Chapter 5

Conducting start-up market

research

Chapter 5
In this chapter we will look at market
research for start ups with limited budgets
Sources of secondary and primary data
Sampling methods
Qualitative and quantitative data

Learning Objectives
At the end of this chapter you will be able to
Explain the different methods of secondary and
primary research available and realise that limited
resources will determine what data is collected and how
it is collected
Understand the benefits of various methods of
collecting market research and that limited resources will
lead to a less than perfect picture of the market
Explain the differences between qualitative and
quantitative data and how they are likely to be collected
Analyse how sampling can be used effectively and the
factors behind sampling decisions
Evaluate the usefulness of various research methods
for small business start-ups and be able to make justified
recommendations on the most appropriate market
research strategy in a given situation.

Setting the Scene

Read Star Financial Services
Discuss points 1 & 2 in pairs
Class discussion

Start-up market research

Having a passion and
knowledge is good but not
good enough
There needs to be
evidence of demand
Gathering evidence can
be costly and money is in short
supply in the beginning
Have to balance the need for
data and the cost
Entrepreneur decision - do I
use data that exists
(secondary) or collect data that
is specific to my purpose
(primary)? often best to have
both
No perfect data but some is
better than none!

Serial entrepreneur
and Dragons Den investor
Peter Jones says that many
small business owners fall short
when it comes to appreciating
the importance of research.
The biggest cause of
business failure at the
moment isnt that theyre
struggling for cash and
working capital, its a lack of
research, says Jones.
You need to have the right
research before you launch a
business, and actually, if you
have an incumbent company
thats been growing, a lot of
people dont focus on the key
things that can improve a
business.

Secondary market research data

An existing company will have lots of existing info
but a start-up will not therefore they will need to do
some research using sources like
Phone book
Trade associations
The Chartered Institute of Marketing
Chambers of Commerce
Enterprise Agencies
Business Link
The trade press
Surveys and directories held on web sites
such as the Institute of Directors
Competition
Other information to understand the economy,
and the demographics of the country or region
include
Government publications such as the National
Statistics online
Can be purchased from companies that
specialise in collecting and analysing market
information e.g. Mintel and Dun and Bradstreet

Secondary market
research data: data that
already exists that has
not been collected
specifically for the
purposes of the
entrepreneur

 Insert table 7.1 P34 marcouse

Primary market research data

If an entrepreneur wants
detailed, precise information
about the market it will need to
be collected specifically for that
purpose
Because he is unlikely to be
able to afford to pay for a
company to do this he may have
to do this himself
A couple of decisions have to
be made
Who shall I collect the
information from?
How shall I collect the
information?

Primary market research data:

data collected by the
entrepreneur, or paid to be
collected, which does not
already exist
Applying real life examples when
discussing the theory will get
you that A grade!
When Toyota launched its MR2
sports car it was very successful
except in France. When they did
some research (which they should
have done before the launch!) they
found out that MR2 is pronounced
Em-Er-Deux (like the French word
Merde!)

Primary market research data Who?

Ideally it would be everyone but they are unlikely to
have the resources, time and skills so a choice has to be
made to sample select a proportion of those people
that could be researched
Random sample selecting respondents to ensure
that everyone in the population has an equal chance of
being interviewed
Research companies will do the following
Pick names at random from the electoral register
(e.g. every 50th name)
Send an interviewer to the address given in the
register
If the person is out they will visit 2 more times and
then give up
This is effective but slow and expensive
A small start up would be unlikely to use this
method

Primary market research

data Who?
Quota sample the characteristics
of the market are mirrored in the
sample
In this example the chocolate
company has decided to survey 200
people
In general 60% of the chocolate
market is made of women
Therefore 60% of the 200 (120) will
be women
The other 40% will be men
This method allows interviewers to
head for the high street and interview
whoever comes along (they just have
to meet their quota)
This is relatively cheap and
effective and is more likely to be used
by start-ups

Giftag Chocolate Box was set up by

former printer Graham Golisti and his
wife Jane and opened in Thirsk
September 2009.
Despite difficult economic conditions the
business has proved successful with its
'Killer Heel' chocolate shoes proving a
big hit with customers.

Primary market research data Who?

Stratified sample this involves interviewing only those with a key
characteristic
Producers of Olay may decide only to interview women between the age of
30-45 because they are the age of their typical customer
The research company would select all the women on the electoral list
They would then randomly select a sub group of those that were 30-45

Factors affecting choice of

sampling methods
Available finance any marketing is likely to be low
cost or free
The nature of the product
it may be easier to research attitudes to
existing products that people know about than
those that are new.
Products may be easier to research than
services because there is something physical to
try out.
Local products will be easier to research than
larger geographical areas
Level of risk the newer the product the greater
the risk (but perhaps higher reward). The greater the
risk the more need for research and for accurate
outcomes
The target market a clearly defined target market
in terms of age, income etc will make it easier to
decide how to sample

Primary market research data

How?
Observation an entrepreneur could just
stand in the competitors environment and
watch the customers behaviour
IT if the business was an existing company
they could use records of sales, loyalty card
systems etc
Written questionnaires
Benefit easy to distribute using email
Disadvantages
this method is over used and people
dont tend to respond in great numbers
It is very difficult to write good
questions must not be leading
Responses dont tend to give extra
information

Primary market research data

How?
Face to Face questionnaires difficult
and time consuming but good information
can be gained
Telephone surveys again good info
gained and much cheaper and quicker
than face-to-face
Focus groups
can be good if a groups through discussion
may reveal info and opinions that individuals
may not have thought about.
Good for uncovering the psychology of
buying e.g. peer influences and image.
Danger in drawing conclusions and applying
them to the whole market

Test Marketing selling a product in a

small segment of the market before
expanding can give good information but
is probably not feasible for a start up

Quantitative and Qualitative data

Some data collected will be
numerical that can be used to create
statistics Quantitative
Other data collected will be opinions,
attitudes and feelings Qualitative
Quantitative methods
questionnaires, telephone surveys,
online surveys (good for establishing
key information about a business and
its market). Reveals what is
happening.
Qualitative methods in-depth
interviews, group discussions (more
difficult and expensive but revealing).
Reveals why it is happening.
Eight out of 10 cats prefer Whiskas
this is quantitative information (if they
found out why the other 2 dont then
they would have qualitative info)

Watch video - always ask your

customer! Lord Karan Bilimoria

Application
Read Bladonmore case study P31
Q1, 2 and 3 - Make notes
Class discussion

Learning Objectives did we achieve them?

At the end of this chapter you will be able to
Explain the different methods of secondary and primary
research available and realise that limited resources will
determine what data is collected and how it is collected
Understand the benefits of various methods of collecting
market research and that limited resources will lead to a less
than perfect picture of the market
Explain the differences between qualitative and quantitative
data and how they are likely to be collected
Analyse how sampling can be used effectively and the
factors behind sampling decisions
Evaluate the usefulness of various research methods for
small business start-ups and be able to make justified
recommendations on the most appropriate market research
strategy in a given situation.

Talkabout Market Research

Pick a name out of the hat that person leaves
the class room
Class thinks of 10 things that person should
mention in their 60 seconds of talkabout
Whilst the speaker talks the class listens for terms
and makes a note of the ones that were mentioned
Rate that person out of 10 (the number of terms
achieved)