MARKET RESEARCH

Marketing research seeks to answer the question of what market needs exist, where they are located, what purchasing patterns exist, where they are located, and other factors such as its pattern of growth. Modern marketing research depends on the development of an extensive management information system normally having a large product and consumer database at its core. The research process is ongoing and data about products, manufacturers, customers and competitors is continually being collected and analyzed.

The market research process follows a series of steps which include understanding the problem to be researched, creating a research design for the problem, designing data sources including designing the data collection methods, implementing the study, analyzing and processing the collected data, and developing the research report. Figure 3.4 illustrates the market research process.

FIGURE 3.4 MARKET RESEARCH PROCESS

Understanding the problem to be researched

A marketing manager, normally working with a marketing research group, must examine a problem carefully to understand its nature and complexity. A careful definition of the problem`s parameters is crucial in developing the research project`s goals.

There are various types of research problems. Some research is merely exploratory in nature which allows management to develop a clearer conceptualization of a problem. A more in-depth market study may be concerned with describing a particular problem in detail. A third type of research is interested in understanding the dynamics of a particular situation in terms of what causes it, or related issues, to occur. The objective of the research is the critical factor in determining the nature of the research design.

How is the research design created?

After developing an understanding of the problem to be researched, the next question to be answered is what potential market value the research has when launching a new product.

EXAMPLE 3.4

Management seeks to determine the market value when launching similar products in a market segment to form the basis for a research budget. It can be determined that other product launches had an average annual profit of $35 million when market research was conducted and only $15 million without market research.

market research value = average profits with market research

- average profits without market research

market research value = $35 million -$15 million

__________

20 million

In this example it would be possible to justify a $20 million-dollar research budget.

Once a budget can be determined for the research project, it is then necessary to determine what types of data will be used. Two types of research data, primary and secondary, may be used in market research. Primary data such as census data collected by the government is original data which is either collected directly or is provided by a source who collects it directly. Secondary data is data reported on by a secondary source such as another market report or a periodical which provides results of primary data used in preparing the report. For the most part, market research uses primary data, although secondary data can be a useful theoretical source as well as validating results obtained from primary data collection studies.

In the development stage, how is marketing research data collected?

Marketing data is obtained using four basic research approaches: observational, focus group, survey and experimental.

• Observational. This is the most unstructured method of collecting data. The data collection method will depend on the context of the situation (for example, if one were to collect data regarding the cruise ship industry, one observational approach would be to book a cruise on one or several selected cruise ships and observe the activities on board, and the food being served, as well as to listen to passengers` before and after comments during embarkation and disembarkation).

• Focus group. In the focus-group methodology, a small group of selected individuals are invited to discuss a certain topic. In the cruise ship example, questions would be focused on the group`s overall impressions regarding the cruise ship industry, with special attention given to particular cruise lines. Data obtained from a focus group session can be very useful when designing a more in-depth research study.
• Survey research. Surveys are the most commonly used form of marketing research. A survey is a systematic research tool used to obtain descriptive data. The three basic types of surveys are mail surveys to specified geographical areas, systematic telephone surveys within a calling area, and one-on-one personal interviews with a single individual or a group.
• Experimental research. This type of research has the most methodological accuracy. In experimental research, measures of the affects of variation in independent variables on the subject dependent variable are taken. This is done using as controlled an environment as possible either in a laboratory or field setting. An example of experimental research is testing the impact of various types of advertising on resulting sales. Different types of advertising can be used in different regional markets for the same product to determine if there is any measurable difference in resulting sales. However, controls for inherent regional differences must be predetermined.

How is a sampling plan developed?

A sampling plan is developed for the purpose of ensuring that the data collected is valid and reliable for the selected population. A sampling plan addresses three issues: the sampling unit, the sampling method, and the sample size.

• Sampling unit. This is a definition of a particular target population. If a company wants to sample opinions of people using a particular product, then it is necessary to define who that target population actually is.
• Sampling method. Researchers can use either a probability or non-probability sample of the target population. A probability sample is a statistical calculation of the sampling error of a target population. At the 1% level of confidence, there is a 99% probability of being a valid and reliable sample of the target population, while 1% would be inaccurate. In a non-probability sample, the researcher makes a judgment about what portion of a target population should be included in a sample.
• Sample size. Since it usually is impractical to sample opinions of an entire target population, it becomes necessary to develop a representative sample of the target population. Of course, the larger the sample, the more reliable and valid are the results. Sample sizes, either at the 5% or 1% level of confidence, are chosen according to the scope of the study, the resources available, and the criticality of the need for reliability.

How is the market research study implemented?

In the implementation stage, the researcher actually collects the required data. This is the most expensive and error-prone stage of the marketing research process. Data collection methods include mechanical means, computers including bar coding and interactive data input, questionnaires and interviewing. The major concern here is that data collection methods insure valid and reliable data.

How is the data processed and analyzed?

The data processing and analysis stage involves the processes of reviewing, categorizing, and analyzing. First the data must be reviewed for collection errors and omissions to insure that all areas have been completed accurately. Then the data has to be placed in categories where similar data can be compared with each other. The analysis step is crucial for the study`s final outcomes. Various statistical analysis methods are utilized for interpreting the results. This can involve using multivariate analysis and frequency distributions.

How is the research report developed?

Final reports should be succinctly written. Results should be interpreted and presented in an understandable format. Management requires report formats that are easily interpreted and conceptually coherent. The appropriate use of graphics can be helpful in explaining outcomes. Oral presentations by researchers often are used to further explain the study.