The most obvious way to try to identify the relationships important in a demand function is simply to ask actual or potential buyers. Thus, you could ask a group of buyers how they might react to price changes, product re-specif location and cheaper credit. Collating the results of the study should then give some indication to the firm of the likely consequences of changing one or more of the key variables. This kind of information can be collected by:

1.Selecting a sample of existing buyers and asking each person a series of questions.

2.Selecting a random sample of people and asking each person a series of questions.

3.Gathering together a group of buyers (nowadays known as a focus group) for discussion and questioning

In all of these approaches the sample of people to be asked is important. On some occasions it may be appropriate to have a random sample of the population as a whole, on others a random sample of existing buyers might be appropriate. Yet again, it may be that only a subgroup of buyers is required: for example, a firm may be interested in the leisure drinking habits of 18 to 25-year-olds, while another might be interested in the holidaying preferences of the over-65s.

The use of questionnaires and interviews is a common procedure administered on behalf of firms by specialist market research companies. In many high streets on any day of the week shoppers and passers-by are asked for their responses to a given set of questions. The results are then used to gather information and advice to managers to enable them to make more informed decisions. However, for whatever purpose a survey is used, its validity is always questioned on a number of grounds.

Shortcomings

1.The first relates to the group of people questioned and whether they were appropriate for the purpose. Clearly, those participating should represent the group as a whole. If they do not, then the sample is biased and the results may not be meaningful.

2. A second problem relates to the response rate. A questionnaire sent to a randomly selected group of buyers may not be so random when the returns are received. A low response rate may mean that the data collected are not representative of the group as a whole: for example, a postal survey may bring responses from people who either have the time for or enjoy filling in questionnaires

3 The third relates to the answers given by respondents. At the time of the questionnaire the respondent may or may not tell the truth. Even if they think they might respond to a price cut at the time of the survey,

4. A fourth relates to face-to-face interview, as the answers may be in£uenced by the interviewer. The attitude and personality of the interviewer may influence the answers of respondents who may be unwilling to give answers which may be truthful but which they perceive the interviewer does not wish to receive or which might make them feel uncomfortable

5. A fifth problem may relate to the questions asked. If the questions are not simple and precise they may be open to misunderstanding and misinterpretation by respondents.

6 A sixth problem relates to respondents who may be asked about aspects of a product or market that they do not have sufficient knowledge to be able to answer.  Interviews are  ‘‘dangerous and unreliable procedure. People just have not thought out in advance what they would do in these hypothetical situations, and their snap judgements thrown up at the request of an interviewer cannot inspire a great deal of confidence.’’

QUESTIONNAIRES

Much work has been done by statisticians and practitioners to overcome many of these problems and to make surveys and interviews an e⁄cient method of collecting information. Questionnaires must be constructed carefully to encourage respondents to give truthful answers and for answers to be checked one against another to ensure consistency. Problems may arise with words having multiple meanings, with questions that can be misinterpreted, with multiple answers that do not allow the respondent to respect fully their opinions or preferences and with the order of questions which may guide the respondent to particular answers.