What is market research, and what is involved in the process? Market research is the process of gathering and analyzing market information for making marketing decisions. Market research can be as simple as including a brief survey with an invoice or via e-mail, or it can be as complex as conducting a full-blown market analysis before launching a new product. Although there are dozens of intermediate steps in conducting marketing research, they all fit into the basic process shown in Figure 12.10.

Figure 12.10

The Marketing Research Process

Why is it important to define the marketing needs or opportunity? Although a new marketing need or opportunity seems apparent, it’s important to really define the opportunity carefully because there might be other hidden opportunities. For example, Tiara has identified the need for a salon supply company located closer to salons in her area. But is distance the real problem, or could other factors, such as poor service or insufficient product offerings, really be the problem?

The first step in the marketing research process is to define the problem, which could include doing more research to further identify or enhance the perceived need or opportunity. Marketing managers and researchers work together to determine the kind of data needed and how to obtain it. Doing so helps the researcher determine the research’s approach, establishes a budget, and ensures the right data is collected.

What kind of data should be collected? Determining which types of data will be collected and how the information will be collected is critical. Two general types of data exist: primary and secondary:

• Primary data are raw data collected by a researcher. The data are frequently collected through observation, questionnaires, surveys (via mail, e-mail, or telephone), focus groups, interviews, customer feedback, samples, and controlled experiments. A focus group is typically a group of 8 to 10 potential customers who are asked for feedback on a good or a service, an advertisement, an idea, or a packaging style.

• Secondary data are data that have already been collected and processed. A great deal of potentially useful data exist within the firm itself, including sales and production data. External sources of secondary data can include data collected from national or international institutions, government statistics, trade publications, and the like. Recently, social media has become a tool for gathering secondary data not only on your product but also on competing products. Because this information already exists, it is usually much cheaper than primary data to obtain.

Examples of primary and secondary data sources are summarized in Table 12.1.

Table 12.1

Primary and Secondary Data Sources

By contacting current salon owners, Tiara Watson has begun to collect primary data about how eager salon owners might be to switch to a closer, cheaper supplier. She also has collected secondary data about the location of the closest salon supply companies and data regarding the demographics of potential salon customers in her region.

How are social media used in market research? Social media sites, such as Facebook and Twitter, are becoming invaluable tools for businesses to get in touch with the public at large (see Figure 12.11). Not only can companies find out what is being said about their products, but they can also find out what is being said about the competition. Both types of information are invaluable—regardless of whether the opinions are good or bad. Honest feedback can be gathered from people who are eager to voice their opinions. There are two advantages of collecting information using social media rather than traditional focus groups: size and immediacy. Focus groups are limited in size, and a researcher can never be sure whether he or she has picked the right individuals. Because of the formality of a focus group, the event often requires much planning and can be quite expensive to implement. Alternatively, social media networks gather quick results from substantial numbers of consumers. Not every company or marketing research project will lend itself to social media tools. But if a fit is determined, social media give marketers another valuable tool for obtaining consumer insights.

Figure 12.11

Benefits of Using Social Market Research

How are the data analyzed and interpreted? Once the data have been collected, they must be assembled into a format that can be easily analyzed and interpreted. The person analyzing the data must understand various statistical techniques and how to use them (a discussion of which goes beyond the scope of this book). The ultimate goal is to conduct careful analyses that will lead to conclusions about what marketing strategies to implement. The analysis must also be honest; researchers should never adjust data to get the results they want. Through surveys and personal interviews, Tiara discovered that about thirty salons in the area were willing to switch suppliers, indicating she had a strong potential target market. Her research also uncovered buyers’ concerns about the current supplier’s product offerings, prices, and its relationship with area salons.

What happens when the research is completed? Once the information is collected and analyzed, it is usually presented in an organized manner to decision makers. The purpose of marketing research, after all, is to help managers make better marketing decisions. A formal presentation may be given to the sales and marketing teams, or a plan outlining a new advertising strategy may require hiring an advertising agency. Changing market conditions require businesses to continually adapt and constantly search for better ways to provide value to customers. As a result, marketing research should be ongoing.

What is a marketing plan? Part of acting on the conclusions of marketing research is creating a marketing plan. A marketing plan is a written document that specifies the marketing activities that will take place to achieve an organization’s objectives. It is the road map that will help carry out the strategies as determined by marketing research.

What are the elements of a good marketing plan? Four elements emerge from all good marketing plans:

• A clearly written marketing objective

• A situational analysis

• A description of the target market

• A description of how the marketing mix will be implemented, evaluated, and controlled.

Why is a marketing objective necessary? A marketing objective is a clearly stated goal to be achieved through marketing activities. It should be realistic, quantifiable, and time specific. A marketing objective of having every home in the United States purchase a specific product is unrealistic. Selling 100,000 units in a year is a more realistic, quantifiable, and time-specific marketing objective. When objectives are realistic, they are attainable and can motivate employees toward the goal. When they are measurable, a firm can determine whether they are being achieved. If deadlines are also imposed, then firms know whether they are reaching their goals in a timely manner.

What is a situational analysis? Creating clearly stated objectives is the first step in any good marketing plan. The next step is conducting a situational analysis. There are several methods that can be used to conduct a situational analysis, which is similar to the SWOT analysis discussed in Chapter 7, in that it includes an evaluation of internal strengths and weaknesses as well as the opportunities and threats found in the external environment; however, it focuses on marketing only rather than on the entire organization.

What do we mean by internal strengths? In terms of marketing, a company’s internal strengths refer to the competitive advantages or core competencies a company has at its disposal to meet a specified marketing objective. Core competencies set a company apart. They enable a firm to provide customers with benefits that cannot be easily imitated by other firms. For example, Deere and Company has been successful in expanding its business by transferring the strength of its John Deere brand-name reputation for superior-quality agricultural equipment into lawn tractors and mowers for urban dwellers and earthmoving equipment for the construction industry. Indeed, a significant portion of Deere and Company’s revenues now come from nonagricultural sales.8

How does a company assess its weaknesses? Assessing internal weaknesses means a company must perform an audit of its current managerial expertise, manufacturing and financing capabilities, and its ability to successfully implement a product’s marketing mix. By honestly assessing its weaknesses, a company can determine a realistic marketing objective. For example, a company that makes handmade watches and has only three employees cannot expect to produce 75,000 watches a week.

Why look to the external environment? The dynamic and ever-changing external environment offers many opportunities and creates many threats. Changes in the degree of competition, the economy, technology, and sociocultural forces, as well as changes in the global, political, and regulatory environments, have caused some firms to thrive while others suffer. This is especially true for international businesses because the number of market environments compounds the analysis. Rapid changes in technology create new opportunities, such as expanding sales over the Internet, but also pose new threats and challenges. Eastman Kodak, once the leader in cameras and photographic film products, was forced into bankruptcy because of its failure to transition to digital photography more quickly. Successful companies continually evaluate environmental factors as part of their situational analysis to match their strengths with opportunities and address their weaknesses to avoid threats.

Are there other ways to perform a situational analysis? Another way to conduct a situational analysis is by analyzing the factors shown in Figure 12.12. This type of situational analysis requires gathering information about a company and its collaborators and the climate of the economy and industry and then extending the information by including an analysis of its customers and its competitors.

Figure 12.12

Factors to Consider in a Situational Analysis

How are target markets determined? Determining a target market begins with market segmentation, the process of separating the broader market into smaller markets segments. A market segment is a subgroup of potential customers who share similar characteristics and therefore have similar product needs and preferences. A market segment should be identifiable, accessible, substantial, and stable and have unique needs. So, for example, rather than selling to all the salons in the state, Tiara decided to focus on a smaller market segment of just those salons in the local area. Some markets, called niche markets, are even more narrowly defined. For example, a company that sells specialized gear shifters for racing bicycles is operating in a niche market.

Marketers choose the market segments that offer the greatest profit potential, and they become the target markets. For each target market, a company tries to blend the marketing mix to best satisfy its targeted customers. The process of developing a unique marketing mix that best satisfies a target market is known as positioning.

How are consumer markets segmented? Consumer markets can be seg­mented based on many variables or characteristics of customers. Four of the most common market segmentation classifications are geographic, demographic, psychographic, and behavioral and are summarized in Table 12.2.

Table 12.2

Consumer Market Segmentation

How are markets defined by location or region? Segmenting markets according to geographic characteristics is called geographic segmentation. For example, clothing apparel, skis, snowblowers, four-wheel-drive vehicles, air conditioning, and heating needs differ according to regional climate differences. Food preferences also vary by region. As a result, McDonald’s offers special menu items to cater to the tastes and preferences of people in particular regions and countries. McLobster Rolls are served in Canada and the northeastern region of the United States; because people in India do not eat beef, the Maharaja Mac, which is made of lamb or chicken meat, is a big seller there. For Tiara Watson’s salon supply company, the prominent hairstyles in her region may require specialized products that are not as popular in other locations.

How are markets defined by different population characteristics? Demographic segmentation is the process of segmenting a market by age, race, religion, gender, ethnic background, and other demographics. For example, by 2020, one in five Americans is estimated to be of Hispanic origin.9 Few businesses want to miss out on this growing market segment. It’s now common to find labels or instructions written in both English and Spanish, and the number of Spanish-language television stations and newspapers is increasing.

Can a market be segmented based on opinions or interests? Harley-Davidson offers a wide variety of motorcycles, and each model attempts to cater to a particular lifestyle.10 Cat food ads cleverly focus on “cat lover” personalities, whereas many beer commercials target men and sports enthusiasts. Segmenting markets based on people’s lifestyles, personality traits, motives, and values is called psychographic segmentation. For example, Whole Foods Market and Trader Joe’s focus on consumers interested in healthier, organic foods, and Planet Fitness sells memberships to customers concerned with their health but who are also price conscious.

Sophisticated marketers closely examine their customers’ lifestyles, personality traits, motives, and values because, unlike geographic and demographic variables, these psychographic variables can be manipulated by marketing efforts. Whatever consumers may value, whether it be quality, social status or affiliation, safety, health, privacy, technology, or appearance, you can bet that businesses will offer a good or service to satisfy that real or perceived need and will be rewarded with profits for doing so.

How can consumer behaviors define a market segment? Do you buy only one particular brand of toothpaste regardless of price? Do you buy cranberry sauce mostly at Thanksgiving? These types of behaviors define behavioral segmentation, the market segmentation based on certain consumer behavior characteristics, such as brand loyalty, price sensitivity, the benefits sought from a product, occasions that stimulate purchases, and the ways in which a product is used.

Brand loyalty, which can affect a buyer’s price sensitivity, is a type of behavioral segmentation. The more loyal the customer, the less sensitive he or she is to a price increase. If a customer has been using the same brand of toothpaste for 12 years and likes the product, a small price increase will most likely not be an issue to that customer.

Finally, knowing how a product is actually used can help companies develop packages that appeal to customers. For example, packaging vitamins in containers with lids easily turned by arthritic hands can appeal to some adult consumers.