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Application of marketing research

Research can be categorized either on the basis of technique (surveys, experiments, observation studies,
etc) or on the basis of purpose. We will look at the techniques in the subsequent chapters. Now let us
focus on the 3 methods of doing Marketing Research based on purpose:

1. Exploratory

As the name implies, exploratory research is the initial exploration done to get an idea and
insights into the problem. Research is a relatively expensive process; exploratory research
ensures that this process is not initiated without a thorough understanding of the problem. This
study is qualitative (understanding the concept) rather than quantitative (providing precise
measurement). Also, this type of research does not give conclusive evidence and subsequent
research needs to be done.

Further, the following purposes justify the use of exploratory research:

 Diagnosing a Situation: Sometimes, companies have a situation at hand, but do not


know how to define it clearly. This prohibits action to be taken. One reason for using it is
to identify the exact nature of the business problem, but exploratory research is limited
only to this. Successive descriptive or experimental research needs to be carried out to
craft the action plan.
 Screening Alternatives: Consider a situation where there are several options, but
budget restrictions do not allow implementation of all of them. Exploratory research helps
choose the best alternatives in this case.
 Uncovering New Ideas: Many a times, consumers do not know what they need which is
especially true in case of technology. Prior to the invention of the first smart phone in the
early nineties, an average person did not feel the need for it or understand how pervasive
the device would become. Exploratory research is used in cases like this to induce new
ideas.

A widely used method for executing exploratory research for this purpose is Concept Testing.
Here, target consumers are introduced to an idea and asked how they feel about it, whether they
are likely to use it, etc. It tests the likeability or acceptability of the new product before investing in
its research and development.

2. Descriptive

This type of research is used when there is some comprehension of the problem, objectives are
defined and the research questions are clearly formulated. Contrary to exploratory research, the
proof descriptive research provides is used for formulating action plans. It helps answer the
questions ‘when’, ‘who’, ‘what’, ‘how’ and ‘where’, but not ‘why’.

Descriptive research typically gives a detailed account of the characteristics or behaviour of a


population. Hence the research work usually involves some element of consumer profiling and
market segmentation.

3. Experimental

Experimental studies demonstrate cause and effect relationships. They try to decipher the
outcome marketing actions might have. For example, it is used when the purpose is to determine
the impact of increase in price on usage.
This research is used in succession to exploratory and descriptive research and hence sufficient
knowledge is gained on the topic by then. Experimental research is also popularly known as
causal research.

The extent of uncertainty also affects what type of method should be chosen. The more well defined the
situation is, the more the research agency will move from exploratory to descriptive to experimental
research.

Degree of Problem Interpretation

The following cases will further help understand the significance of each type of research:

Exploratory Descriptive Causal Research


Research Research (Clearly Defined
(Unaware of (Aware of Problem) Problem)
Problem)

Time of Study Initial Phase Later phase of Later phase of


decision making decision making

Approach Unstructured Structured Highly Structured

Examples  Our sales are  What kinds  Will buyers


declining and of people are purchase
we don’t buying our more of our
know why product? products in a
 Would Who is new
people be buying our package?
interested in competitor’s  Which of two
our new product? advertising
product idea?  What campaigns is
features do more
consumers effective?
prefer in our
product?
CONTEMPORARY APPLICATIONS OF MARKETING RESEARCH

1. Competitive Advantage.

The notion that achieving superior performance requires a business to gain and hold an
advantage competitors is central to contemporary strategic thinking.

Businesses seeking advantage are exhorted to develop distinctive competencies at the


lowest delivered cost or to achieve differentiation through superior value.

The assessing competitive advantage can be done in number of ways. The methods can be
broadly classified as market-based and process-based assessment.

Market-based assessment is direct comparison with a few target competitors, whereas


process-based assessment is a comparison of the methods employed.

2. Brand Equity.

 Brand equity is defined as a set of assets and liabilities linked to a brand that add to or subtract from the
value of a product or service to a company and/ or its customers.
 The assets or liabilities that underlie brand equity must be linked to the name and/or symbol of the
brand.
 The assets and liabilities on which brand equity is based will differ from context to context. However,
they can be usefully grouped into five categories:

a) Brand loyalty

b) Name awareness

c) Perceived quality

d) Brand association In addition to perceived quality

e) Other proprietary brand assets: patents, trademarks, channel relationships etc.

3. Customer satisfaction.

 The measurement of customer satisfaction and its link to product/ service attributes is the vehicle for
developing a market-driven quality approach.
 This approach requires a sequential research design that uses the results from each research phase to
build and enhance the value of subsequent efforts.
 During this process, it is imperative to study customers who were lost, to determine why they left. This
issue must be addressed early in the system design.
 The steps involved in customer satisfaction is
a) Define goals and how information will be used

b) Discover what is really important to customers and employees

c) Measure critical needs

d) Act on the information

e) Measure performance over time

f) Issues in questionnaire design and scaling in satisfaction research

4. Total quality management.

 TQM is a process of managing complex changes in the organization with the aim of improving quality.

 The power of measurements is clearly visible in applications of quality function deployment (QFD), a
japanese import used to make product design better reflect customer requirements.

 In QFD, a multifunctional team measures and analyzes in great detail both customers attitudes and
product attributes. Marketing research plays a crucial role at this stage of the process.

 Then the team creates a visual mtrix in order to find ways to modify product attributes (engineering
characteristics) so as to improve the product on the customer-based measures of product performance.
Along the way, the team must develop a series of measures of several different types.

EMERGING APPLICATION OF MARKETING RESEARCH

1. Database marketing

A database is a customer list to which has been added information about the characteristics
and the transactions of these customers. Business use it to cultivate customers – as they
seek new customers.

Need

A database provides the means for research to support decisions. It enables profiling of
customers by searching for prospects who are similar to existing customers. It provides the
means for implementation of profitable programs of repeat business and cross-selling. It
assist in marketing planning and forecasting. Further a database can:

• Match products or services to customers’ wants and needs


• Help select new lists or use new media that fit the profile of existing customers.

• Maximize personalization of all offers to each customer.

• Provide for ongoing interaction with customers and prospects.

• Pinpoint ideal timing and frequently for promotions

• Measure response and be accountable for results

• Help create the offers most likely to elicit responses from customers

• Help achieve a unique selling proposition (USP), targeted to appeal to your customers.

• Integrate direct-response communication with other forms of advertising

• Demonstrate that customers are valuable asstes.

Types of database

1. Active customers

2. Inactive customers

3. Inquiries

Benefits of database marketing

a) Customers are easier to retain than acquire. The first reason is that it takes five times
the energy and budget to get new customer as it does to keep an existing one. Also, a
disproportionately small number of your customers generate a very large proportion of your
income.

b) Determine their “Lifetime Value”. Building a lasting relationship becomes the obvious way
to a prosperous and profitable future.

c) Developing relationships with customers. Understanding your customers’ tastes and


preferences on an individual basis is the foundation for relationship marketing. Relationship
marketing combines elements of general advertising, sales promotion, public relations and
direct marketing to create more effective and more effective ways of reaching consumers. It
centers on developing a continuous relationship with consumers across a family of related
products and services.

2. Relationship marketing

The relationship marketing process incorporates three key elements:

- Identifying and building a database of current and potential consumers, which


records and cross-references a wide range of demographic, lifestyle and purchase
information.
- Delivering differential messages to these people through established and new
media channels based on the consumers’ characteristics and preferences.
- Tracking each relationship to monitor the cost of acquiring the consumer and
the lifetime value of his or her purchases.
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A wide variety of information used to support marketing decisions can be obtained from
market research. A selection of such uses are summarised below:

Information about the size and competitive structure of the market

• Analysis of the market potential for existing products (e.g. market size, growth,
changing sales trends)
• Forecasting future demand for existing products
• Assessing the potential for new products
• Study of market trends
• Analysis of competitor behaviour and performance
• Analysis of market shares

Information about Products

• Likely customer acceptance (or rejection) of new products


• Comparison of existing products in the market (e.g. price, features, costs, distribution)
• Forecasting new uses for existing products
• Technologies that may threaten existing products
• New product development

Information about Pricing in the Market

• Estimates and testing of price elasticity


• Trends in pricing over recent years
• Analysis of revenues, margins and profits
• Customer perceptions of “just or fair” pricing
• Competitor pricing strategies
Information about Promotion in the Market

• Effectiveness of advertising
• Effectiveness of sales force (personal selling)
• Extent and effectiveness of sales promotional activities
• Competitor promotional strategies

Information about Distribution in the Market

• Use and effectiveness of distribution channels


• Opportunities to sell direct
• Cost of transporting and warehousing products
• Level and quality of after-sales servic