Reducing Launch Failure: Launching a new product involves significant financial commitment; research clarifies if there is sufficient level of demand to justify the investment. By understanding how customers might respond to specific promotional activities or pricing strategies, a firm can avoid costly marketing mistakes.
Evidence-Based Budgeting: Market research data helps managers allocate resources more effectively by showing which market segments offer the highest potential return. This improves the accuracy of budget decisions and increases the probability of a successful market entry or product expansion.
Limiting Uncertainty: While research cannot eliminate risk entirely, it provides a clearer picture of the likely reactions to business changes. This allows for a more cautious and calculated approach to business growth and strategic shifts.
Understanding Rival Strategies: Investigating the strengths and weaknesses of competitors helps a business understand the level and nature of competition. Researching a rival's product range, pricing points, and promotional methods provides a benchmark for a firm’s own performance.
Creating Differentiation: By knowing what competitors are doing, a business can develop unique selling points (USPs) to make their own products stand out. This strategic insight ensures that the firm's marketing efforts emphasize benefits that the competition does not currently provide.
Monitoring Market Share: Research identifies the proportion of total market sales held by different businesses. This helps a firm gauge its own success relative to others and identify which rivals are gaining or losing influence.
Focus on Impact: When an exam question asks why a business should carry out market research, do not just define it; explain the impact on the business. For instance, instead of just saying "to identify needs," explain that this allows the firm to "develop products that customers are more likely to buy, thereby increasing sales revenue."
Contextual Chains of Argument: Examiners look for a logical sequence of events. A strong answer might follow: Research identifies a market gap the firm develops a unique product they face less competition in that segment they can charge a higher price profit margins increase.
Recognize Limitations: High-scoring answers often mention that research is not a guarantee of success. Data can be out-of-date in fast-moving markets, or it might be based on a biased sample, leading to incorrect conclusions despite the systematic effort.
