The Importance of Market Research

This post was written by Sara Talebzadeh, who is currently studying a Master of Business in Marketing at UTS whilst gaining work experience at Brainmates.

__________________________________________________________________________________________

“Market research is the application of the scientific method in search of the truth about marketing phenomena. These activities include defining the market opportunity and problems, generating and evaluating market ideas, monitoring performance, and understanding the marketing process.” – “Exploring Marketing Research” By William G.Zikmund

The concept of a business seems simple. Companies produce goods and services and consumers buy the end products. The challenge lies in creating and delivering value to the customer. Businesses that have a solid value proposition can be considered successful.

So how do we deliver value?

Some questions that we should consider when understanding the concept of value are:

  • What type of products or services does a company sell?
  • Does the product or service meet the consumer’s need?
  • What does the customer think about the company?
  • What are the customer’s expectations when buying and using the products or services?
  • What are the customer’s initial perceptions of the company’s products or services?
  • Are there alternative products or services that can meet the customer’s needs?

These questions can be answered by market research. Market research facilitates decision making, reduces uncertainty and highlights consumer problems. Market research drives every aspect of a business such as:

  • Identifying new market opportunities and evaluating the existing markets
  • Segmenting and analyzing the market
  • Selecting the best target market
  • Evaluating and analyzing the company’s reputation and performance
  • Positioning a product
  • New product development
  • Planning and implementing a marketing mix that meets business objectives

Market Research Classifications

So what type of market research can Product managers utilize in our quest to find answers that will help businesses deliver value? There are three types of market research:

  • Exploratory research
  • Descriptive research
  • Causal research

Exploratory Research

Exploratory research helps businesses to discover new ideas and find potential market opportunities. It is used to explore a situation or search for a problem. This research process is unstructured. Product managers need not go through all the stages of the market research process from the “defining stage” to the “analysis stage”.

The findings from exploratory research are usually based on secondary data (Data that is already available in different departments of the company), open ended questions, similar case studies, a pilot study, or even results from previous research. The results from exploratory research are not generally suitable for Product Managers to draw a conclusion and decide to enter a new market. The result is all too often generalised information about potential markets and the related products or services. It is conducted with an expectation that there is need for more comprehensive research.

Example:
“Mars M&M is a global manufacturer producing candy and chocolate. The company discovered, by doing simple exploratory research that consumers refer to the chocolate and candy by their color. The company achieved the result by asking some open ended questions and running focus groups. This piece of information became useful in shaping future research and marketing strategy.”

Descriptive Research

This kind of research addresses who, what, when, where and how type questions. It is structured research (Product managers apply through all steps in research process). Descriptive research explores more detail about a market. For instance, descriptive research identifies what age groups buy a particular product or brand and why. This type of research is more structured and requires formal research design and data collection.

Example:
“Greg Norman is well known for his performance on golf courses. He is also in the wine trade and sells high quality Australian wine that is offered at a fair price. He is considering extending the business to the American or French wine market. In this situation, the use of descriptive research helped him to have a better understanding of the international wine market and enabled him to make better decisions about where to sell his wine. Descriptive research identified what type of wine consumers enjoys drinking.”

Causal Research

Causality can be derived by the use of “if x, then y”. This type of research helps Product Managers understand the cause and effect of a relationship. Causal research is considered formal research and helps product managers to identify problems and the causes of the problem. Product Managers for example, would be interested in determining what causes a change in customer satisfaction.

The Market Research Process

The following chart shows the stages of the market research process:

market-research-flow-chart

Define the research objective

The first step to the research process is to define the research objective. At this stage, the Product Manager defines the problem that he or she is attempting to solve. Here, the word problem does not have a negative meaning. It can mean a new opportunity. Exploratory research is one of the most common types of research used at the early stage of the investigative process. It is used to obtain a clear understanding of the situation or environment. Secondary data, previous research, discussion with decision makers, experience survey, interviews with industry experts, similar case studies, a review of existing background information are some techniques that will help the Product Manager at this stage of the market research process.

Selection of basic research method

After defining the problem and formulating the objectives, the Product Manager shall design the research. This determines the way that we collect the data. Survey questionnaires, interview, and observations even secondary data studies are methods that can be used to gather the data. However the most common method is a survey questionnaire.

Sampling

“A sample is a subset from larger population” Finding information about the characteristic of a population is an important objective for most types of market research. Information about the population could be achieved by taking a sample. Proper and good sampling has the same characteristic of the population as whole.

Data gathering

During this stage, the Product Manager collects data. It may be obtained by human observation or a survey questionnaire. It can be over the phone or by face-to-face interviews.

Data processing and analyzing

After gathering the data, the information must be converted into language which is understandable for a wider audience. At this stage, the first step is editing and coding. The Product Manager checks the data for any minor mistakes and then “codes” the data. Coding means recording, categorizing, and interpreting the data. The second step in this process is to analyze the data.

Drawing conclusions and reporting

The final stage in the market research process is reporting and drawing a conclusion. A market research report consists of a description and an interpretation of the research results, a conclusion and also an appropriate recommendation. The costs and risks associated with delivering any new product are high. Some new products fail to achieve the objectives set. Market research reduces the risk of taking a new product to market.

References: