MARKET RESEARCH

 

Businesses need information if they are to make good decisions. One way of gaining that information is by carrying out market research. There are various types of market research. Businesses need to decide which market research methods are mostly likely to give them the information they need.

Many businesses are product orientated. This means that they design and make a product, and then try to convince consumers to buy it. An example might be a drug company, like Glaxo, developing a product to help consumers with an illness and then advertising it.

Businesses can also be market orientàted. This is where they try to find out what consumers want before making the final product. In 1993 Pepsi Cola launched Pepsi Max, a sugar free cola drink designed to taste like the original. Before the product was sold, Pepsi tried to find out the type of product consumers wanted. Finding out about what consumers want and need, and what makes them buy, is called market research.

Businesses which are mainly product orientated risk spending a large amount of resources launching a product which proves to be a failure. Researching the market helps reduce this risk. It should focus research and design effort onto products which have a chance of success in the market place. When the product is launched, a carefully researched product stands less chance of failing.

The stages of market research are:

– what is the question which the business wants to find an answer to?

– what information is needed to answer this question?

– what method of market research will be used?

– collect the data;

– analyze the data, draw conclusions and make recommendations.

Market research attempts to find the answers to questions a business might have about its market. For example, in 1991 the marketing department of Pepsi-Cola started with this question: would launching a new product increase total sales of its products? The market researcher must then decide what information might help answer this question. Pepsi-Cola wanted information about the existing pattern of sales in the market and how the market had changed. It hoped to be able to identify a segment of the market which it could sell to. Pepsi also wanted consumers to tell it about the sort of new product they would like to buy. The market researcher then decided how best to collect this information. There are two ways of doing this: desk research and field research. Pepsi-Cola used both. The information is then collected and analyzed. Finally, the business has to make a decision about what to do in the light of the information formed. Pepsi-Cola decided to launch a new product, Pepsi Max.

Desk research involves the use of secondary data. This is information which is already available, both within and outside the business.

Information within the business. Businesses collect information routinely. Invoices, for instance, will tell them how much they sell and who they are selling to. Accounts will give information about the value of sales and costs of production. Pepsi knew, for instance, that sales of ordinary Pepsi were far higher than sales of Diet Pepsi.

Information from outside the business. Businesses can also collect information which is available from sources outside the business. Some of these sources are:

– government – published statistics, such as consumer spending figures; reports such as Monopolies and Mergers Commission Reports;

– the media – reports in newspapers, magazines, on radio and on television;

– trade associations;

– research organizations – reports prepared by specialist market research organizations such as Mintel or Mori; articles published in academic journals.

Pepsi was able to use market research reports about the soft drink market. The results showed that both in the USA and outside North America Diet Pepsi and Regular Pepsi sales were less compared to its main rival, Coca Cola. Pepsi used this information to ask a market research question: how could Pepsi be changed so that sales increased?

Field research involves the collection of primary data – information which no one has yet collected. It is collected specially for the particularly piece of research. Primary data is collected through direct investigation, usually in one of three ways – observation, survey and experiment.

Observation. Looking at and recording what people do and how they behave can be important. For instance, a supermarket may find that sales in one aisle in the store are very poor. By observing people, it would be possible to see whether, for instance, the problem was that people were not going down the aisle at all, or whether there was reasonable traffic down the aisle but customers weren’t buying. However, observation can’t tell the supermarket anything about why shoppers are behaving in this way.

Survey. A survey usually involves asking question of respondents – people or organizations reply to the questions asked. Pepsi surveyed consumers outside the USA about Diet Pepsi. What it found was that Diet Pepsi had two problems. Firstly, drinking Diet Pepsi left many consumers with a slightly bitter after-taste which was caused by the use of artificial sweeteners. Secondly, many consumers, particularly in Latin American countries, had a negative image of diet products. They saw them as effeminate or linked them with people who had problems such as diabetes or being overweight.

There are different ways of conducting surveys. A postal survey, where questionnaires are sent through the post, or a newspaper survey, which readers are invited to fill in and return, are cheap. Telephone surveys, personal interviews and consumers’ panels are more expensive because an interviewer has to be employed to interview customers. However, only a fraction of customers sent a postal survey will respond. A much larger proportion of those approached will take part in telephone and personal interviews. The interviewer can also help the respondents understand what questions mean and how they should be answered.

If the interview is in a person’s home, products, packaging, etc. can also be shown so that reaction can be recorded. A consumer panel, where a group of people meet together, allows researchers to see how people react in a group situation to a product or idea.

Surveys can only be useful for market research purposes if the questions asked are appropriate. For instance, the name of Pepsi’s new product, Max, came from asking consumer panels in a number of countries to choose the best name out of 13 suggested (a closed question because there is a definite answer). Pepsi would have learnt less if they had simply asked the panels to invent a name (an open question because there are so many possible answers). This is because it is unlikely that two panels would have come up with the same name. Pepsi would not then have known which was the most popular.

Sampling. A survey cannot ask every customer for his opinion. Only a fraction or sample of customers can be surveyed. To be useful, the sample chosen must be representative of all consumers (the population).

In a random sample, every potential respondent has an equal chance of being chosen. Random numbers can be used to do this or it can be done by “picking people out of a hat”. A small random sample, however, may not be representative. This means a large sample to be taken, which is costly and takes time. To reduce the length of time, a systematic sample can be used. This is where every 100th or 1000th person on a list like a telephone directory or the electoral register is chosen. In a quota sample, the sample is broken down (or stratified). For instance, Pepsi might know that one out of ten people who bought diet colas were aged 0-14, seven out of ten 15-24 and the rest were over 25 years old. So out of a sample of 100, Pepsi would ask 70 people (7 out of 10) aged 15-24 to complete a survey. One problem with a quota sample is that any people who fit the description can be asked to complete the survey. So Pepsi, wanting to find seventy people aged 15-24 to complete a survey, could ask the first seventy 15-24 year olds who came out of a McDonalds in London. This may not be very representative of all 15-24 year olds. A stratified random sample may get round this problem. It is a quota sample where all the representatives, the people being interviewed, must be chosen at random. For the sample to be random, Pepsi would have to find some way of selecting 70 young people through pure chance.

Experiment. Market researchers can use experimental techniques. To launch a new product is often very costly. Instead, products could be tested on groups of consumers to see whether they are acceptable and likely to sell well. For instance, Pepsi tried out its new formula diet Pepsi Max with consumer panels. They gave a favorable response. If they hadn’t, Pepsi would have gone back and produced another formula. The next stage was to test market Max in two countries, Italy and the UK. These two countries were chosen because British and Italian consumers have different tastes. If the product was a success in both countries, then it was likely that it would be successful throughout the world.

Decisions. The purpose of market research is to help a business come to a decision. Pepsi thought that there was a potentially large market for a new diet coke by looking at market sales figures. It found out what consumers didn’t like about its existing product and designed a new product. Consumer trials showed that the new product was well liked. Finally, Pepsi decided to launch Pepsi Max in some countries.

TASKS

I. Answer the following questions:

1. What is the difference between a market orientated and product orientated business?

2. What is the purpose of market research?

3. What are the stages of market research?

4. What sources of information are available to someone undertaking desk research?

5. What are field research and desk research?

6. A shopping center wants to find out how many shoppers visit the center. How could it gather this information?

7. What differences are there between a postal survey and personal interviews in surveys?

8. A business wants to take a random sample of people in the Perm area. How could it do so?

9. A chocolate manufacturer wants to find out if a new bar of chocolate is going to sell well. How could it find this out without having to go to the expense of launching the product nationally?

II. Match the terms with the definitions:

 

1. Research involving asking questions of people or organizations. A. desk research
2. Information which already exists, such as accounts and sales records, government statistics, newspaper articles or reports from advertising agencies. B. field research
3. Small group out of a total population which is elected to take part in a survey. C. survey
4. Finding out information from secondary data. D. secondary data
5. The process of collecting primary data. E. Sample
6. A person who or an organization which answers questions in a survey. F. market oriented business
7. A business which develops products which have been researched and designed to meet the needs of consumers. G. questionnaire
8. A list of questions to be answered by respondents, designed to give information about consumers’ tastes. H. market research
9. Business which develops products with little or no market research and which it hopes will prove successful in the market. I. respondent
10. The process of gaining information about customers, competitors and market trends through collecting primary and secondary data. J. product oriented business

 

III. Fill in the gaps with the following words: characteristics, acceptance, market segment, analysis, carry out, techniques, products, surveys, observation, research, panels, questionnaires, desk:

Market research is the systematic and objective classification, collection, _______ and reporting of information about a particular marketing problem. Market research uses a variety of ______ such as in-depth interviews and group _____ which can be used primarily for motivational _____; in addition, field studies can be undertaken using ______ and interviews, and _____ research of records and data, these being used primarily for marketing intelligence. Finally, techniques such as consumer _____, market experiments and _____ may be used to gain information about existing ____. Businesses _____ market research to enable them to identify market tends; to find out about market _____; to forecast market potential; to analyze market share; to find a _____ ______; to test consumer _____ of new and existing products.

IV. Render the text in English:

Ïðàêòè÷åñêè ëþáîé êîìïàíèè òðåáóþòñÿ äåòàëüíûå è òî÷íûå çíàíèÿ î ñâîèõ ïîòåíöèàëüíûõ êëèåíòàõ è õàðàêòåðå èõ ïîòðåáíîñòåé è çàïðîñîâ. Ñáîð, îáðàáîòêà è îáúÿñíåíèå ýòîé èíôîðìàöèè – èçó÷åíèå ðûíêà – ñòàëî íàñòîÿùåé èíäóñòðèåé, ãäå ðàáîòàåò ìíîæåñòâî ñïåöèàëèçèðîâàííûõ ôèðì, èñïîëüçóþùèõ íîâåéøèå íàó÷íûå ìåòîäèêè è èíôîðìàöèîííûå òåõíîëîãèè. Äëÿ ìåëêèõ ôèðì òàêèå àãåíòñòâà ñëèøêîì äîðîãè, è îíè ïðîâîäÿò ñâîå ñîáñòâåííîå èçó÷åíèå ðûíêà (êîãäà è ãäå èì ýòî íåîáõîäèìî), ïîñûëàÿ âîïðîñíèêè êëèåíòàì. Áîëåå êðóïíûå ôèðìû ÷àñòî ïîðó÷àþò ïðîâåñòè èçó÷åíèå ðûíêà ñïåöèàëèñòàì.  ýòîì ñëó÷àå ïðèìåíÿþòñÿ ðàçëè÷íûå ìåòîäû:

- êàáèíåòíîå èññëåäîâàíèå, âêëþ÷àþùåå èñïîëüçîâàíèå âíóòðåííåé è âíåøíåé èíôîðìàöèè;

- ïîëåâîå (ýêñïåäèöèîííîå) èññëåäîâàíèå, âêëþ÷àþùåå íàáëþäåíèå, âûáîðî÷íîå èññëåäîâàíèå, ýêñïåðèìåíò, îïðîñ (ïî÷òîâûé îïðîñ, ãàçåòíûé îïðîñ, òåëåôîííûé îïðîñ, ëè÷íóþ áåñåäó, ðàáîòó ãðóïï, èçó÷àþùèõ ðåàêöèþ ïîòðåáèòåëåé íà íîâûå èçäåëèÿ).

VI. Give a summary of the text.