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Cambridge IGCSE0450

Market research

Business Studies 0450 Chapter Notes

What this chapter covers

Market research - The role of market research and methods usedMarket research - Presentation and use of market research results
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In this chapter

  1. 1Why a business uses market research
  2. 2Primary and secondary research
  3. 3Methods of primary research
  4. 4The need for sampling
  5. 5Methods of secondary research
  6. 6Accuracy of market research data
  7. 7Reading the data accurately
  8. 8Describing a trend with figures
  9. 9Drawing a simple conclusion
  10. 10Using results to make decisions
  11. 11Justifying a decision from the data
  12. 12How far can you trust the results?

1. Why a business uses market research

A market-orientated business uses market research information to help decide what to make and sell.

The results have many uses. A business can identify customer needs, judge the level of demand, find a gap in the market and identify its target market. It can also decide what price to set and which method of promotion to use. Research reduces risk, because products are launched with more confidence.

Always say what the business does with the result. Describing a method of research does not answer a question about uses.

Examiner insight

“Better responses were able to explain how being able to identify customer needs could help a business develop suitable products.” “The most common error in answers was to describe types of market research and not focus on how it can help the business.”

Worked example 14 marks

Amina is an entrepreneur. She plans to start up a business selling pens and paper and has collected some market research data. Outline two ways Amina could use the results from her market research.

  1. 1

    Knowledge: way 1: to help identify customer needs and preferences. [1]

  2. 2

    Application: she then knows which pens and paper to sell. [1]

  3. 3

    Knowledge: way 2: to help decide the level of demand, and so the amount to buy. [1]

  4. 4

    Application: this matters for a new start-up business like hers. [1]

2. Primary and secondary research

Primary research gathers first-hand data for the business's own purpose. Secondary research uses data that was recorded earlier, for a different purpose.

Primary research gives up to date information that is specific to the business, and other businesses cannot see it. But it is expensive, it takes time, and the business may not have the skills to carry it out. Bias can affect the results.

Secondary research is cheaper and quicker to collect. But it may be out of date, and it is more general. Develop each point for the business in the question.

Examiner insight

“Some confused primary market research with secondary market research.” “The strongest candidates recognised that a start-up business would have limited finance and therefore may be unable to afford effective primary research.”

Worked example 14 marks

MCL is a private limited company which makes toys. MCL uses primary market research to decide which toys to produce. MCL's finance director knows that the business has a cash flow problem. Outline one advantage and one disadvantage to MCL of using primary market research.

  1. 1

    Knowledge: advantage: the information is up to date. [1]

  2. 2

    Application: it is about the toys MCL is deciding to produce. [1]

  3. 3

    Knowledge: disadvantage: it is expensive and increases costs. [1]

  4. 4

    Application: this may add to MCL's cash flow problem. [1]

3. Methods of primary research

The syllabus names four methods of primary research: postal questionnaire, online survey, interviews and focus groups. Mark schemes also credit observation.

Questionnaires can gather large amounts of data, but poorly written questions can mislead. An online survey is quicker and cheaper, but response levels are poor and nobody is present to explain a question. Interviews take time and are expensive. A focus group gives more detailed information but costs more.

Name the method. A question about methods asks how the research is carried out, not why a business does it.

Examiner insight

“Weaker answers incorrectly focused on why primary market research is important rather than how it is carried out or explained secondary research methods instead.” “A common error was to confuse focus group with pressure group.”

Worked example 12 marks

LKH manufactures clothes. Primary market research will be used to find out what customers think about LKH's clothes. Identify two methods of primary market research.

  1. 1

    Knowledge: interview. [1]

  2. 2

    Knowledge: focus group (observation or a questionnaire would also score). [1]

4. The need for sampling

Sampling is deciding who to ask. A business needs it because sampling can reduce cost and save time. This suits a small business with a limited budget.

Sampling is not a method of market research, and it is not test marketing. It has nothing to do with showing customers a sample of the product.

The sample still has to be chosen with care. The sample size matters, and the people asked must represent the market.

Examiner insight

“The best answers recognised that sampling could help reduce cost and save time.” “Weaker candidates incorrectly thought sampling was showing a sample to the customer and using them as a promotion tool.”

Worked example 14 marks

Marlow's Bakery is a small shop in a seaside town. The owner, Dev, wants to know which new bread flavour customers prefer. He has a small budget, so he asks 80 of his 3,000 regular customers. Outline two reasons why Dev uses a sample.

  1. 1

    Knowledge: reason 1: sampling reduces the cost of the research. [1]

  2. 2

    Application: asking 80 customers, not all 3,000, suits Dev's small budget. [1]

  3. 3

    Knowledge: reason 2: sampling saves time. [1]

  4. 4

    Application: Dev finds out sooner which new bread flavour to bake. [1]

5. Methods of secondary research

The syllabus names three methods of secondary research: online, accessing government sources, and paying for commercial market research reports.

Government statistics are cheap, and quicker for a business to collect. Secondary research gives data about the whole market quickly and without too much expense.

But the data may be out of date. It was recorded for a different purpose, so it is more general.

Examiner insight

“Government statistics could be out of date but it would be cheaper and quicker for QC to collect the information.” “The key advantage of secondary research is to obtain data about the whole market quickly and without too much expense.”

Worked example 16 marks

Hana is opening a vegan café in a city centre. She has no money for a large survey, so she plans to use online searches and government statistics. Explain two reasons why secondary research may suit Hana.

  1. 1

    Knowledge: reason 1: secondary research is cheaper than primary research. [1]

  2. 2

    Application: Hana has no money for a large survey. [1]

  3. 3

    Analysis: so she keeps her cash for opening the café. [1]

  4. 4

    Knowledge: reason 2: secondary data is quicker to collect. [1]

  5. 5

    Application: the government statistics she plans to use have already been gathered. [1]

  6. 6

    Analysis: so she learns about the market sooner and can open her café earlier. [1]

6. Accuracy of market research data

The sample size and who is asked both affect accuracy: a small sample, or one that does not represent the market, can mislead. Unclear wording of the questions and interviewer bias also mislead, and so does data that is out of date.

Never say one type of research is more accurate. Name a factor and explain its effect on the data.

Examiner insight

“Vague answers such as ‘the business needs to consider sample size to ensure it gets accurate results’ were often given which did not answer the question.” “Primary research was often stated incorrectly as being more accurate.”

Worked example 12 marks

LKH manufactures clothes. The accuracy of the market research data is important. Identify two factors which could affect the accuracy of market research data.

  1. 1

    Knowledge: a small sample size, or not asking enough people. [1]

  2. 2

    Knowledge: the wording of the questions, or questions that are unclear. [1]

Recap

  • Uses: identify customer needs, judge demand, find a gap in the market, identify the target market.
  • Primary is up to date and specific but expensive. Secondary is cheaper but may be out of date.
  • Primary methods: postal questionnaire, online survey, interviews, focus groups.
  • Sampling is deciding who to ask: it reduces cost and saves time, and must represent the market.
  • Secondary methods: online, government sources, paid commercial market research reports.
  • Accuracy depends on sample size, who is asked, question wording, bias and how old the data is.

7. Reading the data accurately

Market research results are often presented as graphs, charts and diagrams. Before drawing any conclusion, read what the figures measure: the units and which way round the data runs.

Check the sample size and who is being asked. A percentage may be of the people asked, not of the whole population.

A wrong reading spoils every later point, so read first and write second.

Examiner insight

“Others failed to recognise that each figure in Appendix 3 represented thousands of dollars.” “Weaker candidates read the figures the wrong way around and thought profits were falling and liquidity was improving.”

Worked example 12 marks

Mei's Tea House asks 200 customers which bubble tea flavour they prefer. The table gives the results. State the most popular flavour and the percentage of customers who chose it.

FlavourCustomers
Taro90
Mango70
Lychee40
  1. 1

    Application: taro is the most popular flavour at Mei's Tea House. [1]

  2. 2

    Application: 90 out of the 200 asked is 45%. [1]

8. Describing a trend with figures

Data collected over time shows trends: the figures rise, fall or stay level. Say which, and quote the figures that prove it.

Give the start and end figures with their units. “Sales are going up” earns less than “sales rose from textdollar40 000 to textdollar61 000”. A trend can help a business predict future market size.

Describing is only the first step. The next step is what the trend means for the business.

Examiner insight

“Other candidates commented on the data without including the numbers which the question required.” “Answers need to go beyond comments such as makes a loss and give the actual figure.”

Worked example 12 marks

Karim's Cycles asks 100 people each year whether they cycle to work. The graph shows the results for four years. Describe the trend shown by the graph.

  1. 1

    Knowledge: the number who cycle to work rises every year. [1]

  2. 2

    Application: it rises from 20 in the first survey to 55 three years later. [1]

9. Drawing a simple conclusion

A conclusion says what the data means for the business. Give the figure, say what it tells the business about its customers, then say what follows.

Keep it simple and supported. Name the group, the product or the demand that the data points to.

Results help a business identify customer needs and its target market. A chart that is only described, and not used, earns little.

Examiner insight

“Weaker responses described the information presented in the chart and did not answer the question set.” “This style of question requires interpretation of the data, for example, is it more or less significant to the business, how the business is affected and why?”

Worked example 14 marks

Tasha's Trainers asks 200 people which age group would buy its new trainer. The table gives the results. Explain one conclusion Tasha's Trainers can draw from the results.

Age groupPeople who would buy
12 to 1770
18 to 2590
26 to 4030
Over 4010
  1. 1

    Knowledge: the results identify the target market, the group most likely to buy. [1]

  2. 2

    Application: 160 of the 200 people, 80%, are aged 12 to 25. [1]

  3. 3

    Analysis: the trainer appeals most to young people, so Tasha should design and advertise it for them. [1]

  4. 4

    Analysis: this makes a sale more likely, so revenue rises. [1]

10. Using results to make decisions

Results are collected to be used. A business can use them to decide the level of demand, what price to set and the method of promotion.

One chart answers one question. In one case study, chart one gave the potential market, chart two the ease of recruiting employees or customers' disposable income, chart three the distribution channels and chart four market share. Match the chart to the decision.

Market share is not the selling of shares in a business.

Examiner insight

“Weaker candidates confused chart three with that of competitors in the market rather than indicating which distribution channels TT should use and chart four occasionally saw confusion around the market share with selling shares in a business.” “Stronger candidates went on to explain the impact that this could have on increasing revenue and therefore possibly profits.”

Worked example 14 marks

Amina is an entrepreneur. She plans to start up a business selling pens and paper and has collected some market research data. Outline two ways Amina could use the results from her market research.

  1. 1

    Knowledge: help identify customer needs, preferences or trends, or find a gap in the market. [1]

  2. 2

    Application: for pens and paper. [1]

  3. 3

    Knowledge: help decide the level of demand or the market size. [1]

  4. 4

    Application: for this new, start-up business. [1]

11. Justifying a decision from the data

Where a question asks you to choose, give a decision and the reason for it. A decision on its own is not worth marks.

Support it with the figures, then weigh the other side: what the data does not show, or what the other option offers.

A justified decision gives a reason that comes from the data. Each point needs development: say what happens next to the business.

Examiner insight

“Only better answers contained an evaluation of the figures and went on to fully justify the conclusion of which option to choose.” “A decision alone is not evaluation.”

Worked example 16 marks

Lena's Laundrette asks 250 customers if they would use it if it opened 24 hours a day. The table gives the results. Do you think Lena's Laundrette should open 24 hours a day? Justify your answer.

AnswerCustomers
Yes150
No70
Not sure30
  1. 1

    Knowledge: research results show the level of demand for a change. [1]

  2. 2

    Application: 150 of the 250 asked, 60%, say they would use a 24-hour service. [1]

  3. 3

    Analysis: more customers using the laundrette means more sales and revenue. [1]

  4. 4

    Analysis: night opening needs extra staff, which raises wage costs. [1]

  5. 5

    Evaluation: yes, it should open 24 hours, because 60% of its own customers is a clear majority, so demand is strong. [1]

  6. 6

    Evaluation: people's actions do not always match what they say, so Lena should try night opening for a short time and check that the revenue covers the wages. [1]

12. How far can you trust the results?

A conclusion is only as good as the data behind it. Factors that affect accuracy include the sample size, who is being asked and whether the sample represents the market, the wording of the questions and the age of the information.

People's actions do not always match what they say. The interviewer can also add bias.

To evaluate, say which factor weakens the conclusion and why.

Examiner insight

“Some misread the question and incorrectly outlined methods of market research.” “Weaker candidates incorrectly thought sampling was showing a sample to the customer and using them as a promotion tool.”

Worked example 12 marks

Primary market research will be used to find out what customers think about LKH's clothes. The accuracy of the market research data is important. Identify two factors which could affect the accuracy of market research data.

  1. 1

    Knowledge: sample size, because too few people were asked. [1]

  2. 2

    Knowledge: age of information, because the data may be out-of-date. [1]

Recap

  • Results come as graphs, charts and diagrams. Read the units, the sample and the direction first.
  • Describe a trend with figures: start, end and units.
  • A conclusion says what the data means for this business, not just what it shows.
  • Match each chart to a decision: demand, price, promotion, distribution or market share.
  • A decision needs a reason from the data and a view on the other side.
  • Check the sample size, who was asked, the wording and the age of the data.

End-of-chapter exercise

Test yourself on the whole chapter. Work through these before moving on.

  1. Kiln & Co sells pottery online. Define 'primary research'.2 marks
  2. Brightwater Gym has used a postal questionnaire to ask members about its classes. Identify two other methods of primary research it could use.2 marks
  3. Olu's Toys wants to find out about the toy market without asking customers. Identify two methods of secondary research it could use.2 marks
  4. Tea Chest is a small business that sells tea to 20,000 customers. It asks 400 of them which new blend they prefer. Outline two reasons why Tea Chest uses a sample.4 marks
  5. Nia is starting a small business selling handmade candles. She will use secondary research to learn about the market. Outline one advantage and one disadvantage to Nia of using secondary research.4 marks
  6. Pixel Phones is about to launch a new phone case. The owner carries out market research first. Explain two ways market research could help Pixel Phones.6 marks
  7. Pia's Pizza asked 12 customers on a Monday lunchtime to complete a survey about its menu. Some of the questions were hard to understand. Explain two factors that could affect the accuracy of the data.6 marks
  8. Reed Gym is a new gym. It wants to know what classes local people expect, and it has little money to spend. Do you think an online survey is the best method of primary research for Reed Gym to use? Justify your answer.6 marks
  9. Rosa plans to open a bakery in a town of 9,000 people. She has £2,000 to start up and has never carried out market research. A commercial market research report on bakeries in her country, written three years ago, costs £150. Explain two advantages and two disadvantages to Rosa of carrying out her own primary research instead of buying the report.8 marks
  10. Hamza's Phones is a small repair shop next to a college with 1,500 students. Hamza wants to sell a new range of phone cases to the students. He has £500 for market research and is considering the three options in the table. Which option will give Hamza the most accurate data? Justify your answer. | Option | Method | Cost | Detail | | --- | --- | --- | --- | | A | Online survey emailed to 300 students | £120 | About 1 in 5 students usually reply | | B | Focus group of 8 students who already use his shop | £450 | One discussion | | C | Government statistics on spending by young people | Free | Published four years ago |12 marks
  11. Brightside Bakery has collected questionnaire results from 300 customers. State two ways market research results can be presented.2 marks
  12. Rapid Repairs asks 250 customers to rate its service. The table gives the results. State the percentage of customers who rated the service poor. | Rating | Customers | | --- | --- | | Good | 150 | | Average | 75 | | Poor | 25 |2 marks
  13. Bright Bikes records its sales in thousands of dollars. The table gives the results. State the sales in 2025 and the increase since 2023. | Year | Sales (thousands of dollars) | | --- | --- | | 2023 | 40 | | 2024 | 52 | | 2025 | 61 |2 marks
  14. Dalia's Diner asks 100 customers each year whether they prefer to eat in. The table gives the results. Explain one conclusion Dalia's Diner can draw from the results. | Year | Customers who prefer to eat in (out of 100) | | --- | --- | | 2022 | 62 | | 2023 | 55 | | 2024 | 47 | | 2025 | 38 |4 marks
  15. Cyclone Cycles asks 500 people in its town which advertising they notice most. The table gives the results. Explain one way Cyclone Cycles could use the results to promote its bicycles more effectively. | Advertising noticed most | People | | --- | --- | | Social media | 275 | | Local radio | 150 | | Newspaper | 75 |4 marks
  16. Hira asks 12 friends outside her gym what they think of her new protein bar. She plans to launch the bar in shops across her country. Explain one reason why her results may not be accurate.4 marks
  17. Sam's Sports asks 250 customers if they would use the shop if it opened on Sundays. The table gives the results. Do you think Sam's Sports should open on Sundays? Justify your answer. | Answer | Customers | | --- | --- | | Yes | 160 | | No | 60 | | Not sure | 30 |6 marks
  18. Hasan's Hardware Store wants to open a second branch. The table gives the results of two surveys. Which town gives stronger support for a branch? Justify your answer. | Town | People asked | Want a branch | | --- | --- | --- | | A | 200 | 80 | | B | 60 | 45 |6 marks
  19. Koru Gym asks a sample of its members each year whether they are satisfied and whether the gym is too crowded. The table gives the results. The manager says, “More members are satisfied every year, so nothing needs to change.” Do you agree? Justify your answer. | Year | Members asked | Satisfied | Said too crowded | | --- | --- | --- | --- | | 2023 | 200 | 150 | 20 | | 2024 | 400 | 260 | 100 | | 2025 | 500 | 290 | 200 |8 marks
  20. Rio Retail wants to open one new shop. It surveyed 500 people in each of Town A and Town B. The table gives the results. Rio's directors want to open in Town B. Do you agree? Justify your answer. | | Town A | Town B | | --- | --- | --- | | People asked | 500 | 500 | | Would shop weekly | 150 | 270 | | Average spend per visit (dollars) | 18 | 12 | | Competitors | 1 | 4 | | Where surveyed | town centre, several days | outside a rival shop, one morning |12 marks

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