CHAPTER FIVE
MARKETING RESEARCH
LEARNING OBJECTIVES
After reading this chapter, you should be able to:
1. a. Define marketing research.
b. Identify and explain marketing research process.
2. a. Define market forecasting;
b. List and explain market forecasting methods.
MARKETING RESEARCH DEFINED
Marketing essentially deals with effective identification of consumer needs and finding means of satisfying those needs. To identify and satisfy consumer needs, it is important to conduct marketing research.
Research is the systematic process of generating, analyzing and interpreting data or information for solving an identified problem, resolving critical issues and making informed decisions. Thus, marketing research can be regarded as the systematic process of generating, analyzing and interpreting data or information for solving an identified marketing problem, resolving critical marketing issues and making informed marketing decisions. Kotler and Keller (2007) see marketing research as the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company. In another definition by the American Marketing Association {AMA} (1987), marketing research is the function that links an organization to its markets through the gathering of information.
FEATURES OF A MARKETING RESEARCH
A careful study of the above definitions of marketing revealed some features of a marketing research. These are:
1. Marketing function: Marketing research is one of the fundamental functions of a marketing department or firm. Thus, firms’ marketing departments should be able to conduct simple marketing research. However, complex marketing research projects can be contracted to marketing firms that specialize in this area.
2. Systematic process: Research is a systematic process and marketing research is not an exception. The process includes identifying and defining a research problem, stating research objectives, questions and hypotheses, gathering data, analyzing data, presenting or reporting findings, and making decisions.
3. Links a company to the market: As earlier mentioned, anticipation and identification of consumer needs is the starting point of marketing and precedes production. The marketing function that ascertain whether consumers have a need for a product or not, whether the need is substantial for desired profitability or not, and whether the consumers have the purchasing power or not, is marketing research. When consumers’ needs exist and the purchasing power is strong, a company is said to have identified a market to serve with goods and services at a profit. By so doing, the company is linked to the market.
4. Means of solving identified marketing problem: When companies are confronted with problems associated with customers, products, price, distribution, communication/promotion, sales, and competition, etc they usually organize, fund and execute marketing research projects in order to unravel the root cause of such problems, and thereafter tackle them with the appropriate marketing strategies.
5. Means of resolving critical marketing issues: Marketing, like many other fields, is inundated with several theories dealing with two or more variables. Often, two or more variables are assumed to be directly or inversely related. However, such assumption may not be true in all cases, especially in practical business situation. For example, two critical marketing issues in every company – advertising and sales - are assumed to have direct or positive relationship with each other. But the fact remains that advertising is a cost element and may erode realizable profit without necessarily increasing sales. Therefore, this kind of marketing dilemma can be resolve through a case study of a particular company’s advertising expenditure and sales for a given period, say 30 months.
6. Means of making informed decision: The ultimate goal of marketing research is to avail marketing managers with the executive summary of the research problems, methodologies, findings and recommendations for further managerial action. Such research report usually clears doubt and give mangers the confidence to make certain decision.
DIFFERENCES BETWEEN MARKETING RESEARCH AND MARKET RESEARCH
The terms marketing research and market research are often used interchangeably but they differ in meaning. The terms are used interchangeably because they are both related to each other to a large extent. However, technically they are distinct in many ways.
First, Market Research is concerned with getting information about customer, competition, and industry in general, while Marketing Research is concerned with getting Information about product and consumer preference.
Second, Market Research is a superset. It explores various market segments, market trend, market growth, market potential, competitive analysis, market forecast, and SWOT and PEST analysis for a particular market. On the other hand, Marketing Research is the subset of Market research. It covers the market related information of a particular company/business. It mostly explores various strategies (channel related, advertising, and promotion) adopted by a particular business house. In addition, it includes customers’ preference for the company's products/services (See Figure 5.1).
Figure 5.1: Differences between Marketing Research and Market Research
Third, Marketing Research is the right term to be used when management or a researcher first identifies a marketing problem before conducting a research. Market Research is more appropriate when management or a researcher conduct a research about a market without knowing in advance what the problem at hand is, but mainly seeks to benefit from the data or information generated from the activity.
MARKETING RESEARCH PROCESS
Effective marketing research involves seven steps: defining the problem, stating the research objectives, developing research plan/design, gathering data, analyzing the data, presenting the findings, and making the decision. The steps are explained below:
1. Defining the Problem: The existence of a marketing problem calls for a research. That is, there must be a marketing problem before there can be marketing research. However, marketing problems are not glaring, thus they have to be searched and identified. What is glare are the symptoms of a marketing problem such as declining patronage, sales, market share and profits, and unhappy customers. Thus, a marketing research problem has to be identified and clearly and adequately defined. This is necessary because problem identified is half solved. At this juncture, we may ask: “what is a marketing research problem?”
Technically, a marketing research problem is the gap between what is known and what is desired or yet to be known in the field of marketing. It can also be regarded as the deficiency or cause(s) of deficiency between the desired result and the actual result on issues relating to marketing. However, it is good to note that the academia and practitioners view marketing problem differently. The first definition reflects the academia’s view of a marketing research problem, while the second definition reflect the practitioners/firms’ view of a marketing problem. Hair, Bush and Ortinau (2000) present the fundamental and philosophical differences between management (practitioners) and researchers using eight attribute differences as shown in Table 6:1.
Table 5.1: Fundamental and Philosophical Differences Between Management and Researchers
Attribute Differences | Decision Makers | Researchers |
1. Research motivation | To make symptoms disappear | To discover the true facts and relationships |
2. Disposition to knowledge | Want answers to questions | Want to ask questions |
3. Orientation | Pragmatic, subjective | Scientific, objective |
4. Responsibility | To make profits | To generate information |
5. Use of the research | Political | Nonpolitical |
6. Organizational position | Line/middle/top management | Supportive staff, specialist |
7. Level of involvement | Highly involved, emotional | Detached, analytical |
8. Training | General decision making | Scientific/technique application |
Source: Hair, Bush and Ortinau (2000:62), Marketing Research: A Practical Approach for the New Millennium. Singapore: Irwin McGraw-Hill.
2. Stating Research Objectives, Questions and Hypotheses: At the outset of every research, there is need to define or state the research objectives. Without defining the research objectives, the research will have no direction and end up achieving nothing. Remember the saying “if you do not know where you are going, you will never get there.”
The aim and objectives of a research specify the general and specific purpose of the research. Aim refers to primary goal of the study and is usually stated in one-sentence, while objective refers to specific goals of the study. The research objectives are usually itemized in sentences.
In stating research objectives, key action words such as identify, evaluate, examine, determine, ascertain, verify, investigate, appraise, assess, etc. are used. Ultimately, the aim and objectives of study usually point to the methodology of the study. Also, aim and objectives should be operational, measurable and achievable. If the stated research objectives are achieved, then the management or decision makers will have the information required to solve the identified marketing problem.
Research questions are interrogative statements about two or more variables. Research questions take queue from the research objectives, and vice versa. However, hypothesis is a tentative supposition subject to statistical testing. Put differently, hypothesis refers to intelligent guess about the relationship between two or more variables or events.
For clarity, the following examples highlight the linkage between research objective, research question and hypothesis.
· Research objective: To investigate the relationship between advertising and sales.
· Research question: What is the relationship between advertising and sales?
· Research hypothesis: Advertising exerts significant influence on the company’s sales.
3. Developing a Research Plan/Design: Data collection and analysis are the hallmark of every research. For research finding to be reliable, the research data and analysis must also be relevant and accurate. To obtain research data that is relevant, accurate and reliable, the procedure for collecting and analyzing data must be adequately specified, validated, and documented in advance. Thus, a research design is a master plan of the methods and procedure that should be used to collect and analyze the data needed by the decision maker (Hair et. al., 2000). It entails that the researcher must determine at the time of the commencement of research where, how, when, and from whom to collect data; it also entails spelling-out the design technique, appropriate statistical instrument for data analysis, the research budget and duration.
Research design is a major component of a research proposal. It usually occupies chapter three of Bachelor Degree, Master’s Degree and Ph.D. projects/thesis’ proposals or final research projects/thesis. A good research design consists of the type of research, population of study, sample size and sampling procedure, data collection technique, measurement of research variables, and method and procedure of data analysis.
4. Gathering data: At this stage, the researcher begins to implement the research plan. He first determines the source(s) of data to best answer the research questions. If the researcher is interested in determining consumers’ perception or opinion about a company’s product or service quality, prices and promotion, etc., then he/she collects raw data by asking consumers questions verbally (using structured or unstructured interview) or in written form (using questionnaire). It is very expensive to generate raw or primary data.
If, however, the researcher is interested in identifying the market demography, economic trends, market structure, market size, market share, market growth, etc., then he/she requires documented or processed data, called secondary data. Secondary data can be obtained from internal secondary data sources or external secondary data sources.
Internal secondary data sources refer to data collected by individual firms for accounting purposes, production purposes, and marketing activity reports.
External secondary data sources refer to data collected by outside agencies such as international institutions, governmental institutions, trade and professional associations or private research firms. Examples of international institutions are World Bank, International Monetary Fund, Transparency International, and United Nations, etc. Examples of governmental institutions in Nigeria are Central Bank of Nigeria, Federal Office of Statistics, Stock and Exchange Commission, Nigerian Stock Exchange, National Population Commission, National Communication Commission, Standard Organization of Nigeria, Corporate Affairs Commission of Nigeria, Bureau for Public Enterprises, etc. Manufacturers Association of Nigeria, Nigeria Institute of Management; and private research firms are some of the examples of professional associations. It is less expensive for the researcher to generate secondary data as they have already been collected and documented.
5. Processing and analyzing data: Good knowledge of statistics is required during data processing and analysis. Data obtained by means of questionnaire need to be summarized into a smaller form. The statistical tools used in summarizing data are measure of averages (mean, median and mode) and measure of dispersion (range, variance, and standard deviation). These tools are also used to measure and rank research variables.
To test the research hypothesis and make inferences, it is mandatory to use inferential statistical tools. These are chi square, covariance, correlation analysis, ANOVA, MANOVA, and regression analysis statistical tools, etc.
6. Presenting the findings (communication of result): Through data analysis, the research findings are determined and the research objectives are effectively achieved. Results of the analysis are to be reported without bias. Such results are used to make generalization and to discuss the implications to the management.
No matter how perfectly the research project was designed and implemented, if the results cannot be effectively communicated to the client, the research project cannot be considered a success.
The parts common to all marketing research report are as follows:
i. Title page
ii. Table of Contents
iii. Executive Summary
iv. Introduction
v. Research objectives
vi. Concise statement of problem
vii. Review of related literature
viii. Research method and procedure
ix. Data analysis and findings
x. Conclusion and recommendations
xi. Limitations
xii. Appendixes
7. Taking managerial decision: Managers often welcome the outcome of research with mix feelings for two reasons. First, managers welcome research findings with happiness because it ought to provide managers with best course of action to take in order to solve the marketing problem at hand. Second, managers are also likely to treat the research findings with doubt because such findings could be marred by poorly designed research methodology and could mislead the company if implemented.
All things being equal, research is expected to provide the management with findings and courses of action (in the form of recommendation) to aid informed managerial decision. Research aids rational decision instead of subjective, trial-and-error, intuitive decision.
SELF-ASSESSMENT QUESTIONS
1. a. Attempt a definition of marketing research.
b. List and briefly explain the marketing research process.
2. Discuss any three (3) differences between “market research” and “marketing research.”
3. The company which you are serving as the marketing manager has just discovered a sharp fall in its market share and has called upon you to dig in to the root of the problem and proffer solutions for informed management decision. Describe how you will go about this exercise. (2010 Exam Question, IBBUL)
4. Discuss four (4) reasons why managers fail to implement research findings and recommendations.