Formal Market Research: Advantages and Disadvantages (I)
In this video, we’ll discuss formal market research in more detail. We’ll talk about the advantages and disadvantages. We’ll also look at the three basic parts of a new product survey and discuss sample question structure.
Remember in Unit Two, Video One, we discussed two formal methods of doing market research: surveys and focus groups. In this course, we’ll only have time to discuss and practice using surveys.
Not surprisingly, the advantages and disadvantages of formal research are the opposite of informal research.
Let’s first look at the advantages. Formal research can produce more quantitative data. Surveys generally provide more quantitative data than a focus group. But surveys also can ask for some qualitative information. Formal research is also more likely to be objective. Consequently, potential investors are more likely to be persuaded by the results.
Like informal research, formal research also has some serious disadvantages.
First, it can be difficult to find respondents. Researchers want objective data and therefore do not want to use people they know. This requires more time in planning.
Second, formal research can be expensive in several ways. It takes more time to administer a formal survey, and all respondents are given the same full survey. If entrepreneurs want to complete the research quickly, they often have to pay for help.
Formal research usually requires a professional-looking prototype or visual aide to accompany the survey. This adds to costs and requires more planning.
A larger, more expensive investment proposal may require using a marketing research firm to provide more persuasive, objective, and quantitative data. This adds a lot to cost. It also requires more planning.