Market Research

Objectives of Lecture on Market Research

This lecture should lead you to an understanding of the uses and abuses of market research. If, in the future, there is talk of commissioning market research for an N ! "roject #or other research you may be $orking on% you should be able to& ' evaluate the usefulness #or other$ise% of market research for the "roblem you are involved $ith ' discuss a""ro"riate ty"es of research $ith confidence ' set yourself realistic e("ectations regarding the results) timing

*It is a ca"ital mistake to theorise before one has data+

,ir -rthur .onan !oyle

Research on -gatha .hristie

HarperCollins found sales of Agatha Christie novels declining in 1985 Quantitative & qualitative research commissioned Readers liked niceness! of the crimes" #ut covers $ere gruesome and #lood% Result& ne$ cover designs commissioned and in the first %ear sales rose '()

Research at N./ro$n
0igh rate of returns in 1223 Manchester 4niversity "aid 5166k to research $omen7s si8es 96,666 measurements taken :omen have *thicker $aists, lo$er busts and conical figures+ ,ha"e of clothes $as changed Returns do$n to ;<= #vs industry average of 39=%

,tructure of Market Research Lecture

,"end on Market Research Ty"es of Market Research otential roblems

Market Research vs Marketing Research #strictly s"eaking...%

Market Research Researching the immediate com"etitive environment of the market"lace, including customers, com"etitors, su""liers, distributors and retailers Includes all the above "lus& ' com"anies and their strategies for "roducts and markets ' the $ider environment $ithin $hich the firm o"erates #e.g. "olitical, social, etc%

Marketing Research

Market#ing% Research& !efinition

The systematic design, collection, analysis and re"orting of data and findings relevant to a s"ecific marketing situation facing the organisation

,"ending on Market Research by ,ector in the 4>

Non'ad. research agencies -d. agencies Retailers and $holesalers Other

?= 9= ?=

2= ??= 13=
Manufacturing .om"anies

ublic sector

;1=

,ervice com"anies

The Ten Most .ommon Market Research -ctivities

-ctivity ercentage of com"anies doing activityA
!irectly relevant to N !

!etermination of market characteristics Measurement of market "otential Market share analysis ,ales analysis ,tudies of business trends ,hort range forecasting .om"etitive "roduct studies Long range forecasting ricing studies Testing e(isting "roducts A based on research activities of 922 com"anies in the 4, 2; 21 @2 @< @< @3 @6

2< 2< 2<

To" 16 market research activities

Market Measurement Ne$ roduct develo"ment)conce"t testing -d or brand a$areness monitoring)tracking .ustomer ,atisfaction #inc Mystery ,ho""ing% 4sage and -ttitude ,tudies Media Research B evaluation -dvertising develo"ing and "re'testing ,ocial ,urveys for central)local government /rand)cor"orate re"utation Omnibus ,tudies 1@= 1?= 13= 16= <= C= 9= ?= ?= 3=

Source: BMRA

Market Research /udgets

1 ' ;= of com"any sales D total budget

of this& 96= ' @6= in'house

@9= of Eortune 966 com"anies have internal de"artments

;6= ' 96= e(ternally

1. ,yndicated ' service research firms ;. .ustom research firms 3. ,"ecialty research firms

F(ternal Market Research Eirms

Ty"es
1. ,yndicated ' service research firms

!escri"tion
!ata gathered "eriodically from customers and distribution channels and then sold to clients #e.g. -... Nielson% 0ired to carry out s"ecific research "rojects for clients. The firm conducts the survey and the results are the "ro"erty of one client only #e.g. Research International% Eirms "roviding a s"ecialised service to other market research firms, e.g. a firm selling field intervie$ing services #e.g. .ontinental Research%

;. .ustom market research firms

3. ,"ecialty line research firms

:hy .onduct Market Research in Ne$ roduct !evelo"mentG

' The "roduct must a""eal to the customer #ho$ever $idely defined% ' Timely market research can hel" you mould the "roduct to the consumer7s need)$ants ' Market research tend to "oint out successes and failures before "roducts are launched *for real+ ' -s a result, it can save you money and time

:-RNINHI
Market Research is about understanding consumer reactions to the "roduct. Marketing may understand the consumer best but RB! may $ell #early on% understand the "roduct best

!on7t sim"ly hand M.R. over to marketingI

Ty"es of Market Research

/y ,ource /y Methodology /y Objectives

' rimary ' ,econdary

' Jualitative ' Juantitative

' F("loratory ' !escri"tive ' .ausal #or e("erimental%

Ty"es of Market Research& /y ,ource

rimary ,econdary

.ollection of data s"ecifically for the "roblem or "roject in hand /ased on data "reviously collected for "ur"oses other than the research in hand #e.g. "ublished articles, government stats, etc%

Ty"es of Market Research& /y Methodology

Jualitative
Ty"e of Juestion ,am"le ,i8e Information "er res"ondent Juestioner7s skill -nalyst7s skill Ty"e of analysis robing ,mall 0igh 0igh 0igh ,ubjective, Inter"retative -bility to re"licate -reas "robed Lo$ -ttitudes Eeelings Motivations

Juantitative
,im"le Large Lo$#ish% Lo$#ish% 0igh Objective, ,tatistical 0igh .hoices EreKuency !emogra"hics

/enefits of Jualitative Market Research vs Juantitative

/enefit .hea"er robes in'de"th motivations and feelings .omment)F(am"le ,maller sam"le si8e -llo$s managers to observe #through one $ay mirror% Lreal7 consumer reaction to the issue ' e.g. comments and associations #e.g. Levis% regarding a ne$ "roduct fresh from the labs Hives the research de"artment a lo$ cost and timely sense of $hich issues to "robe in Kuantitative research

Often useful "recursor to Kuantitative research

Jualitative vs Juantitative
*otal +kt Quant Qual ,hare
Market Measurement N !).once"t testing -d)brand a$areness tracking .ustomer satisfaction #incl mystery sho""ing% 4sage and attitude surveys 1@.?= ;6.@= 3.3= 13.@= 11.C= ;<.3= 1;.<= 1?.?= ;.;= 2.<= C.C= 16.?= 9.?= C.6= 16.?=

Source BMRA,

Ty"es of Market Research& /y Objective

F("loratory reliminary data needed to develo" an idea further. Fg outline conce"ts, gather insights, formulate hy"otheses !escribe an element of an ideas "recisely. Fg $ho is the target market, ho$ large is it, ho$ $ill it develo" Test a cause and effect relationshi", e.g. "rice elasticity. !one through e("eriment

!escri"tive

.ausal

The Market Research rocess

1. !efining the "roblem and objectives ;. !evelo"ing the research "lan 3. .ollecting the information ?. -nalysing the information 9. resenting the findings

,te"s
!istinguish bet$een the research ty"e needed e.g. ' e("loratory ' descri"tive ' causal

!ecide on ' budget ' data sources ' research a""roaches ' research instruments ' sam"ling "lan ' contact methods

Information is collected according to the "lan #N./. it is often done by e(ternal firms%

,tatistical mani"ulation of the data collected #e.g. regression% or subjective analysis of focus grou"s

Overall conclusions to be "resented rather than over$helming statistical methodologies

.omments
If a "roblem is vaguely defined, the results can have little bearing on the key issues The "lan needs to be decided u"front but fle(ible enough to incor"orate changes) iterations This "hase is the most costly and the most liable to error ,ignificant difference in ty"e of analysis according to $hether market research is Kuantitative or Kualitative .an take various forms& ' oral "resentation ' $ritten conclusions su""orted by analysis ' data tables

otential roblems $ith Market Research

1. ;. 3. ?. :hen and ho$ not to do it roblems $ith research buyers vs su""liers EreKuent technical "itfalls roblems $ith traditional market research

:hen and 0o$ Not to .onduct Market Research

Lack of resources
Closed mindset Poor timing re: marketplace

Research results not actionable

Late timing re: process

Vague object ives Cost out$eighs #enefit

:hen and 0o$ Not to .onduct Market Research

Occasion Lack of resources .omments)F(am"le If Kuantitative research is needed, it is not $orth doing unless a statistically significant sam"le can be used :here "sychogra"hic data #for e(am"le% is used $hich $on7t hel" the com"any form firm actions :hen research is used only as a rubber stam" of a "reconceived idea :hen research results come too late to influence the decision If a "roduct is in the Ldecline7 "hase #e.g. records% there7s little "oint in researching ne$ "roduct varieties Market research cannot be hel"ful unless it is "robing a "articular issue The e("ected value of the information should out$eigh the cost of gathering the data

Research results not actionable .losed mindset Late timing re& "rocess oor timing re& market"lace Mague objectives .ost out$eighs benefit

.ost)/enefit of Market Research& LRule of Thumb7 matri( . D .ost

/ D /enefit

/N. #G% Large Market ,i8e .N/ ,mall

#e.g. re"lacement scre$ for s"ectacles% #e.g. ne$ brand of fro8en fish%

/N.
#e.g. 0igh !efinition T.M.%

/N. #G%
#e.g. com"uter aided metal stam"ing machines%

Lo$

0igh

F("ected rofit Margin

roblems :ith Research /uyers vs ,u""liers

/uyer Narro$ conce"t of research Research used tokenistically 4nrealistic vie$ of timeframe ,u""liers Mariable Kuality of market researchers Market researchers not sufficiently demanding Technical "roblems

roblems :ith Research /uyers vs ,u""liers ' !etail

roblems $ith /uyer of Research
' Narro$ conce"t of research many managers see M.R. as no more than fact'finding they therefore s"end little time defining the "roblem or e("laining the conte(t the results are irrelevant a vicious circle arises ' Research used tokenistically used to confirm e(isting vie$s rather than objective look at market"lace ' 4nrealistic vie$ of time frames often results are e("ected very ra"idly research therefore commissioned too late research firms bo$ to time "ressure and results are sub'o"timal !iffering styles M.R. documents are often "hrased in an abstract, tentative $ay #and rely on jargon% $hilst managers e("ect concrete, do$n to earth recommendations

roblems $ith ,u""lier of Research

' Mariable Kuality of market researchers little uniformity of "rofessionalism across the industry many small, "oorly Kualified com"anies ' Market researchers are not sufficiently demanding u"front time often insufficient little contact throughout "rocess ' Technical "roblems arise e.g. "roblem ill'defined Kuestionnaires "oorly constructed

roblems $ith ,u""lier of Research

Mariable Kuality of market researchers
little uniformity of "rofessionalism across the industry many small, "oorly Kualified com"anies

Market researchers are not sufficiently demanding

u"front time often insufficient little contact throughout "rocess

Technical "roblems arise e.g.

"roblem ill'defined Kuestionnaires "oorly constructed

EreKuent Technical itfalls

1. ;. 3. ?. oor definition of "roblem !esigning the Kuestionnaire ,am"le si8e small !ata collection inadeKuate

Issues to consider in Kuestionnaire design

,ensitivity of Kuestion /ias in formulation .ultural issues Re"etition Res"ondent motivation Juestioner training re'testing .om"rehensiveness Realism Fase of com"letion

,am"le -irline Juestionnaire

1. :hat is your total income to the nearest hundred "oundsG ;. -re you an occasional or freKuent flyerG 3. !o you like this airlineG ?. 0o$ many airline ads did you see last s"ring com"ared to this s"ringG 9. :hat are the most salient and determinant attributes in your evaluation of airlinesG C. !o you think it is right for the government to ta( air tickets and de"rive a lot of "eo"le of the chance to flyG

!odgy Juestions& -irline F(am"le

Juestions 1. :hat is your total income to the nearest hundred "oundsG Objections ' the res"ondent "robably doesn7t kno$ the ans$er $ith this degree of accuracy ' the firm doesn7t need to kno$ the ans$er $ith this degree of accuracy ' "eo"le are not keen to reveal income that accurately ' a Kuestionnaire should never begin $ith such a "ersonal Kuestion ;. -re you an occasional or freKuent flyerG 3. !o you like this airlineG ' ho$ do you define occasional versus freKuent& everyone $ill define it differently ' Llike7 is a relative term ' $ill "eo"le ans$er it honestly $hen "hrased so blatantlyG

!odgy Juestions& -irline F(am"le ' cont7d

Juestions ?. 0o$ many airline ads did you see last s"ring com"ared to this s"ringG Objections ' :ho can rememberG ' :hat do you call Ls"ring7G ' :hat is an adG Is it TM, maga8ine, "oster or $hatG ' :hat7s meant by Lsalient7 and Ldeterminant7G ' This sounds "om"ous and arrogant even if "eo"le do understand ' -ll objectivity is out of the $indo$ ' :hy ask if you7ve already made your mind u" of the effectsG

9. :hat are the most salient and determinant attributes in your evaluation of airlinesG

C. !o you think it is right for the government to ta( air tickets and de"rive a lot of "eo"le of the chance to flyG

roblems $ith Traditional Market Research

1. Market research has allo$ed "rominent "roduct failures, and $rong "redictions ;. Markets are increasingly becoming micro' segmented #e.g. s"orts shoes aimed at affluent fashion conscious $omen s"ecifically for aerobics%, so mass market research becomes corres"ondingly irrelevant 3. It is hel"ful for im"rovements, but less so for radical innovations ?. Eor more accurate targeting it may be advantageous to $ork $ith leading customers $ithin the target grou"

Careful how you ask the question

J. !o you a""rove of smoking $hilst "rayingG
-& No

J. !o you a""rove of "raying $hilst smokingG

-&Oes

Market Research Eailures& The 122; Flection

olls rediction on eve of election D 1 "oint Labour lead -ctual election result D @ "oint Tory lead

ReasonsA ' Late s$ing to Tories #maybe accounts for 1)? of error% ' InadeKuate $eighting of results to incor"orate& Tory voters7 reluctance to reveal intentions *,"iral of silence+ ' reluctance to go against the fashion ' oor sam"ling methods
A according to inKuiry chaired by !avid /utler, rofessor of Fconomics

No$& ' -djusted "olls *$eight+ results ' ,ome "olls done by secret ballot

.oca .ola Eailure& .hronology

May 12@9

Old .oke $ithdra$n Ne$ .oke introduced

Puly

Old .oke reintroduced as .oke .lassic

.oca .ola Eailure& /ackground and Research

' Farly @6s, share losses to e"si ' Ne$ roduct research carried out Q?m cost ;66,666 taste tests C6= of consumers "referred it in blind tests ' /4T research $as narro$ly defined considered taste not emotions dro""ing Old .oke not mentioned

4.,. Reaction to Old .oke7s Return

olitical ,enator !avid rior of -rkansas on the ,enate Eloor& A very meaningful moment in the history of America, this shows that some national institutions cannot be changed Media -/. interru"ted its soa" o"era, Heneral 0os"ital on :ednesday afternoon to break the ne$s .oca .ola7s share "rice rose to its highest level in 1; years

Fconomic

Limited 4se of Market Research

*Eormal market analyses continue to be useful for e(tending "roduct lines, but they are often misleading when applied to radical innovations. Market studies "redicted that Intel7s micro"rocessor $ould never sell more than 16= as many units as there $ere minicom"uters, and that ,ony7s transistor radios and miniature TM sets $ould fail in the market"lace.

-t the same time, many essential failures such as Eord7s Fdsel and su"ersonic trans"ort $ere studied and "lanned e(haustively on "a"er, but lost contact $ith the customers7 real needs. ,ource& Pames /rian Juinn

Ne$ Market Research

Traditional Market Research

Reliance on lead customers

interactive develo"ment increasingly "o"ular #3M, 0 , ,ony, Raychem% /etter for true innovations

Large .om"any Reliance on .ustomer7s Mie$s

:hat Many e("erienced large com"anies are relying more on interactive develo"ment $ith lead customers :hy Traditional market research for truly innovative ne$ "roducts has freKuently "roved misleading :ho 3M 0e$lett' ackard ,ony Raychem 0o$ Radically ne$ "roducts introduced by small teams $orking closely $ith lead customers #e.g. retailers%. :ith this info. designs ra"idly modified and interactive changes made

Market Research& ,ummary

1. Market Research is usually an integral "art of understanding innovations ' you ignore it at your "eril.... ;. /ut it must be timely, objective and relevant, other$ise it is $orse than useless, leading you do$n the $rong "ath 3. ,o, be involved as far as you can be, es"ecially u" front and don7t let the jargon deter youI