Chapter 1
Marketing Research: A Pervasive Activity
Many people have a mistaken impression about marketing research. They believe it is simply asking consumers what they think or feel about a certain brand or an advertisement. Although marketing research does make use of consumer surveys, it involves much more than that. Consider the following examples.1
Example After watching countless hours of videotapes of consumers entering various retail outlets such as department stores, grocery stores, and banks, marketing researchers have advised against investing in elaborate store displays for the first 30 feet from the entrance, the so-called "decompression zone" in which shoppers are merely getting oriented to the store layout and are not inclined to pick up merchandise for purchase. Similarly, the researchers noted that most consumers are likely to veer right as they proceed into the store, not because most are right-handed, but because we drive on the right—British and Australian consumers veer left.2
Example Gillette develops new products (for example, Mach III razors) by watching consumers shave—not by standing in their bathrooms, but by watching video from microcameras that have been attached to razors that the consumers were using to shave. This closeup view shows clearly what the blades do to the whiskers and surrounding skin, enabling Gillette to create more effective shaving instruments, to make superior product claims, and to charge premium prices.3
Example When Wrigley found sales and market share for their Juicy Fruit gum declining, the company asked teens who were frequent gum-chewers to find pictures that reminded them of the gum and to write a short story about them. Marketing researchers studied each montage and noted a common theme of "sweet tasting." Advertising was created with the tagline "Gotta Have Sweet," which proved memorable, and sales rose 5 percent after the campaign.4
Example Many organizations are supplementing customer satisfaction surveys by deploying "secret shoppers" to conduct discreet tests of the moments-of-truth between customers and service providers. The secret shopper engages in a normal purchase transaction and reports back to the firm his or her experience answering questions such as: Was the merchandise easy to find and of high quality? Were the service people helpful? Could you get through to a knowledgeable person when calling the company's 800 customer service center number? Did the Web site function properly or were there dysfunctional links?5
Example In an attempt to speed up refueling and engender loyalty to its stations, Mobil Oil Company test-marketed an electronic key-chain wand called a Speedpass in St. Louis. Customers simply wave the device to activate the pump. The device automatically charges the gasoline purchase to the purchaser's designated credit card when refueling is complete, without the customer ever having to go inside the station or show the credit card. The Speedpass can be used only at Mobil stations.6
Example Researchers are intrigued with the potential of online chat rooms as a focus group forum. They cite large savings in travel expenses, because the participants can log in from all over the world. They also say that new products or advertisements can be shown online just as easily as in person, and they point out that the time-consuming and expensive step of transcribing focus group tapes is unnecessary, because the online focus group is already conducted in text, which may simply be downloaded and saved. Critics of online focus groups say that important cues and reactions like nonverbal body language are lost in the online environment, but supporters respond that they encourage online focus group participants to use emoticons, such as the smiley faces [:)], and note that soon, video capabilities will allow all participants to see each other, simulating more closely a traditional focus group.7
Example Dorothy Lane Market, in Dayton, Ohio, recently initiated a frequent-shopper program. Customers sign up for the discount program by providing some personal information, such as name and address, in exchange for a card, which the company uses to track buying habits. Price discounts go only to club members, and the company's direct-mail promotions are customized to reflect the individual's shopping habits. Not only are the store's customers happy that they don't have to clip coupons to save, Dorothy Lane is more profitable. Moreover, the card has helped to cut inventory and speed distribution. Because the card quickly reveals which products are selling and how fast, the stores are more likely to get just what they need, when they need it, from their suppliers.8
These examples simply scratch the surface regarding the scope of marketing research activities. This book will provide a better perspective on what marketing research is and how it can be used. For the moment, note that it involves more than asking individual consumers about their likes and dislikes. Although consumer surveys are an important marketing research tool, other methods are also used. The choice depends on the problem to be solved. The fundamental point is that marketing research is a pervasive activity that can take many forms because its basic purpose is to help managers make better decisions in any of their areas of responsibility.
Role of Marketing Research
Anyone planning a career in business should understand what marketing research can do. Every day, marketing managers are called upon to make decisions, sometimes minor, sometimes far-reaching, each of which will be better-informed and likely to produce better results with the intelligent use of marketing research. Effective decision making depends on quality input, and marketing research plays an essential role in translating data into useful information. Any business seeking an edge in attracting and retaining customers in competitive market environments turns to marketing. And in turn, marketing can create strategies to work toward these goals of attraction and retention, if the business understands its customers. This understanding comes through marketing research, both periodic projects directed toward specific problems at hand, and continuing, ongoing measurement of the marketplace.
Beyond marketing researchers and marketers, the success of one's career in many related fields would be enhanced by a working knowledge of marketing research. For example, much of management consulting is fundamentally marketing research. Entrepreneurs enhance their likelihood of staying in business by understanding their new and growing customer base. Financial analysts need to understand the perceptions of their consumer and business customers in order to sell their products. Those Internet service providers who invest the time to understand what their customers value will be around long after their less knowledgeable upstarts crash. People beyond traditional business boundaries also benefit from research. For example, land planners use marketing research to understand better the desires of their constituents—anything from shopping mall site location to where a new neighborhood park might be built. Politicians use marketing research to plan campaign strategies. As much as citizens protest negative ad campaigns, such ads continue because they are memorable and advertising agencies measure success in part through short-term memory measures. Clergy and congregations use marketing research to determine when to hold services, what genre of worship music to play, and how to serve the different segments in the congregation.
You may recall from your introductory course in marketing that the principal task of marketing is to create value for customers, where customer value is the difference between customer perceptions of the benefits they receive from purchasing and using products and services, and their perceptions of the costs they incur in exchange for them. Customers who are willing and able to make exchanges will do so when (1) the benefits of exchanges exceed the costs of exchanges, and (2) the products or services offer superior value compared to alternatives. In their attempts to create customer value, marketing managers generally focus their efforts on the elements of the marketing mix, or the four Ps—the product or service, its price, its placement or the channels in which it is distributed, and its promotion or communications mix.
The marketing manager's essential task is to develop a marketing strategy that involves combining the marketing mix elements in such a way that they complement each other and positively influence customers' value perceptions and behaviors. This task would be much simpler if all the elements that affect customers' perceptions of value were under the manager's control and if customer reaction to any contemplated change could be predicted with certainty. Usually, however, a number of factors affecting the success of the marketing effort, including economic, political and legal, social, natural, technological, and competitive environments, are beyond the marketing manager's control, and the behavior of individual customers is largely unpredictable.
Figure 1.1 summarizes the task of marketing management. Customers are the target because they are the focus of the firm's activities. Their satisfaction is achieved through simultaneous adjustments in the elements of the marketing mix, but the results of these adjustments are uncertain because the marketing task takes place within an uncontrollable environment (see Figure 1.2). Consequently, as director of the firm's marketing activities, the marketing manager has an urgent, continuous need for information—and marketing research is responsible for providing it. Marketing research is the firm's formal communication link with the customer and environment. It is the means by which the firm generates, transmits, and interprets information from the customer and environment about or relating to the success of the firm's marketing plans.
The American Marketing Association's (AMA) definition of marketing research emphasizes its information-linkage role (ama.org):
Marketing research is the function which links the consumer, customer, and public to the marketer through information—information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve our understanding of marketing as a process.
Note that this definition indicates that marketing research provides information to the marketer for use in at least four areas: (1) the generation of ideas for marketing action, including the identification of marketing problems and opportunities; (2) the evaluation of marketing actions; (3) the comparison of performance versus objectives; and (4) the development of general understanding of marketing phenomena and processes. Further, marketing research is involved with all phases of the information-management process, including: (1) the specification of what information is needed; (2) the collection and analysis of the information; and (3) the interpretation of that information with respect to the objectives that motivated the study in the first place.
A periodic survey (Table 1.1) conducted by the American Marketing Association details how many organizations use marketing research.9 Much research, for example, is done to measure consumer wants and needs. Other research assesses the impact of previous adjustments in the marketing mix or gauges the potential impact of new changes. Some research deals directly with the environment, such as studies of legal constraints on advertising and promotion and studies of social values, business policy, and business trends.
Another way of looking at the function of marketing research is to consider how management uses it. Some marketing research is used for planning, some for problem solving, and some for control. When used for planning, it deals largely with determining which marketing opportunities are viable and which are not promising for the firm. Also, when workable opportunities are uncovered, marketing research provides estimates of their size and scope, so that marketing management can better assess the resources needed to develop them. Problem-solving marketing research focuses on the short- or long-term decisions that the firm must make with respect to the elements of the marketing mix. Control-oriented marketing research helps management to isolate trouble spots and to keep abreast of current operations. The kinds of questions marketing research can address with regard to planning, problem solving, and control decisions are listed in Table 1.2.
It is important to highlight the key role of marketing research in the decision-making process. Marketing research is an essential element of marketing. Consider the following:
"Market research is crucial to a corporation's marketing process." So says Herb Baum, President and CEO of Hasbro Inc. toy manufacturer. "I don't think anybody ought to be making marketing decisions without some form of research, because you can waste a lot of time and money. What it really does is it helps you understand your . . . customers."10
In addition, the communication link that marketing research serves between the firm and its customers and its environment is becoming increasingly critical and difficult as the world moves to a highly competitive global economy. Firms operating in the international arena often use marketing research to get a perspective on what it is like to do business in specific countries. Some of the questions that marketing research has been used to investigate in this capacity are listed in Table 1.3. Globalization of marketing research naturally follows the globalization of large, multinational clients, and just as products are adapted and tailored for local cultures and tastes, it is also important to recognize that for research too, what works in one environment does not necessarily work in another (see Research Realities 1.1). Marketing researchers point to international business as one of three key influences on changes in how they conduct their business—the other two factors being the Internet and one-to-one marketing:
The Internet, globalization, and one-to-one marketing are expected to be the primary influences on marketing research, says a survey of marketing research professionals. Interactive research and virtual reality are expected to flourish over the Internet and future broadband electronic communications technologies. The globalization of business will drive more cross-cultural research, to recognize increasing diversity and changing demographic bases. And as companies build relationships with their customers as unique individuals, they will need marketing and marketing research like never before—just who is this customer and what does he or she want? "Marketing research in the 21st century may be barely recognizable by a 20th century researcher" and the marketing research industry will be under more pressure to attract top talent.11
We say more about the Internet later in this chapter and throughout the book, and we examine some one-to-one direct marketing and database marketing issues in the next chapter. See Table 1.4 for a summary of current marketplace phenomena that are impacting marketing research and increasing its applicability and importance.
Who Does Marketing Research?
Marketing research, as a significant business activity, owes its existence to the shift from a production-oriented to a consumption-oriented economy that occurred in this country at the end of World War II. However, some marketing research was conducted before the war, and the origins of formal marketing research predate the war by a good number of years:
More by accident than foresight, N. W. Ayer & Son applied marketing research to marketing and advertising problems. In 1879, in attempting to fit a proposed advertising schedule to the needs of the Nichols-Shepard Company, manufacturers of agricultural machinery, the agency wired state officials and publishers throughout the country requesting information on expected grain production. As a result, the agency was able to construct a crude but formal market survey by states and counties. This attempt to construct a market survey is probably the first real instance of marketing research in the United States.12
There were even formal marketing research departments and marketing research firms before World War II.13 However, marketing research really began to grow when firms found they could no longer sell all they could produce but rather had to gauge market needs and produce accordingly. Marketing research was called upon to estimate these needs. As consumer discretion became more important, there was a concurrent shift in the orientation of many firms. Marketing began to assume a more dominant role and production a less important one. The marketing concept emerged and along with it, a reorganization of the marketing effort. Many marketing research departments were born in these reorganizations. The growth of these departments was stimulated by a number of factors, including past successes, increased management sophistication, and the data revolution created by the invention of the computer. The success of firms with marketing research departments caused still other firms to establish departments.