The Importance of Marketing Research

MARKETING RESEARCH AND INFORMATION SYSTEMS

The Importance of Marketing Research

A.         Marketing research is the systematic design, collection, interpretation, and reporting of information to help marketers solve specific marketing problems or take advantage of marketing opportunities.

1.         It is a process for gathering information not currently available to decision makers.

2.         The purpose of marketing research is to inform an organization about customers’ needs and desires, marketing opportunities for particular goods and services, and changing attitudes and purchase patterns of customers.

B.         Marketing research can help a firm better understand market opportunities, ascertain the potential for success for new products, and determine the feasibility of a particular marketing strategy.

C.         Marketing research is used by all sorts of organizations to help develop marketing mixes to match the needs of customers.

D.         Changes in the economy have changed marketers’ decision making strategies to focus more on small-scale surveys and short-range forecasting. Businesses need speed and agility to survive and to react quickly to changing consumer behavior.

E.         The real value of marketing research is measured by improvements in a marketer’s ability to make decisions.

1.         Marketers should treat information in the same manner as other resources utilized by the organization, and must weigh the costs of obtaining information against the benefits derived.

2.         Information should be judged worthwhile if it results in marketing activities which improve the organizations ability to satisfy its target customers, leads to increased sales and profits, or helps the organization achieve some other goal.

II.          The Marketing Research Process

To maintain the control needed to obtain accurate information, marketers approach marketing research as a process with logical steps. These steps should be viewed as an overall approach to conducting research rather than as a rigid set of rules to be followed in each project.

A.         Locating and Defining Problems or Research Issues

1.         The first step in launching a research study is problem or issue definition, which focuses on uncovering the nature and boundaries of a situation or question related to marketing strategy or implementation. The first sign of a problem is typically a departure from some normal function, such as conflicts between or failures to attain objectives.

2.         Marketing research often focuses on identifying and defining market opportunities or changes in the environment. When an organization discovers a market opportunity, it may need to conduct research to more precisely understand the situation so it can craft an appropriate marketing strategy.

3.         To pin down the specific boundaries of a problem or an issue through research, marketers must define the nature and scope of the situation in a way which requires probing beneath superficial symptoms.

B.         Designing the Research Project

Once the problem or issue has been defined, the next step is research design, an overall plan for obtaining the information needed to address it. This step requires formulating a hypothesis and determining what type of research is most appropriate for testing the hypothesis.

1.         Developing an Hypothesis

a)         An hypothesis is an informed guess or assumption about a certain problem or set of circumstances.

b)         The hypothesis is based on all available insight and knowledge about the problem or circumstances from previous research studies and other sources.

c)         Sometimes several hypotheses are developed during a research project; these accepted or rejected hypotheses become the study’s chief conclusions.

2.         Types of Research

The nature and type of research varies based on the research design and the hypotheses under investigation.

a)         Exploratory Research

(1)        When marketers need more information about a problem or want to make a tentative hypothesis more specific, they conduct exploratory research.

(2)        Marketers may review information in the organization’s own records, examine publicly available data, or question knowledgeable people inside or outside the organization to gain insights into the problem.

b)         Conclusive Research

Conclusive research verifies insights through an objective procedure to help marketers make decisions; it is used when the marketer has in mind one or more alternatives and needs assistance in the final stages of decision making.

(1)        If marketers need to understand the characteristics of certain phenomena to solve a particular problem, descriptive research is a good aid.

(a)        Descriptive studies can range from general surveys of customers’ educations, occupations, or ages to specifics on how they use products or how often they purchase them.

(b)        Descriptive studies generally demand in-depth knowledge and assume the problem or issue is clearly defined.

(2)        Experimental research allows marketers to make causal deductions about relationships. Marketers must plan the research so collected data proves or disproves that X causes Y.

3.         Research Reliability and Validity

In designing research, marketing researchers must ensure that research techniques are both reliable and valid.

a)         A research technique has reliability if it produces almost identical results in repeated trials.

b)         To have validity, the method must measure what it is supposed to measure, not something else.

C.         Collecting Data

The next step in the marketing research process is collecting data to help prove or disprove the research hypothesis. The research design must specify the types of data to collect and how the data is collected.

1.         Types of Data

a)         Primary data are observed and recorded or directly collected from respondents. This type of data must be gathered through observation or by surveying people of interest.

b)         Secondary data are compiled inside and outside the organization for some purpose other than the current investigation.

2.         Sources of Secondary Data

Marketers often begin the data collection phase of the marketing research process by gathering secondary data.

a)         Internal sources of secondary data can include the organization’s own database, which may contain information about past marketing activities, as well as accounting records.

b)         External sources of data include periodicals, government publications, unpublished sources, online databases, or outside services.

c)   New technologies like TiVo and services provided on the Internet are challenging traditional sources of secondary data by offering year-round, up-to-the-minute data.

3.         Methods of Collecting Primary Data

The collection of primary data is a more lengthy, expensive, and complex process than the collection of secondary data.

a)         Sampling

(1)        Because the time and resources available for research are limited, it is almost impossible to investigate all members of a target market or other population.

(a)        A population, or “universe,” includes all the elements, units, or individuals of interest to researchers for a specific study.

(b)        Researchers can project the reactions of a total market or market segment by systematically choosing a limited number of units—a sample—to represent the characteristics of a total population.

(2)        Sampling in marketing research is the process of selecting representative units from a total population. Most types of marketing research employ sampling techniques. There are two basic types of sampling: probability sampling and non-probability sampling.

(3)        With probability sampling, every element in the population being studied has a known chance of being selected for study.

(a)        When marketers employ random sampling, all the units in a population have an equal chance of appearing in the sample.

(b)        Stratified sampling divides the population of interest into groups according to a common attribute then a random sample is chosen within each group.

(4)        Non-probability sampling is more subjective than probability sampling because there is no way to calculate the likelihood that a specific population element will be chosen. One type of non-probability sampling is quota sampling, in which researchers divide the population into groups and then arbitrarily choose participants from each group.

b)         Survey Methods

(1)        Marketing researchers often employ sampling to collect primary data through mail, telephone, online, or personal interview surveys.

(a)        Selection of a survey method depends on the nature of the problem or issue, the data needed to test the hypothesis, and the resources, such as funding and personnel, available to the researcher.

(b)        Gathering information through surveys is becoming increasingly difficult because fewer people are willing to participate.

(2)    In a mail survey, questionnaires are sent to respondents, who are encouraged to complete and return them.

(a)        Mail surveys are used most often when the individuals in the sample are spread over a wide area and funds for the survey are limited.

(b)        A mail survey is less expensive than telephone surveys, as long as the response rate is high enough to produce reliable results.

(c)        The main disadvantages of this method are the possibility of a low response rate and of misleading results if respondents differ significantly from the population being sampled.

(d)        Premiums or incentives which encourage respondents to return questionnaires have been effective in developing panels of respondents who are regularly interviewed by mail.

(3)        In a telephone survey, an interviewer records respondents’ answers to a questionnaire.

(a)        Telephone surveys have some advantages over mail surveys, including higher rates of response, speed, and the ability to gain rapport with respondents and ask probing questions.

(b)        Telephone surveys have several disadvantages.

·          Few people like to participate in telephone surveys which limit participation and distort representation.

·          Telephone surveys are limited to oral communication; visual aids or observation cannot be included.

·          Interpreters of results must make adjustments for subjects who are not at home, do not have telephones, have unlisted numbers, or screen or block calls.

(4)        In an online survey, questionnaires can be transmitted to respondents who have agreed to be contacted and have provided their e-mail addresses.

(a)        The potential advantages of email surveys are quick response and lower cost than traditional mail, telephone, and personal interview surveys—if the response rate is adequate.

(b)        More firms are also using websites or various online communities to conduct surveys.

(c)     Crowdsourcing calls for taking tasks usually performed by a marketer or researcher and outsourcing them to a potential market through an open call for ideas.

(d)    Marketers are likely to rely more heavily on online surveys in the future, as most people not have Internet access.

(5)        In a personal interview survey, participants respond to questions face to face.

(a)        One such research technique is the in-home (door-to-door) interview, which takes place in the respondent’s home.

(b)        The object of a focus-group interview is to observe group interaction when members are exposed to an idea or concept. These interviews are often conducted in informal small groups of eight to 12 people and allow customer attitudes, behaviors, lifestyles, needs, and desires to be explored.

(c)        More organizations are starting customer advisory boards, which are small groups of actual customers who serve as sounding boards for new product ideas and offer insights into their feelings and attitudes toward the organization’s products, promotion, pricing, and other elements of marketing strategy.

(d)        Another option is the telephone depth interview, which combines the traditional focus group’s ability to probe with the confidentiality provided by telephone surveys.

(e)        Shopping mall intercept interviews involve interviewing a percentage of individuals passing by certain “intercept” points in a mall.

(f)         An on-site computer interview is a variation of the mall intercept interview, in which respondents complete a self-administered questionnaire displayed on a computer monitor.

c)         Questionnaire Construction

(1)        Questions must be clear, easy to understand, and directed toward a specific objective.

(2)        A common mistake in constructing questionnaires is to ask questions which interest researchers but yield no useful information to accept or reject a hypothesis.

(3)        Questions are usually of three kinds: open-ended, dichotomous, and multiple-choice (as shown in the text).

(4)        Researchers must be careful not to ask questions which may be considered too personal or require an admission of activities likely to condemn by others.

d)         Observation Methods

In using observation methods, researchers record individuals’ overt behaviors, taking note of physical conditions and events. Direct contact with subjects is avoided.

(1)        Observation may include the use of ethnographic techniques, such as watching customers interact with a product in a real-world environment.

(2)        Observation may also be combined with interviews.

(3)        Data gathered through observation can sometimes be biased if the person is aware of the observation process.

(a)        An observer can be placed in a natural market environment, such as a grocery store, without biasing or influencing shoppers’ actions.

(b)        If the presence of a human observer is likely to bias the outcome or if human sensory abilities are inadequate, mechanical means may be used to record behavior.

(4)        Observation is straightforward and avoids a central problem of survey methods: motivating respondents to state their true feelings or opinions. However, results tend to be descriptive.

D.         Interpreting Research Findings

After collecting data to test hypotheses, marketers need to interpret research findings.

1.         The first step in drawing conclusions from most research is displaying the data in table format.

2.         Next, the data must be analyzed: statistical interpretation focuses on what is typical and what deviates from the average.

3.         Data require careful interpretation by the marketer.

4.         Managers must understand the research results and relate them to a context that permits effective decision making.

E.         Reporting Research Findings

1.         The final step in marketing research is to report the research findings. The marketer must take a clear, objective look at the findings to see how well the gathered facts answer the research question or support or negate the initial hypotheses.

2.         The report of the research results is usually a formal, written document.

3.         Bias and distortion can be a major problem if the researcher is intent upon obtaining favorable results. Marketing researchers must be very careful with their word choices.

III.         Using Technology to Improve Marketing Information Gathering and Analysis

Technology is making information for marketing decisions increasingly accessible.

A.         Marketing Information Systems

1.         A marketing information system (MIS) is a framework for the day-to-day management and the structuring of information regularly gathered from sources inside and outside an organization. It provides a continuous flow of information about prices, advertising, expenditures, sales, competition, and distribution expenses.

2.         The main focus of the marketing information system is data storage and retrieval as well as computer capabilities and management’s information requirements.

3.         An effective marketing information system starts by determining the objective of the information by identifying decision needs which require certain information. The organization can then specify an information system for continuous monitoring to provide regular, pertinent information about external and internal environments.

B.         Databases

1.         A database is a collection of information arranged for easy access and retrieval.

2.         Databases, usually accessed through a computer system, allow marketers to tap an abundance of useful information to make marketing decisions. Databases may contain internal sales reports, newspaper articles, company news releases, government economic reports, bibliographies, and more.

3.         Customer Relationship Management (CRM) employs database marketing techniques to identify different types of customers and develop specific strategies for interacting with each customer.

a)         Identify and build a database of current and potential customers.

b)         Deliver differential messages according to each consumer’s preference and characteristics through established and new media channels.

c)         Track consumer relationships to monitor the costs of retaining individual customers and the lifetime value of their purchases.

4.         Marketers must distinguish between active customers, those likely to continue buying from the firm and inactive customers, those likely to defect.

a)         Identify profitable inactive customers who can be reactivated.

b)         Remove inactive unprofitable customers from the customer database.

c)         Identify active customers who should be targeted with regular marketing activities.

5.         Marketing researchers can also use commercial databases developed by information research firms to obtain useful information for marketing decisions.

6.         Single-source data is information provided by a single firm about household demographics, purchases, television viewing behavior, and responses to promotions, such as coupons and free samples.

C.         Marketing Decision Support Systems

A marketing decision support system (MDSS) is customized computer software which helps marketing managers anticipate the effects of certain decisions.

IV.        Issues in Marketing Research

A.         The Importance of Ethical Marketing Research

1.         It is essential professional standards be established by which research may be judged reliable because marketing managers and other professionals increasing relying on marketing research, marketing information systems, and new technologies to make decisions,.

2.         These standards are necessary because ethical and legal issues develop as marketing research data is gathered.

3.         Organizations like the Marketing Research Association have developed codes of conduct and guidelines to promote ethical marketing research.

B.         International Issues in Marketing Research

1.         The marketing research process described in this chapter is used globally, but to ensure research is valid and reliable, data-gathering methods may be modified to allow for differences in sociocultural, economic, political, legal, and technological forces in different world regions (global issues will be discussed in further detail in chapter 9).

2.         Experts recommend a two-pronged approach to international marketing research.

a)         The first phase involves a detailed search for and analysis of secondary data to gain greater understanding of a particular marketing environment and to pinpoint issues that must be taken into account in gathering primary research data.

b)         The second phase involves field research using many of the methods described in the chapter, including focus groups and telephone surveys, to refine an organization’s understanding of specific customer needs and preferences.

(1)        Specific differences among countries can have a profound influence on data gathering.

(2)        Primary data gathering may have a greater chance of success if the organization employs local researchers who better understand how to approach potential respondents in their own language.

Source:  Pride & Ferrell (2012), Marketing, South-Western.