How does a business find out what its customers and market really want?
The purpose of market research (to identify customer needs, find gaps in the market, reduce risk, inform decisions), methods of research (primary: survey, questionnaire, focus group, observation; secondary: internet, market and government reports), and the use of data (qualitative and quantitative, social media, reliability).
A focused answer to Edexcel GCSE Business 1.2.2, covering the purpose of market research, primary and secondary methods, and the use of qualitative and quantitative data, social media and the reliability of research.
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What this dot point is asking
Edexcel wants you to explain why businesses do market research, the methods they use (primary and secondary), and how they use the data, including the difference between qualitative and quantitative data, the role of social media, and why reliability matters.
The purpose of market research
The overall aim is to reduce uncertainty. A new business cannot know in advance whether customers will buy, so research replaces guesswork with evidence. Finding a gap in the market (a need no rival is meeting) is the prize, because a business that fills a gap faces less competition.
Methods of market research
Primary research is gathered directly from potential customers. A survey or questionnaire asks set questions to many people; a focus group discusses a product in depth with a small group; observation watches how customers actually behave. Its strength is that it is specific and current; its weakness is cost and time.
Secondary research reuses existing data. The internet, market reports (for example industry data) and government reports (such as population and income statistics) are quick and cheap to access. The weakness is that the data was collected for someone else's purpose, so it may not fit the business exactly and may be dated. New businesses often start with cheap secondary research to size the market, then run a small piece of primary research to test their specific idea.
Using the data
Quantitative data is easy to compare, chart and measure, which is useful for spotting trends and sizing demand. Qualitative data gives the depth and the "why" behind the numbers, which helps a business understand customer feelings. Good research uses both: the numbers show what is happening, the words explain why.
Social media is now a major research source: businesses read comments, reviews, polls and engagement data cheaply and in real time to learn what customers think. It is fast and large-scale, but the people who post are not always representative.
The reliability of data is the catch that Edexcel stresses. If the sample is too small, the questions are leading, or the figures are old, the business will make decisions on a false picture. A research result is only as good as the data behind it.
Try this
Q1. State one example of a primary research method and one example of a secondary research method. [2 marks]
- Cue. Primary: survey, questionnaire, focus group or observation. Secondary: internet, market report or government report.
Q2. Explain one reason why the reliability of market research data is important. [3 marks]
- Cue. Unreliable data (small or biased sample, out of date) leads to wrong decisions and wasted money.
Exam-style practice questions
Practice questions written in the style of Pearson Edexcel exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Edexcel 20203 marksExplain one benefit to a new business of carrying out market research. (Paper 1, Section B)Show worked answer →
A 3-mark explain question rewards one benefit developed through a chain.
For example: market research reduces risk (point) because it gives the business evidence about whether customers actually want the product and what they will pay (because), so the entrepreneur is less likely to invest in an idea that will not sell and waste money (effect). Application to a context (for example a new gym surveying local residents first) strengthens it.
Markers reward the developed link. Other valid benefits: identifying customer needs, finding a gap in the market, informing decisions on price or location. A bare list of benefits caps at one mark.
Edexcel 20226 marksDiscuss the usefulness of primary research compared with secondary research for a new business with a limited budget. (Paper 1, Section B)Show worked answer →
A 6-mark discuss question rewards a two-sided comparison with a judgement.
For primary research: it gives data collected first-hand for the business's exact purpose (for example a survey of local customers), so it is up to date and specific, which is valuable for a new idea. Against it: primary research is slow and expensive to gather, which is a problem for a business with little money.
For secondary research: it is cheap and quick because it already exists (internet, market and government reports), so it suits a tight budget, but it is not tailored to the business and may be out of date or about a different market.
A strong answer judges: a budget-limited start-up often begins with cheap secondary research to size the market, then uses a small, focused piece of primary research (a short survey) to confirm its specific idea, balancing cost against relevance. Markers reward the comparison and the supported judgement, not two separate descriptions.
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Sources & how we know this
- Pearson Edexcel GCSE (9-1) Business (1BS0) specification — Pearson Edexcel (2017)