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What is Marketing Research? | |
|According to the American Marketing Association, marketing research is the systematic gathering, recording, and analyzing of data |
|about problems relating to the marketing of goods and services. |
|Every small business owner-manager must ask the following questions to devise effective marketing strategies: |
|Who are my customers and potential customers? |
|What kind of people are they? |
|Where do they live? |
|Can and will they buy? |
|Am I offering the kinds of goods or services they want - at the best place, at the best time and in the right amounts? |
|Are my prices consistent with what buyers view as the product's value? |
|Are my promotional programs working? |
|What do customers think of my business? |
|How does my business compare with my competitors? |
| |
|Marketing research is not a perfect science. It deals with people and their constantly changing feelings and behaviors, which are |
|influenced by countless subjective factors. To conduct marketing research you must gather facts and opinions in an orderly, objective |
|way to find out what people want to buy, not just what you want to sell them. |
|Why do it? |
|It is impossible to sell products or services that customers do not want. Learning what customers want, and how to present it |
|attractively, drives the need for marketing research. Small business has an edge over larger concerns in this regard. Large businesses|
|must hire experts to study the mass market, while small-scale entrepreneurs are close to their customers and can learn much more |
|quickly about their buying habits. Small business owners have a sense their customers' needs from years of experience, but this |
|informal information may not be timely or relevant to the current market. |
|Marketing research focuses and organizes marketing information. It ensures that such information is timely and permits entrepreneurs |
|to: |
|Reduce business risks |
|Spot current and upcoming problems in the current market |
|Identify sales opportunities |
|Develop plans of action |
|How to do it |
|Without being aware of it, most business owners do market research every day. Analyzing returned items, asking former customers why |
|they've switched, and looking at competitor's prices are all examples of such research. Formal marketing research simply makes this |
|familiar process orderly. It provides a framework to organize market information. |
|Market Research - The Process |
|Step One – Define Marketing Problems and Opportunities |
| |
|Market research, like other components of marketing such as advertising, can be quite simple or very complex. You might conduct simple|
|market research such as including a questionnaire in your customer bills to gather demographic information about your customers. On |
|the more complex side, you might engage a professional market research firm to conduct primary research to aid you in developing a |
|marketing strategy to launch a new product. |
|Regardless of the simplicity or complexity of your marketing research project, you'll benefit by reviewing the following seven steps |
|in the market research process. |
|Step One: Define Marketing Problems and Opportunities |
|The market research process begins with identifying and defining the problems and opportunities that exist for your business, such as:|
|• Launching a new product or service. |
|• Low awareness of your company and its products or services. |
|• Low utilization of your company's products or services. (The market is familiar with your company, but still is not doing business |
|with you.) |
|• A poor company image and reputation. |
|• Problems with distribution, your goods and services are not reaching the buying public in a timely manner. |
| |
|Step Two: Set Objectives, Budget and Timetables |
| |
|Objective: With a marketing problem or opportunity defined, the next step is to set objectives for your market research operations. |
|Your objective might be to explore the nature of a problem so you may further define it. Or perhaps it is to determine how many people|
|will buy your product packaged in a certain way and offered at a certain price. Your objective might even be to test possible cause |
|and effect relationships. For example, if you lower your price by 10 percent, what increased sales volume should you expect? What |
|impact will this strategy have on your profit? |
|Budget: How much money are you willing to invest in your market research? How much can you afford? Your market research budget is a |
|portion of your overall marketing budget. A method popular with small business owners to establish a marketing budget is to allocate a|
|small percentage of gross sales for the most recent year. This usually amounts to about two percent for an existing business. However,|
|if you are planning on launching a new product or business, you may want to increase your budget figure, to as much as 10 percent of |
|your expected gross sales. Other methods used by small businesses include analyzing and estimating the competition's budget, and |
|calculating your cost of marketing per sale. |
|Timetables: Prepare a detailed, realistic time frame to complete all steps of the market research process. If your business operates |
|in cycles, establish target dates that will allow the best accessibility to your market. For example, a holiday greeting card business|
|may want to conduct research before or around the holiday season buying period, when their customers are most likely to be thinking |
|about their purchases. |
| |
|Step Three: Select Research Types, Methods and Techniques |
| |
|There are two types of research: primary research or original information gathered for a specific purpose and secondary research or |
|information that already exists somewhere. Both types of research have a number of activities and methods of conducting associated |
|with them. Secondary research is usually faster and less expensive to obtain that primary research. Gathering secondary research may |
|be as simple as making a trip to your local library or business information center or browsing the Internet. |
| |
|Step Four: Design Research Instruments |
| |
|The most common research instrument is the questionnaire. Keep these tips in mind when designing your market research questionnaire. |
|Keep it simple. |
|Include instructions for answering all questions included on the survey. |
|Begin the survey with general questions and move towards more specific questions. |
|Keep each question brief. |
|If the questionnaire is completed by the respondent and not by an interviewer or survey staff member, remember to design a |
|questionnaire that is graphically pleasing and easy to read. |
|Remember to pre-test the questionnaire. Before taking the survey to the printer, ask a few people-such as regular customers, |
|colleagues, friends or employees-to complete the survey. Ask them for feedback on the survey's style, simplicity and their perception |
|of its purpose. |
|Mix the form of the questions. Use scales, rankings, open-ended questions and closed-ended questions for different sections of the |
|questionnaire. The "form" or way a question is asked may influence the answer given. Basically, there are two question forms: |
|closed-end questions and open-end questions. |
|Close-end questions - Respondents choose from possible answers included on the questionnaire. Types of close-end questions include: |
|Multiple choice questions which offer respondents the ability to answer "yes" or "no" or choose from a list of several answer choices.|
| |
|Scales refer to questions that ask respondents to rank their answers or measure their answer at a particular point on a scale. For |
|example, a respondent may have the choice to rank their feelings towards a particular statement. The scale may range from "Strongly |
|Disagree", "Disagree" and "Indifferent" to "Agree" and "Strongly Agree." |
|Open-end questions - Respondents answer questions in their own words. Completely unstructured questions allow respondents to answer |
|any way they choose. Types of open-end questions include: |
|Word association questions ask respondents to state the first word that comes to mind when a particular word is mentioned. |
|Sentence, story or picture completion questions ask respondents to complete partial sentences, stories or pictures in their own words.|
|For example, a question for commuters might read: "My daily commute between home and office is _____ miles and takes me an average of |
|______ minutes. I use the following mode of transportation: _______." |
| |
|Step Five: Collect Data |
| |
|To help you obtain clear, unbiased and reliable results, collect the data under the direction of experienced researchers. Before |
|beginning the collection of data, it is important to train, educate and supervise your research staff. An untrained staff person |
|conducting primary research will lead to interviewer bias. |
|Stick to the objectives and rules associated with the methods and techniques you have set in Step Two and Step Three. Try to be as |
|scientific as possible in gathering your information |
| |
|Step Six: Organize and Analyze Data |
| |
|Once your data has been collected, it needs to be "cleaned." Cleaning research data involves editing, coding and the tabulating |
|results. To make this step easier, start with a simply designed research instrument or questionnaire. |
|Some helpful tips for organizing and analyzing your data are listed below. |
|Look for relevant data that focuses on your immediate market needs. |
|Rely on subjective information only as support for more general findings of objective research. |
|Analyze for consistency; compare the results of different methods of your data collection. For example, are the market demographics |
|provided to you from the local media outlet consistent with your survey results? |
|Quantify your results; look for common opinions that may be counted together. |
|Read between the lines. For example, combine U.S. Census Bureau statistics on median income levels for a given location and the number|
|of homeowners vs. renters in the area |
| |
|Step Seven: Present and Use Marketing Research Findings |
| |
|Once marketing information about your target market, competition and environment is collected and analyzed, present it in an organized|
|manner to the decision makers of the business. For example, you may want to report your findings in the market analysis section of |
|your business plan. Also, you may want to familiarize your sales and marketing departments with the data or conduct a company-wide |
|informational training seminar using the information. In summary, the resulting data was created to help guide your business |
|decisions, so it needs to be readily accessible to the decision makers. |
| |
|Define the Problem or Opportunity |
|The first step of the research process, defining the problem or opportunity, is often overlooked - but it is crucial. The root cause |
|of the problem is harder to identify than its obvious manifestations; for example, a decline in sales is a problem, but its underlying|
|cause is what must be corrected. To define the problem, list every factor that may have influenced it, then eliminate any that cannot |
|be measured. Examine this list while conducting research to see if any factors ought to be added, but don't let it unduly influence |
|data collection. |
|Assess Available Information |
|Assess the information that is immediately available. It may be that current knowledge supports one or more hypotheses, and solutions |
|to the problem may become obvious through the process of defining it. Weigh the cost of gathering more information against its |
|potential usefulness. |
|Gather Additional Information |
|Before considering surveys or field experiments, look at currently held information: sales records, complaints, receipts, and any |
|other records that can show where customers live and work, and how and what they buy. One small business owner found that addresses on|
|cash receipts allowed him to pinpoint customers in his market area. With this kind of information he could cross-reference his |
|customers' addresses and the products they purchased to check the effectiveness of his advertising. |
|Customers' addresses tell much about them. Lifestyles - and buying habits - are often correlated with neighborhoods. |
|Credit records are an excellent source of information, giving information about customers' jobs, income levels, and marital status. |
|Offering credit is a multifaceted marketing tool with well-known costs and risks. |
|Employees may be the best source of information about customer likes and dislikes. They hear customers' minor gripes about the store |
|or service - the ones customers don't think important enough to take to the owner. Employees are aware of the items customers request |
|that you do not stock. They can often supply good customer profiles from their day-to-day contacts. |
|Outside Data |
|Secondary Research |
|Secondary research exploits published sources like surveys, books, and magazines, applying or rearranging the information in them to |
|bear on the problem or opportunity at hand. A tire sales business owner might guess that present retail sales of tires is strongly |
|correlated with sales of new cars three years ago. To test this idea, it's easy to compare new car sales records with replacement tire|
|sales three years later. Done over a range of recent years, this should prove or disprove the hypothesis and help marketing efforts |
|tremendously. |
|Localized figures tend to provide better information as local conditions might buck national trends. Newspapers and other local media |
|are often quite helpful. |
|There are many sources of secondary research material. It can be found in libraries, colleges, trade and general business |
|publications, and newspapers. Trade associations and government agencies are rich sources of information - GALES' Directory is |
|available at any public library. |
|Sources of Secondary Research |
|ASAE Directory of Associations Online |
|Ask a Librarian - U.S. Library of Congress |
|Bureau of Labor Statistics |
|Business Research Lab |
|Center for Business Women's Research |
|Economic Statistics & Research |
| |
|Internet Public Library |
|Population & Demography Resources |
|Primary Research |
|Primary research can be as simple as asking customers or suppliers how they feel about a business or as complex as surveys conducted |
|by professional marketing research firms. Direct mail questionnaires, telephone surveys, experiments, panel studies, test marketing, |
|and behavior observation are all examples of primary research. |
|Primary research is often divided into reactive and non-reactive research. Non-reactive primary research observes how real people |
|behave in real market situations without influencing that behavior even accidentally. Reactive research, including surveys, |
|interviews, and questionnaires, is best left to marketing professionals, as they can usually get more objective and sophisticated |
|results. |
|Those who can't afford high-priced marketing research services should consider asking nearby college or university business schools |
|for help. |
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