The observation method involves human or mechanical observation of what people actually do or what events take place during a buying or consumption situation. “Information is collected by observing process at work”. The following are a few situations:-

1. Service Stations - Pose as a customer, go to a service station and observe.

2. To evaluate the effectiveness of display of Dunlop Pillow Cushions - In a departmental store, observer notes:-
   1. How many pass by;
   2. How many stopped to look at the display;
   3. How many decide to buy.

3. Super Market - Which is the best location in the shelf? Hidden cameras are used.

4. To determine typical sales arrangement and find out sales enthusiasm shown by various salesmen-Normally this is done by an investigator using a concealed tape-recorder.

Advantages of Observation Method

1. If the researcher observes and record events, it is not necessary to rely on the willingness and ability of respondents to report accurately.

2. The biasing effect of interviewers is either eliminated or reduced. Data collected by observation are, thus, more objective and generally more accurate.

Disadvantages of Observation Method

1. The most limiting factor in the use of observation method is the inability to observe such things such as attitudes, motivations, customers/consumers state of mind, their buying motives and their images.

2. It also takes time for the investigator to wait for a particular action to take place.

3. Personal and intimate activities, such as watching television late at night, are more easily discussed with questionnaires than they are observed.

4. Cost is the final disadvantage of observation method. Under most circumstances, observational data are more expensive to obtain than other survey data. The observer has to wait doing nothing, between events to be observed. The unproductive time is an increased cost.