Lesson 1, Topic 1
In Progress

1.6 Methods of collecting primary data

ryanrori December 22, 2020

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a) Surveys

Surveys involve getting information from specific people by using direct questioning or by using indirect questioning through a questionnaire.

Questions deal with the following factors:

  • Facts – For example, “Where do you live?”
  • Opinions – For example, “Which butter do you prefer?”
  • Motives – For example, “Why do you go to Maputo every year for your holiday?”

The questionnaire is the most frequently used method to collect primary data. Questionnaires are a more detailed and structuredway of collecting information, but are more difficult to design and more costly.

There are various ways to make contact with people for a research survey.

Telephone surveys

Telephone surveys are used when the question time with respondents (the people being interviewed, the people answering or responding to the questions)is short, little time is available to do the survey, and there is not much money available for the survey.

An advantage is that any problems or questions can be discussed directly with the respondent. The disadvantages are that only people with phones can be interviewed, the contact period is short and it is easier to lie over the telephone.

Postal surveys

This is a better method of doing a survey. One of the reasons being that most respondents do not like giving their opinions directly to an interviewer. It also enables you to interview people over a wide geographical area. Another advantage is that there is no pressure on the respondent to answer quickly giving them more time to think about their answers. Also, the contact person or interviewer cannot influence the respondents’ opinions. When using postal surveys it is important to give clear instructions. It is also a good idea to offer incentives (something to motivate people to reply such as a prize or a competition)to encourage people to send back their responses quickly because two of the problems of postal surveys are that you get only a few replies, and those replies come in very slowly.

Personal surveys

This method uses a face-to-face contact situation. The advantages are that more questions can be asked and answered, and if the respondent gives permission, you can use a tape recorder. If, during a personal survey, you interview people at a shopping centre, you may be able to design a simple questionnaire that you can use to conduct the interviews yourself. It should give you some information about your potential customers’ needs.

Example of a questionnaire for a take-away restaurant.

  1. If you use a take-away restaurant in this area, which one is it?
    1. Steers
    1. KFC
    1. Nando’s
    1. Wimpy
    1. Sizwe’s
  2. Why do you use that one?
  3. How do you get there?
    1. Do you walk there?
    1. Do you drive there with your own car?
    1. Do you drive there in a taxi?
  4. At what time of the day do you usually go there?
    1. Late morning
    1. Lunch time
    1. Afternoon
    1. Supper time
    1. Late night
  5. How often have you been there during the past month?
  6. How do you rate that restaurant for:
    1. Food quality:
      1. Good
      1. Average
      1. Poor
    1. Price:
      1. Good
      1. Average
      1. Poor
    1. Cleanliness
      1. Good
      1. Average
      1. Poor
    1. Service:
      1. Good
      1. Average
      1. Poor
  7. In a new take-away restaurant in this area, what food would you like to see?
  8. Any comments?

After analysing the results of the questionnaire, you should have information about your potential market size and other important data on your customers’ needs.

b) Traffic counts

Insome situations, traffic counts of pedestriansand vehiclescan give you information about market size. You may also be able to get a vehicle traffic count from your local municipality, or you can do the count yourself. It is important to take counts at different times of the day, on different days of the week to get a realistic average. Not all people passing by will be potential customers. For example, pedestrians on their way to and from work may not be potential shoppers at your store unless you are selling convenience or impulse products. Other examples are that if you are selling women’s fashions, male pedestrians may not be of much value to you, nor would older people if you plan to sell music popular with young people.

A useful method is to draw circles from your planned location of business to the various population centres around you. Calculate how many people live in each of these geographical areas and work out how long it would take them to get to your business. Remember that for some retail businesses distance can be a delivery expense. For each of these geographical areas work out how many people stay there, and who your competition that serves these potential customers is. To be successful, each business needs a given number of people to support it.

c) Experimentation

Experimentation is a method similar to testing. It can only be done in controlled conditions, for example, a supermarket chain store group (This is a group of stores with the same name and same appearance, for example Game, Makro, CNA, Clicks) doing an experiment in one of its stores to test a new display method. From the results of the experiment, decisions are made to be used in all the other stores.

d) Observation

The entrepreneur can do an observation study by watching consumers to see what products they buy, where they buy these products and by examining prices charged for products. There are two methods of observation, namely human and artificial. Human observation is when entrepreneurs themselves watch the number of consumers and their behaviour in a supermarket or shopping mall and record the information. Artificial observation uses mechanical or electronic equipment, for example using a television camera in a shop to record consumers’ behaviour and what they buy.

e) Test marketing

This is a method where the findings of completed questionnaires are tested for the first time. The test is done on small, but representative samples of people (This is a group of people that are just like the customers you expect to attract to your business)or on geographical areas under normal competitive circumstances. The use of the test marketing method helps to reduce the risks of wrong decisions and mistakes.

Collecting data

Vuyo, the owner of Zama-Zama Tours, says, “I steal from other companies.” It is not as bad as you think because Vuyo is only stealing business strategies that some of the best companies are willing to share with him. “If you want to be a smart company, you study smart companies.” This is how he suggests you do it:

  • Find role models

      Vuyo looks everywhere for potential role models (These are people or companies that you want to copy because they are successful). To find them he looks in books, travel, financial and other magazines. He also studies competitors, suppliers and customers.

  • Choose the best companies to copy

      When Vuyo studies the role model companies, he is particularly interested in the ideas that seem to work well for them. Most of the companies that Vuyo studies are not directly connected with his company or its services, but they deal with the same kinds of challenges and problems as he does.

  • Study the role model companies well

      Vyuo and other managers and employees study everything about the role model companies to get an understanding of why those companies succeed. They read annual reports, articles, speeches, attend trade shows, talk to employees at these companies and contact Stock Exchange analysts to find out how the companies become successful.

  • Generate and share business ideas in the company

At Zama-Zama Tours everyone is encouraged to give his or her business ideas and suggestions. Every Thursday there is a meeting between staff and managers where anyone can share business ideas and make suggestions. Vuyo believes this gives his business a big competitive advantage because they want to learn from everyone, and this attitude helps the company learn faster than anyone else.

Vuyo’s way of stealing strategies for success from successful companies works. He says, “If I study excellent companies, I come up with excellent ideas.”

Developing the questionnaire

When you design a questionnaire give careful attention to the type of questions asked, the words used, and the order in which the questions are asked.

The questions must be easy to understand and be relevant and useful for the study.

You can use two types of questions:

  • Open questions – respondents answer using their own words
  • Closed questions – you give respondents a choice of selected answers

The wording of the questions must be clear, simple and direct. When structuring the questionnaire, decide on the order in which you need to arrange the questions. The first questions need to be interesting and encourage respondents to answer, while the difficult or more personal questions should be asked towards the end of the questionnaire. It is important to pre-test a questionnaire before using it on respondents so that you can make necessary changes or corrections.

Because the entrepreneur will not be able to question all the people in a market segment, smaller groups or representative samples are used for research purposes. However, your sample must be big enough as it would be dangerous to plan a business on a very small sample or test group, for example, only 20 people. Bigger samples that represent the target market give valuable information for the entrepreneur.

Collecting secondary data

Secondary data is data that has already been collected by someone else, but the entrepreneur needs to search for it. Valuable sources of secondary data can be magazines, the internet, census reports, trade publications, advertising media, trade associations and market research companies’ surveys. Although secondary data costs very little to collect, it is often old information that is outdated.

Club Shisa

Siyabonga is always up-to-date on the latest trends of young people. When he finishes college he wants to open a place that will be popular with young people. Siyabonga has had many part-time jobs while studying at college and has worked in many bars and restaurants.

Siyabonga feels he is now ready to open a club to attract customers in the 21 to 35 year age groups. He says, “I just have a feel for the business. Some people just analyse and plan too much. I don’t need the pain of all that effort.”

Taylor, one of Siyabonga’s marketing lecturers, is worried about Siyabonga’s attitude towards planning and asked Siyabonga to discuss his plans for his new club. As usual, Siyabonga was excited about his plans, but Taylor found that Siyabonga had not thought about necessary details. “Siyabonga, have you done any market research to support your excitement?” Taylor asked. “Well Sir, that book work does not fit in with my feelings about making right decisions,” Siyabonga replied.

Low cost secondary market research

Monde needed market research before opening his men’s clothing store called ‘Monde’s’. He needed to know what kind of clothing customers would want to buy at his speciality shop. Although Monde did not have the money to pay for a market research company to collect data using interviews and surveys, he knew that it was too risky to guess what customers would want. Monde knew that he did not need large numbers of customers, but he did need loyal, regular customers.

To solve his problem, Monde thought of doing secondary research that examined how other companies achieved loyal customers. The result, Monde’s has a regular buyer Executive Club. Customers who spend R500 at Monde’s get a R100 bonus reward. “I copied the idea from the South African Airways frequent flyer programme,” admits Monde. By doing this Monde benefited from expensive market research paid for by someone else. When planning his merchandise lines (product groups),Monde thought about how men’s clothing shops usually stock expensive suits that cost from R2 500. The profits on these expensive suits are good, but Monde questioned if the market was big enough. To answer that question, Monde turned to market research collected by clothing manufacturers. All he had to do was ask them for it. What he found out surprised him. Expensive suits are bought by only 15% of the market, but 21% of customers prefer suits in the R750 to R1 700 price range. An advantage was that there was also less competition in that price range. This information helped Monde to decide on his target market. Monde believes in developing loyal customers. Two weeks after a customer buys a suit, Monde phones them to find out if they are happy with their purchase. Regular customers are also told about special sales a few days before the sales are advertised to the general public. By using market research done by others, Monde has created a successful men’s clothing store.