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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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