Briefly explain the limitations to a business of using secondary market research information.
CAMBRIDGE
A level and AS level
Year Examined
February/March 2017
Topic
Market Research
👑Complete Model Essay
Limitations of Secondary Market Research Information for Businesses
Secondary market research, also known as desk research, involves analyzing pre-existing data collected for purposes other than the specific needs of a business. While a cost-effective way to gain market intelligence, it presents several limitations that businesses must consider. This essay will discuss these limitations, including the potential for outdated information, lack of specificity, unknown data collection methods, and gaps in information.
Outdated Information
One major limitation of secondary research is the risk of encountering outdated information. Markets are dynamic and constantly evolving, influenced by factors like changing consumer preferences, technological advancements, and economic fluctuations. Relying on data collected months or even years ago can provide a misleading picture of the current market landscape. For instance, a business using outdated market share data from a previous year might make strategic decisions based on inaccurate assumptions about its competitors' current positions.
Lack of Specificity
Secondary data is often collected for broader purposes and may not align perfectly with a business's specific needs. For example, a company looking to launch a niche product might find general market reports on the broader industry insufficient. These reports may not provide detailed insights into the specific target audience, their preferences, or the competitive landscape within that niche. Consequently, decisions based on such data may lack the precision required for success.
Unknown Data Collection Methods
The credibility of secondary research hinges on the reliability of the data collection methods employed. However, businesses often lack control over these methods when using external sources. Biases in sampling, data collection techniques, or analysis can significantly impact the accuracy and reliability of the information. Without transparency regarding the methodologies used, businesses risk basing their decisions on potentially flawed data.
Gaps in Information
Despite the wealth of data available, secondary research might present significant gaps relevant to a business's specific needs. This is particularly true for niche markets or specialized products where publicly available information is limited. For instance, a company researching a new technology might find insufficient data regarding consumer adoption rates or potential challenges in the supply chain. These gaps can hinder a business's ability to make fully informed decisions.
Conclusion
While secondary market research offers a cost-effective starting point for businesses, its limitations must be carefully considered. Outdated information, lack of specificity, unknown data collection methods, and potential gaps in data can hinder its reliability and relevance. Businesses should therefore critically evaluate the source, timeliness, and methodologies used in collecting secondary data. Supplementing secondary research with primary research tailored to their specific needs can provide a more accurate and comprehensive understanding of the market, ultimately leading to more informed business decisions.
Sources:
- Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson Education.
- Proctor, T. (2013). Strategic Marketing: An Introduction. Routledge.
Briefly explain the limitations to a business of using secondary market research information.
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A-Level Business Studies Essay Guide: Limitations of Secondary Market Research
This guide will help you write a compelling essay on the limitations of secondary market research in business. By understanding these limitations, you can better evaluate the usefulness of secondary data and make informed decisions about your own research.
What is Secondary Market Research?
Secondary market research involves analyzing information that already exists. It utilizes a variety of sources, including:
- The Internet: Search engines, websites, and online databases provide a wealth of information.
- Commercial Information Organisations: These organizations collect and sell market data, often offering detailed reports and insights.
- Government Publications: Official statistics and reports provide valuable insights into economic trends and social demographics.
- Industry Publications: Trade magazines and journals offer specialized information relevant to specific industries.
The primary purpose of secondary market research is to gain information and market intelligence, especially about competitors.
Advantages of Secondary Market Research
Secondary market research has several significant advantages:
- Cost-Effective: It is generally cheaper than primary research, requiring less time and resources.
- Accessibility: Information is readily available from a wide range of sources.
- Time-Saving: Secondary research can be conducted quickly, allowing businesses to gather information without lengthy data collection processes.
Limitations of Secondary Market Research
Despite its benefits, secondary market research has some inherent limitations:
1. Outdated Information
The information may be historical or out of date, presenting a misleading picture of the current market. This is particularly problematic for fast-paced industries where trends change rapidly.
2. Lack of Specificity
Secondary data is often collected for general purposes, making it unsuitable for specific business needs. The information might not address the unique requirements of a particular company or product.
3. Data Collection Methodology Unknown
The lack of knowledge about the data collection methods can lead to inaccurate information. For example, the sample size, response rates, and survey design may be unclear, compromising the reliability of the data.
4. Gaps in Information
Secondary research may contain significant gaps in the information, limiting its suitability for making informed decisions. The data might not cover all relevant aspects of the market or the specific target audience.
Tips for Using Secondary Market Research Effectively
To minimize the limitations of secondary market research, consider these tips:
- Evaluate the source: Check the credibility and reputation of the source, assessing its bias and objectivity.
- Cross-reference information: Compare findings from multiple sources to validate data and identify potential inconsistencies.
- Consider the date of publication: Ensure the information is relevant and up-to-date, especially for dynamic markets.
- Supplement with primary research: Combine secondary data with primary research to address specific business needs and fill gaps in information.
Conclusion
While secondary market research offers valuable insights and cost savings, businesses need to be aware of its limitations. By critically evaluating the data, understanding its limitations, and combining it with other research methods, businesses can maximize the value of secondary research and make informed decisions.
Extracts from Mark Schemes
Limitations of Secondary Market Research Information
Secondary market research is the analysis of information that already exists – there are various sources of such information, e.g. internet, commercial information organisations. The main purpose of desk research is to gain information and market intelligence on competitors. Considered to be a low-cost approach to getting market information, secondary research can be useful but may present limitations:
- The information may be historical/out of date and thus give a misleading picture.
- The general nature of the information may mean it is not suitable for purpose; it was not collected for the specific needs of a business.
- The data collection methods may be unknown and may also lead to inaccurate information.
- There may be significant gaps in the information leading to limitations on suitability.