Market Research
What Is Market Research?
Market research is how businesses find out what customers want, what rivals are doing and how big the market really is. Without it, decisions are guesswork. With it, a business can launch products, set prices and design adverts based on what real people actually do and say.
The specification requires you to know three things research collects: demand (how many people will buy), competition (who else is selling and how) and the target market (who the customer really is). Tesco is a masterclass here — its Clubcard scheme collects data from millions of shoppers every week, telling Tesco which products are selling, which adverts worked and where to open the next store.
Market research collects information about three things: demand, competition, and the target market. It helps businesses identify opportunities and understand customers and rivals better.
Primary Research
Primary research is brand-new information that the business collects itself. It is gathered for a specific purpose, so it is relevant and up to date — but it takes time and money to collect.
Questionnaires & surveys — a set of written questions sent online, by post or handed out in the street. They can reach large samples quickly and the answers are easy to count, but written questions cannot probe feelings deeply.
Interviews — a one-to-one conversation between a researcher and a customer. They produce rich, detailed answers but are slow and expensive, and the interviewer can unintentionally lead the answers.
Focus groups — a small group of 6–10 target customers discusses a product while a researcher listens. Honest reactions are captured, but one loud voice can dominate and bias the result.
Secondary Research
Secondary research uses information already out there — someone else collected it first. It is fast and cheap, but it may be out of date or not quite fit the question the business is asking.
Typical sources include internet research (competitor websites, review sites, social media), government statistics (Office for National Statistics), market reports from firms like Mintel, and printed press such as newspapers and trade magazines. A new coffee shop could spend ten minutes on Google Maps counting rivals before paying a researcher to count them in person.
Qualitative vs Quantitative
Qualitative research gathers opinions, feelings and reasons — why customers buy, how they feel about a brand. Interviews and focus groups produce qualitative data. It is rich and detailed but hard to turn into a graph.
Quantitative research gathers numbers — how many people, how much they spend, how often they buy. Large-scale questionnaires and sales data produce quantitative data. It is easy to plot on charts and compare across segments, but it does not explain why.
Good businesses use both. A Tesco Clubcard shows what customers buy (quantitative); a focus group explains why they switched to a rival (qualitative). Together, the two answer the full question. Netflix does the same thing: its servers log which shows are watched and for how long (quantitative), while surveys and small viewer panels explore why people cancelled their subscription (qualitative). Netflix then commissions new shows based on both data sets — a decision worth hundreds of millions of pounds needs more than one angle.
Research also has limits. Sample size matters — a survey of 30 people is too small to trust. Sampling bias distorts the result — asking shoppers outside Waitrose will not tell you what Aldi shoppers think. Questions can be leading (‘don’t you agree our product is great?’). And customers sometimes lie about what they would buy, especially on price or ethics. A business that does not check these issues can make a costly decision based on flawed data.
Qualitative research explains why (opinions, feelings) — collected through interviews and focus groups. Quantitative research answers how many (numbers, statistics) — collected through large questionnaires and sales data.
Market Size and Market Share
Market size is the total value or volume of sales in a market — e.g. the UK coffee shop market is worth around £5 billion per year. Market share is the slice of that market one business controls. Both are calculated using data that market research provides.
The formula is: Market share (%) = (business sales ÷ total market sales) × 100. If Costa’s UK coffee sales are £1.1 billion and the total coffee shop market is £5 billion, Costa’s market share is (1.1 ÷ 5) × 100 = 22%. Tracking market share over time tells a business whether it is winning or losing compared with rivals, which is more useful than just looking at sales on their own. If Costa’s sales rise 3% but the market grows 10%, Costa is actually losing ground — rivals like Caffè Nero and Pret A Manger are growing faster.
Turning Research Into Decisions
Research is worthless unless a business uses it. Good firms link every research finding to a decision. Greggs famously spotted a trend for vegan food through social media listening and survey data — the result was the vegan sausage roll launched in 2019, now one of their best-selling lines. Research identified the market opportunity; the launch was the decision that used it.
Research also helps interpret tables and charts. A business may see a bar chart showing that 18–24 year-olds buy most of its products online, while over-50s prefer in-store. The decision that follows might be: push online promotions at younger shoppers, and keep printed catalogues for older ones. This kind of data-led segmentation flows straight into the marketing mix we covered last lesson.