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Market Research
Marketing requires an assessment of consumer needs through research. This marketing research is far-reaching in its enquiries - it covers product development, identifying the market, and suitable methods of selling, distribution, promotion and after sales service. The main divisions of market research are:
Product research - this is concerned with the design, development and testing of new products, the improving of existing products and the forecasting of likely trends in customers' preferences. Comparisons with competing products should be carried out, and the growing importance of packaging as a buying influence needs to be researched. Efficient after-sales service should also be considered. research is needed to improve standards of comfort, visual appeal and suitability of the product. A point to note is that increased spending power today is either controlled by women or heavily influenced by them. By their nature, women are more sensitive to colour and fashion and in many areas, such as household products, they are demonstrating a desire for products that are nice to look at as well as practical. This needs to be remembered.
Sales Research - this involves a thorough examination of the selling activities of the company. This is usually made by sales outlets and/or sales territories, and analysed so that direct comparisons can be made with published data. The position of a company in its market should be checked, in relation to its competitors - who should be identified and ranked in order of importance. If company sales are falling, then the overall trend in the market should be checked. if the general trend is an upward one, but company sales are not also rising, then research must be carried out to find out the reason. the effectiveness of the sales force should be examined, the distribution of territories, the methods of operation etc. all need to be assessed. Distribution plans should be considered - is the best channel being used? Estimates of sales must be based on sound knowledge of the factors likely to affect consumption of the product.
Customer Research - this covers investigations into buyer behaviour and studies the social, economic and psychological influences affecting purchasing decisions. Reasons for preferences for certain brands, pack sizes etc. will be examined. The impact of the company's selling activities should be studied from the dealer's point of view, and from the consumer angle. Unfavourable trade attitudes may be based on the failure of the company in the past to offer acceptable terms of trading, although the dealer may have no quarrel with the product itself. Deliveries may be another cause of dissatisfaction. Customer research includes consumer surveys to study the opinions and behaviour of those who use the product. this may involve the use of questionnaires to a sample of the population, or in-depth interviews.
Promotion Research - this is concerned with testing or evaluating the effectiveness of the various methods used in promoting a company's products or services. These include exhibitions, public relations campaigns, advertising, special offers etc. The task of selecting the right media to use is very difficult as there is such a range available. The most suitable methods of promoting the product should be studied in detail. Present practice needs to be considered for its effectiveness, and alternatives should be objectively considered.
Primary and Secondary Data
When carrying out research, there are two main sources of information - primary and secondary sources. Secondary sources consist of existing data and should always be examined first - this is done by carrying out Desk Research. Primary information is new information which is collected by Field Research.
Desk Research
The required information may have already been researched by someone else. There are also published sources of information which can save a firm time and money if properly used. A firm itself has many records which are useful secondary sources of information - such as those relating to purchasing, production, personnel, marketing, sales and finance. In addition there are a large number of external sources, such as the government, universities, trade associations, academic and professional journals, commercial research organisations. When using published sources it is important to find out the methods used to collect and tabulate the data - the firm must be sure that the information is valid and reliable.
Field Research
When all published sources have been considered, there may still be some unanswered questions. There are a number of areas in which field research is usually necessary:
a. advertising research - the effectiveness of advertisements themselves;
b. consumer research - investigation of the factors which underlie consumer choice and preference;
c. distribution research - effectiveness of alternative channels of distribution, methods of handling etc.;
d. packaging research - colour, design, size, shape, informational content etc.;
e. product research - acceptability of a new product, development of profiles of people who use the product etc.
The Collection of Primary Data
This may be done by one, or a combination, of three methods - observation, experimentation and sample survey.
Observation is the simplest, but usually the least satisfactory, and consists essentially of observing whatever is under investigation. A good example of this approach is the measurement of customer flow patterns in shops, from which many principles of store layout have been derived.
This method depends heavily on the skill of the observer, and suffers from the need for secrecy if people are to behave as they do under normal circumstances. Also, observation does not throw much light on the reasons for the observed behaviour, which is usually of great importance.
Experimentation is usually less expensive than a sample survey and is more controlled than observation. The major drawback lies in the difficulty of testing something in as realistic conditions as possible. This may in some cases be overcome by e.g. testing package design by putting the test item on the shelves of a shop. The experiment may have to be run many times in order to get a number of results which may then be averaged out.
It may, however, be expensive and time-consuming to use experimentation if there are a number of variables which you wish to investigate e.g. in the case of a new package you may wish to isolate the separate effects of the name, colour, size, shape, information on the package.
The most familiar method used in the collection of primary data is the sample survey. There is a wide selection of survey methods, and, apart from time and money constraints, the choice of method will be dictated by three separate considerations:
a. selection of those who will be involved in the survey - the respondents;
b. the way in which the respondents will be contacted;
c. the information required and the means of obtaining it.
Theoretically, the ideal method of collecting primary data is to undertake a census of the whole population which needs to be investigated. In practice, such an exercise is nearly always impossible. It can only be done where the required population is a small and easily defined group which is readily accessible. The cost would also be enormous even if it were possible to conduct such a survey. There would also be so much data that by the time it was all analysed it would be out of date.
For these reasons most researchers content themselves with a representative sample of the population which they wish to study. Once the researcher has precisely identified the population to be studied e.g. "the market for instant cake mixes", he can set about finding a sample which will give the desired information, within the ever-present constraints of time and money.
Selection of the sample
This is based upon two laws of statistics - The Law of Statistical Regularity and The Law of Inertia of Large Numbers. The first law says that any sample taken from a larger group will tend to have the same characteristics as the larger group. The second law says the large groups give more accurate results than small ones. This is because in a large group you may have very opposing characteristics, but these cancel one another out and you get a better overall picture. In too small a group you may get a bias in one direction, with nothing to compensate for it.
On the basis of these laws, you can determine the size and composition of a sample which will give a desired level of accuracy while allowing for, and eliminating, possible sources of error. In fact, a properly designed and executed sample may prove to be more accurate than a poorly conducted census.
There are a number of methods of sampling:
Random sampling - using this method, every element of the population has the same probability of being included in the sample. A probability based sample is essential if the results of the survey are to be used for predictive purposes.
However, there is often a need for a quick survey, perhaps to clarify basic issues, or to use as a preliminary to a probability survey, or to provide generalised information in a hurry. The following methods are often used:
Convenience sampling - this consists of getting information from any convenient group whose views may be relevant to the inquiry e.g. one may stop passers-by on the street to ask their views on parking meters. This could be done as a basis for formulating more precise questions to be asked of a representative sample of the population.
Judgement sampling - this is a slightly more refined technique in that respondents are selected on the basis of the interviewer's opinion that they constitute a representative cross-section of the population to be investigated.
Quota sampling - this is a distinct improvement on the previous two approaches in that the respondent "type" is specified on the basis of the characteristics of the population at large. Each interviewer is then assigned a quota (number of people to interview) and gets information from people who meet the specification decided upon e.g. he may have to interview 10 middle-class housewives between 20 and 35 years old who have at least one child under school age. This could be done by visiting a residential suburb and interviewing young women pushing prams!
Contacting the respondents
Three methods may be used - personal interview, postal questionnaire or telephone interview.
The telephone interview possesses the major disadvantage that telephone subscribers represent only a proportion of all households, and tend to be concentrated in the higher socio-economic groups.
NB This socio-economic breakdown is not dependent upon income but simply upon occupation, and is derived from data published by JICNARS (Joint Industry Committee for National Readership Surveys). The above groupings have been widely adopted by marketing researchers. However they originated over a generation ago when society was more class based and so they need to be used carefully and in conjunction with other data.
Additionally, respondents have little time to give a considered response, and there is the possibility of interviewer bias. People often feel that their privacy has been invaded and are antagonistic towards the interviewer. The disadvantages of telephone interviewing can be overemphasised, however, and researchers are becoming increasingly aware of the advantages of the telephone for quick, low-cost interviews where the interviewer can explain questions and gain access to respondents who would not answer a postal questionnaire or give a personal interview.
The postal questionnaire possesses the advantage that it enables the researcher to reach any household or business establishment in the UK at very low cost. It also avoids the problem of the interviewer being biased towards or against any respondent. Respondents have more time to give considered answers and can be anonymous.
Unfortunately, postal questionnaires suffer from very high refusal rates - a 50% response would be considered excellent. There is also the problem that the respondent either selects or deselects himself from the survey, and you may end up with a sample of respondents which is no longer representative of the population you wish to investigate. As with the telephone interview, there is always the possibility of misinterpretation of the actual questions asked.
It is because of the disadvantages of telephone interviews and postal questionnaires that the personal interview remains the most popular survey technique, despite its quite high cost. The use of trained interviewers produces a high percentage of acceptable responses with a low refusal rate.
The ability of the interviewer to explain questions improves accuracy and allows longer and more complex questions to be asked. The interviewer may also be able to obtain additional information from observations e.g. type of housing, possession of consumer durables. Additionally products may be demonstrated.
The major disadvantages are high cost, the shortage of trained interviewers and the fact that it may be difficult to gain access to certain people in order to carry out an interview.
Questionnaires
1. Many problems involved in data collection of all kinds may be minimised through good questionnaire design.
2. All questionnaires must be identifiable and must therefore have a title, and perhaps a number. Also, where the questionnaire is to be administered by an interviewer, provision should be made for recording the date and time of the interview, where it took place and the interviewer's name.
3. All questionnaires should make provision for the recording of basic respondent data as a basis for subsequent classification, and to permit comparisons with other surveys. This data may be obtained by questioning and observation, and should include: age, sex, social class, occupation of head of household, marital status, family size and composition, level and type of education.
Other useful data includes: name and address, owner or tenant of property, type of property, ownership of consumer durables. Income information is obviously desirable, but many respondents consider this a private matter and will either refuse to answer or will exaggerate. If such questions must be asked, they are best left to the end of the interview!
4. The questionnaire should contain control questions to check if the respondent is giving consistent answers to the questionnaire.
5. The questionnaire must contain questions that will elicit the information required!
6. Questions may be Yes/No, multiple choice or open-ended.
7. Yes/No are easy to ask, understand, record and analyse. They do not, however, give much range of answer and are largely useful for factual questions such as "Do you have a refrigerator?".
8. Multiple choice questions offer the respondent a number of alternatives and so permit the collection of more detailed and accurate data and allow you to obtain a measure of the strength of opinion or attitudes e.g.
"How often do you use Whizzo?"
At least once a week
Once a fortnight
Once a month
Less than once a month
Never
"Old age pensions should be increased"
Strongly agree
Agree
Disagree
Strongly disagree
No opinion
9. Open-ended questions give the respondent complete freedom in answering and so yield the maximum information, as well as eliminating interviewer bias. They do, however, have to be recorded exactly as the respondent gives them, and much of the data may be irrelevant. It is also more difficult to analyse the responses to open-ended questions.
10. In as far as is possible, all questions should be clear and unbiased.
11. The sequence in which questions are asked has an important bearing on the value of the data obtained. Initial questions should put the respondent at ease, and lead naturally into more specific questions. Also, some questions can lead respondents to answer subsequent questions in a particular way e.g. if you ask a question about price, followed by a question about reasons for preferring a particular brand, then price will usually be stated as a major reason in the response to that question.
Editing, tabulating and analysis of data collected
The collected responses have to be checked for any silly answers, unanswered questions etc. - this is the editing process. The responses to each question then have to be collected together and statistics complied.
Often computers are used to help with this task - spreadsheets are useful for this purpose, as tables of results can be shown, and charts such as line graphs and bar charts drawn from these tables. These assist in the analysis of the information gathered.
Presentation of the findings from a survey
Many organisations have adopted a formal layout for a survey report, along the following lines:
1. Introduction - including title of report, date of publication
2. Table of contents
3. Preface - including acknowledgements
4. Statement of purpose - outlines the general nature of the investigation
5. Methodology - the way in which the research was carried out
6. The findings
7. Conclusions - based upon the findings
8. Recommendations - based upon the conclusions
9. Appendices - should include a detailed account of the sample of respondents, a copy of the questionnaire and the instructions given to interviewers, detailed statistical tables etc.
Buying market research
Many companies use the services of market research agencies, which may be independent companies or may be the market research departments of advertising agencies. This may be to supplement their own research or as a substitute for a research department of their own.
In addition to undertaking research on behalf of clients, some of the bigger organisations specialise in documenting a particular area of marketing on a continuous basis. The findings from such research are usually incorporated in standardised reports which are circulated to subscribers at regular intervals. A well known example of such a service is the Inventory Audit of Retail Sales which is often referred to as the Nielsen Index, after its originator.
Once products leave a factory there is a time-lag before they are sold and consumed. The longer this time-lag, the more difficult it is for the producer to control supply to meet variations in demand, and modify his production to maximise profit. The Inventory Audit helps reduce these uncertainties by monitoring both sales and stock levels for three major product groups - food, drugs and pharmaceuticals.
The actual audit is made in a representative sample of outlets, carefully selected from all retail outlets stocking the three product groups. Each outlet enters into an agreement with Nielsen's under which all invoices are retained for inspection and auditors are permitted to take physical stock on the premises. Sales of each item are determined and data circulated to subscribers, together with information about the number of outlets stocking given brands, their prices, average order sizes etc.
In addition to commercial research organisations, several academic institutions have been very successful in practical research projects over a wide range of industries. Universities, polytechnics and business schools are usually willing to offer assistance with the marketing problems of companies of all sizes.
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