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Better business
“Decision research” correlates performance
directly with better business
performance
45
Raguragavan Ganeshasundaram and Nadine Henley
Edith Cowan University, Perth, Australia Received September 2005
Revised July 2006
Accepted August 2006
Abstract
Purpose – Proceeding from the widely accepted but relatively untested premise that the gathering of
intelligence via market research is central to business success, this paper reports a study investigating
the extent to which the type of research carried out influences the level of business performance.
Design/methodology/approach – Just over 6,000 market research projects conducted by a sample
of 68 companies in New Zealand were classified as mainly “decision” or “background research” the
companies allocated to one of three categories according to the mix of those types in their total
research programme, and their business performance rated on four criteria. Firm size and the market
research budget were taken into account as potential confounding variables. ANOVA, MANOVA and
factor analysis were applied to data gathered from responses to a questionnaire developed by
Diamantopoulos and Souchon, appropriately modified to the specific conditions of this study.
Findings – Companies carrying out mostly “decision research” rated themselves as performing
generally better than those placing more emphasis on “background research” regardless of the size of
the firm or the its market research budget. They scored highly on return-on-assets, return-on-sales and
sales growth, and exhibited positive overall performance. The initial finding was strongly reinforced
by factor analysis, 98 per cent of the variation in business performance being explained by the
categorisation of a company’s research as dominantly “decision” “background” or “mixed”.
Practical implications – The evidence for the positive effect of “decision research” on business
performance suggests deliberate repositioning of market research strategy towards “decision
research” rather than the “background research” which is generally in favour. This will require a
major shift in the marketing management mindset with respect to marketing intelligence.
Originality/value – This is the first study to show a direct correlation between type of market
research conducted and better business performance. It offers an improved conceptual framework for
marketing intelligence and planning.
Keywords Market research, Marketing intelligence, Market research methods, Performance measures
Paper type Research paper

Introduction
There is evidence in the literature for a positive link between market research and
business success. It has been claimed that the level and type of market research
activity has a variety of beneficial effects:
.
increasing the probability of successful marketing (Gandz and Whipple, 1977);
.
enhancing business performance in general (Hooley and Lynch, 1985; Baker et al., Marketing Intelligence & Planning
1986); Vol. 25 No. 1, 2007
pp. 45-65
.
facilitating the achievement of profitability (Zikmund, 1986; McDaniel and Gates, q Emerald Group Publishing Limited
0263-4503
1991); DOI 10.1108/02634500710722399
MIP .
assisting in the creation of superior customer value (Narver and Slater, 1990;
25,1 Kohli and Jaworski, 1990);
.
leading to organizational learning (Sinkula, 1994);
.
enhancing organizational performance (Moorman, 1995); and
.
being the most important factor in overall business success (Slater and Narver,
46 1997).

Hence, marketing intelligence is seen as an important prerequisite for organisational

effectiveness (Barabba and Zaltman, 1991), an intuitively appealing proposition given
that the basic purpose of marketing intelligence is to “help the manager make decisions
that are more likely to be correct than incorrect” (Peterson, 1988, p. 9), and that
“increasing the percentage of good decisions should be manifested in improved
bottom-line performance” (Lehman, 1989, p. 14).
Despite the apparent consensus that marketing intelligence is central to business
success, surprisingly little empirical work has been conducted on the link between
market research and business performance. Most studies have focused primarily on the
extent to which market research has been adopted by organisations as an activity,
rather than investigating the consequences of its adoption. One exception is the study
by Hart and Diamantopoulos (1993), which found that the level of use had no apparent
effect on organisational performance. However, they did not explore possible
explanations for their finding of an insignificant relationship between research and
success. Some have argued that it is probably the case that different types of market
research have different effects (Holbert, 1974; Gandz and Whipple, 1977; O’Dell et al.,
1984; Low and Mohr, 2001), but this argument has not been examined empirically.
Market research can be used in a conceptual, instrumental, or symbolic way
(Deshpandé and Zaltman, 1982, 1984; Lee et al., 1987; Menon and Varadarajan, 1992;
Moorman et al., 1992; Moorman, 1995; Diamantopoulos and Souchon, 1996; Souchon
and Diamantopoulos, 1997). Conceptual research, which in this paper is termed
“background” research, refers to the indirect use of research information (Beyer and
Trice, 1982) for “general enlightenment” in developing a manager’s knowledge base
(Menon and Varadarajan, 1992), without serving any one particular decision
(Moorman, 1995). Instrumental research, here termed “decision research” refers to the
direct application of research findings to make, implement of evaluate marketing
decisions (Moorman, 1995). When research is used instrumentally to evaluate
decisions, one assesses whether the outcomes were positive or negative, and seeks the
reasons for those outcomes (Zaltman and Moorman, 1988).
Research is said to have been used in a symbolic way when information is distorted
beyond the intent to support decision-makers’ opinion (Goodman, 1993), is used to
justify a decision already made (Fieldman and March, 1981), or simply to keep
information providers happy (Menon and Varadarajan, 1992). Symbolic research can
be considered as one form of instrumental use (Menon and Varadarajan, 1992) that is
generally dysfunctional (Connolly and Thom, 1987) Consequently, it was not
considered separately in this study.
Holbert (1974), Gandz and Whipple (1977) and O’Dell et al. (1984) voiced the opinion that
research which tests ideas (our “decision research”) is likely to be better than research that
generates ideas (our “background research”), but they did not test this opinion empirically.
Recent research has further extended the study of market information utilisation, or its
adoption into decision making, in an export market setting (Rose and Shoham, 2002; Better business
Diamantopoulos et al., 2003; Toften and Olsen, 2003; Williams, 2003), but still without performance
testing different types of research against performance.

Market research and information use

Market research and business performance have been found to be positively related
(Schlegelmilch et al., 1986; Hart, 1987; Weitzel, 1987; Hill, 1988; Schlegelmilch and 47
Therevil, 1988; Lehman, 1989; Turner, 1991; Sinkula, 1994; Thomas et al., 1993;
Moorman, 1995; Sarvary and Parker, 1997; Slater and Narver, 1997; Aaker et al., 1998;
Slater and Narver, 2000). Most studies that discuss the relationship between market
research and business performance have emphasised a logical link between marketing
intelligence generation and good decisions. Collectively, the received wisdom is that
“those companies with zero or low usage could significantly improve their performance
by making better use of market research” (Hooley and West, 1984, p. 347).
The marketing concept holds that consumers’ needs and wants are central to business
decisions and that market research is required to understand them, forming a key rationale
for the importance of marketing intelligence (Drucker, 1954). According to this school of
thought, market research enables the firm to focus on the needs and wants of target
markets, so enabling the firm to enjoy long-term competitive advantage and superior
profitability (Kohli and Jaworski, 1990; Narver and Slater, 1990; Jaworski and Kohli, 1993;
Slater and Narver, 1994). Kohli and Jaworski claimed that market research is a major
element of the “intelligence generation” component of market orientation, reflecting the
true customer focus and co-ordination of the firm’s efforts to serve the chosen customer
base. Accordingly, a focus on market needs is a prerequisite for business success
(Barabba, 1995), since staying “close to the customer” is a distinguishing characteristic of
successful firms (Stevens et al., 1997); or, as Peterson (1988, p. 9) put it, “being close to the
customer requires creative market research and lots of it”.
Market research can be described as the process of listening to the voice of the
market and conveying information about it to appropriate management (Maltz and
Kohli, 1996; Wierenga and van Bruggen, 1997; Dawes et al., 1998; Li and Calantone,
1998; Arken, 2002). An important corollary to this idea is that market information is of
importance to all major areas of the firm. Thus, marketing intelligence has been
considered as the traditional sensing mechanism that can help a company become
market oriented and establish customer commitment (Day, 1991, 2001). It is argued
that if marketing intelligence, generated by market research, is to play a critical role in
the firm’s quest to become more market-oriented, relevant information must be
produced and disseminated in the most appropriate form to achieve better performance
(Low and Mohr, 2001; Gray and Hooley, 2002; Noble et al., 2002). For instance, some
departments or management levels may gather marketing intelligence that is specific
and action-oriented, whereas others may search for marketing intelligence that is
educational (Day, 1994; Day and Nedungadi, 1994). Menon and Varadarajan (1992)
claimed that this differentiation is critical when one is attempting to evaluate the type
of market research and the effect of its use.
Hart and Banbury (1994) argued that the primary aim in commissioning any market
research study is to help achieve a profit or competitive advantage. They noted that the
two most frequently used indicators of performance were profitability measures that
indicate economic aspects of business performance, and sales-based measures that
MIP indicate the degree of power a firm has in the market place. Li and Ye (1999) posited
25,1 that performance assessment can be based on two other measures: growth (such as
sales growth and market share) and profit (such as return on assets and return on
sales). They contended that growth measures are indicative of how effectively a firm
can open up new markets or expand in existing markets, while profit measures indicate
the efficiency of its operation. Together, those indicate the company’s overall
48 effectiveness (Dess and Robinson, 1984; Raju and Roy, 2000). However, the literature
suggests that business performance goes beyond financial and market performance
and proposes the inclusion of an overall performance measure that would allow the
respondents to consider other components, such as the company’s ability to produce
high quality products, to excel in internal business processes, and to hire and retain
high performing employees (Kaplan and Norton, 1992; Gray et al., 1998; Troy et al.,
2001; Low and Mohr, 2001; White et al., 2003).
Building on the conceptual base provided by the literature on the implementation of
the marketing concept and extending the argument to business performance, this paper
reports a study to test whether the type of market research (decision or background)
makes a difference to business performance. Examining this relationship sheds light on
the process by which market research is undertaken and how it can enhance business
performance. The findings enhance understanding and suggest best practice.

Methodology
A list of companies was compiled from the New Zealand Market Research Society’s
Directory, 2000 and New Zealand Business Who’s Who, 1998. Market research
companies were excluded, and agreement to participate was sought from 137 client
companies, who made up the initial sample. Initially, their chief executives were
approached with an outline of the research and were invited to nominate a participant
from among their staff, who was with the company during the period of study, could
provide information relating to all research projects that had been commissioned over
the past ten years, and had knowledge about company’s financial and market
performance. Just less that three quarters of the sampling frame (87 companies, 64 per
cent of the total) agreed to take part in the study. However, 19 companies had done no
formal market research or were unable to nominate a staff member who has the
necessary qualification to meet the sample selection requirements. Thus, the final
sample comprised 68 companies, or 50 per cent of the sampling frame, each with one
nominated respondent. They covered a wide spectrum of service and manufacturing
companies from the private sector. The industry categories represented are shown in
Appendix, and are in line with New Zealand’s sector profile. They mainly comprise
wholesale, retail, distribution (17 per cent), insurance (16 per cent), banking services (12
per cent) and agriculture, mining, quarrying, manufacturing (12 per cent). Annual
revenues ranged from NZ$10 million to NZ$1 billion (NZ$1 ¼ US$0.65 ¼ £0.35, at
October 2006). The firm size, varied from 25 to more than 5,000 employees. The
company age spanned from 12 to more than 100 years.
The study comprised two major parts: first, the classification of projects and companies
into types; second, the assessment of business performance by type of company.
Classification procedures Better business
This study required that companies were classified according to the type of research performance
they predominantly undertook. This was accomplished in four steps. First, 6,036
research briefs/reports were reviewed from the 68 participating companies and a
judgment was made for each one, on the “decision” versus “background” dimension, as
defined earlier. The study considered only formal market research. Second, validity of
this two-way classification was examined by using a questionnaire that would elicit 49
some views on the types of research used by the organisations. Third, each company
was classified as a “decision research” “mixed research” or “background research”
user. Finally, validity of the eventual tripartite classification was examined by using
the same questionnaire to identify similar groups or “segments” of companies with
respect to their research attitudes. Each of these steps is explained more fully below.

Classification of market research projects using literature definitions

Utilising the literature definitions of instrumental (or “decision”) and conceptual (or
“background”) market research (Deshpandé and Zaltman, 1982, 1987; Menon and
Varadarajan, 1992; Diamantopoulos and Souchon, 1996; Souchon and Diamantopoulos,
1997), 6,036 research reports from the 68 participating companies were classified
according to six characteristics:
(1) the purpose for which the research project was carried out;
(2) the prior expectations of what it would achieve;
(3) the clarification of stated research objectives;
(4) the criteria used to select research projects to commission;
(5) the methodology employed to collect information; and
(6) the outcomes of the research and implementation of recommendations.

The review process showed that “background research” in general, related to:
exploratory studies of customer preferences/needs; customer perceptions of
new/exciting products; competitive products’ attributes/prices; awareness of
company and/or its products; market share and/or growth rate; customer
satisfaction and acceptance of products; product/brand performance; and tracking
studies. A specific example would be assessing advertising themes which were likely
to be most appealing or best recalled. It was found that “decision research” in general,
related to confirmatory studies of product/concept testing; price determination;
products’ profit margins; promotional mix selection; quality determination; channel
and segmentation studies; operation problems; and evaluation studies. For example, a
project might be required to determine which advertisement among several would
generate the highest sales over a defined period or to assess the likely sales volumes of
alternative products.
The projects included both in-house and commissioned market research, accounting
for 12 and 88 per cent of the total, respectively. The sample included reports on both
primary and secondary research, but the number of secondary projects was negligible.
Background research projects (64 per cent of the total) were more qualitative in nature
than decision research counterparts (31 per cent). The median cost of background
research projects was more than twice that of decision research projects (NZ$ 96,000
versus 42,000).
MIP Validation of the classification of market research projects
25,1 The validity of the classifications based on literature definitions was examined by
administering a questionnaire developed by Diamantopoulos and Souchon (1999) to
the 68 nominated staff. It contained 37 statements on a wide range of issues relating to
the use of market research in organisations, one group measuring conceptual and
instrumental use another measuring symbolic use. The two groups of statements were
50 not differentiated and were modified slightly in terms of language, style and direction
to suit the purpose of the current study. Various clustering algorithms were used with
the data set, all suggesting a two-cluster solution as the best solution. Cluster one
included variables related to “background research” and Cluster two those related to
“decision research”. The inclusion of variables measuring symbolic use into the
“decision research” dimension supported Menon and Varadarajan’s (1992) claim that
symbolic use is one form of “decision research” use. This solution supported the
original two-way classification of research type based on the classification system
derived from the literature.

Classification of companies based on type of market research use

The 68 companies were classified into three groups according to the proportion of
“decision research” undertaken by each organisation established by the previous two
steps. The 24 heaviest users were labelled “decision research” companies, the next
group of 22 “mixed research” companies, and the final group of 22 “background
research” companies.

Validation of the classification of companies

The validity of the resulting tripartite classification was examined by considering a
different schema of classifications using Q-type factor analysis and hierarchical cluster
analysis to identify similar groups or “segments” of companies with respect to their
research attitudes. The same 37 statements were used, and both clustering procedures
gave a practically identical classification of companies to the one based on proportion
of decision research commissioned, which again suggests that the initial classification
gave a robust result.

Measurement of business performance

Business performance was evaluated subjectively by each nominated respondent from
the 68 companies on four performance dimensions in comparison to the industry norm.
Though the annual reports and other relevant documents were made available at the
time of data collection, subjective measures of performance were employed in this
study for four reasons.
First, managers were reluctant to disclose actual performance data, which they
considered commercially sensitive or confidential. Most who did required the
researchers to sign a confidentiality agreement. Second, as this study involved
companies from different industries, subjective measures could be more appropriate
than objective measures for comparing profit performance. Profit levels can vary
considerably across industries, obscuring any relationship between the independent
variables and business performance (Rhyne, 1986; van der Walt et al., 1989). Covin et al.
(1994) contend that direct comparisons of objective financial data obtained from firms
in different industries can be misleading, as some industries simply outperform others.
The third reason was that objective financial measures might not accurately indicate Better business
the actual financial position of a company due to variables such as the level of performance
investment in R&D or marketing activity (Dess and Robinson, 1984). Lastly, several
studies show a strong correlation between objective and subjective measures of
performance (Ford and Schellenberg, 1982; Gupta and Govindarajan, 1984; Pearce et al.,
1987; Covin et al., 1994; Hart and Banbury, 1994; Gray et al., 1998).
In order to assess business performance by category of market research use, each 51
nominated respondent was asked to provide a subjective evaluation of the company’s
performance on four dimensions in comparison to the industry norm on a five point
scale ranging from much higher (5) to much lower (1). These dimensions included the
firm’s return on assets, return on sales, and sales growth as well as their overall
performance. All statements were worded so that the higher the mean score, the higher
the perceived business performance. The reliability test indicated that the four-item
business performance scale appeared to have a reasonably high degree of internal
consistency (Cronbach’s a ¼ 0.74).
Several authors have argued that the firm size and the level of market research
expenditure could be confounding factors in business performance, if not controlled for
(Hart and Diamantopoulos, 1993; Low and Mohr, 2001). Larger firm size may entail a
higher level of market research expenditure (Hooley and West, 1984; King, 1985; Hart
and Diamantopoulos, 1993). Bellenger (1979) stated that firms with larger market
research budgets are likely to be larger overall and more sophisticated in business
processes than those with smaller budgets. Therefore, possible effects on business
performance of firm size (number of employees) and the research budget (size of the
market research budget) were investigated by asking the 68 respondents to rate their
organisations, relative to other similar firms, on the same five-point scale (Table I).

Results
The preliminary results shown in Table II indicated that the differences in the means of
all performance measures between the “decision research” and “background research”

“I would like you to rate your organisation’s performance in the past 5 years in comparison to similar
organisations in your industry on a five-point scale from much higher (5) to much lower (1).
Compared to similar organisations
Much About the
lower 1 Lower 2 same 3 Higher 4 Much higher 5
Number of employees in my
organisation is . . .
Sales growth of my organisation
is . . .
Return on assets of my
organisation is . . .
Return on sales of my
organisation is . . .
Overall performance of my
organisation is . . . Table I.
Market research expenditure of Evaluation of business
my organisation is . . . performance
MIP
Respondents’ ratings (per cent)
25,1 Lower/much About Higher/much
Performance measures Type of company lower the same higher Mean score

Return on assets Decision research – 24 76 4.0

Mixed research 10 36 54 3.4
52 Background research 27 9 64 3.6
Return on sales Decision research – 17 83 3.9
Mixed research 18 28 54 3.4
Background research 27 9 64 3.5
Sales growth Decision research – 25 75 4.2
Mixed research – 55 45 3.7
Table II. Background research 21 17 62 3.5
Respondents’ ratings on Overall performance Decision research – 24 76 3.9
performance measures by Mixed research – 42 58 3.6
type of company Background research 9 37 54 3.4

companies were statistically significant ( p , 0.05). However, before the assessment of

their relative performance, an attempt was made to examine the possible effects of firm
size and research budget on business performance.

Effect of firm size

Table III presents data on the potential influence of firm size on the types of companies
classified according to the research type they predominantly employed. It shows that
half of the “decision research” companies are large firms. This supports the argument
that large companies are more likely to have the management expertise and necessary
resources for effective implementation of new systems and be able to test ideas
developed through expertise (Fletcher et al., 1996). Bellenger (1979) pointed out that
managers in large firms tend to have more resources available for research, may be
more technically sophisticated about research, with large market research
departments, and may have a more favourable attitude toward market research
than managers in small consumer-oriented companies. On the other hand, a third of the
“decision research” companies were small firms, perhaps in the early years of
operation, and were likely to use “information in an instrumental manner” (decision
research) for cost-effectiveness reasons (Low and Mohr, 2001). However, the mean
scores of 3.1 for “decision research” companies and 2.5 for “background research”
companies are not statistically different ( p . 0.05).

Effect of research budget

Table III indicates that, in contrast to the quarter (22 per cent) of both “decision
research” and “background research” companies which perceived that they had a
relatively larger market research budget than similar companies, more than half (56
per cent) of “mixed research” companies believed that to be the case. The large market
research budget may enable “mixed research” companies to commission higher
proportion of both “background research” and “decision research” projects. On the
other hand, half of the “background research” companies perceived themselves to have
a smaller research budget. This may be attributed to their size and their nature of
operations. Though the mean scores indicate a slight difference on the research budget
 Firm size (number of employees) Research budget (level of market research expenditure)
Respondents’ ratings (per cent) Respondents’ ratings (per cent)
Small Large Small
Type of (lower/much Medium (about (higher/much Mean (lower/much Medium (about Large (higher/much Mean
company lower) n ¼ 32 the same) n ¼ 16 higher) n ¼ 20 score lower) n ¼ 32 the same) n ¼ 22 higher) n ¼ 14 score

Decision
research 35 22 50 3.1 25 50 22 2.8
Mixed
research 32 40 20 2.7 31 17 56 3.0
Background 33 38 30 2.5 44 33 22 2.4
performance

companies
Better business

Distribution of responses

budget size” by type of

“firm size” and “research
and mean ratings for
Table III.
53
MIP dimension between “decision research” companies (M ¼ 2.8) and “background
25,1 research” companies (M ¼ 2.4), the differences were non-significant ( p . 0.05).
An examination of both measures showed that though there were some differences
in the mean scores of the ratings of “decision research” and “background research”
companies on the control variables, no significant differences were found on the ratings
given by managers of different types of companies. Therefore, it is assumed that firm
54 size and research budget did not have an important confounding influence on the
relationship between types of research undertaken by companies and their business
performance in this study.

Return on assets
Table II shows that three quarters of the “decision research” companies (76 per cent)
and almost two thirds of the “background research” companies (64 per cent) perceived
themselves to be generating a relatively higher return on assets and being highly
effective in terms of their capital investments. However, more than a quarter of the
“background research” companies (27 per cent) considered themselves to be achieving
a poor return on assets (“lower/much lower”) compared to similar firms. None of the
“decision research” companies indicated themselves as being in the “lower/much
lower” category. However, caution is called for in interpreting the results, because a
firm could increase its level of return on assets by postponing a capital investment
(Howell and Sakurai, 1992). The difference between the mean scores of “decision
research” companies (M ¼ 4.0) and “background research” companies (M ¼ 3.6) on the
return on assets dimension is statistically significant at p , 0.05.

Return on sales
The results for return on sales in Table II show that more than four in five of the
“decision research” companies (82 per cent) and almost two thirds of the “background
research” companies (64 per cent) considered themselves to be in a better position
(“higher/much higher”) than similar firms. Again, about a quarter of the “background
research” companies (27 per cent) rated themselves weaker than similar firms in the
industry. The results indicated a significant difference ( p , 0.05) in the mean scores
for “decision research” companies (M ¼ 3.9) and “background research” companies
(M ¼ 3.5) on the return on sales dimension. Caution is again indicated in the
interpretation of this finding for, as Szymanski et al. (1993) observe, the cost of goods
sold as a per cent of sales is lower for large businesses than for small businesses, which
suggests that an increase in firm size will increase return on sales. The findings of this
study also show a difference in the ratings between ROA and ROS, but the difference in
firm size was not statistically significant.

Sales growth
The degree of power a firm has in the market place can be measured by growth in sales
of the companies (Hart and Banbury, 1994). Table II shows that three quarters of the
“decision research” companies (75 per cent) and almost two thirds of the “background
research” companies (62 per cent) perceived themselves to be more effective in opening
up new markets or expanding their existing markets (“higher/much higher”) than
similar firms in their industry. This indirectly points to the proactive nature of
“decision research” companies that target sales growth by their ability to change the
market or by leading customers’ needs in new directions (Jaworski et al., 2000; Kumar Better business
et al., 2000; Harris and Cai, 2002). The mean scores indicate that the performance of performance
“decision research” companies (M ¼ 4.2) was significantly ( p , 0.05) higher than that
of the respective “background research” companies’ (M ¼ 3.5) on the sales growth
measure of performance.

Overall performance 55
Table II indicates the overall performance of the participating companies by
considering the above three measures so far discussed along with other components,
such as product quality, employee satisfaction and social responsibility. Responses
indicated that three quarters of the “decision research” companies (76 per cent) and
well over half of the “background research” companies (57 per cent) perceived their
“overall performance” as “higher/much higher” than similar firms in their industry.
The overall mean scores indicated a linear relationship with the proportion of “decision
research” undertaken by the organisations. There is a significant differences
( p , 0.05), with the mean overall performance for “decision research” companies being
3.9, and for “background research” companies being 3.4.

Multivariate results
The univariate results give some measure of difference of higher business performance
in favour of “decision research” companies. It is known that the four measures used are
not independent. Each measure indicates in some way a common sense dimension of
overall performance. However, it is possible that if the four measures were reduced to
one underlying dimension, a greater difference in the evaluation might be found. A
MANOVA analysis was therefore carried out, to show the combined effect of return on
assets, return on sales, sales growth and overall performance. The results indicated a
much-enhanced difference in the business performance of companies using different
proportions of “decision research”. A significant difference in favour of the “decision
research” companies emerged ( p ¼ 0.000), and the h 2-value shows that 98 per cent of
the variation in the single measure of business performance is explained by the type of
research conducted by organisations. The MANOVA result imposed a single
dimension on the results.
The dimensionality of the ratings was further studied using a factor analysis of the
four variables. The data obtained from respondents on business performance were
subjected to principal components analysis. Using the Kaiser criterion, two significant
components emerged, as shown in Table IV. Two components explained 81 per cent of
the total variance. However, based on the eigenvalues, the scree test and theoretical

Rotation sums of squared

loadings
Initial eigen values Percentage Cumulative
Factor Total Percentage of variance Cumulative per cent Total of variance per cent

1 2.316 57.91 57.91 1.868 46.71 46.71

2 1.057 23.14 81.05 1.014 25.35 72.06
3 0.751 16.28 97.33 1.011 25.27 97.33 Table IV.
4 0.107 2.67 100.00 Total variance explained
MIP consideration, a three-factor solution was retained. In the three-factor solution shown in
25,1 Table V, the variance has been redistributed more evenly, and factors two and three
accounted for equal amount of variance and eigenvalues.
The return on sales and return on assets variables loaded significantly on the first
component, overall performance on the second component, and sales growth on the
third component. These three together accounted for 97 per cent of the variation in the
56 original variables. Based on the factor loadings, they were called “profitability”
“overall effectiveness” and “growth” measures, respectively.
Table VI, which gives the results of an ANOVA analysis on the three-factor
solution, demonstarates a slight improvement, in terms of the h 2-values, on the
univariate ANOVA using four variables. The companies which used a higher
proportion of “decision research” scored more highly than “background research”
companies on all three measures of performance. All differences in the means were
significant at the p , 0.05 level.
The use of subjective measure of performance in this study is supported by the
literature; numerous previous studies have found that subjective perceptions of
relative performance strongly correlate with objective measures of performance over
the same time period (Ford and Schellenberg, 1982; Dess and Robinson, 1984; Rhyne,
1986; Pearce et al., 1987; van der Walt et al., 1989; Covin et al., 1994; Hart and Banbury,
1994; Gray et al., 1998). Table VI indicates that “decision research” companies scored
highly on all three measures of business performance, followed by “mixed research”
companies, except on profitability. The “background research” companies
outperformed “mixed research” companies on the profitability measure, even though
the latter spent relatively more than the other two types on market research. A possible
reason might be the confounding effect of firm size, where “background research”

Measurement variables Profitability measures Overall effectiveness Growth measures

Return on sales 0.96 0.08 0.16

Return on assets 0.95 0.16 0.16
Table V. Overall performance 0.15 0.98 0.16
Three-factor matrix Sales growth 0.19 0.16 0.97

Type of companies (mean factor scores)

Decision Mixed Difference between “decision”
Measurement research research Background and “background” research
variables n ¼ 24 n ¼ 22 research n ¼ 22 companies

Profitability
measures 0.25 20.20 2 0.08 0.33
Overall
effectiveness 0.12 0.08 221 0.33
Growth
Table VI. measures 0.39 20.20 2 0.23 0.62
Mean factor scores by
type of companies Note: All differences are significant at the 0.05 level
companies were relatively smaller, and may have performed better financially because Better business
of the nature of their operations. performance
This study suggests that firms using a higher proportion of “decision research” are
likely to have better business performance. They may be able to achieve greater
performance by using their research agenda to reshape the structure of the market
according to their own competencies (Carrillat et al., 2004). It could also be argued that
they are better able to gain competitive advantage by changing the behaviours of their 57
customers in new directions (Kumar et al., 2000; Harris and Cai, 2002) and exploiting
opportunities before their competitors do (Hamel and Prahalad, 1994).
The low level of perceived performance among the “background research”
companies calls for some explanation. A lack of action may provide one possible
explanation, and a qualitative discussion is presented in the next section. Another
explanation would be that some aspects of “decision research” (such as personal
interest, makes sense to users, related to tasks facing users, action-oriented, innovative)
are more performance-enhancing in a direct manner (Ganeshasundaram and Henley,
2006), while “background research” may have more to do with knowledge generation
and hence may have an indirect impact on performance through learning processes in
the longer-term (Baker and Sinkula, 1999). It is also possible that the emphasis placed
by “background research” companies on searching for greater understanding of the
market and adjusting to it may be a limitation in certain market situations (Jaworski
et al., 2000) or the performance benefit of increasing the level of market understanding
may be limited (Baker and Sinkula, 1999).
This study suggests that the inclusion of research type may have an impact on how
market research affects business performance. These findings imply that
understanding why market research in some companies leads to more successful
outcomes than in other companies may be relevant to effective business practice. This
leads to the conclusion that the use of a higher proportion of “decision research”
enabled “decision research” companies to attain positive overall success. This
evidence, if replicated using objective measures, would justify a re-orientation from
conducting primarily “background research” to conducting primarily “decision
research”.

Implications for practitioners

The qualitative data from in-depth interviews suggest that managers implicitly
assumed that both types of research would have an equal and direct influence on
measures of business performance. This unidimensional treatment of market research
does not accurately capture the market research-performance relationship, and has
implications for managerial practice and performance. As our study found an
association between proportion of “decision research” and the perceived measures of
business performance, we asked respondents “how can research be made more
actionable?” The qualitative data suggested that managers perceived there were seven
main ways to do so:
(1) provide top management support and motivation to undertake actionable
research;
(2) provide a clear definition of research objectives and its subsequent application;
MIP (3) understand decision makers’ underlying motivations, expectations, and prior
25,1 experience with information;
(4) provide information that is relevant and specific to the decision maker’s needs;
(5) blend industry experience in research design;
(6) tie the information to the bottom line by connecting to the operational aspects of
58 the organisation; and
(7) match the research process to decision needs.

First, managers perceived top management support and incentives to carry out
decision-specific research to be the key factors for engaging in actionable research. One
respondent from a multinational retail chain observed that:
though a lot of energy and experience is required to work on decision specific projects, the
continuous support and appreciation from the top encourage us to continuously go for such
projects.
Another respondent explained that:
. . . to me it is the support that gives us authority and responsibility to look for
decision-oriented projects; it motivates us by acting on our recommendation – allowing us to
present our ideas/findings to the board members – considered as an incentive to work on
specific but important projects.
It was noted that, though “decision research” generally cost less than “background
research” in this study, the outcome may relate to a specific issue or problem rather
than being broadly applicable. Hence, management needs to support a number of
projects with ongoing funding.
Second, managers perceived that having a clear definition of research objectives and
their subsequent application helped them to produce actionable research. One
respondent from an insurance company said:
before commencing the research, I make sure what they want to know, why they want to
know and how the findings would help achieve their objectives . . . From my point of view,
this may be the most important step to get it right.
Another respondent noted that:
I will be in trouble if I don’t understand what the company is seeking and the kind of
information it needs . . . answering those specific questions helps me to produce actionable
research rather than tell lots of fascinating facts.
In other words, rather than investigating how a company is performing in the market,
actionable research investigates – for example – which of three product options have
the most appeal to current customers and what the competition is currently charging
for similar products.
Third, managers perceived that clear communication from decision makers about
what they expected from the research helped them to produce more actionable
research. Understanding of decision makers’ underlying motivations prior to the start
of the research was also helpful. One respondent explained that:
. . . before conducting the research, we use a check-list to verify research objectives with all
key users along with their expectations and commitment on the project . . . our research will
 be incomplete and even provide incorrect answers if we were unable to understand the Better business
ultimate motives.
performance
Fourth, managers perceived that combining their industry experience in both market
research and business operations helped them to design actionable research. A
respondent from a dairy company put it this way:
. . . rather than asking the customers what they may/may not know, we decide on possible 59
solutions and then ask which one would suits them (customers) best. This provides us with
plan-ready results that would deliver real answers and become real drivers for profitability.
Schmalensee and Lesh (1998) argued for the conducting qualitative research after
quantitative surveys, to add insights, rather than using it to understand the customers’
issues before doing surveys to quantify the results. Many managers felt quantitative
research demands strong industry experience and a higher level of inter-functional
coordination.
Fifth, relating to research design, managers perceived that matching the research
process with decision timing is essential for facilitating decision research. One
respondent explained that “having continuous dialogue with decision makers allowed
us to devise our (research) process to go with their (decision) requirements” and added
that “. . . in this case specific, ad hoc research facilitated quick and timely collection of
needed information.”
Sixth, managers saw the need to link research outcomes to the operational aspects
of the firm as another incentive for actionable research. One respondent stated that “we
make sure the outcome (of the research) is directly linked to profitability or
competition. This way we create interest among decision makers and stimulate action.”
Apart from providing market data, a respondent suggested that research could add
value by translating the data into market and business insights by “indicating the key
implications, action needed, priorities, measurable desired outcomes, and resources
and follow up needed in implementing the decision.”
A possible explanation for the apparent contradiction between the managers’
comparatively lower rating of “background research” companies and the higher
proportion of “background research” conducted, is that the convention among research
companies and marketers is to do “background research”. One respondent from a large
bank told us that:
. . . in many cases I have done research simply because they had allocated a budget for it. In
some cases I didn’t even know why we were doing the research, but just wanted to know
more about the market.
Why the convention exists is not certain, but it could be challenged by future research
similar to this study.

Summary
The research findings reported here have extended previous research on the evaluation
of the benefits of marketing intelligence by investigating the role of the type of market
research conducted and its impact on business performance. The results suggest that
there is an association between the proportion of “decision research” and the perceived
measures of business performance. Companies emphasising this type of research scored
highly on all three components – profitability, growth, and overall effectiveness –
MIP ahead of the “mixed research” companies. This is because “decision research” is
25,1 considered more tuned to the issue of feasibility of decision-making and implementation
(Deshpandé and Zaltman, 1987), better aligned with more focused research (Wyner,
2002), and more useful by virtue of specificity to the problem and its promise of
actionable recommendations (Ganeshasundaram and Henley, 2006). It is possible that
“background research” may have an indirect, more subtle impact on business
60 performance in the long-term because of its emphasis on knowledge generation (Menon
and Varadarajan, 1992). The finding that “decision research” is more likely to lead to
better performance than “background research” raises the issue that it is apparently
conducted less frequently (Ganeshasundaram and Henley, 2006). This has implications
for theory development, research methodology, and management.
The findings of this study could be read by marketing managers as a call to think
through the purpose of commissioning research, the decisions that could follow, the
opportunity cost and the relative impact on business performance. One
recommendation we would make is that managers and planners assess whether
“decision research” would be more appropriate, more useful and more likely to result in
better business performance, especially as the median cost of decision research projects
was half that of background research projects among the companies in the sample.
Another recommendation would be that market research companies advise their
clients to consider undertaking “decision research”. This will require a major shift in
the current convention, which favours “background research” but it has the potential to
enhance business performance for both the users and providers of market research.

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Appendix
Characteristics of the sample

Sector Percentage of total

Wholesale, retail, distribution 17

Insurance 16
Finance, banking, banking services 12
Agriculture, mining, quarrying, manufacturing 12
Communication services 9
Culture, recreation services 7
Business services 7
Government administration 7
Electricity, gas, services 6
Health services 4
Travel, transport, storage 3
100 Table VII.

Corresponding author
Raguragavan Ganeshasundaram can be contacted at: r.ganeshasundaram@ecu.edu.au

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