Marketing Research

Marketing research is what a company has to resort to if it can’t answer a question by using any of the types of information discussed so far—market intelligence, internal company data, or analytics software applied to data. Marketing research is generally used to answer specific questions. The name you should give your new product is an example. Unless your company has previously done specific research on product names—what consumers think of them, good or bad—you’re probably not going to find the answer to that question in internal company data. Also, unlike internal data, which is generated on a regular basis, marketing research is not ongoing. Marketing research is done on an as-needed or project basis. If an organization decides that it needs to conduct marketing research, it can either conduct marketing research itself or hire a research firm to do it.

So when is marketing research needed? Keep in mind, marketing research can be expensive. You therefore have to weigh the costs of the research against the benefits. What questions will the research answer, and will knowing the answer result in the firm earning or saving more money than the research costs?

Marketing research can also take time. If a quick decision is needed for a pressing problem, it might not be possible to do the research. Finally, sometimes the answer is obvious, so there is no point in conducting the research. If one of your competitors comes up with a new offering and consumers are clamoring to get it, you certainly don’t need to undertake a research study to see if such a product would survive in the marketplace.

Alex J. Caffarini, the president and founder of the marketing research firm Analysights, believes there are a number of other reasons companies mistakenly do marketing research (Caffarini, n.d.):

· “We’ve always done this research.” The research has taken on a life of its own; this particular project has continued for years and nobody questioned whether it was still relevant.

· “Everyone’s doing this research.” Their competitors are doing it, and they’re afraid they’ll lose competitive advantage if they don’t; yet no one asks what value the research is creating.

· “The findings are nice to know.” Great—spend a lot of money to create a wealth of useless information. If the information is nice to know, but you can’t do anything with it, you’re wasting money.

· “If our strategy fails, having done the research will show that we made our best educated guess.” They’re covering their butts. If things go wrong, they can blame the findings, or the researcher.

· “We need to study the problem thoroughly before we decide on a course of action.” They’re afraid of making a tough decision. Conducting marketing research is a good way to delay the inevitable. In the meantime, the problem gets bigger, or the opportunity closes.

· “The research will show that our latest ad campaign was effective.” They’re using marketing research to justify past decisions. Rarely should marketing research be done after the fact.

Is Marketing Research Always Correct?

Marketing research can help companies avoid making mistakes. Tim Hortons, a Canadian coffee that has been expanding, opened self-serve kiosks in Ireland, but the service was a flop. Why? Because cars in Ireland didn’t have cup holders. Would marketing research have helped? Probably. So would a little bit of market intelligence. It would have been easy for an observer to see that trying to drive a car and hold a cup of hot coffee at the same time is difficult.

That said, that marketing research is not infallible. In fact, marketing research studies have rejected a lot of good ideas. The idea for telephone answering machines was initially rejected following marketing research. So was the hit sitcom Seinfeld, a show that in 2002 TV Guide named the number-one television program of all time. Even the best companies, such as Coca-Cola, have made mistakes in marketing research that have led to huge flops. In the next section of this chapter, we’ll discuss the steps related to conducting marketing research.

Key Points

Many marketing problems and opportunities can be solved by gathering information from a company’s daily operations and analyzing it. Market intelligence involves gathering information on a regular, ongoing basis to stay in touch with the marketplace. Marketing research is what a company resorts to if it can’t answer a question by using market intelligence, internal company data, or analytical software.

Steps in the Marketing Research Process

Step 1: Define the Problem (or Opportunity)

There’s a saying in marketing research that a problem half defined is a problem half solved. Defining the “problem” of the research sounds simple, doesn’t it? Suppose your product is tutoring other students in a subject you’re a whiz at. You have been tutoring for a while, and people have begun to realize you’re good at it. Then, suddenly, your business drops off. Or it explodes, and you can’t cope with the number of students you’re being asked to help. If the business has exploded, should you try to expand? Perhaps you should subcontract with some other “whiz” students. You would send them students to be tutored, and they would give you a cut of their pay for each student you referred.

Both of these scenarios would be a problem, wouldn’t they? They are problems insofar as they cause you headaches. But are they really the problem? Or are they the symptoms of something bigger? For example, maybe business has dropped because the school is experiencing financial trouble and has lowered the number of scholarships. Consequently, there are fewer total students. Conversely, if you’re swamped with people who want you to tutor, perhaps the school awarded more scholarships than usual, so there are a greater number of students who need services. Alternately, perhaps you ran an ad in your school’s newspaper, and that led to the influx of students.

Businesses are in a similar situation. They take a look at symptoms and try to get to the potential causes. If you approach a marketing research company with either scenario—either too much or too little business—the firm will seek more information from you such as the following:

· In what semester(s) did your tutoring revenues fall (or rise)?

· In what subject areas did your tutoring revenues fall (or rise)?

· In what sales channels did revenues fall (or rise): Were there fewer (or more) referrals from professors or other students? Did the ad you ran result in fewer (or more) referrals this month than in the past months?

· Among what demographic groups did your revenues fall (or rise)—women or men, people with certain majors, or first-year, second-, third-, or fourth-year students?

The key is to look at all potential causes so as to narrow the parameters of the study to the information you actually need to make a good decision about how to fix your business if revenues have dropped or whether to expand if your revenues have exploded.

The next task for the researcher is to put into writing the research objective. The research objective is the goal or goals the research is supposed to accomplish. The marketing research objective for your tutoring business might read as follows: To survey college professors who teach 100- and 200-level math courses to determine why the number of students referred for tutoring dropped in the second semester.

This is admittedly a simple example designed to help understand the basic concept. If you take a marketing research course, you will learn that research objectives get more complicated. The following is an example (Burns & Bush, 2010, p. 85):

To gather information from a sample representative of the US population among those who are “very likely” to purchase an automobile within the next six months, which assesses preferences (measured on a 1–5 scale ranging from “very likely to buy” to “not likely at all to buy”) for the model diesel at three different price levels. Such data would serve as input into a forecasting model that would forecast unit sales, by geographic regions of the country, for each combination of the model’s different prices and fuel configurations.

Now do you understand why defining the problem is complicated? Many a marketing research effort is doomed from the start because the problem was improperly defined. Coke’s ill-fated decision to change the formula of Coca-Cola in 1985 is a case in point: Pepsi had been creeping up on Coke in terms of market share over the years as well as running a successful promotional campaign called the “Pepsi Challenge,” in which consumers were encouraged to do a blind taste test to see if they agreed that Pepsi was better. Coke spent four years researching “the problem.” Indeed, people seemed to like the taste of Pepsi better in blind taste tests. Thus, the formula for Coke was changed. But the outcry among the public was so great that the new formula didn’t last long—a matter of months—before the old formula was reinstated. Some marketing experts believe Coke incorrectly defined the problem as “How can we beat Pepsi in taste tests?” instead of “How can we gain market share against Pepsi?” (Burns & Bush, 2010, p. 87–88).

Step 2: Design the Research

The next step in the marketing research process is to do a research design. The research design is the “plan of attack.” It outlines what data to gather and from whom, how and when you will collect the data, and how you will analyze it. Let’s first look at the data to gather. There are two basic types. The first is primary data, information you collect yourself, using hands-on tools such as interviews or surveys, specifically for the research project you’re conducting. Secondary data is data that has already been collected by someone else, or data you have already collected for another purpose. Collecting primary data is more time-consuming, work-intensive, and expensive. Consequently, always try to collect secondary data first to solve a research problem. A great deal of research on a variety of topics already exists. If this research contains the answer to your question, there is no need to replicate it.

Sources of Secondary Data

Your company’s internal records are a source of secondary data. So are any data you collect as part of marketing intelligence gathering efforts. You can also purchase syndicated research. Syndicated research is primary data that marketing research firms collect regularly and sell to other companies. J.D. Power & Associates is a provider of syndicated research. The company conducts independent, unbiased surveys of customer satisfaction, product quality, and buyer behavior for industries. The company is best known for its research in the automobile sector.

One of the best-known sellers of syndicated research is the Nielsen Company, which produces the Nielsen ratings. The Nielsen ratings measure the size of television, radio, and newspaper audiences. You have probably read or heard about TV shows that get the highest (Nielsen) ratings. (Arbitron does the same thing for radio.) Nielsen, along with its main competitor, Information Resources Inc. (IRI), also sells businesses scanner-based research. Scanner-based research is collected by scanners at checkout stands in stores. Each week, Nielsen and IRI collect information on the millions of purchases at stores. The companies then compile the information and sell it to firms. The Nielsen Company has also teamed with Facebook to collect marketing research information. Via Facebook, users will see surveys in some of the spaces in which they used to see online ads (Rappeport & Gelles, 2009).

By contrast, MarketResearch.com is an example of a marketing research aggregator, a marketing research company that doesn’t conduct its own research and sell it. Instead, it buys research reports from other marketing research companies and then sells the reports in their entirety or in pieces to other firms. Check out MarketResearch.com’s website. There are a huge number of studies to buy for relatively small amounts of money.

A local library is a good place to gather free secondary data. It has searchable databases as well as handbooks, dictionaries, and books, some of which can be accessed online. Government agencies also collect and report information on demographics, economic and employment data, health information, and balance-of-trade statistics. The US Census Bureau collects data every 10 years about who lives where. Basic demographic information about sex, age, race, and types of housing in which people live in each state, metropolitan area, and rural area is gathered so that population shifts can be tracked, including determining the number of legislators each state should have in the US House of Representatives. For the US government, this is primary data. For marketing managers, it is an important source of secondary data.

The Survey Research Center at the University of Michigan also conducts periodic surveys and publishes information about trends in the United States. One research study the center continually conducts is called the “Changing Lives of American Families.” This is important research data for marketing managers monitoring consumer trends in the marketplace. The World Bank and the United Nations are international organizations that collect a great deal of information. Their websites contain many free research studies and data related to global markets.

Gauging the Quality of Secondary Data

When you are gathering secondary information, it’s good to be skeptical. Sometimes studies are commissioned to produce the result a client wants to hear—or wants the public to hear. For example, throughout the twentieth century, numerous studies found that smoking was good for people’s health. The problem was the studies were commissioned by the tobacco industry. Web research can also pose certain hazards. There are many biased sites that try to fool people into thinking that they are providing good data. Often the data is favorable to the products they are trying to sell. Beware of product reviews as well. Unscrupulous sellers sometimes get online and create bogus ratings for products. See below for questions you can ask to help gauge the credibility of secondary information.