widely available to others as every business organization on the market can have access to the research.
2. Quantitative Market Research & Qualitative Market Research
This classification is about type of data and information. In addition to classifying market research as primary or secondary, qualitative market research or quantitative market research can also be used.
A. Quantitative Market Research
Quantitative research (numerical) relies on very larger number of responses from the population to get numerical answers. This factual and measurable data and information can be statistically analyzed to be presented in tables, charts, graphs, etc. Closed-ended questions are often used about company products, customers, markets and competitors.
Common methods of quantitative market research include:
- Closed questions from surveys / questionnaires. Allowing respondents to choose from the list, e.g. gender, age, income, true or false questions, single-choice questions, multiple-choice questions, rankings or sliding scales whether they agree or disagree.
- Data from secondary market research.
Advantages of quantitative market research include:
- Provides lots of quantitative data to analyze such as market share, sales levels, profitability, income levels, etc.
- Easy to analyze results because findings can be collected as numbers and presented visually.
Disadvantages of quantitative market research include:
- Not much flexibility because pre-written questions are used.
- Numbers not always tell the whole story.
The advantages and disadvantages of quantitative market research are the opposite of those for qualitative methods, as outlined above.
B. Qualitative Market Research
Qualitative research (non-numerical) relies on getting non-numerical answers such as opinions, beliefs, feelings, attitudes or perceptions. Open-ended questions are often chosen to find out motivations behind customers’ buying behaviors, statements regarding they choices of particular products or employees’ views on a certain matter.
Common methods of qualitative market research include:
- In-depth interviews.
- Focus groups.
Advantages of qualitative market research include:
- Excellent choice for exploring the driving forces and restraining forces behind the behavior and attitudes of customers.
- Provides rich qualitative information and extra follow-up questions can be asked inexpensively.
- Can help generate honest answers from respondents, especially during one-on-one interviews.
Disadvantages of qualitative market research include:
- Findings do not represent the whole population because of small sample size. Hence, further research might be necessary.
- Very time-consuming to conduct the research and interpret subjective findings. It may also be expensive in case hiring skilled interviewers is necessary.
- Poor validity of findings due to intended or not-intended bias, therefore the whole research.
The advantages and disadvantages of qualitative market research are the opposite of those for quantitative methods, as outlined above.
3. Ad Hoc Market Research & Continuous Market Research
This classification is about frequency of collecting data and information. Market research can itself be divided into ad hoc market research and continuous market research.
A. Ad hoc Market Research
Ad hoc research (once) takes place only when it is necessary to solve a very specific marketing problem or an issue in a business organization. This one-off research tends to be quick and very narrow only for a strictly-defined purpose.
B. Continuous Market Research
Continuous research (ongoing) takes place on a regular basis either weekly, monthly, quarterly, semi-annually or annually. This ongoing research tends to be regular hence costly as it requires following up on government statistics about the economic situation or researching the industry to compile analytical reports.
4. Internal Market Research & External Market Research
This classification is about origin of data and information. Market research can include both internal market research and external market research.
A. Internal Market Research
The data and information come from the company’s own records such as internal company documents including existing market research reports, sales figures, reports from the sales people, Annual Reports (Cash Flow Statement, Profit & Loss Account, Balance Sheet), data from customer services, etc.
B. External Market Research
The data and information come from information available publicly either paid or free-of-charge including financial reports, market analyses, government publications and government statistics, media articles, market intelligence reports, academic journals, etc. Also, from any externally purchased information from market research agencies.
In summary, different types of market research present multiple benefits to a business organization including improving marketing strategies which are crucial for differentiated marketing, assessing customer reactions by testing new product on a small group of customers, understanding of rivals or predicting the future as to understand the likely trends to react accordingly.
