As a manager, you are making decisions all the time. It is your responsibility to reduce the risk associated with the decisions which you make. The risk arises because of lack of complete information. Therefore, you are always seeking information to improve the quality of your decision-making. In many areas of management, such as production, finance and personnel, the information required for decision-making is primarily generated within the firm and is easy to collect and analyse. Moreover, in these areas formalised procedures have greatly improved decisions: statistical quality control in
manufacturing, PERT in project scheduling, queuing theory in managing large machinery maintenance programmes, etc. This unit examines marketing research and its sub-elements as they affect marketing activities.
At the end of through this unit, you should be able to:
- explain marketing research
- state the relevance of marketing research in the context of marketing decisions
- develop an appreciation of the various possible uses and
- applications of marketing research
- state the procedure of conducting marketing research
- develop familiarity with the necessary steps needed to complete each stage of the procedure.
The Context of Marketing Decisions
In the area of marketing, much of the information required for decision- making exists outside the firm e.g. information on why people buy only certain products and not other products; information about the competitor’s next move; information about new government rules and regulations which can affect your working, etc. The marketing manager faces a challenging task in attempting to improve his decision-making. The variables involved in the marketing decisions being external to the firm make collection of information cumbersome and expensive. Since the variables are often qualitative and dynamic in nature, their measurement is also difficult, and the results not always accurate.
Moreover, many of the variables interact with each other in a very complex fashion, which makes it difficult to isolate and measure specific variables. Thus, the pressure on the marketing manager is very strong to correctly choose the most critical decision variables and seek relevant information about them. The wrong choice of (information) variables will not only result in unnecessary expenditure but can also lead the decision-making process astray. The correct identification of variables requires at least a basic understanding of why people behave in the manner in which they do. The manager also needs to monitor what is happening in the marketplace and in the general environment of the firm. The only way the manager can monitor all these is through regular market research.
Definition of Marketing Research
The American Marketing Association defines marketing research as the systematic gathering, recording and analysing of data about problems related to the marketing of goods and services. Crisp has defined marketing research as … the systematic, objective and exhaustive search for and study of the facts relevant to any problem in the field of marketing.
It would be useful to add the word ‘continuous’ to these two definitions to make them even more meaningful. A study conducted today may lose much of its relevance by next year and may need updating, modification or even an entirely new effort. The rate of change in information would depend on the specific product and customer segment with which you are dealing. If your firm is marketing bathroom fittings you are dealing with functional products. The functions these fittings
will service, for example, in 1995, are the same as what they serve today. Therefore, you may not use extensive marketing research to understand the changes in customer tastes, because the variations in the designs (given the functional character of the product) which you can introduce are very limited. However, you would like to know what new colours and materials are preferred by the customers and undertake research for this purpose.
If your firm is marketing ready-made clothes for teenagers, you are dealing with a market where rapid change is its distinguishing characteristic. You would need continuous and extensive market research to find out what designs, fabrics, colours and prices will appeal to this market segment, this winter, the coming summer and the following winter and so on. You would also need to monitor the fashion scene in Europe and America and see what new trends can be
successfully adapted for the Nigerian market. The fact that a product line is greatly affected by changing customer tastes, habits, values, attitudes, or dealing in a product which is not that susceptible to environmental influences, makes you need marketing research to improve and be at least one step ahead of your competitors. In the latter case (ready-made clothes), marketing research is a critical input for the mere survival of the firm; in the former (bathroom fittings), marketing research is necessary because it can yield valuable ideas to make the firm a market innovator and leader. Marketing research can be used for consumer products, industrial products and services.
Purpose of Marketing Research
The basic purpose of marketing research is to facilitate the decision- making process. A manager has before him a number of alternative solutions to choose from in response to every marketing problem and situation. In the absence of market information, he may make the choice on the basis of his hunch. By doing so, the manager is taking a big risk because he has no concrete evidence to evaluate these alternatives in comparison with others or to assess its possible outcome. But with the
help of information provided by marketing research, the manager can reduce the number of alternate choices to one, two or three, and the possible outcome of each choice is also known. Thus, the decision- making process becomes a little easier.
The second purpose of marketing research is that it helps to reduce the risk associated with the process of decision-making. The risk arises because of two types of uncertainties: uncertainty about the expected outcome of the decision, and uncertainty about the future. Uncertainty
about the expected outcome of the decision will always remain no matter how much information you may have collected to base your decision on hard facts. Unforeseen factors have the uncanny ability of upsetting even the most stable apple cart. For example, in the mid-1950’s, Ford Motor Company in the USA had a 25 per cent share of the automobile market. The company wanted to introduce a new car model which would appeal to young executives and professionals. The decision was based on research which revealed that
this market segment accounted for 25 percent of the market, and was expected to grow to about 40 percent. Ford spent colossal amounts researching and designing the new model which was named Edsel. When introduced in the market, the car was a total flop. This happened because of occurrence of three unforeseen events. Firstly, the youthful car market segment did not grow as rapidly as the market research had indicated. Secondly, the recession also set in at about this time and people began looking for more economical means of transportation. Thirdly, there was a sudden change in customer tastes, with people turning away from flashy exteriors, and the flamboyant Edsel was totally out of tune with new the taste for austerity and functional simplicity. This example highlights the fact that despite best research efforts, the outcome can still be unpredictable. As Reynolds, a former Ford executive, commented on the Edsel fiasco, It is hard to see how anyone could, given the kind of car market that existed in 1955 and 1956, have anticipated such trends.…”
The risk also arises because of uncertainty of what will happen in the future, the way the customers or distributors would behave, the manner in which the competition will react, and so on. To the extent that research provides information about the future, it anticipates the future, thus providing the manager with a solid basis for his decision-making. However, it cannot provide perfectly exact or accurate information. But since the techniques of marketing research are based on scientific methods of collecting, analysing and interpreting data, its findings and projects, at the least, provide a definite trend of scenarios for future decision-making.
The third purpose of marketing research is that it helps firms in discovering opportunities which can be profitably exploited. These opportunities may exist in the form of untapped customer needs or wants not catered to by the existing firms. Food Specialities Limited (manufacturers of Nescafe Coffee, Lactogen Powdered Milk) have recently introduced in the Indian market a dairy whitener (as a substitute for milk) called ‘Every Day’ to be used for making tea and coffee. The product has proved to be a success because it is most convenient for use in offices, where tea and coffee are consumed in large quantities but milk is not easy to procure. Every Day fulfils a slot in the market for
powdered milk which was not being catered to by the existing milk powders brands.
Scope of Marketing Research
Marketing research (MR) is concerned with all aspects of marketing, relating to product design and development, product-mix, pricing, packaging, branding, sales, distribution, competition, target customer segments and their buying behaviour, advertising and its impact. Specifically, the scope of MR includes customers, products, distribution, advertising, competitive information and macro-level phenomenon.
- Marketing is concerned with identifying and fulfilling customer needs and wants. Thus, MR should precede marketing. The unfulfilled wants should first be identified and translated into technically and economically feasible product ideas, which then should be marketed to the customers. But mere identification of customer wants is not enough. Marketing requires continuous effort to improve the existing product, increase sales and beat the competition. For this, it is important to know who the customers are for your products (whether housewives, teenagers, children), what their socio-economic profile is (in terms of income, education, cultural, religious and professional background) and where they are concentrated in terms of location. Besides this information, it is also important for you to know the process by which a prospective customer arrives at a decision to buy your product. If you know the sequential steps in the purchase process and the influencing variables in each, you can design appropriate strategies to exert a positive impact on them, and thus ensure an actual purchase. The study of consumers and their purchase behaviour is so important that there is a separate, special body of knowledge known as Consumer Behaviour.
- The second area which is of direct concern for MR is product and product design. MR is helpful in determining the final design of the product and its physical attributes of colour, size, shape, packaging, and brand name. it is useful in arriving at the right combination of product mix, the number of variations of the basic product, accessories and attachments. It can also help decide the quantities to be produced according to the projected demand estimates. MR can also be used to gauge customer reactions to different prices.
- Marketing research helps in discovering what types of distribution channels and retail outlets are most profitable for your product. On the basis of comparative information for different channels and different types of outlets, you can choose the combination most suitable for your product. Distributor, stockist, wholesaler or retailer may represent one kind of distribution channel in contrast to another in which you may use only the distributor and retailer. Consider an example: A firm is marketing refrigerators through distributors and retailers in the Eastern zone. The understanding between the firm and distributors is that the latter will provide the after-sale- service. Analysing the sales figures, the firm finds that the sales level in the Eastern zone is much lower than in the other zones. Marketing research indent reveals that one of the reasons for this low sales performance is the poor after-sale service provided by the distributor. In a high value, durable product such as the refrigerator, the quality of after sales service is an important factor influencing the customers’ purchase decision regarding the specific brand to buy. The firm decides to do away with the distributor and instead opens its own branch office. The new distribution channel comprising branch office and retailers is operationally more expensive, but the company can now control the quality of after sales service as well as the other marketing inputs. The result is improved sales and the incremental cost associated with the new distribution network is justified.
Marketing Research Procedure
Marketing research is undertaken in order to improve the understanding about a marketing situation or problem and consequently improve the quality of decision-making related to it. The usefulness of the marketing research output will depend upon the way the research has been designed and implemented at each stage of the process. There are five steps in every marketing research process:
- Problem definition
- Research design
- Field work
- Data analysis
- Report presentation and implementation.
A problem is any situation which requires further investigations. However, not all marketing problems need further investigation or research. Many problems are of a routine and trivial nature which can be solved immediately after ascertaining all the facts of the case. For example, your distributor wants 90 days credit against the usual 60 days because he is facing certain financial problems. You can immediately check the distributor’s past record in honouring his outstanding and ascertain the genuineness of his problem and make a decision. Some problems faced by marketing managers are such that they can be handled on the basis of past experience and intuition. Such decisions can be made if the manager has been in the line for at least a couple of years. Decisions made on judgment may not always turn out to be correct, but the problem may not be important enough to justify substantial time, money and effort to be spent on solving it. But when the problem is critical, spending resources to initiate formal marketing research is warranted. Also, when the problem is such that the manager has no past experience to guide him (as in case of a new product launch) or the decision will have a critical impact on the future of the company (diversification in new markets, new products), it is worthwhile to undertake research and make decisions on the basis of concrete results rather than mere hunch or judgment.
It is very important that you define the problem for research properly. It is correctly said that ‘a problem well defined is half- solved’. Clear, precise, to the point statement of the problem
itself provides clues for the solution. On the other hand, a vague, general, or inaccurate statement of the problem only confuses the researcher and can lead to wrong problems being researched and useless results generated.
Marketing Research as a tool for decision-making is gaining wide acceptance. Marketing decisions involve variables which are often external to the firm, dynamic in nature, uncontrollable by the firm and interact with each other in a complex manner. Because of their dynamic and uncontrollable nature, the uncertainty associated with them is very high, which in turn leads to the situation that in most marketing decisions the associated risk factor is also very high. The marketing manager is always on the lookout for ways and means to reduce this risk. One way that the risk can be reduced is through the use of MR which, by providing information, reduces uncertainty and converts the unknown risk factor into a known calculated risk.
In this unit, it was highlighted that MR can be used for gathering information about market structure, competitors’ activities, consumer behaviour, testing the efficacy of various elements of the marketing strategy and making forecasts. MR can be used for pre-testing a strategy before actually implementing it, monitor it during implementation, and after implementation, monitor the results to assess its impact. Apart from its usefulness in the area of marketing, MR is also used for monitoring socio-economic projects. The manager must take the decision regarding the utility of MR on the basis of the cost involved in conducting the research and the benefits expected to accrue from it.
PRINCIPLES OF MARKETING
- THE ROLE OF MIDDLEMEN IN MARKETING ACTIVITIES
- THE DIRECTING AND LEADING FUNCTION
- RECRUITMENT AND SELECTION
- PRODUCT LIFE CYCLE AND NEW PRODUCT DEVELOPMENT
- PRODUCT CLASSIFICATION
- PRICING POLICIES AND PRACTICES
- PERSONAL SELLING AND SALES PROMOTION
- MARKETING RESEARCH AND ITS APPLICATIONS
- MARKETING MIX
- MARKETING ENVIRONMENT
- MARKETING COMMUNICATION
- MARKET SEGMENTATION
- MANAGEMENT FUNCTIONS AND BEHAVIOUR
- INTRODUCTION TO MARKETING
- EVOLUTION OF MANAGEMENT THEORY
- EMPLOYEE TRAINING AND DEVELOPMENT
- DELEGATION AND DECENTRALISATION OF AUTHORITY
- DECISION-MAKING IN BUSINESS
- CHANNELS OF DISTRIBUTION
- ADVERTISING AND PUBLICITY