What is Market Research and Why is it Important?

Market research is a systematic process of gathering and analyzing data to inform marketing decisions. This overview explains its significance, key objectives, methods, and the critical role it plays in understanding consumer needs, enhancing business strategy, and optimizing marketing effectiveness. Discover how market research can drive growth and innovation in your organization.

Market Research: An Overview

Market research is a systematic, objective, and formal process of gathering, analyzing, and interpreting data to inform marketing decisions. It’s crucial that this process remains unbiased by personal views. Before starting any research, it’s essential to define the primary objectives and detail the methodology.

As an integral part of a Marketing Information System (MIS), market research provides critical information, primarily from external sources, to help address specific marketing problems faced by management.

Key Topics in Market Research:

1. Introduction to Market Research
2. Meaning of Market Research
3. Definition of Market Research
4. Objectives of Market Research
5. Importance of Market Research
6. Market Research Process
7. Areas of Market Research
8. Approaches to Market Research
9. Basics of Market Research
10. Acceptance of Market Research
11. Primary Marketing Research
12. Integration of Market Research
13. Evaluating the Benefits of Market Research
14. Issues in Market Research

Introduction to Market Research

The marketing journey begins with a product idea and concludes only when customer needs are fully met. The customer is central to all marketing activities, and consumer satisfaction is the ultimate goal. Therefore, marketing research is fundamental to marketing management, providing crucial insights into consumers, dealers, and the overall marketing mix.

As businesses grow and management becomes more distant from the marketplace, marketing research becomes an increasingly vital tool for scientific investigation and analysis of marketing problems, supporting informed decision-making.

Advertising, for instance, presents its own challenges. Advertisers need to understand target audiences, consumer motivations, and the effectiveness of their campaigns. Market research (MR) helps address these questions by systematically collecting, processing, and interpreting data related to product, distribution, price, promotion, consumers, and forecasting. MR is a broader term than “market research,” which focuses only on specific markets. Marketing research encompasses advertising and media research, supplementing intuition, experience, and judgment.

While not new, marketing research has been revitalized and formalized since World War II. With the rise of the “marketing concept” (focused on consumer satisfaction), it has become a major marketing activity, on par with sales, advertising, new product development, pricing, distribution, and marketing services.

Meaning of Market Research

• Research: Research involves systematically gathering, recording, and analyzing critical and relevant facts about a problem in any field of human endeavor. It signifies a thorough and investigative study of a problem, a proposed action, a hypothesis, or a theory.
• Marketing Research: Marketing research is a systematic, objective, and intensive search for and analysis of data relevant to identifying and solving marketing problems.

Market research specifically includes:

1. Market size
2. Customer location
3. Customer demographics (age, sex, income, education, standard of living, etc.)
4. Analysis of market demand
5. Customer needs, habits, buying motives
6. Dealer preferences
7. Degree of competition

Definition of Market Research

Most formal definitions align with the American Marketing Association’s: “Marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services.” Operationally, this involves understanding market facts, consumer types and numbers, product characteristics, distribution channels, consumer motivation and behavior, and developing and testing advertising and sales promotion ideas.

Common terms associated with marketing research include market research, product or consumer research, distribution research, motivation research, copy research (in advertising), and sales planning and control research.

Kotler defines marketing research as “The systematic design, collection, analysis and reporting of data and findings relevant of a specific marketing situation facing the company.”

The term “systematic” is crucial, distinguishing research from haphazard data collection. A systematic study is orderly, ensuring accuracy and a fair representation, and impartial in its analysis and interpretation. For research to be systematic, it must be planned in advance and interpreted upon completion. Thus, marketing research is “the planning of and systematic gathering, recording, analysis and interpreting data about problems (or opportunities) relating to the marketing of goods and services.”

Objectives of Market Research

Marketing research serves several key objectives:

1. Formulation: It aids in developing all marketing plans, policies, programs, and procedures.
2. Evaluation: It’s used to assess these plans and policies once implemented.
3. Cost Reduction: It helps minimize marketing costs, especially in selling, advertising, promotion, and distribution.
4. Problem Solving: It addresses marketing problems related to the product (branding, packaging, labeling), consumer markets, and all phases of the marketing process.
5. Business Survival and Growth: It provides an “insurance cover” for businesses in a dynamic economy.
6. Optimizing Marketing Mix: It enables marketing management to ensure the right product (brand and package) reaches the right customers, at the right places and prices, through the right channels, with the help of the right personnel.
7. Consumer and Profit Focus: Its primary goal is to help manufacturers create acceptable and saleable goods that reach the market more easily, quickly, cheaply, and profitably, without compromising consumer interests.

What Marketing Research Can Do for Business:

Market research answers crucial questions for manufacturers about their customers: where they are, what they want, when they want it, where, and how much they’re willing to pay. For marketing middlemen (wholesalers and retailers), it identifies what goods to purchase, when, at what prices, how to advertise and display, pricing strategies, and necessary services. For advertisers, it shows how to effectively communicate product information, leading to pre-sold goods.

With adequate knowledge from marketing research:

1. Producers avoid making unwanted goods or offering them through inappropriate channels to uninterested consumers.
2. Merchants avoid stocking unwanted goods, offering them at the wrong season, in incorrect quantities, or at incorrect prices.
3. Advertisers avoid mistakes in messaging, targeting, and appeal.

In essence, marketing research helps producers, merchants, distributors, and advertisers avoid manufacturing or marketing errors, minimizing business failures and maximizing profitability. Specialized consultancy services also offer expert advice in these areas.

Importance of Market Research

Mass production in anticipation of demand for expanding markets brought forth specific distribution challenges.

(a) Widening of Communication Gap:

Expanding markets introduced numerous middlemen, creating barriers to the flow of consumer and dealer feedback back to the manufacturer. This communication gap, a lack of information feeding back from consumer to producer, became the primary driver for the increasing importance of marketing research. Market research is essential for gaining firsthand knowledge of consumers and changes in demand patterns.

(b) Emergence of Buyers’ Market:

The shift to a buyers’ market and intensified competition necessitated continuous marketing research. This ensured maximum consumer satisfaction, repeat purchases, and the development of appropriate marketing strategies for survival and growth. Marketing research helps establish the best positive correlation between products/brands and consumer needs and preferences.

(c) New Marketing Concept:

First articulated in 1952 by Ralph Cardines of General Electric Corporation, the marketing concept positions market research as its cornerstone. No business can truly be market-oriented or customer-centered without effective marketing research. As the customer became the focal point of the marketing universe, marketing research gained unique importance as an invaluable management tool. It aids in formulating accurate and realistic marketing, advertising, and sales promotion plans and programs, based on current consumer demand, evolving tastes, preferences, and whims. Marketing research provides a quick path to profit by enabling businesses to serve customers precisely as they wish to be served.

(d) Marketing Change:

Change is a constant force, the essence of progress in life. It’s the common denominator in planning, organizing, motivating, and controlling marketing activities. Marketing research empowers management to anticipate, meet, and creatively adapt to accelerating changes, particularly in consumer demand. The real challenge for marketing management is to prioritize business transformation—finding new roles, customers, products, and markets—even over efficient current operations. Marketing research effectively helps management profit from marketing change.

(e) Changes in Technology:

Marketing research assists in keeping pace with new developments driven by rapid advancements in science and technology. It helps management implement prompt adjustments and innovations in product design, packaging, advertising, sales promotion, and distribution policies, ensuring the business remains current in the dynamic marketplace.

Market Research Process

Research follows a systematic, step-by-step sequence:

1. Problem Definition and Research Goals:

Often, advertising problems are clear. However, sometimes the core issue is hidden and needs to be uncovered. It’s crucial to identify the decisions that will be made based on the research input. Once the problem is identified, research goals must be clearly articulated.

Typical research goals include:

• Measuring product awareness in the target audience after a campaign.
• Assessing consumer attitudes toward rival products to identify vulnerabilities.
• Determining the more effective of two developed ad concepts.

2. Sources of Information:

Data can be gathered from internal records, libraries, directories, and literature (secondary data). If the project requires more data, primary data must be collected by either the research department or an external agency.

3. Analysis of Secondary Data:

This step involves analyzing existing secondary data to gain insights into the problem at hand.

4. Identification of Sample:

When primary data is needed, the target group of people or organizations (the “universe” or “population”) from which to collect it must be determined. A census (questioning all members) is rarely done due to cost and time. Reliable results can be obtained by questioning a portion of the population called a “sample,” whose members are “respondents” or “subjects.” The sample must be representative of the overall population, similar to how a blood sample from a finger represents the blood in the entire body.

There are two categories of samples:

• Probability Samples: These give all members of the population a chance of being included.
  • Simple Random Sample: Each member has an equal chance of selection.
  • Stratified Sample: The population is divided into strata (e.g., doctors into GPs, specialists, surgeons), and random samples are selected from each stratum.
  • Cluster Sample: Clusters of people resembling the overall population are identified.
• Non-Probability Samples: Not all members have a chance of being included.
  • Quota Sample: Considers certain numbers of various subgroups in the population.
  • Judgment Sample: Members are selected based on the researcher’s judgment of their appropriateness.
  • Convenience Sample: Chosen for ease of interviewing.

In advertising, non-probability samples are often used because identifying and randomly selecting all subjects in a population can be impractical. Also, for many problems, sample data doesn’t always need to be projected to the entire population. The quality of the research heavily depends on the sample selection, which requires statistical grounding.

5. Data Collection:

After identifying the sample, data collection begins using either quantitative or qualitative techniques.

• Quantitative Data: Provides responses in numbers and statistics, answering “how many,” “how much,” and “how often.” The most common method is a survey (personal, mail, or telephone) using a questionnaire with dichotomous (yes/no), multiple-choice, rating, or open-ended questions. Observation (recording what people do) and experiments (testing hypotheses by controlling variables) are other methods.
• Qualitative Research: Seeks in-depth answers beyond quantitative scope, examining attitudes, motivations, and behavior. It is often exploratory, using depth interviews to encourage open sharing of attitudes and opinions, or focus groups (respondents subjected to probing questions). Projective techniques allow respondents to rationalize vague questions by projecting their feelings onto objects and people (e.g., sentence completion, word association, cartoon balloons, picture drawing, Thematic Apperception Test (TAT)). While increasingly used, qualitative research requires expertise; simpler quantitative methods are often preferred.

6. Data Analysis and Result Presentation:

Raw data collected from the sample needs processing, analysis, and interpretation. Tabulation is a useful technique. Computers greatly assist in data analysis, and relationships between data must be established for meaningful insights. Results must be presented clearly, in plain English, avoiding jargon and complex statistical computations, as researchers and advertisers often have different technical backgrounds. Findings should be logical and concise.

Market Research – 5 Major Areas

Marketing research focuses on five crucial areas:

1. Market: Includes consumer/dealer research, competition analysis, and sales forecasting.
2. Product:
3. Price:
4. Promotion: Covers personal selling, advertising, sales promotion, and public relations.
5. Distribution: Encompasses transport, warehousing, order processing, inventory control, and channel selection.

Marketing research is instrumental in developing an optimal marketing mix. It aids in problem-solving in any marketing branch at four stages:

1. Identifying and defining the problem, including its causes.
2. Recommending reasonable and profitable solutions or alternative courses of action.
3. Determining the most profitable and best courses of action to resolve the problem.
4. Testing the feasibility of a particular solution or action decided upon by the marketing manager.

In a constantly changing market and economy, marketing research serves as a powerful investigative arm for marketing managers. It covers:

1. Market research
2. Sales research
3. Product research
4. Advertising and sales promotion research
5. Research on sales methods and policies
6. Dealers’ research
7. Distribution research
8. Pricing research

Specifically, marketing research is useful at four stages in the problem-solving process within any marketing domain:

1. Identifying and defining the problem, including its root causes.
2. Suggesting viable and profitable alternative courses of action.
3. Determining the most desirable alternatives to ensure optimal resource utilization.
4. Testing the practicality of a chosen alternative course of action.

Marketing research focuses on the five vital marketing areas: Market, Product, Price, Promotion, and Distribution. Market surveys provide information on consumer demand, while the marketing mix (the 4 Ps) represents the marketing efforts to meet that demand.

Market Research – Approaches

Four primary approaches characterize marketing research:

• Historical Method: Gathers past data to draw comparisons, contrasts, and make predictions.
• Observational Method: Collects data by directly measuring consumer and market phenomena as they occur.
• Experimental Method: Sets up experiments with control procedures to determine the effects of specific marketing actions.
• Survey Method: The most widely used approach, gathering data by asking questions of knowledgeable informants, typically selected through sampling techniques.

Any investigation usually includes these steps:

1. Situation Analysis: To orient the research and develop hypotheses. This involves a preliminary investigation of the company, its products, and distribution channels.
2. Informal Investigation: Extends the preliminary search through informal conversations with industry experts.
3. Problem Definition: Precise definition of the problem is essential to focus efforts on key areas.
4. Formal Investigation Planning: Meticulous planning is crucial to avoid wasting time and money and ensure proper data collection.
5. Data Collection and Analysis: The core of the project, where data is gathered and analyzed.
6. Interpretations and Recommendations: Presented in a format most useful to those who requested the study.

The most recognized part of marketing research is the consumer survey, with its questionnaires and sampling. The underlying premise is that people can and will provide valuable information to marketers, provided questions are unbiased. For example, people will share product usage details, preferences, and reasons. Consumer panels can test new product flavors and provide feedback. Data from these panels are increasingly important as an early warning system.

A growing challenge with individual interviews is people’s increasing reluctance to participate, partly due to door-to-door sales disguised as surveys. This makes it difficult for genuine interviewers to establish credibility and gain cooperation.

Market Research – Basics

Conducting your own market research, while time-consuming, isn’t difficult for small business owners. Informal research happens continuously when you discuss customer needs or chat with suppliers and sales representatives.

The Market Research Grid illustrates two data source types and three crucial research areas for any business:

• Customer: Gathering information about your customers helps focus marketing efforts, improve customer service, and guide new product/service development.
• Competition: Information on competitors reveals what works and doesn’t, inspires product/service improvements, and offers insights into increasing market share.
• Environment: This refers to economic, social, and political forces shaping business. Tracking environmental information keeps you aware of trends or events (e.g., interest rate changes, local mill closures) that impact your business, allowing you to assess their ripple effects.

Data Sources:

• Secondary Data: Already collected by someone else (e.g., telephone books, government publications, Statistics Canada, trade journals, other company surveys). This provides insights into customer wants, competitor actions, and the environment.
• Primary Data: Firsthand information collected directly from the source (e.g., surveying customers, questioning competitors). While potentially more costly and time-consuming, it offers the most current and specific, thus valuable, market research data.

Market Research Grid Components:

• i. Customer
• ii. Competition
• iii. Environment
• iv. Secondary (data source)
• v. Primary (data source)

Market Research – Primary Marketing Research

Primary marketing data is typically collected from consumers or customers, usually on a sample basis. While the stereotypical street interviewer might collect a small portion, these data are particularly important as they represent the direct “listening” part of the dialogue with consumers.

Suppliers of Primary Marketing Research:

Many organizations offer market research services, as only very large and sophisticated organizations have the resources to handle all aspects in-house. These suppliers provide two types of research:

1. Syndicated Research:

These suppliers offer easy and quick services, often with ongoing or ad hoc research programs whose results are sold to multiple clients. This includes standard research like ACNielsen store audits, providing retail purchase information. Shared costs are an advantage, but research quality is even more important. Ad hoc research is when a supplier (often industrial-focused) identifies a topic of interest to several companies, conducts the research, and sells the results “off the shelf.” Researchers with ongoing programs (like opinion polls) may “sublet” space (interviewer time) on omnibus surveys for a few simple questions to a large sample at low cost.

The main advantages of these approaches are ease, speed, and cost-sharing, making research affordable for individual organizations. They are also quick to organize and can serve as pilots for more complex studies.

Main types of syndicated research:

Retail Audits:

Sophisticated in logistics but simple in concept. Auditors regularly visit panel retail outlets (randomly recruited), conduct physical stock checks on surveyed products, and combine stock changes with store records (receipts) to determine consumer sales. These are considered highly accurate for consumer sales volume and value, forming the basis for brand-share, price and distribution levels, and retailer stock figures.

• Panel Research: Measures consumer behavior and can approach the accuracy of retail audits with the added benefit of consumer profiles. Techniques vary, covering various subjects.
• Home Audit: Panel members save packaging in a receptacle. An auditor weekly checks contents, product stocks, and asks brief questions. Effective with low attrition and long-term feedback.

Diary Method:

Householders record information in a diary, collected by an interviewer (or mailed).
Both methods have long proven accurate for share data and, importantly, provide trend, repeat purchasing, and brand-switching information often unobtainable otherwise.

Omnibus Surveys:

Similar to ad hoc surveys, but questionnaire space is “sublet” to different researchers, creating mini-surveys. Often run alongside ongoing research (e.g., political polls). Cost benefits are significant as fieldwork is a major cost. They can also offer faster results (especially by telephone).

However, questionnaires must be short and simple, and the context can be unpredictable due to uncontrolled questions from other researchers. They can also locate target group individuals for follow-up by conventional ad hoc surveys.
As computer ownership increases, electronic research and “cyber panels” will likely become dominant for data collection, offering input from targeted populations at lower cost.

2. Custom Research:

This is the core business of the market research industry. A client commissions a research organization for a specific task, and the organization assumes responsibility for all aspects. There are distinct specializations: consumer fields (large random surveys) vs. industrial fields (extended interviews with individual organizations). Further divisions exist between retail audits, individual consumer questionnaires, and group discussions/in-depth psychological interviews.

Many firms also specialize in measuring marketing performance, such as advertising effectiveness, a rapidly growing area due to interactive media. For example, Nielsen Media Research partnered with Internet Profiles to provide data on Internet users visiting websites, enabling firms to structure follow-up activities based on user profiles.

Within the market research community, firms often specialize in subtasks. A commissioned agency might plan the research but subcontract sampling (specialist database), pre-testing, main interviews, and analysis.

Market Research – Integration

Integrating marketing research into a business organization presents two main challenges. First, the difficulties or obstacles involved in introducing marketing research into the company structure for the first time. Second, the challenges of embedding the use and results of marketing research into management thinking and planning.

Setting Up a Marketing Research Department:

The initial problem revolves around fitting marketing research into the organization, raising awareness of its capabilities (and limitations), and ensuring effective communication with operating management. Integration is typically easier in companies with existing central marketing departments or those already applying the marketing concept. In such cases, the role of marketing research will likely have been discussed, and top management will recognize its need for planning. This creates a more receptive environment, and resistances to establishing a research department are better understood, if not overcome. Subsequent use of marketing research will depend on its practical and measurable benefits.

Gaining management buy-in for marketing research will be harder in firms without marketing departments or those unfamiliar with the “marketing concept.” In these situations, barriers to research arise as management and executives perceive “all this marketing and research business” as a potential threat to their security, status, and authority. The primary obstacle is people’s fear of the unfamiliar—fear of redundancy, less desirable job reassignments, undermined authority, criticism of past methods, required changes in functions and new learning, and restricted freedom of action. These genuine fears must be acknowledged.

Other thing:

Executive acceptance and utilization of marketing research (and any management innovation) directly correlate with how well executives understand it, its potential impact on them, and the extent to which they are kept informed. It is imperative that anyone affected by its operation be informed and understand its benefits to them and the company. A communication problem will exist regardless of management’s marketing orientation.

Where top management supports marketing research but anticipates implementation difficulties, consultants can be valuable. They can advise on establishing a research department, required information, staffing, and how to “present” it to management and executives. Consultants can also assist in selecting research managers, preparing job descriptions, and specifying executive requirements. Due to their broad experience across industries and varying management research sophistication, independent consultants can recommend a tailored marketing research setup that considers existing organizational structure, products, markets, distribution and selling methods, marketing perspective, and internal politics. They can mediate between the ideal and what is practically achievable. Advice from external consultants differs from that of internal executives who share decision-making responsibility.

Integrating a new marketing research department is likely smoother under central control, ideally reporting to a sympathetic top or marketing management executive. This arrangement confers status and importance, and being under senior management’s wing, the department is more likely to be involved in longer-range, significant projects, allowing it to prove its value during critical early stages.

The Closer Integration of Established Marketing Research Departments:

The second set of problems concerns integrating existing marketing research operations into management thinking and planning, aiming for smoother, more effective cooperation between the research department and other business units. The main challenges mirror those of setting up a new department: organizational obstacles, understanding management’s problems and how research can contribute, and effective communication.

Even in mature marketing organizations with apparent organizational cohesion, where researchers work closely with executives, the communication problem persists. This is a two-way issue:

• Researcher Jargon: Many specialist research executives use professional jargon that other executives don’t understand or are unaccustomed to using.
• Management Language: Research personnel, often unfamiliar with business management and accounting terminology, may struggle to express themselves clearly and convincingly in management language.

With the increasing number of specialists (economists, psychologists, sociologists, mathematicians, statisticians, operations research workers) in business, the communication problem gains new dimensions. Effectively deploying these specialists, understanding their techniques, and managing the influx of information they provide are urgent challenges.

How can this communication gap be bridged, and a common language developed to connect diverse activities toward a shared goal? Meetings, training programs, and management development schemes to familiarize personnel with new research, planning, and control techniques will help, but they are not the complete solution.

Marketing Research Directors and Managers

There is a growing need for Marketing Research Directors and Managers to be generalists (distinct from research specialists) with specific responsibilities for:

1. Studying and understanding the resources of other intellectual disciplines that can assist general and marketing management.
2. Developing effective working relationships and communication between general and marketing management.
3. Cultivating a deep appreciation of management problems and initiating and planning research programs to help solve them.
4. Ensuring that the right internal and external technical specialists are engaged, individually or as a team, at the most appropriate time, based on a precise and agreed brief.
5. Liaising between general/marketing management and research technicians during the research program’s execution.
6. Helping general and marketing management understand research—its uses, strengths, and limitations.
7. Preparing budgets for and controlling the costs of the company’s total marketing research effort, including external services.

Financial discipline applies to marketing research as much as any other business activity, with the research budget serving as the main control instrument. The Marketing Director or Manager must estimate required research efforts, seek approval for estimates, and usually account for unplanned projects. Management should allocate a definite budget for a future-oriented research program, ensuring costs stay within authorized limits and avoiding day-to-day cost justifications, as research returns may not be immediate or financially measurable.

External research

Buying external research services is like buying any other product or service. The buyer must either provide a job specification for the supplier to meet at a specified cost or accept the supplier’s quotation based on their own job specification. Once the contract is signed, changes should only be made by written agreement, and mutual confidence is essential for successful completion.

As a leading industrial marketing researcher noted, “Unless the marketing research agency is aware of the purpose behind the research—particularly in the complex field of industrial marketing research—it cannot contribute to the identification of the buyer’s real, as opposed to apparent, problems.” In research, more material is acquired than used. If the marketing researcher is not a confidant of management, they might inadvertently discard relevant information without realizing its importance.

Market Research – Acceptance

Marketing research has gained acceptance among most large corporations, advertising agencies, and media, evidenced by the rapid growth of formal departments, the increasing number and quality of personnel, and its rising status.

Organizational structures for marketing research vary. Most large consumer goods companies have well-established, formal departments, which developed earlier and tend to be larger and more sophisticated than those in industrial goods companies. In smaller companies of both types, the activity might be limited to one or two individuals, often reporting to the sales manager, and in very small firms, it may be a part-time role for inadequately trained staff.

Some of the largest and most diverse research departments are found in advertising agencies, potentially employing over 100 people, including a director, manager, research account executives (for liaison and planning), and functional departments for economic analysis, survey planning, media research (print, TV, radio), copy research, motivation research, operations research, communications, public relations, and sales consultants. Most media outlets—magazines, newspapers, TV, and radio networks—also maintain extensive marketing and media research departments. While not yet universal, the most logical organizational structure for marketing research is as a staff function reporting to the marketing manager.

In this model

The Marketing Research Department holds equal status with Advertising, Sales Promotion, Sales Management, New Product Development, Pricing, Distribution, and other marketing functions. Reporting to the marketing manager, marketing research serves as the “eyes and ears” for all other marketing functions, effectively supporting them. If, as is still common, it is part of another marketing function (e.g., Sales), its role is often confined to that function’s work, and it remains underutilized by other marketing departments. A sound reporting principle dictates that marketing research should be independent but accessible to all other marketing functions.

However, on a less formally documented level, acceptance is not as robust, and significant problems persist. Crash programs are still common, rather than systematic, long-range research planning. Research results are often rejected if they conflict with marketing experience and judgment. There’s ongoing debate about whether research inhibits responsiveness. Too frequently, research serves as a status symbol rather than a practical marketing tool.

Despite these challenges, the future appears promising. As marketing evolves into more of a science, relying more on long-range planning than intuition, marketing research is likely to achieve higher status and full integration.

Market Research – Evaluating the Benefits

Marketing research demands time and money, both typically scarce resources. To justify allocating resources to research, management must understand its value. Research should clearly improve the decision-making process, aiming for managerial rather than merely statistical significance. Simultaneously, it must be recognized as a tool, not a substitute for judgment. Due to time constraints, enough “right” information is never obtained to dictate a specific action. However, research helps avoid major errors and compensates for insufficient experience or unreliable intuition.

The value of research can be assessed from two angles: analyzing the benefits a firm gains from research, or identifying the risks incurred by not conducting research. The decision context must be evaluated when determining research scope and expense. The value of a decision made with research should exceed the value of the same decision without research, by an amount greater than the research cost. Furthermore, the firm needs sufficient resources to act on the insights gained; otherwise, the findings won’t contribute to decision-making, and the research will be a waste of resources.

Often, researchers neglect this cost-benefit relationship, especially when individual risks and benefits are hard to quantify. Insufficient attention to research outcomes and costs risks conducting either too much or too little research. However, a cost-benefit justification can put the researcher at risk, as actual benefits are measurable post-research and can be compared to anticipated ones. If benefits don’t materialize, the researcher might be accused of inflated expectations.

The Risks of Inadequate Research:

As an alternative to a benefit-focused strategy, researchers can create “what if” scenarios outlining the risks a company might face by operating without sufficient information. These risks could include decreased market penetration effectiveness or creating ill will that prevents future expansion. In the long run, this justification is easier for the researcher to use than the benefit formula, as they can point out that some of the worst-case scenarios have not occurred.

Market Research – Issues

Among the more important controversies in the field today are the following:

• Reporting vs. Recommending: Should marketing researchers merely report facts, or should they also provide marketing recommendations? The trend favors the latter, and with the development of the “research generalist” (who understands both research and marketing), greater involvement in marketing planning is likely.
• Funding Research: Who should pay for marketing research—advertisers or advertising agencies? This issue intensifies as agencies offer more collateral services and become more marketing-oriented. Currently, there’s no universal solution, but more agencies are performing comprehensive research on a fee basis.
• Agency Research: Should advertising agencies conduct research at all? This is particularly contentious regarding advertising effectiveness studies. Negatives include potential bias, sloppy work, and extra costs, while positives include deep product knowledge, research sophistication, and enlightened self-interest.
• Qualitative vs. Quantitative Research: This debate became prominent with the rise of motivation research, which extensively uses social sciences (sociology, psychology, anthropology) to understand “how” and “why” people react to products and advertising, initially with less emphasis on established sampling techniques. The issue is less acute now as both approaches reconcile and enrich each other.

One extreme form of quantification is applying management science techniques to marketing management. Independent operations research firms may develop and manage computerized customized marketing models. Alternatively, a small group of operations research specialists might be employed as a separate unit within the firm, often in an uneasy relationship with the regular marketing research department.

Whatever the interaction, the disconnect and lack of communication between these groups can be challenging. This estrangement often arises when an operations research group is brought into a project despite excellent planning, fieldwork, analysis, interpretation, and practical recommendations from marketing research personnel.

Simultaneously

It becomes clear that the operations research group is building total business or marketing models, based on ongoing discussions with top management, and continuously monitoring resource allocation and measuring results. Effectively, they are managing by providing specific, continuous advice on actions, timing, and probable consequences. Top management, accustomed to such systems achieving miracles in production, refinery, distribution, and logistics, expects similar results in the more complex realm of marketing.

Reasonable progress has indeed been made in more mechanical marketing areas, such as media and sales effort allocation. Less progress has occurred in areas like measuring the specific results of creative advertising communications. Whether such operations research activity is considered marketing research depends on its definition. Nevertheless, a critical decision for any firm is how to conceptualize and integrate orthodox, well-executed marketing research with its more “foreign” counterpart.

When a company is not large or sophisticated enough for such operations research applications and models, it will likely resort to more obvious, common-sense “what if” or “what is the relationship of” questions, answered from internally generated data. For example, “What if we merged this sales district with that one?” “What if we reduced promotional effort on that product line?” “What if we combined this product with that, or added a new flavor?”

Continuous monitoring of sales, especially at the retail level, exemplifies greatly expanded speed and capacity. Virtually instantaneous data retrieval from computer systems allows almost continuous access to sales by category and brand, enabling immediate problem resolution. Most of these studies are simple enough in principle and practice that most executives can understand and fully participate, rather than feeling uneasy or alienated.