A company uses market observation to determine market changes. Market observation is a task area of market research. A company uses this option if it wants to collect market data in a simple way and does not want to spend a lot of money on it.
In this section you will find out what is behind the topic of market observation. We will explain to you what benefits a company can derive from market observation and which methods of market observation must be distinguished from one another. You will then learn how market observation can be successfully implemented and which areas of responsibility there are in addition to market observation within the framework of market research. To consolidate your knowledge of market observation, you can answer some practice questions after the article
What should you know about market observation?
In order to obtain meaningful information, the company chooses a longer period of time to observe the market. Market observation provides a company with the data that is relevant for increasing sales, not only in the start-up phase.
The following factors play a decisive role in any market observation:
- behavior of customers
- Development of the market where the product is to be sold
- Development of sales prices
- actions of competitors
What benefits can a company derive from observing the market?
Every market is subject to constant change. New competitors appear and old competitors disappear from the market. This can be quickly determined by continuously observing the market. Market observation is also useful for a company because trends and product innovations from the competition can be identified more quickly. With a detailed analysis, the company can maintain or even improve its own ability to react to new market conditions.
In this way, the following questions can be answered more quickly:
- Is it worth bringing a new product onto the market or is it already saturated?
- How high should the budget be for marketing?
- Does the company have to develop a new target group or are the existing customers also interested in the new product?
- Should the company expand its production area to achieve higher output?
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Which methods of market observation can be distinguished?
Market observation knows the following two subtypes:
- Primary market observation
- Secondary market observation
Primary market observation
The company carries out its primary market observation based on information obtained from internal sources. For example, the company had its own market survey carried out. The information obtained during data collection is up-to-date and reflects the wishes of the target group. However, this method is disadvantageous because it is very time-consuming and costly.
Secondary market observation
In the secondary market observation, the company relies on information that comes from external sources. These external sources are e.g. B. Market research companies or statistical values that apply to an entire industry from the State Office for Statistics. This has the disadvantage that the data obtained can only be used to a limited extent for one’s own company.
How can market observation be implemented successfully?
A prerequisite for successful market observation is that the company defines a precise goal. The further steps include the type of data collection and the maximum budget that the company would like to allocate for market observation. For the market observation itself, the people who are to carry out the necessary actions must be determined. Is the boss solely responsible for this, does he entrust a group of employees or does he outsource the job to an external service provider?
The goals of market observation can be the developments in your own company and those of the competition. In addition, after observing the market, it should also be clear how the market is developing overall.
Other areas of market research
In addition to market observation, the following two fields are among the classic tasks of market research:
- Market analysis
- Market forecast
The company carries out an analysis of the market, e.g. B. wants to bring a new product onto the market or to achieve a better market position by innovating an existing product.
In market analysis, the company conducts an examination of the market in which the new product is to be sold or an existing product is already being sold. A one-time market analysis is related to a point in time. In order to gain more precise insights, the company should carry out a market analysis at regular intervals. This makes it easier to recognize market changes and new trends. The company uses the information from the market analysis to take customer wishes into account when manufacturing the new product or to adapt it in the case of a product innovation.
After a company has analyzed a market and observed it for a sufficient period of time, it can start with the market forecast. As part of a market forecast, the company tries to predict the future development of the market based on the information obtained. The findings of the market forecast flow into the development and manufacture of the new product.
Some important Practice questions:
When should a company conduct market observation?
- Only companies that are in the start-up phase benefit from market observation.
- It is the right tool if a company wants to collect data in a simple way and not incur high costs.
- It should be carried out at regular intervals (e.g. monthly or quarterly).
Which task areas does market research not know apart from the market forecast?
- Market analysis
- Market shifts
- Market observation
Which factor does not play a role in market observation?
- Customer and competitor behavior
- State policies such as B. the reduction of the VAT rate
How often should a market analysis be carried out?
- Market analyzes are not a suitable means of successfully positioning a product on a market.
- A one-time analysis is enough for a new product to be successfully sold.
- In order to get more detailed information about new trends, a company conducts several market analyses.
What must happen before a successful market observation?
- The company must seek additional employees in good time to carry out market observation.
- A prerequisite for successful market observation is that the goal is precisely defined.
- Before starting to observe the market, a detailed cost analysis of the entire campaign must be carried out.