Marketing Research

Marketing managers are constantly faced with the necessity of defining problem areas. They must make decisions concerning target markets and about the marketing mixes best adapted to these markets. They have to make assumptions concerning competitors’ actions and about the uncontrollable and ever-changing environmental factors. It is the task of marketing research to help the marketing manager make better decisions and to choose wisely among alternative marketing strategies. It should aid the manager not only in planning, but also, through the feedback it provides, in controlling. Nature of Marketing Research Marketing research is the systematic, objective, and exhaustive gathering, recording, and analyzing of the facts relevant to any problem in the field of marketing. It can be thought of as the application of the scientific method to the solution of marketing problems - followed by the making of recommendations based on the results. Marketing research includes various subsidiary types of research, the most important being: (1) product research, involving market tests for new products, seeking out new uses of present products, and making studies of packaging effectiveness, among other activities; (2) market analysis, primarily the study of the size, location, and other characteristics of market; (3) sales research, activities such as evaluating sales policies, making pricing studies, assessing the effectiveness of salespeople, and setting sales quotas; (4) consumer research, of which motivation research is a type, concerned chiefly with the discovery and analysis of consumer attitudes, reactions, and preferences; and (5) advertising research, designed to help in evaluating the advertising program and in making decisions concerning it. Motivation or Qualitative Research
Motivation research is a qualitative tool, unlike other methods of market research designed to provide quantitative results. It makes use of the findings and methods of the behavioral sciences - particularly psychology, sociology, and anthropology. It aims at discovering not only the conscious opinions, attitudes, preferences, and wants of consumers but also their unconscious drives and motivations. The so-called ―depth interview‖ is used in this type of research. Limitations of Marketing Research Marketing research is not the cure-all for every company problem related to marketing. Many executives still look with skepticism on marketing research and need to be ―sold‖ on its usefulness. This is reflected in marketing research budgets that average about 0.2 percent of sales as compared to new-product research with budgets running from 5 to 10 percent. This situation often leads to the development of products with negligible market potential. The Computer and Marketing Information Systems Some market research functions are being expanded to a marketing information system (MIS). More market-related data are available than most firms can translate into useful information. A system is needed to provide an orderly flow of pertinent data from both internal and external sources that is relevant for decision making. A MIS can be the basis for monitoring, developing, and selecting various plans and functions. Recent developments in the use of computers, and a subsequent decline in the cost of using them has encouraged more marketers toward a MIS. New applications for gathering information include:
1. Computer-prepared market research reports.
Dun & Bradstreet provides data on 390,000 business firms and from a model can compile individual market profiles.
2. Measuring movement of goods.
Selling Areas-Marketing, Inc., a subsidiary of Time, Inc., provides its chain store and wholesaler clients with data on 66 main product categories and 361 sub-groupings.
3. Input-output analysis.
Evaluation of changes in usage patterns of industries or firms. Planning Market Research Some basic steps in planning marketing research include:
1. Developing hypotheses.
Most hypotheses tested emerge from insight or knowledge gained from individual experience, previous research studies or general information on a subject or activity. The hypothesis must be stated in form that can be measured by acceptance or rejection. For example: ―Trading stamps develop stronger shopper loyalty to grocery store choice, than other factors.‖ If no conclusion can be assumed, then a null hypothesis or a ―no difference statement‖ can be used. For example: ―There is no difference in shopper loyalty between grocery stores using trading stamps and those which do not.‖ Validity of a hypothesis is easier to confirm if acceptance or rejection can be measured. When forming a hypothesis, the researcher must be sure that the variable being tested is the only variable. In the above example, for instance, the stores must be comparably priced, convenient, have a similar selection of goods, etc.
2. Sources of market information: Collective data.
Market research provides information and reduces risk by helping executives make rational choices under conditions of less-than-perfect knowledge. Marketing research includes fact-finding and management counseling. Management counseling entails the assessment of various talents and thoughts of persons in marketing and the other functional areas of the firm such as accounting, production, or finance as they relate to marketing decisions. This again is the systems approach in action (MISs). Fact-finding is the actual collection of data and information. This activity includes the generation of primary and secondary data, which may then be processed further by the application of operations research techniques. Primary data. Primary data is information gathered from original sources for a specific purpose or objective. Some techniques for gathering primary data include:
1. Surveys. Answers to questions are sought through telephone or personal, face-to-face interviews, or through the mail. Generally, a specific list of questions or a questionnaire is prepared and mailed. Validity and reliability of these surveys are vital considerations. Pretesting for clarity and question sequence, instruction adequacy, and ease with which results can be edited, coded, and tabulated is essential. Then the reliability of the final results must be determined by careful statistical analysis. One common mistake in questionnaire construction is to ask questions that interest the researcher but do not provide information that can be used to make a marketing decision.
2. Observation. Here the consumer is observed in the act of purchasing. Sometimes films are taken and then analyzed. Candid camera is actually an observation technique.
3. Field experiments. May involve the survey method, the observation method, or both. The main characteristics are more rigorous research design, often using sample control groups and sophisticated statistical techniques.
Secondary data. Many people desiring market research information make the mistake of rushing out to get primary data before exhausting existing secondary sources. Secondary data may be readily available and at little or no cost. Secondary sources include: internal company records; U.S. government publications; trade, professional, and business associations; university research bureaus; libraries; and consulting, advertising, and other firms. Especially helpful government publications are the Census of Business and other publications of the U.S. Bureau of the Census; the Statistical Abstract of the United States, the Survey of Current Business, and the Monthly Labor Review. Trade publications may be located by referring to the Ayer Directory of Newspapers and Periodicals and associations through the U.S.D.A. publication, National Associations of the United States. University bureaus of business research such as those at Michigan, Harvard, Ohio State, Minnesota, Washington, Illinois, California, and Texas provide services for both private and public organizations. Interpreting Research Findings At the outset of a market research study some guidelines should be established for a continual evaluation of the data throughout the collection period. It is crucial that the marketing researchers and the research users cooperate at every stage in the research design. Often research studies go unused due to the inability of the user to understand lengthy discussions of research limitations or the use of unfamiliar technology. In addition to a written report, an oral presentation should be required to expand or clarify the results. Future Trends Noticeable improvements in market research relate to the use of advanced statistical techniques. This should lead to the further reduction of risk and uncertainty in business decisions. However, research is not a one-shot process. Research is important both preceding and following major change decisions and to ensure that research data remain current.

Introduction to Marketing

There have been some exciting changes in the way marketing is viewed by practicing marketing managers and students of marketing. No longer is marketing thought of as being limited to personal selling and advertising designed to get rid of the output of the production process. On the contrary, today the concept of marketing held by most successful firms is that (1) marketing must be consumer oriented, and (2) it must have a part in the decision making in all phases of management. Modern marketing begins with the customer, not with the production department. But it plays a vital role in design and production; and it follows the product through its entire cycle into the hands of the final users. Thus management is seen as a total marketing management system, highly complex, and often expensive.
Marketing Defined
Marketing is an organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketers with a stronger consumer orientation and a broader management approach place emphasis, in defining marketing, on its role in directing the flow of goods and services to the consumer. In other words, marketing is not viewed as the actual performance of such functions as production and design but as the influencing and guiding of these activities through the role marketing plays in decision making. Marketing may also be defined as the activities involved in recognizing consumer needs, developing products and services to satisfy these needs, and creating and then expanding a demand for these products and services.
While marketing, especially in its use of marketing research and in its borrowing from the behavioral sciences, does to some extent employ the scientific method, it can never control all the variables or exactly repeat experiments with the same results. Therefore, marketing is more of an art than a science. Like practitioners of other arts, the marketing person relies on skill, judgment, and intuition in making decisions more often than on scientifically established certainties. The Economic Impact of Marketing Marketing’s role as a catalytic agent is dramatically illustrated by the growth of the U.S. Gross Domestic Product (GDP). GDP, the value of all goods and services produced in a year, rose from a little over $1 trillion in 1970 to over $12.3 trillion by the first quarter of 2005. Marketing provides the synergistic network required for an economy of abundance. Marketing activities are the source of increasing employment. Sales employees in manufacturing, service, and other industries, retail employees, and workers in transportation, communications, and other related groups represent between one fourth and one third of the civilian labor force. About 50 cents of every retail dollar goes to cover marketing costs. Basic Economic Functions Marketing is a regulating force, allocating scarce resources and influencing the distribution and size of income for both individuals and firms. Basically, marketing is closely related to the broader field of economics. Marketing is viewed by economists as creating time, place and possession utilities - that is having goods when and where they are wanted, and then completing the transfer to provide possession utility. As a branch of economics, marketing draws on such concepts as value theory, demand-supply analysis, scale of economy, marginal revenue, the law of diminishing marginal utility, various theories of competition, and concepts of nonprice competition. While most closely related to the field of economics, marketing also makes use of techniques and findings borrowed from the other behavioral sciences, especially psychology, sociology, and anthropology. These disciplines help the marketer better understand consumers - their motivations and needs, their social behavior and structure, and human nature in general. Marketing also looks to mathematics for techniques - sampling, probability and quality control, and quantitative methods with varying applications. The Marketing Management Concept Today, most successful business firms have emerged, or are emerging, from dominance by production and engineering considerations to a marketing management viewpoint, which encompasses all of the activities of the firm. Fundamental to this new philosophy is the recognition and acceptance of a customer-oriented approach. Although the overall dimensions of the business system are determined by individual decisions, such decisions now include a much broader range of interrelated internal and external factors.
Internally, executive decision makers now realize that profitable decisions emerge from not only production or sales estimates, but also from the ripple effect of information concerning areas such as personnel, finance, management, or accounting. Each area of the firm has aspects of marketing just as marketing contains functions of all the other areas. To make intelligent decisions a marketing manager must know the nature of these other functions and must understand how alternative marketing strategies will be affected. Externally, information for the development of alternative strategies is generated by a consumer-oriented view of marketing activity by the firm. Early approaches to marketing emphasized commodities, institutions, and functions. These elements were studied in an attempt to determine the nature of the marketing activity. Little emphasis was placed on interaction between the various functional areas of the firm or on the decision-making process. Functional conflicts arise when the accountant wants a high rate of capital turnover and return on investment, the production manager or engineer wants costly capital-intensive equipment to produce large homogeneous quantities, the cost control person wants small inventories and limited varieties, the personnel manager wants stable production with few cyclical demands for labor, and the marketer wants increased varieties and large inventories in an attempt to please clients and maximize sales. It is easy to see that any marketing strategy will involve many compromises before an optimum decision is reached. Marketing management implies that all functional areas, including marketing, must be first devoted to determining consumers’ wants followed by an integrated effort toward satisfying those wants at a profit. Profit replaces sales as a primary goal. A basic change in management attitudes resulting in organizational and procedural changes may be necessary for effective adoption of the marketing management concept. Today’s marketing person - more and more, the marketers of the future - rely on systems theories and analysis to guide their decisions. Marketing is seen as a total system, embedded in the overall social and economic system, and not as a collection of unrelated activities and institutions. You will learn more of the systems approach later in this course. Present-day marketers and students of marketing emphasize the importance of marketing strategy. Development of strategies entails two steps: (1) selection of a target market, and (2) development of a marketing mix. The Target Market The idea of a target market is based on the concept of market segmentation - the thought that any market with divergent demands (heterogeneous) will consist of a number of smaller markets. The marketer can identify these segments and set up targets by taking into consideration the characteristics of potential customers in these segments, the marketing mixes that might meet their needs, the goals of the company’s marketing program, and various other factors. The market grid is a matrix type of chart used to analyze markets, set up target markets, and develop appropriate marketing mixes for each individual segment.