In order to answer this question, we must first define what marketing research is. Marketing research is a systematic approach to gathering facts and figures related to the marketing of goods and services (Tull and Hawkins 1992).
This is a very simple but useful definition that can be expanded to underline the purpose of this activity to a formalised means of obtaining information to be used in making marketing decisions . These marketing decisions are the answers that organisations must answer in response to questions about their customer base. Marketing research is all about gathering information to encompass a wide range of issues relating to an organisation and its environment. Marketing research can either take place internally within the firm or externally using a specialist marketing research firm. I will examine the ways in which marketing research can improve performance and the benefits of using a specialist research firm.
Marketing research is an important part of a firm s business strategy. This is reflected in American Marketing Association s statistics that states 77 percent of the nation s consumer goods manufacturers maintain formal marketing research departments. This stresses the growing need for marketing research particularly in the face of the change towards stiffer competition by other firms in the same markets. Marketing research is a must if organisations wish to get ahead of the pack to find out more about their customer s needs, the rival s prices and ensuring the consumer is happy with the product after purchase. Approximately three out of four new products will fail to attract enough buyers to remain available for purchase. Most marketers give the reason as a failure to understand market needs.
Firms view the matching of a new product to potential customers to improve the chances of a product s success. A firm s own sales analysis is also a reason for marketing research to see how their own products are selling and contrasting the figures to competitors. This is useful if a firm realises its own product is not performing well and offers guidance on how the product can be further developed either by product enhancement or promotional campaigns. A prime example is the UPC scanning system used by supermarkets, which allow them to record what purchases are made by each individual customer, how much they spend and on how many products. The introduction of the clubcard allows this information to be further refined so that supermarkets also have information such as the name and address of customers, post code (geographical location) of the customer.
So if there is a large majority of purchasers from rural areas, the supermarket may find it usual to have higher spending on, say, gardening products and thus gives them scope to diversify more into this area of product. Using this customer data, supermarkets can increase the spending on certain brands by offering money off coupons or the saving of stamps for a special offer to either heighten the selling of a product that is not regularly purchased, or to ensure that the selling of a good product is maintained Marketing research can be divided into three main categories to result in improving performance: scanning, risk assessment, and monitoring. By splitting down marketing research into categories, it helps the firm to concentrate on specific activities that it could improve upon. Scanning activities search for opportunities and challenges in the firm s environment. This is useful in the firm s changing economic climate. This marketing research function allows the marketers to track and identify any changes in technology, markets and cultural and economic conditions that will affect the firm.
Such questions include Can research indicate promising markets that we have not yet reached ? A way of finding out the answers to these questions is to use questionnaires, perhaps offering a free one off product in return for answering the questions. However, it is important that those being questioned are able to understand what is being asked by using clear straightforward language, avoiding dual-meaning words, ensuring the appropriate responses are available and providing a checklist to aid recall to receive relevant feedback. Once these opportunities and challenges have been exploited, the firm can move on to develop effective strategies and tactics, which often carry considerable risk. It is uncertain whether a change in the methods already used will actually bring any benefits to the firm, hence the need for risk assessment.
Marketing researchers will direct their risk assessment activities towards evaluating the likelihood of success by linking proposed actions to feedback from customers in real or simulated conditions. One such method of undergoing this type of research may be to use promotions at stalls and asking for feedback. Risk assessment activities will thus enable firms to measure the costs and benefits of a particular course of action, such as introducing a new product or implementing a new promotional technique. Where scanning and risk assessment focus on the future, monitoring activities assess current events. This part of market research seeks to discover how well past decisions are working out now. This may include activities such as analysing sales and profit data, customer satisfaction levels, and results from advertising and promotion programs.
The questions the marketing researcher might ask include What is our overall market share? Scanning takes into account the overall look at the market and it s competitors. This can be exemplified by the washing machine market. If a washing machine only has a C rating in energy conservation in comparison to a competitor s A rating the firm could indeed do better in improvements. One way a market researcher can find out this type of information is that of the mystery shopper , who will look at prices and information of a rival s products whilst acting as a customer.
In a sense, monitoring activities can be defined as diagnostic tools. They aim the marketing research effort at identifying problems and suggesting ways of fixing them. In some cases, firms may not feel they have the technical assistance or expertise to conduct marketing research themselves. Those firms that fall into this category may call upon specialist independent research firms. This is also possible if a firm only wants to concentrate on certain product lines, brands or geographic areas. Others organise their research functions according to the types of research they need performed, such as sales analysis, new product development, or advertising evaluation.
If this is the case, contracting firms may call upon specialist research firms to carry part of the study or even the whole study depending on the cost and budget. One important consideration the contracting firm must take into account is whether the data collected from the research firms is reliable and accurate as well as confidential from other competitors. To gain an insight into just how valuable research is to companies, marketing research firms in one year earned almost 40 percent of the $4.6 billion outside the United States in one year. Specialist research firms may be divided into three categories: syndicated services, full-service suppliers, or limited-service suppliers. This makes it easier for the contracting firm to tailor their research needs more easily.
Syndicated services are organisations that regularly provide a standardised set of data to all customers. This can be highlighted by Mediamark Research Inc. (MRI) who operate a syndicated product research service based on personal interviews with adults regarding their exposure to advertising media. Advertisers, advertising agencies, magazines, newspapers, broadcasters and cable TV networks are included as their clients. The J.
D. Power and Associates company that specialises in the domestic and international automobile markets can reflect full-service research suppliers. It contracts with clients to conduct complete marketing research projects. A full-service supplier becomes almost a part of the client s business as it performs all the steps in the marketing research process.
Limited service research suppliers are marketing research firms that specialise in a limited number of activities, such as conducting field interviews or performing data processings. The National Research Group Inc. reflects this type of marketing research and work almost exclusively for clients in the movie industry. Their speciality is to rate entertainment facilities through input from audiences of movie-goers. Studies can also be requested to help advertising strategies and track awareness and interest. Syndicated services can be considered a type of limited-service research supplier.
In conclusion, we have observed that firms can indeed use marketing research to improve their performance. This improvement can be highlighted by the firm in being able to learn more about their customer s requirements and how they can improve upon their product in comparison to rival firms by the collecting of information that is specific to the firm s needs. Techniques such as the clubcard means that a firm can tend its product range towards what the consumer requires. And if the firm feels it does not have the know-how about marketing research, there is a role for specialist marketing research firms to produce the relevant information.