Five-step marketing research approach to making better decisions
From Information To Action
This Chapter introduces a new Marketing Research Framework which is presented in a five-step marketing research approach. The Chapter provides a description of three types of research – exploratory, descriptive, and causal – in the context of setting research objectives, and examines different methods and techniques of obtaining data.
After reading this chapter you should be able to:
1. Identify the reason for doing marketing research, and describe the five-step marketing research approach leading to marketing actions.
2. Describe how secondary and primary data are used in marketing, including the uses of questionnaires, observations, experiments, and panels.
3. Explain how information technology and data mining link massive amounts of marketing information to meaningful marketing actions.
THE ROLE OF MARKETING RESEARCH
To place marketing research in perspective, we can describe (1) what it is, (2) some of the difficulties in conducting it, and (3) the five steps marketing executives can use in conducting marketing research.
What is Marketing Research?
Marketing researchis the process of defining a marketing problem and opportunity, systematically collecting and analyzing information, and recommending actions. The broad goal of marketing is to identify and define both marketing problems and opportunities and to generate and improve marketing actions. Although marketing research isn’t perfect, it seeks to reduce risk and uncertainty to improve decisions by marketing managers.
Why good marketing research is difficult?
Ask a moviegoer if she liked the title for a film she just saw and you’ll probably get a straightforward answer. But often marketing researchers face difficulties in asking consumers questions about new, unknown products. For example,
· Suppose your company is developing a brand new product, never before seen by consumers. Would consumers really know whether they are likely to buy a particular product that they probably have never thought about before?
· Imagine if you, as a consumer, were asked about your personal hygiene habits. Even though you knew the answer, would you reveal it? When personal or status questions are involved, will people give honest answers?
· Will consumers’ actual purchase behavior be the same as their stated interest or intentions? Will they buy the same brand they say they will?
A task of marketing research is to overcome these difficulties and to obtain the information needed to make reasonable estimates about what consumers will or won’t buy.
Five-step marketing research approach to making better decisions
A decisionis a conscious choice from among two or more alternatives. All of us make many such decisions daily. At work we choose from alternative ways to accomplish an assigned task. At college we choose from alternative courses. As consumers we choose from alternative brands. No magic formula guarantees correct decisions.
Managers and researches have tried to improve the outcomes of decisions by using more formal, structured approaches to decision making, the act of consciously choosing from alternatives. The systematic marketing research approach used to collect information to improve marketing decisions and actions uses five steps (Figure 2). Although the five-step approach described here focuses on marketing decisions, it provides a systematic checklist for making both business and personal decisions.
Five-step marketing research approach leading to marketing actions
Define the problem
Set research objectives
Identify possible marketing actions
Develop the research plan
Identify data needed for marketing actions
Determine how to collect data
Collect relevant information by specifying
Take marketing actions
Make actions recommendations
Implement action recommendations
Lessons learned for future research
1. What is marketing research?
2. What are the five steps marketing research uses to help lead to marketing actions?
STEP 1: DEFINE THE PROBLEM
Designers at Fisher-Price, the nation’s top marketer of infant and preschool toys, seek to develop toys they think kids will like, but the problem is: How can they be certain kids will like the toys? As part of their marketing research, Fisher-Price gets children to play at its state-licensed nursery school in East Aurora, New York. From behind one-way mirrors, Fisher-Price designers and marketing researchers watch the children use, and abuse, the toys to develop better products.
The original model of a classic Fisher-Price toy, the Chatter Telephone™, was simply a wooden phone with a dial that rang a bell. Observers noted, however, that the children kept grabbing the receiver like a handle to pull the phone along behind them, so a designer added wheels, a noisemaker, and eyes that bobbed up and down.
Fisher-Price’s toy testing shows how to define the problem and its two key elements: setting the research objectives and identifying possible marketing actions suggested by the research.
Set the Research Objectives
Objectives are specific, measurable goals the decision maker - in this case, an executive at Fisher-Price - seeks to achieve in solving a problem. Typical marketing objectives are increasing sales and profits, discovering what consumers are aware of and want, and finding out why a product isn’t selling well. For Fisher-Price, the immediate research objective was to decide whether to market the old or new telephone design.
In setting these research objectives, marketers have to be clear on the kind of research they are about to do. The three kinds of research are:
1. Exploratory researchprovides ideas about a relatively vague problem. General Mills discovered that the initial version of its Hamburger Helper wasn’t satisfactory for many consumers, so it interview them to get ideas to improve the product.
2. Descriptive research generally involves trying to find the frequency that something occurs or the extent of a relationship between two factors. So when General Mills wants to study how loyal consumers are to its Wheaties, it can obtain data on the number of households buying Wheaties and competitive products.
3. Causal research, the most sophisticated, tries to determine the extent to which the change in one factor changes another one. In the Fisher-Price example discussed next, changing the toy designs is related to changes in the amount of time children play with the toy. Experiments and test markets, discussed later, are examples of causal research.
Identify Possible Marketing Actions
Effective decision makers develop specific measures of success, which are criteria or standards used in evaluating proposed solutions to a problem. Different research outcomes - based on the measure of success - lead to different marketing actions. For the Fisher-Price problem, if a measure of success were the total time children spent playing with each of the two telephone designs, the results of observing them would lead to clear-cut actions as follows:
Measure of Success: Playtime
· Children spent more time playing with old design.
· Children spent more time playing with new design.
Possible Marketing Action
· Continue with old design; don't introduce new design.
· Introduce new design; drop old design.
One test of whether marketing research should be done is if different outcomes will lead to different marketing actions. If all the research outcomes lead to the same action - such as top management sticking with the older design regardless of what the observed children liked - the research is useless and a waste of money. In this causal research study, results showed that kids liked the new design, so Fisher-Price introduced its noisemaking pull-toy Chatter Telephone, which became a toy classic and sold millions.
Digital Research, Inc., a marketing research firm, evaluates almost 500 new toys from more than 160 toy manufacturers to select Family Fun magazine’s Toy of the Year award. More than 700 children “toy testers” are involved. And they’ve been right on the money in selecting Barney the TV dinosaur, Tickle Me Elmo, and Fisher-Price’s Love to Dance Bear™ as hot toys - ones that jumped off retailers’ shelves. But sometimes they are wrong. Forecasting which toys are hot is critical for retailers, which must place orders to manufacturers 8 to 10 months before Christmas shoppers walk into their stores. Bad forecasts can lead to lost sales for understocks and severe losses for overstocks.
Marketing researchers know that defining a problem is an incredibly difficult task. For example, if the objectives are too broad, the problem may not be researchable. If they are too narrow, the value of the research results may be seriously lessened. This is why marketing researchers spend so much time in defining a marketing problem precisely and writing a formal proposal that describes the research to be done.
STEP 2: DEVELOP THE RESEARCH PLAN
The second step in the marketing research process involves (1) specifying the constraints on the marketing research activity, (2) identifying the data needed for marketing decisions, and (3) determining how to collect the data.