COLLEGE OF BUSINESS MANAGEMENT AND ACCOUNTANCY

MARKETING RESEARCH

PART I • INTRODUCTION AND EARLY PHASES OF MARKETING RESEARCH

Definition of Marketing Research

The American Marketing Association formally defines marketing research as the following:
Marketing research is the function that 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
understanding of marketing as a process.

Marketing research is the systematic and objective identification, collection, analysis,

dissemination, and use of information to improve decision-making related to the identification and
solution of problems and opportunities in marketing. Several aspects of this definition are noteworthy.
First, marketing research is systematic. Thus, systematic planning is required at all stages of the
marketing research process. The procedures followed at each stage are methodologically sound, well
documented, and, as much as possible, planned.

Marketing research uses the scientific method in that data are collected and analyzed to test prior
notions or hypotheses. Marketing research attempts to provide accurate information that reflects a true
state of affairs. It is objective and should be conducted impartially. Although research is always
influenced by the researcher’s philosophy, it should be free from the personal or political biases of the
researcher or the management. Research motivated by personal or political gain involves a breach of
professional standards. Such research is deliberately biased to result in predetermined findings.

The motto of every researcher should be, “Find it and tell it like it is.” Marketing research involves
the identification, collection, analysis, dissemination, and use of information. Each phase of this
process is important.
 We identify or define the marketing research problem or opportunity and then determine the
information needed to investigate it. Because every marketing opportunity translates into a
research problem to be investigated, the terms “problem” and “opportunity” are used
interchangeably here.
 Next, the relevant information sources are identified and various data collection methods
varying in sophistication and complexity are evaluated for their usefulness. The data are
collected using the most appropriate method; they are analyzed and interpreted, and inferences
are drawn.
 Finally, the findings, implications, and recommendations are provided in a format that allows
the information to be used for marketing decision-making and to be acted upon directly.

A Classification of Marketing Research

Our definition states that organizations engage in marketing research for two reasons:
(1) to identify and (2) to solve marketing problems. This distinction serves as a basis for classifying
marketing research into problem-identification research and problem-solving research, as shown in

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Figure 1.1. Problem-identification research is undertaken to help identify problems that are, perhaps,
not apparent on the surface and yet exist or are likely to arise in the future.

Examples of problem identification research include market potential, market share, brand or
company image, market characteristics, sales analysis, short-range forecasting, long-range forecasting,
and business trends research. A survey of companies conducting marketing research indicated that 97
percent of those who responded were conducting market potential, market share, and market
characteristics research. About 90 percent also reported that they were using other types of problem-
identification research. Research of this type provides information about the marketing environment
and helps diagnose a problem.

For example, a declining market potential indicates that the firm is likely to have a problem
achieving its growth targets. Similarly, a problem exists if the market potential is increasing but the
firm is losing market share. The recognition of economic, social, or cultural trends, such as changes in
consumer behavior, may point to underlying problems or opportunities. Once a problem or opportunity
has been identified, problem-solving research is undertaken to arrive at a solution. The findings of
problem-solving research are used in making decisions that will solve specific marketing problems.
Most companies conduct problem-solving research.

Table 1.1 shows the different types of issues that are addressed by problem-solving research,
including segmentation, product, pricing, promotion, and distribution research. Classifying marketing
research into two main types is useful from a conceptual as well as a practical viewpoint. However,
problem-identification research and problem-solving research go hand in hand, and a given marketing
research project may combine both types of research.

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This was illustrated in the opening Boeing example. The consumer surveys identified potential demand
for smaller planes (problem identification). Subsequent product research led to the introduction of the
new versions of the Boeing 737, which cater to the 100- to 215-seat market (problem-solving).
Kellogg’s provides another example.

The Marketing Research Process

We conceptualize the marketing research process as consisting of six steps.

Step 1: Problem Definition

The first step in any marketing research project is to define the problem. In defining the problem, the
researcher should take into account the purpose of the study, the relevant background information, the
information needed, and how it will be used in decision-making. Problem definition involves
discussion with the decision makers, interviews with industry experts, analysis of secondary data, and,
perhaps, some qualitative research, such as focus groups. Once the problem has been precisely
defined, the research can be designed and conducted properly.

Step 2: Development of an Approach to the Problem

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Development of an approach to the problem includes formulating an objective or theoretical

framework, analytical models, research questions, and hypotheses and identifying the information
needed.

Step 3: Research Design Formulation

A research design is a framework or blueprint for conducting a marketing research project. It details
the procedures necessary for obtaining the required information, and its purpose is to design a study
that will test the hypotheses of interest, determine possible answers to the research questions, and
provide the information needed for decision-making. Conducting exploratory research, precisely
defining the variables, and designing appropriate scales to measure them are also a part of the research
design. The issue of how the data should be obtained from the respondents (for example, by
conducting a survey or an experiment) must be addressed. It is also necessary to design a questionnaire
and a sampling plan to select respondents for the study.

Step 4: Fieldwork or Data Collection

Data collection involves a field force or staff that operates either in the field, as in the case
Of personal interviewing (in-home, mall intercept, or computer-assisted personal
interviewing), from an office by telephone (telephone or computer-assisted telephone
interviewing), through the mail (traditional mail and mail panel surveys with pre-recruited
households), or electronically (e-mail or Internet). Proper selection, training, supervision, and
evaluation of the field force helps minimize data-collection errors.

Step 5: Data Preparation and Analysis

Data preparation includes the editing, coding, transcription, and verification of data. Each
questionnaire or observation form is inspected or edited and, if necessary, corrected. Number
or letter codes are assigned to represent each response to each question in the questionnaire.
The data from the questionnaires are transcribed or keypunched onto magnetic tape or disks,
or input directly into the computer. The data are analyzed to derive information related to
the components of the marketing research problem and, thus, to provide input into the
management decision problem.

Step 6: Report Preparation and Presentation The entire project should be documented In a
written report that addresses the specific research questions identified; describes the
approach, the research design, data collection, and data analysis procedures adopted, and
presents the results and the major findings. The findings should be presented in a
comprehensible format so that management can readily use them in the decision-making
process. In addition, an oral presentation should be made to management using tables,
figures, and graphs to enhance clarity and impact. The Internet is also being
used to disseminate marketing research results and reports, which can be posted on the Web
and made available to managers on a worldwide basis

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The Role of Marketing Research in Marketing Decision Making

The nature and role of marketing research can be better understood in light of the basic
marketing paradigm depicted in Figure 1.2.

The emphasis in marketing is on the identification and satisfaction of customer needs.

To determine customer needs and to implement marketing strategies and programs aimed at
satisfying those needs, marketing managers need information. They need information about
customers, competitors, and other forces in the marketplace. In recent years, many factors
have increased the need for more and better information. As firms have become national and
international in scope, the need for information on larger and more distant markets has
increased.

As consumers have become more affluent and sophisticated, marketing managers need
better information on how they will respond to products and other marketing offerings. As

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competition has become more intense; managers need information on the effectiveness of
their marketing tools. As the environment changes more rapidly, marketing managers need
more timely information.

The task of marketing research is to assess the information needs and provide management
with relevant, accurate, reliable, valid, current, and actionable information. Today’s
competitive marketing environment and the ever-increasing costs attributed to poor decision-
making requires marketing research to provide sound information. Sound decisions are not
based on gut feeling, intuition, or even pure judgment

Traditionally, marketing researchers were responsible for assessing information needs and
providing the relevant information, whereas marketing decisions were made by the managers.
However, these roles are changing. Marketing researchers are becoming more involved in
decision-making, whereas marketing managers are becoming more involved with research.

This trend can be attributed to better training of marketing managers, the Internet, and
other advances in technology, and a shift in the marketing research paradigm in which more
and more marketing research is being undertaken on an ongoing basis rather than in response
to specific marketing problems or opportunities. In essence, marketing research must add value
to marketing decision-making, indeed to the entire organization. It should be emphasized that
marketing managers do not work in isolation from other functions in the organization. Rather,
the marketing orientation embodies a cross-functional perspective to meet consumer needs
and attain long-term profitability.

Therefore, marketing research should interface with the other functions in the organization
such as manufacturing, research and development, finance, accounting, and other functional
areas as may be relevant in a given project.

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As illustrated by the examples in the chapter overview and by the Power Decisions
example, marketing and marketing research are becoming more and more integrated. Power
Decisions (www.powerdecisions.com) is a market research company focused on marketing
strategy. Using market research and decision clarification tools, they help clients benefit from
the right marketing research information for uncovering marketing strategy solutions that
work. Power Decisions researches, evaluates, and facilitates its clients’ market entry and
market share growth. Figure 1.3 is a pictorial representation of Power Decisions’
methodology.

A food-processing company approached Power Decisions for opportunity scanning and

brand development. The client was a well-respected private-label food processor with a
strong position in Western markets. Top grocery chains stocked much of their canned
vegetables line—it was known for packing quality products at competitive prices. The private-
label business, however, grew more price-competitive and profits began to erode. A
proprietary brand strategy was required to deliver higher profits through restored margins.
Power Decisions’ role was to guide an 18-month multistage effort to discover the most
appropriate product categories to pursue. They undertook a major consumer research product
concept testing study, which consisted of the following steps:
Scanned and evaluated more than 40 product groups, recommending a shortlist of product
category candidates. Conducted a consumer research study to find canned food products
with low consumer satisfaction and high interest in a new brand. Made a trade-off analysis to
calculate the price–quality blends that had the best chance of success. Worked closely with the
client product development team as they formulated test runs of the final food product
chosen to ensure that the test formulations held to the product attributes formula derived
from consumer research.

The final stage was to manage the brand name development, package design, initial

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ad campaign, and test market plan. As a result, the new brand containing the blend of
ingredients desired most by consumers was successfully introduced at a premium price level.
The brand quickly gained both trade and consumer acceptance and was later expanded
To other products and institutional markets. As shown by the experience of Power Decisions,
marketing research can greatly enhance the information available to management. Marketing
research also plays a special role in obtaining competitive intelligence.

Marketing Research and Competitive Intelligence

Competitive intelligence (CI) may be defined as enhancing marketplace

competitiveness through a greater understanding of a firm’s competitors and the competitive
environment. This process is unequivocally ethical. It involves the legal collection and analysis
of information regarding the capabilities, vulnerabilities, and intentions of business
competitors, conducted by using information databases and other “open sources” and through
ethical marketing research inquiry. CI enables senior managers in companies of all sizes to
make informed decisions about everything from marketing, research and development (R&D),
and investing tactics to long-term business strategies. Effective CI is a continuous process
involving the legal and ethical collection of information, analysis that doesn’t avoid
unwelcome conclusions, and controlled dissemination of actionable intelligence to decision-makers
Competitive intelligence is a crucial part of the emerging knowledge economy. By
analyzing rivals’ moves, CI allows companies to anticipate market developments rather than
merely react to them.

The Marketing Research Industry

The marketing research industry consists of suppliers who provide marketing research services.
Marketing research suppliers and services provide most of the information needed for making
marketing decisions. Most of the big suppliers have several subsidiaries and divisions that
encompass various areas of marketing research. Nevertheless, it is useful to classify marketing
research suppliers and services. Broadly, research suppliers can be classified as internal or
external (see Figure 1.4).

An internal supplier is a marketing research department within the

firm. Many firms, particularly the big ones, ranging from automobile companies (GM, Ford,
Chrysler) to consumer products firms (Procter & Gamble, Colgate Palmolive, Coca-Cola) to
banks (JPMorgan Chase, Bank of America), maintain in-house marketing research departments.

The marketing research department’s place in the organizational structure may vary
considerably. At one extreme, the research function may be centralized and located at the
corporate headquarters. At the other extreme is a decentralized structure in which the
marketing research function is organized along divisional lines. In a decentralized scheme, the
company may be organized into divisions by products, customers, or geographical regions,
with marketing research personnel assigned to the various divisions. These personnel generally
report to a division manager rather than to a corporate-level executive.

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The best organization for a firm depends on its marketing research needs and the structure of
marketing and other functions, although in recent years there has been a trend toward
centralization and trimming of the marketing research staff. Internal suppliers often rely on
external suppliers to perform specific marketing research tasks. External suppliers are outside
firms hired to supply marketing research data. These external suppliers, which collectively
comprise the marketing research industry, range from small (one or a few persons) operations
to very large global corporations.

External suppliers can be classified as full-service or limited-service suppliers.

Full-service suppliers
offer the entire range of marketing research services, from problem
definition, approach development, questionnaire design, sampling, data collection, data
analysis, and interpretation, to report preparation and presentation. The services provided by
these suppliers can be further broken down into syndicated services, customized services, and
Internet services (see Figure 1.4).

 Syndicated services
collect information of known commercial value that they provide to
multiple clients on a subscription basis. Surveys, panels, scanners, and audits are the main
means by which these data are collected. For example, the Nielsen Television Index by Nielsen
Media Research (www.nielsenmedia.com) provides information on audience size and
demographic characteristics of households watching specific television programs. The Nielsen
The company (www.nielsen.com) provides scanner volume tracking data, such as those

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generated by electronic scanning at checkout counters in supermarkets. The NPD Group

(www.npd.com)maintains one of the largest consumer panels in the United States. Quick-
Track, conducted by Sandelman & Associates in the “Fast . . . Fruit” opening example, is
another illustration of a syndicated service.

 Customized services
offer a wide variety of marketing research services customized to suit a
client’s specific needs. Each marketing research project is treated uniquely. Some marketing
research firms that offer these services include Burke, Inc. (www.burke.com), Synovate
(www.synovate.com), and TNS (www.tns-global.com). The survey conducted by Harris
Interactive for Boeing in the opening example constituted customized research.

 Internet services
are offered by several marketing research firms, including some that have specialized
in conducting marketing research on the Internet. For example, Greenfield Online Research
Center Inc. in Westport, Connecticut (www.greenfieldonline.com), a subsidiary of The
Greenfield Consulting firm (www.greenfieldgroup.com), offers a broad range of customized
qualitative and quantitative online marketing research for consumer, business-to-business, and
professional markets. Using large, proprietary databases, studies are conducted within the
company’s secure Web site. Jupiter Research (www.jupiterresearch.com) offers research and
consulting services that focus on consumer online behavior and interactive technologies.

Limited-service suppliers specialize in one or a few phases of the marketing research project,
Services offered by such suppliers are classified as field services, focus groups, and qualitative
research, technical and analytical services, and other services.

 Field services
collect data through mail, personal, telephone, or electronic interviewing, and
firms that specialize in interviewing are called field service organizations. These organizations
may range from small proprietary organizations that operate locally to large multinational
organizations. Some organizations maintain extensive interviewing facilities across the country
for interviewing shoppers in malls. Some firms that offer field services are Field Facts, Inc.
(www.fieldfacts.com) and Field Work Chicago, Inc. (www.fieldwork.com).

 Focus groups and qualitative services

provide facilities and recruitment of respondents for focus groups and other forms of
qualitative research such as one-on-one depth interviews. Some firms may provide additional
services such as moderators and prepare focus group reports. Examples of such firms include
Jackson Associates (www.jacksonassociates.com) and The

Opinion Suites(www.opinionsuites.com).

 Technical and analytical services

are offered by firms that specialize in design issues and computer analysis of quantitative
data, such as those obtained in large surveys. Firms such as SDR of Atlanta (www.sdr-

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consulting.com) offer sophisticated data analysis using advanced statistical techniques.

Sawtooth Technologies (www.sawtooth.com) provides software for research data collection
and analysis. Microcomputers and statistical software packages enable firms to perform data
analysis in-house. However, the specialized data analysis expertise of outside suppliers is still in
demand.

 Other services
include branded marketing research products and services developed to address
specific types of marketing research problems. For example, Survey Sampling International
(www.surveysampling.com) specializes in sampling design and distribution. Some firms focus
on specialized services such as research in ethnic markets (Hispanic, African, multicultural).
Examples in this category include Hispanic Consumer Research (www.hispanicconsumer-
research.com) and Multicultural Insights (www.multicultural-insights.com). Certain guidelines
should be followed when selecting a research supplier, whether it is a full-service or a limited--
service supplier.

Careers in Marketing Research

Promising career opportunities are available with marketing research firms (e.g., the Nielsen
Co., Burke, Inc., The Kantar Group). Equally appealing are careers in business and nonbusiness
firms and agencies with in-house marketing research departments (e.g., Procter & Gamble,
Coca-Cola, GM, the Federal Trade Commission, United States Census Bureau). Advertising
agencies (e.g., BBDO International, J. Walter Thompson, Young & Rubicam) also conduct
substantial marketing research and employ professionals in this field. Some of the positions
available in marketing research include vice president of marketing research, research director,
assistant director of research, project manager, statistician/data processing specialist, senior
analyst, analyst, junior analyst, fieldwork director, and operational supervisor.

Figure 1.5 lists job titles in marketing research and describes their accompanying
responsibilities. The most common entry-level position in marketing research for people with
bachelor’s degrees (e.g., BBA) is an operational supervisor. These people are responsible for
supervising a well-defined set of operations, including fieldwork, data editing, and coding, and
may be involved in programming and data analysis. In the marketing research industry,
however, there is a growing preference for people with master’s degrees. Those with MBA or
equivalent degrees are likely to be employed as project managers.

In marketing research firms such as TNS, the project manager works with the account
director in managing the day-to-day operations of a marketing research project.

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The Role of Marketing Research in MIS and DSS

Earlier, we defined marketing research as the systematic and objective identification,

collection, analysis, and dissemination of information for use in marketing decision-making.
The information obtained through marketing research and sources such as internal records and
marketing intelligence becomes an integral part of the firm’s marketing information system
(MIS).

A marketing information system (MIS) is a formalized set of procedures for generating,

analyzing, storing, and distributing information to marketing decision-makers on an ongoing
basis. Note that the definition of MIS is similar to that of marketing research, except that an
MIS provides information continuously rather than based on ad hoc research studies. The
design of an MIS focuses on each decision-maker’s responsibilities, style, and information
needs. Information gathered from various sources, such as invoices and marketing intelligence,
including marketing research, is combined and presented in a format that can be readily used
in decision-making.

More information can be obtained from an MIS than from ad hoc marketing research
projects, but an MIS is limited in the amount and nature of the information it provides and the
way this information can be used by the decision maker. This is because the information is

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rigidly structured and cannot be easily manipulated. Developed to overcome the limitations of
an MIS, decision support systems (DSS) enable decision-makers to interact directly with
databases and analysis models. Decision support systems (DSS) are integrated systems including
hardware, communications network, database, model base, software base, and the DSS user
(decision maker) that collect and interpret information for decision making. Marketing
research contributes research data to the database, marketing models and analytical techniques
to the model base, and specialized programs for analyzing marketing data to the software
base.

A DSS differs from an MIS in various ways (see Figure 1.6). A DSS combines the use of models
or analytical techniques with the traditional access and retrieval functions of an MIS. A DSS is
easier to use in an interactive mode and can adapt to changes in the environment as well as to
the decision-making approach of the user. In addition to improving efficiency, a DSS can also
enhance decision-making effectiveness by using “what if ” analysis. DSS has been further
developed into expert systems that utilize artificial intelligence procedures to incorporate
expert judgment.

Summary

Marketing research involves the identification, collection, analysis, dissemination, and use of
information. It is a systematic and objective process designed to identify and solve marketing

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problems. Thus, marketing research can be classified as problem-identification research and problem-
solving research. The marketing research process consists of six steps that must be followed
systematically. Figure 1.7 is a concept map for the marketing research process. The role of marketing
research is to assess information needs and provide relevant information
to improve marketing decision-making. However, the decision to undertake marketing
research is not an automatic one but must be carefully considered.

Marketing research may be conducted internally or may be purchased from external suppliers,
referred to as the marketing research industry. Full-service suppliers provide the entire range of
marketing research services from problem definition to report preparation and presentation.
The services provided by these suppliers can be classified as syndicated, standardized,
customized, or Internet services. Limited-service suppliers specialize in one or a few phases of
the marketing research project. Services offered by these suppliers can be classified as field
services, focus groups and qualitative services, technical and analytical services, and other
services.

Due to the need for marketing research, attractive career opportunities are available with
marketing research firms, business and nonbusiness firms, agencies with marketing research
departments, and advertising agencies. Information obtained using marketing research
becomes an integral part of the MIS and DSS. Marketing research contributes to the DSS by
providing research data to the database, marketing models and analytical techniques to the
model base, and specialized marketing research programs to the software base. International
marketing research is much more complex than domestic research as the researcher must
consider the environment prevailing in the international markets that are being researched.

The ethical issues in marketing research involve four stakeholders: (1) the marketing researcher,
(2) the client, (3) the respondent, and (4) the public. The Internet can be used at every step of
the marketing research process. SPSS Windows is an integrative package that can greatly
facilitate marketing research.

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