LESSON 2: MARKET RESEARCH

MARKET RESEARCH

This simple reminder must keep the entrepreneur alert all the time. The entrepreneur
should exert all efforts to know the market he or she wants to exploit. The more you know about
your market, the better you will be able to determine customer needs and wants. You will be able
to research them wherever they are. This can possible through conducting a good market
research.

Basic Questions that you must aske in preparation for any major market research:

A. WHY: Purpose and objective for conducting the market research

B. WHAT: Determines the scope and the limitations of the market research to be
conducted.
C. WHICH: Determines which segment of the market must be studied; this must be the
market segment that the entrepreneur is eyeing.
D. WHO: Identifies who among the members of the selected market segment will
participate in the market research
E. WHEN: Determines the time and timing of the research. This is critical for entrepreneurs
whose product or service will be offered to a time constrained market such as office
workers.
F. WHERE: Pinpoints the relevant location of the market research
G. HOW: Determines the methodology to be used for the market research (e.g, survey,
focus group discussion, observation)

Market research involves two types of data:

a. Primary information. This is research you compile yourself or hire someone to gather

for you.

b. Secondary information. This type of research is already compiled and organized for

you. Examples of secondary information include reports and studies by government
 agencies, trade associations or other businesses within your industry. Most of the research
you gather will most likely be secondary.

When conducting primary research using your own resources, first decide how you'll
question your targeted group: by direct mail, telephone, or personal interviews.

If you choose a direct-mail questionnaire, the following guidelines will increase your
response rate:

a. Questions that are short and to the point (preferably answered by yes or no)

b. A questionnaire that is addressed to specific individuals and is of interest to the

respondent

c. A questionnaire of no more than two pages

d. A professionally-prepared cover letter that adequately explains why you're doing this
questionnaire (if surveys will be given to professionals, experts, or busy people of high
profile)

e. A postage-paid, self-addressed envelope to return the questionnaire in. Postage-paid

envelopes are available from the post office (if surveys will be given to professionals,
experts, or busy people of high profile)

Market Research Methodologies

Important market information can only be obtained by conducting a good market

research. The more the entrepreneur knows about his or her relevant market, the more customers
can be properly segmented and reached, products can be positioned, brands can be promoted,
prices can be set, and can be pinpointed. Entrepreneurs and investors do not want to put
resources in unknown markets. Good market research allows entrepreneurs and investors to
make wiser decisions.

In order to aid the entrepreneur in gathering relevant market information, there are
several market research methodologies using scientific approaches that can be employed.

Market Research Methodologies:

1. Sales Data Mining: the data can logically be arranged chronogically known as data
array. After arraying and classifying data, the researcher can now do a frequency
distribution and construct frequency table.

In market research, there are three commonly used graphs:

A. Histogram or bar graph. Consists of a series of rectangles or “bars’’. Each bar is

proportional in width to the range of values within a class and proportional in height to the
number of items falling in a class.
B. Frequency polygon. Constructed by marking the frequencies on the vertical axis with a
dot corresponding to the values on the horizontal axis. These dots are the connected with a
straight line to form a polygon.

C. Pie chart. It is a circular graph divided into sections that represent the relative
frequencies or magnitudes of the grouped values.

2. Focus Group Discussion: one of the most common qualitative research tools. It is
effective in extracting consumer and non-consumer experiences regarding products, places or
programs. This method can also be used for generating initial insights.

FGD can be used to address substantive issues such as:

a. Understanding consumers’ perceptions, preferences, and behavior concerning a product

category;
 b. Obtaining impressions on new product concepts;

c. Generating new ideas about older products;

d. Developing creative concepts and copy material for advertisements;

e. Securing price impressions; and

f. Obtaining preliminary consumer reaction to specific marketing programs.

The FGD is an interview by a facilitator of a small group of people that normally lasts for
an hour and a half up to three hours. The participants are selected because of their knowledge
about the topic. The objectives must be clear and precise. It takes a great deal of planning from
the researcher’s end to ensure that objectives set are met.

There are four key decisions to be made:

1. Respondent selection. which includes:

a. The definition of respondents;

b. The classification of respondents; and

c. The screening of respondents.

2. Sample size

3. Data gathering. Methods in FGD involve:

a. The selection ad preparation of the venue and equipment;

b. The formulation of the discussion agenda; and

c. A facilitator who is very skilled in moderating and possesses the ability to draw
out significant insights from the participants.

4. Data analysis. Which includes:

a. The integration of the information gathered;

b. Some observations on respondent behavior; and

c. Listing of recommendations and report writing.

Steps in conducting a focus discussion:

1. Develop the research objectives. What is the research all about?

2. Determine the participants’ profile. Who are the most knowledgeable or most relevant
participants?

3. Determine the appropriate token or “compensation” for the participants.

4. Develop a participant screener questionnaire.

5. Recruit the participants.

 6. Select a good facilitator. The key qualities of a good facilitator are:

a. Kindness with firmness

b. Involvement and encouragement

c. Complete understanding

d. Flexibility

e. Sensitivity

7. Develop a facilitator’s discussion guide.

8. Arrange for the venue and logistics.

9. Analyze the results of the focus group discussion.

In analyzing FGD, the researcher should compare and contrast all points raised by the
different respondents and note from what point of view they are coming from. The researcher
must summarize the points where the participants strongly agreed upon or disagreed on about an
issue. The researcher must also write down quotations that seem particularly relevant to his or
her identified objectives and must group similar comments together in order to identify
participants’ preferences.

In the final analysis, the objective of the FGD must be addressed and conclusive insights
must be drawn to help the entrepreneur improve his or her business. Insighting is needed after
the results of the FGD have been documented to generate superior ideas or modify existing ones.

3. Observation Technique: Probably one of the best ways of gathering data about
customers in their natural setting without having to interact or talk to them. One has to simply
observe people as they go about their usual activity such as buying and using products and
services and assess how they behave.

Observation must be documented and tallied for proper analysis. Prior to doing the
observation, it is important for the researcher to ensure that the following conditions are met:

1. The needed information must be observable or inferable from the behavior that can be
observed.

2. The subject matter contains some sensitivity that needs detached observation.

3. The behaviors of interest must be repetitive, frequent, or predictable in some manner.

4. The behaviors of interest must be of relatively short duration.

Advantages of Observation research

1. It allows the researcher to see what customers actually do rather than rely on what they
say and they do.

2. It allows the researcher to observe customers in their natural setting.

3. It does not subject the researcher to the unwillingness of customers or their inability to
reply to certain questions.
 4. Some information is better gathered quickly and accurately through observations.

Disadvantages of Observation Research

The researcher can only see the outside behavior of the customer, but cannot determine
the inner motivation of the customer.

1. The researcher cannot get the reasons behind the behavior.

2. The researcher can only focus on the “here and now”. It cannot cover the past nor cover
the future.

3. Finally, the observation technique may border on the unethical because the respondents
have not agreed to be observed.

The different types of observation techniques:

a. Human observation: humans observe the events as they happen

b. Mechanical observation: mechanical devices are used to record events for later
analysis.

4. Survey Research: The most preferred instrument for in-depth quantitative research. The
respondents are asked a variety of questions which are often about their personal information,
their motivations and their behavior. Surveys can be conducted via telephone, personal (face-to-
face interview), and mail interview (either printed or electronic mail). Probably the most popular
type of survey research is the Usage, Attitude, and Image (UAI) survey, which is intended to
derive market awareness, market size and share, product usage and preference, customer interest,
and customer image.

IMPORTANT CONCERNS THAT ONE HAS LOOK INTO IN PLANNING A SURVEY:

A. SAMPLING TECHNIQUES. Classified into:

a. Probability Sampling: where the respondents are randomly selected from a population
such as in the lottery method.

b. Non-probability Sampling: the technique that is resorted to “when it is difficult to

estimate the population of the study because they are mobile or transitory in a given
location”. This renders the characteristics or profile of a group that is difficult to
generalize. Some of the different types of non-probability sampling are convenience
sampling, purposive sampling, quota sampling, and snowball sampling.

B. GETTING THE SAMPLE SIZE. The three basic sample size determinants are as follows:

a. Data variability of a proportion: dispersion of the data or how widely spread the data is
from a central point.

b. Confidence level in the estimation process: the higher the confidence level desired, the
bigger the sample size needed; the current industry standard has 95% confidence level.

c. Error in the result of the estimation process: the less error margin desired, the bigger is
the required sample size; it is expressed as plus or minus (+/-) a certain percentage.
C. DESIGNING THE QUESTIONNAIRE. Here are some basic rules that have to be followed
in question formulation:

a. The questions, in their totality, should be able to elicit all necessary information required
in the research.

b. Each question should be clear and definite.

c. Each question should cover one topic at a time.

d. Each question should be presented in a neutral manner.

e. Each question should be translated into the dialect that the target respondents are familiar
with.

EVALUATION:

Instruction: Arrange the data by completing the tables given in the separate answer
sheet. Please detach the answer sheet and submit.

CASE STUDY: Selling Hotdog: A researcher observed and recorded the following data in
a store selling hotdogs. (Answer the tables in the answer sheet)

1. Boy, aged 10, bought two hotdogs at 2pm

2. Girl, aged 8, bought one hotdog at 4pm.
3. Man, aged 26, bought 3 hotdogs at 1pm.
4. Couple, man and wife, aged about 30, bought 2 hotdogs at 8 am.
5. Boy, aged 14, bought 6 hotdogs at 3pm.
6. 3 girls, aged about 18, bought 6 hotdogs at 6pm.
7. Girl, aged 5, asked mom to buy her one hotdog at 11 am. Mom aged 27, bought one for
herself.
8. Twin boys, aged 7, asked their older brother to buy them four hotdogs at 12 noon. Older
brother, aged 14, bought 2 hotdogs for himself.
9. 2 teenagers, boy and girl, aged about 15, bought 2 hotdogs at 1pm.
10. Five children (two girls, 3 boys), about 9 years old, bought 5 hotdogs at 12 noon.
11. Man, aged 27, bought 2 hotdogs at 9am.
12. Woman, aged 30, bought 3 hotdogs at 10 am.
13. 3 boys, aged 13, bought five hotdogs at 4pm.