As a manager, you are making decisions all the time. It is your responsibility to reduce the risk associated with the decisions which you make. The risk arises because of a lack of complete information.
Therefore, you are always seeking information to improve the quality of your decision-making. In many areas of management, such as production, finance, and personnel, the information required for decision-making is primarily generated within the firm and is easy to collect and analyze.
Moreover, in these areas formalized procedures have greatly improved decisions: statistical quality control in manufacturing, PERT in project scheduling, queuing theory in managing large machinery maintenance programs, etc. This unit examines marketing research and its sub-elements as they affect marketing activities.
Definition of Marketing Research
The American Marketing Association defines marketing research as the systematic gathering, recording, and analyzing of data about problems related to the marketing of goods and services.
Crisp has defined marketing research as … the systematic, objective, and exhaustive search for and study of the facts relevant to any problem in the field of marketing.
It would be useful to add the word ‘continuous’ to these two definitions to make them even more meaningful. A study conducted today may lose much of its relevance by next year and may need updating, modification, or even an entirely new effort.
The rate of change in information would depend on the specific product and customer segment with which you are dealing. If your firm is marketing bathroom fittings, you are dealing with functional products.
The functions these fittings will service, for example, in 1995, are the same as what they serve today. Therefore, you may not use extensive marketing research to understand the changes in customer tastes, because the variations in the designs (given the functional character of the product) which you can introduce are very limited.
However, you would like to know what new colors and materials are preferred by the customers and undertake research for this purpose. If your firm is marketing ready-made clothes for teenagers, you are dealing with a market where rapid change is its distinguishing characteristic.
You would need continuous and extensive market research to find out what designs, fabrics, colors, and prices will appeal to this market segment, this winter, the coming summer, the following winter, and so on.
You would also need to monitor the fashion scene in Europe and America and see what new trends can be successfully adapted for the Nigerian market.
The fact that a product line is greatly affected by changing customer tastes, habits, values, attitudes, or dealing in a product that is not that susceptible to environmental influences, makes you need marketing research to improve and be at least one step ahead of your competitors.
In the latter case (ready-made clothes), marketing research is a critical input for the mere survival of the firm; in the former (bathroom fittings), marketing research is necessary because it can yield valuable ideas to make the firm a market innovator and leader. Marketing research can be used for consumer products, industrial products, and services.
Purpose of Marketing Research
The basic purpose of marketing research is to facilitate the decision-making process. A manager has before him a number of alternative solutions to choose from in response to every marketing problem and situation.
In the absence of market information, he may make the choice on the basis of his hunch. By doing so, the manager is taking a big risk because he has no concrete evidence to evaluate these alternatives in comparison with others or to assess their possible outcome.
But with the help of information provided by marketing research, the manager can reduce the number of alternate choices to one, two, or three, and the possible outcome of each choice is also known. Thus, the decision-making process becomes a little easier.
The second purpose of marketing research is that it helps to reduce the risk associated with the process of decision-making. The risk arises because of two types of uncertainties: uncertainty about the expected outcome of the decision, and uncertainty about the future.
Uncertainty about the expected outcome of the decision will always remain no matter how much information you may have collected to base your decision on hard facts. Unforeseen factors have the uncanny ability to upset even the most stable apple cart.
For example, in the mid-1950s, Ford Motor Company in the USA had a 25 percent share of the automobile market. The company wanted to introduce a new car model which would appeal to young executives and professionals.
The decision was based on research that revealed that this market segment accounted for 25 percent of the market, and was expected to grow to about 40 percent. Ford spent colossal amounts researching and designing the new model which was named Edsel.
When introduced in the market, the car was a total flop. This happened because of occurrence of three unforeseen events.
Firstly, the youthful car market segment did not grow as rapidly as the market research had indicated.
Secondly, the recession also set in at about this time and people began looking for more economical means of transportation.
Thirdly, there was a sudden change in customer tastes, with people turning away from flashy exteriors, and the flamboyant Edsel was totally out of tune with new the taste for austerity and functional simplicity.
This example highlights the fact that despite the best research efforts, the outcome can still be unpredictable. As Reynolds, a former Ford executive commented on the Edsel fiasco, It is hard to see how anyone could, given the kind of car market that existed in 1955 and 1956, have anticipated such trends.…”
The risk also arises because of the uncertainty of what will happen in the future, the way the customers or distributors would behave, the manner in which the competition will react, and so on.
To the extent that research provides information about the future, it anticipates the future, thus providing the manager with a solid basis for his decision-making.
However, it cannot provide perfectly exact or accurate information. But since the techniques of marketing research are based on scientific methods of collecting, analyzing, and interpreting data, its findings, and projects, at the least, provide a definite trend of scenarios for future decision-making.
The third purpose of marketing research is that it helps firms in discovering opportunities that can be profitably exploited. These opportunities may exist in the form of untapped customer needs or wants not catered to by the existing firms.
Food Specialties Limited (manufacturers of Nescafe Coffee, Lactogen Powdered Milk) have recently introduced in the Indian market a dairy whitener (as a substitute for milk) called ‘Every Day’ to be used for making tea and coffee.
The product has proved to be a success because it is most convenient for use in offices, where tea and coffee are consumed in large quantities but milk is not easy to procure. Every Day fulfills a slot in the market for powdered milk which was not being catered to by the existing milk powders brands.