Marketing Research
Copyright © 1999 by Gemmy Allen, all rights reserved.Marketing information is a critical element in making effective marketing decisions. The pace of technological development and the globalization of trade mean that today's environment changes more quickly than ever before. Micro- and macro-environmental sources -- along with internal data and marketing research -- provide unprocessed data for marketers to develop into actionable, marketing information. Obviously, a marketer’s decisions can only be as good as the information that led to those decisions. Therefore, it is of the utmost importance for an organization to have a well-developed information gathering, analyzing and disseminating system so marketing decision-makers are provided with timely and accurate information.
Information
Every member of an organization must have quality information in order to act intelligently and make good decisions. In order to create useful information, data (unprocessed facts and figures) must be collected and organized in some meaningful pattern. Information is data that have been deliberately selected, processed, and organized to be useful. Organizations gather and store a vast amount of information as a regular part of conducting their business. Internal information comes from within the organization itself (internal environment). For example, internal data ranges from sales data collected by the accounting department to consumer product returns and complaints data processed by customer service. External information has been generated from data outside the organization. The external environment of marketing includes many diverse information sources, such as demographic, economic, legal, technological, and competitive.
Managers need more than information to make decisions. They need intelligence to provide the organization with a competitive edge. The Society of Competitive Intelligence Professionals (SCIP) was founded in 1987 and defines competitive intelligence (CI) as the process of monitoring the competitive environment. CI is performed by corporate marketing departments and may be referred to as marketing intelligence. CI involves the legal and ethical collection of information. It adds value to information gathering by introducing a disciplined system not only to gather information, but also to perform analysis and disseminate findings tailored to the needs of decision-makers. CI developed in response to increasing international business, a decline in defense spending and the explosive growth of the telecommunications industry.
Competitor intelligence professionals (CIP) collect all the information about competitors that can be developed from available public information (databases, government reports, competitors’ employees, firm’s salespeople). Also, they may be charged with working to prevent competitors from doing the same to them. Public documents available about competitors include financial reports to shareholders and the SEC, patent office filings, executive speeches, marketing materials, newspaper and magazine articles, investment house analyst reports – in short, anything that’s available from the growing number of publicly accessible databases. Once information is collected, the CIP’s job is to analyze it and report to management on what the competitor’s next market strategies might be. Marketers must know their markets, as well as their competitors.
Marketing Information System
The environment provides the organization with information overload. Information management can be done manually, but most organizations rely upon computers. Taking advantage of developments in technology and methodology to increase the level of decision support, the concept of an information system was introduced in the mid-1960s. An information system (IS) is an ongoing and interacting structure of people, equipment and procedures designed to gather, synthesize and distribute pertinent, timely and accurate information. Marketers soon tailored it for their own unique needs and named it marketing information system (MkIS). MkIS is the source for controlled and readily observed marketing variables. An effective MkIS is a powerful source of competitive advantage. It may lead to new products or new processes.
Wal-Mart’s world-renowned information systems are a key factor in its success. The model allows Wal-Mart to better know and service its customers. Some analysts say that Wal-Mart's extensive information database is second in size only to that maintained by the U.S. government. Besides raw sales, profit margin and inventory numbers, the system also documents what consumers buy together, like cereal and milk.
Computers and the Internet make the process of gathering intelligence easier. Yet, many researchers can’t always get everything they need by using just one application from a MkIS. Instead of one central system from which to retrieve information, it is more common to have to go to many places to get needed information. Too much data is coming into most organizations from too many directions. Hundreds of electronic sources flow into companies separately. In fact, many companies subscribe to different information products from different publishers in different formats. This makes it very difficult for marketers to analyze information.
SageMaker is a kind of newsstand for the hundreds of electronic sources that normally flow into companies separately. It bundles together many publications and services so customers can use them as though they are a single product. Publishers send their information to SageMaker, which republishes it all in a single format and delivers it over the Internet to servers inside energy and chemical companies. When a researcher sits down and says, 'What do we know about Chevron?' anything about Chevron from all those sources appears under a single interface. The researcher doesn’t have to search 50 Web sites or launch 50 applications.
Marketing Decision Support Systems
In general, the MkIS produces a standard report according to a schedule. Unlike a MkIS, a decision-maker can interact directly with the decision support system (DSS), which adds speed and flexibility to the research process. DSS is an analytic model that joins a decision-maker's experience and judgment to the computer’s processes. Decision-makers can access databases to produce non-standard reports that can be used on a problem-to-problem basis. Decision-makers can analyze, manipulate, format, display and output data in different ways. The DSS provides a modeling function to help interpret the information retrieved. Each DSS is developed and adapted to support a firm’s own decision problems.
A DSS enables decision-makers to represent environmental forces (such as customer purchasing practices and changes in prices) and quickly evaluate many alternatives and assumptions within models. The decision-maker can ask, “What is?” and “What if?” questions. Microsoft’s Excel, electronic spreadsheet software, is an example of a form of DSS software. Excel will automatically recalculate a quantity when one of the variables in a formula is changed.
Marketers have adapted DSS. A marketing decision support system (MDSS) is the part of a MkIS that displays information in useful visual and graphic forms. Information might include recurring market and accounting data from market analysis and accounting activities; intelligence relevant to the future strategy of the firm; market research studies not of a recurring nature; and a broad range of data from both internal and external sources. The purpose of MDSS is to identify problems and opportunities early to provide a head start or at least to keep up with the competition.
A database is data accessible by a computer. It is an organized collection of data -- such as facts, figures and documents -- that have been stored for efficient access. Users interact directly with the database to retrieve information. Database marketing is used to employ a firm’s database information to direct its marketing efforts towards the best segment and potential customers. Massive amounts of data can be manipulated allowing marketers to identify specific users of products, measure their actual purchase behavior, and relate it to specific brand and product categories. Microsoft’s Access is an example of database software.
Marketers use datamining (the extraction of hidden predictive information from large databases) to “drill down” into the data to any level of detail needed to identify common characteristics of high-volume users. Then, clusters of consumers who share certain characteristics such as income, education, and brand loyalty can be identified as targets for marketing efforts. Advertising messages can be tailored to this target.
Market research
Since decision-makers seldom have all of the information that they need, information gaps will be revealed by use of MDSS models. Marketers must decide if they need more information and how to get it. Getting more information may cost too much or take too long. The organization must decide whether the benefits of having additional information are worth the costs of providing it. Thus, marketers should weigh carefully the costs of additional information against the benefits resulting from it. If new information is deemed valuable, market research procedures can be used to develop and analyze new information.
Marketing research is a formalized means of acquiring information to assist in the making of marketing decisions. The American Marketing Association (AMA) defines marketing research as the function that links the consumer, customer, and public to the marketer through information--information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Marketing research specifies the information required to address these issues, designs the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications.
Organizations develop and maintain products through a continuous process of market research, follow-up with previous customers and interaction with current customers. Marketers utilize research to improve product value to current customers and to find new customers. For example, marketers receive feedback from customers through purchase behavior that is tracked in a database as well as through survey responses, product registration, warranty cards, etc. Thus, market research completes a communication “loop” between the seller and the market. Understanding how buyers relate to products can help organizations make better products and promote them better across the world.
Marketing Research and Market Research
In his book Modern Marketing Theory: Critical Issues in the Philosophy of Marketing Science (South-Western College Publishing, 1991), Shelby Hunt distinguishes between marketing research and market research.
Marketing research (or, alternatively, scholarly research in marketing) always seeks to expand the total knowledge base of marketing. In a general, market research attempts to solve a particular company's marketing problem. To evaluate a particular department store’s image would be a market research problem. To explore whether department stores have images at all is a marketing (scholarly) research problem. To attempt to determine the best location for a particular warehouse is a market research problem. To attempt to develop a model for locating warehouses in general is a marketing research problem. The following question can serve as a litmus test for differentiating market research from marketing research: “After conducting this research project, what will we then know about marketing in general that we do not know now?” In short, “What will be the contribution of this research to knowledge about marketing?” (p. 2)
Also, visit The Market Research Society at:
http://www.marketresearch.org.uk/
Marketing Research ProcessMarketing research is sometimes defined as “the application of the scientific method to marketing.” The scientific method forces an orderly research process. The marketing research process is an application of the four basic steps in scientific method. For more information, see Trochim, William M. The Research Methods Knowledge Base, 2nd Edition. Internet WWW page, at URL: http://trochim.human.cornell.edu/kb/index.htm .
(1.) State the Problem. It has been said, “a problem well defined is half-solved.” The problem must be clearly defined and the objectives precisely stated to properly guide the rest of the research process. Yet, defining the problem can be one of the most difficult parts of the research. An incorrectly defined problem can lead to incorrect research objectives and consequently a poor decision. Not only is it important for the right problem to be identified, but the definition should be specific. Many people define symptoms of the problem as the problem (for example, declining sales) instead of the defining the real problem (for example, declining quality). A research design is the specification of methods and procedures for acquiring the information needed to solve problems. Designs may be identified as exploratory, descriptive and causal. Exploratory research is used to gain ideas and insight to define the problem and suggest hypotheses. It is particularly helpful in breaking broad, vague problem statements into smaller, more precise problem statements. Descriptive research, in contrast to exploratory research, is concerned with describing the characteristics of certain groups, to estimate the proportion of people who behave in a certain way, or to make predictions. The researcher already knows a substantial amount about the research problem, perhaps as a result of an exploratory study, before the project begins. Descriptive information is often useful for predictive purposes, but the causes (reasons why) of what is being predicted improves understanding. Causal research tests relationships of causal factors to the effects predicted. “Does X cause Y?” For example, does a lower price cause an increase in sales?
*insert graphic – Research designs - 3resdes
(2.) Form a Hypothesis (possible solution to a problem). Also, this step is known as “research.” In marketing this step is known as developing the research plan and involves outlining sources of existing data, specifying research approaches, contact methods, sampling plans, and instruments to be used to gather new data. Data about the problem must be gathered before a possible solution to the problem can be formed. Secondary data is pre-existing, collected for another purpose. Since the information was collected for some other purpose, it may not satisfy the current needs of the researcher, either because the data needed by the researcher do not exist, or the data are not relevant to the current. Ideally, secondary data should be available inside the organization from its MkIS. Also, secondary data is available outside the organization from the Internet, libraries, trade associations, universities, private research organizations, and government agencies. The Internet can be electronically monitored for any mention of the company and its products so that the firm can stay on top of consumer reactions to its products as well as to get any media reviews of its products as soon as they are published on the Internet.
Primary data is collected to solve a current problem. Far too often, researchers gather primary data when much relevant secondary information is already available – at little or no cost! Sources of primary data include observation, surveys, and experiments. Observation means that the situation of interest is checked and a person or some mechanical device records the relevant facts, actions, or behaviors. A survey involves using a questionnaire (data collection instrument) to ask respondents questions to secure the desired information. Questionnaires may be administered by mail, over the telephone, by computer, or in person. In an experiment, a researcher selects matched groups, gives them different experimental treatments controlling for other related factors, and checks for differences in the responses of the experimental group and the control group. A common experiment is test marketing where the researcher duplicates real market conditions in a small geographical area to measure consumers’ responses to a strategy before committing to a major marketing effort.
*insert graphic – Sources of data – 3data
Data is gathered through sampling techniques since it is usually not economically feasible for researchers to gather information from everyone (census or population). It is interesting to note that samples are used in to infer the accuracy of the U.S. census. The use of large field staffs introduces greater potential for non-sampling error. Thus, even the Census Bureau uses sample surveys to check the accuracy of various censuses. Researchers select a sample (subset or portion) of the population of interest to represent the larger group. A properly selected sample will have the same characteristics as the population from which it was selected. Population can refer to people, manufacturing firms, retail or wholesale institutions, or inanimate objects such as parts produced in a manufacturing plant. Selecting the sample involves determining: (1) the sampling unit (Who should be surveyed?) (2) the sample size (How many people should be surveyed?) and (3) the sampling design (How should the sample be chosen?)
*insert graphic – Sample designs – 3sam
(3.) Test the Hypothesis. Marketers refer to this step as “implementing the research plan.” Research is implemented to determine if the hypothesis solves the problem or not. The data must be collected, processed, analyzed, and interpreted. Observation is often used for exploratory research while questionnaires are best suited to descriptive research. For causal research, the best approach is experimental research.
(4.) Draw Conclusions. Marketers refer to this step as “interpreting and reporting the findings.” After analyzing the data from the research, conclusions can be drawn. Relationships, trends and patterns can be identified. In it's simplest form, the conclusion will be "yes" the hypothesis was correct, or "no" the hypothesis was not correct. A formal report is prepared and presented.
Market Research Services
Many companies have their own marketing research departments. However, due to corporate downsizing, more independent market research firms are being hired to conduct research. The external suppliers of market research might maintain a large database, design models, and/or collect, process, and analyze survey data. For example, Dun & Bradstreet has a marketing database of more than 10 million U.S. businesses, which can be used to generate highly targeted prospect lists, print mailing labels and telemarketing reports, and append demographic data to customer files. Lexis/Nexis is a full-text news and legal information service. Its database contains articles from the popular press in addition to academic and practitioner-oriented journals, press releases, governmental sources, and a great deal of legal information.
- Custom services work with individual clients (NPD, Burke, MARC).
- Syndicated services routinely collect information on several different issues and provides it to firms that subscribe to their services (Nielsen, Arbitron).
- Field services concentrate only on collecting data for research projects (personal and telephone interviews, focus groups).
- Selective services specialize in just one or two aspects of marketing research, mainly concerning coding data, editing, or data analysis.
- Branded services specialize in data collection and analyses procedures that address specific research problems and are marketed as branded products (PRIZM™).