Chapter 1: The Role of Marketing Research
Chapter 1: The Role of Marketing Research
Chapter 1: The Role of Marketing Research
Chapter Objectives Structure Of The Chapter The role and limitations of marketing research A definition of marketing research The purpose of the research Clear, concise, attainable, measurable and quantifiable objectives The need to set a time horizon for marketing research A reporting period The research proposal Step 1: Problem definition Step 2: Hypothesis generation Step 3: Decision on type of study Step 4: Decision on data collection method Step 5: Development of an analysis plan Step 6: Data collection Step 7: Analysis of data Step 8: Drawing conclusions and making recommendations Chapter Summary Key Terms Review Questions Chapter References
In essence, management is about decision making. Decision is invariably surrounded by uncertainties and, therefore, risks. Marketing research is charged with helping to reduce such uncertainties, "...but will never remove it. At best, marketing research will increase the probability that the decisions which management has to take will help attain the organisation's marketing objectives.
Chapter Objectives
The objectives of this chapter are to: Define the role of marketing research in decision making Outline the contents of a research brief
Outline the contents of a research proposal, and Explain in detail each of the principal steps in research design.
"Marketing research is the systematic and objective search for, and analysis of, information relevant to the identification and solution of any problem in the field of marketing." The key words in this definition are; systematic, objective and analysis. Marketing research seeks to set about its task in a systematic and objective fashion. This means that a detailed and carefully designed research plan is developed in which each stage of the research is specified. Such a research plan is only considered adequate if it specifies: the research problem in concise and precise terms, the information necessary to address the problem, the methods to be employed in gathering the information and the analytical techniques to be used to interpret it. Maintaining objectivity in marketing research is essential if marketing management is to have sufficient confidence in its results to be prepared to take risky decisions based upon those results. To this end, as far as possible, marketing researchers employ the scientific method. The characteristics of the scientific method are that it translates personal prejudices, notions and opinions into explicit propositions (or hypotheses). These are tested empirically. At the same time alternative explanations of the event or phenomena of interest are given equal consideration. Not many years ago an agricultural engineering company developed an improved rice milling machine. The machine was introduced into Thailand where existing rice milling machines were of a design which resulted in a high percentage of brokens (broken kernels). The new rice mill produced a negligible percentage of brokens. Intuitively a successful product would be predicted, launched with hardly any need for marketing research when the new mill had such obvious advantages over existing products. The agricultural engineering company went through the expensive and time-consuming process of importing the machine into Thailand. They set up extensive distribution and servicing facilities only to be surprised when the mill failed to gain acceptance. In Thailand, smallholders take their rice to a miller. Since they do not have sufficient cash to pay for milling their rice they get paid in 'brokens'. The miller then sells the 'brokens' for animal feed. The more effective milling machine simply did not fit into the Thai rice processing system. The company's assessment of the market was hardly objective. They saw the 'brokens' as a problem which their product solved. The prospective customer did not see it as a problem at all. The third of the key terms in the definition given a little earlier was analytical. The marketing researcher's task goes beyond the collecting of data. He/she must also interpret the data in terms of what the it means to the organisation which commissioned the research. Knowing that 60% of those interviewed thought that product A was superior to product B is, in itself, of little value. The organisation needs to know the alternative ways it can respond to this data. Data is equivalent to the raw materials of manufacturing; it has to be converted into information before it becomes useful in decision making. The process of convening data into information is achieved through analysis. Although the need for precision and thoroughness in marketing research has been stressed here, it is to be remembered that, in practice, there is a perpetual conflict between the demands of expediency and the search for truth. The reality is that management is frequently under pressure to make timely decisions. Therefore management often seeks answers through marketing
research in the shortest time possible and, moreover, at minimum cost. On such occasions its methods tend to be less theoretically rigorous and its analysis more superficial. The market research brief Marketing research can be concerned with any of a variety of aspects of the market: the product, sales, buyer behaviour, promotion, distribution, pricing, packaging, etc. Since the researcher cannot investigate everything about a market, he/she must be selective. The question remains as to how the researcher decides where to focus the study, and to what depth each issue should be investigated. The answer should lie in a document called the research brief. The research design is a set of guidelines given to the researcher by the person(s) who have commissioned the research and/or the individual(s) who are to make use of the results in their decision making. The brief must inform the researcher which aspects of the market are particularly important. In particular, the research brief should include: the purpose of the research the objectives stated in a clear, concise, attainable, measurable and quantifiable way a time horizon a resource allocation, including the budget and facilities a reporting period. Each of these components of the brief is explained in a little more detail in the section that follows.
Unless the purpose of the research is stated in unambiguous terms it is difficult for the marketing researcher to translate the decision-maker's problem into a research problem and study design.
It was possible to test customer reaction to the concept of the new tree-lifter by showing pictures, line drawings and by supplying product specifications to prospective buyers. However, since the company had not decided their pricing policy an important element could not be tested. In large measure, it was also possible to gauge the likely reaction from competitors. The researchers began by looking at the basis of competition to determine whether it was on price, product quality or unique product features. The researchers were able to look at precedents. They examined the pattern of response on past occasions when one or other of those companies already in the market had launched a new product. An audit of the environment was undertaken too, but the missing component was the company's' own plans for exploiting the market. Since the company had no involvement in the agricultural engineering sector, prior to acquiring the rights to the tree-lifter, they had no agreements with distributors, no idea of which, if any, of the distributors would be prepared to stock their product; they had no salesmen trained in selling into this industry and so on. The product's potential depended very much on such initiatives.
The solution would have been to undertake a study which would have described the market in detail in terms of customers, competitors and the environment. The company could then have put a marketing plan together and conducted a follow-up study to test their propositions out on the marketplace.
A reporting period
The researcher must also know from the outset of the study the points in time when interim reports are required, if any, and the deadline for the final report. The form of interim reports should also be specified at the outset, whether verbal or written, and whether presentations are to be made to a group (nature and size of the group) or an individual. In addition there are several characteristics of a good research brief and these are that it: means the same thing to all concerned does not ask for irrelevant information defines the relevant populations to be measured identifies the correct variables to be measured
specifies the degree of accuracy really needed within the main results specifies an order of priorities when the sample has to be broken down for the purposes of analysing data for subgroups, and does not pre-judge the selection of research techniques and procedures.
responsibility for ensuring that the research proceeds along clearly defined lines rests with the decision-maker. In many instances the researcher has to take the initiative. In situations, in which the researcher senses that the decision-maker is either unwilling or unable to fully articulate the objectives then he/she will have to pursue an indirect line of questioning. One approach is to take the problem statement supplied by the decision-maker and to break this down into key components and/or terms and to explore these with the decision-maker. For example, the decision-maker could be asked what he has in mind when he uses the term market potential. This is a legitimate question since the researcher is charged with the responsibility to develop a research design which will provide the right kind of information. Another approach is to focus the discussions with the person commissioning the research on the decisions which would be made given alternative findings which the study might come up with. This process frequently proves of great value to the decision-maker in that it helps him think through the objectives and perhaps select the most important of the objectives. Whilst seeking to clarify the objectives of the research it is usually worthwhile having discussions with other levels of management who have some understanding of the marketing problem and/or the surrounding issues. Other helpful procedures include brainstorming, reviews of research on related problems and researching secondary sources of information as well as studying competitive products. Kerlinger2 suggests that a well-defined marketing research problem tends to have three common characteristics as shown in figure 1.3.
A hypothesis is a conjectural statement regarding the relation between two or more variables. There are two key characteristics which all hypotheses must have: they must be statements of the relationship between variables and they must carry clear implications for testing the stated relations. These characteristics imply that it is relationships, rather than variables, which are tested; the hypotheses specify how the variables are related and that these are measurable or potentially measurable. Statements lacking any or all of these characteristics are not research hypotheses. For example, consider the following hypothesis: "Red meat consumption increases as real disposable incomes increase." This is a relation stated between one variable, "red meat consumption", and another variable, "disposable incomes". Moreover, both variables are potentially measurable. The criteria have been met. However for the purposes of statistical testing it is more usual to find hypotheses stated in the so-called null form, e.g. "There is no relationship between red meat consumption and the level of disposable incomes." Consider a second hypothesis: "There is no relationship between a farmer's educational level and his degree of innovativeness with respect to new farming technologies." Again there is a clear statement of the relationship being investigated but there are question marks over the measurability with respect to at least one of the variables i.e. "...a farmer's degree of innovativeness." We may also encounter difficulties in agreeing an appropriate measure of the other variable, i.e. "level of education". If these problems can be resolved then we may indeed have a hypothesis.
Hypotheses are central to progress in research. They will direct the researcher's efforts by forcing him/her to concentrate on gathering the facts which will enable the hypotheses to be tested. The point has been made that it is all too easy when conducting research to collect "interesting data" as opposed to "important data". Data and questions which enable researchers to test explicit hypotheses are important. The rest are merely interesting. There is a second advantage of stating hypotheses, namely that implicit notions or explanations for events become explicit and this often leads to modifications of these explanations, even before data is collected. On occasion a given hypotheses may be too broad to be tested. However, other testable hypotheses may be deduced from it. A problem really cannot be solved unless it is reduced to hypothesis form, because a problem is a question, usually of a broad nature, and is not directly testable.
Exploratory research is intended to help researchers formulate a problem in such a way that it can be researched and suggest testable hypotheses. Descriptive research: As the name suggests, descriptive research is concerned with describing market characteristics and/or marketing mix characteristics. Typically, a descriptive study specifies the number and size of market segments, the alternative ways in which products are currently distributed, listing and comparison of the attributes and features of competitive products, etc. This type of study can involve the description of the extent of association between variables. For example, the researcher may observe that there is an association between the geographical location of consumers and their tendency to consume red meat. Note that the researcher is able to describe the relationship rather than explain it. Nonetheless if the relationship between the two is fairly stable this descriptive information may be sufficient for the purposes of prediction. The researcher may, for example, be able to predict how fast the per capita consumption of red meat is likely to rise over a given time period. The principal difference between exploratory and descriptive research is that, in the case of the latter, specific research questions have been formulated before the research is undertaken. When descriptive research is conducted the researcher must already know a great deal about the research problem, perhaps because of a prior exploratory study, and is in a position to clearly define what he/she wants to measure and how to do it. Causal research: Causal research deals with the "why" questions. That is, there are occasions when the researcher will want to know why a change in one variable brings about a change in another. If he/she can understand the causes of the effects observed then our ability to predict and control such events is increased. In summary then there are three distinct types of marketing research study: exploratory, descriptive and causal. The purpose of each is summarised in figure 1.4. In some cases, a research programme will be of one kind or another, but in other instances these three typologies will represent phases within a single marketing research investigation.
Those new to marketing research often intuitively believe that decisions about the techniques of analysis to be used can be left until after the data has been collected. Such an approach is illadvised. Before interviews are conducted the following checklist should be applied: Is it known how each and every question is to be analysed? (e.g. which univariate or bivariate descriptive statistics, tests of association, parametric or nonparametric hypotheses tests, or multivariate methods are to be used?) Does the researcher have a sufficiently sound grasp of these techniques to apply them with confidence and to explain them to the decision-maker who commissioned the study? Does the researcher have the means to perform these calculations? (e.g. access to a computer which has an analysis program which he/she is familiar with? Or, if the calculations have to be performed manually, is there sufficient time to complete them and then to check them?) If a computer program is to be used at the data analysis stage, have the questions been properly coded? Have the questions been scaled correctly for the chosen statistical technique? (e.g. a t-test cannot be used on data which is only ranked) There is little point in spending time and money on collecting data which subsequently is not or cannot be analysed. Therefore consideration has to be given to issues such as these before the fieldwork is undertaken.
Suppose a fruit juice processor wishes to test the acceptability of a new drink based on a novel combination of tropical fruit juices. There are several alternative research designs which might be employed, each involving different numbers of samples. Test Comparing sales in a test market and the market share of the product it is Number of A targeted to replace. samples = 1 Test Comparing the responses of a sample of regular drinkers of fruit juices to Number of B those of a sample of non-fruit juice drinkers to a trial formulation. samples = 2 Test Comparing the responses of samples of heavy, moderate and infrequent C fruit juice drinkers to a trial formulation. Number of samples = 3
The next consideration is whether the samples being compared are dependent (i.e. related) or independent of one another (i.e. unrelated). Samples are said to be dependent, or related, when the measurement taken from one sample in no way affects the measurement taken from another sample. Take for example the outline of test B above. The measurement of the responses of fruit juice drinkers to the trial formulation in no way affects or influences the responses of the sample of non-fruit juice drinkers. Therefore, the samples are independent of one another. Suppose however a sample were given two formulations of fruit juice to taste. That is, the same individuals are asked first to taste formulation X and then to taste formulation Y. The researcher would have two sets of sample results, i.e. responses to product X and responses to product Y. In this case, the samples would be considered dependent or related to one another. This is because the individual will make a comparison of the two products and his/her response to one formulation is likely to affect his/her reaction or evaluation of the other product. The third factor to be considered is the levels of measurement of the data being used. Data can be nominal, ordinal, interval or ratio scaled. Table 1.1 summarises the mathematical properties of each of these levels of measurement. Once the marketing researcher knows how many samples are to be compared, whether these samples are related or unrelated to one another and the level of measurement then the selection of the appropriate statistical test is easily made. To illustrate the importance of understanding these connections consider the following simple, but common, question in marketing research. In many instances the age of respondents will be of interest. This question might be asked in either of the two following ways: Please indicate to which of the following age categories you belong (a) 15-21 years ___ 22 - 30 years ___ Over 30 years ___ (b)
How old are you? ___ Years Table 1.1 Levels of measurement Measurement Measurement Level Examples scale Nominal Frequency counts Producing grading categories Ordinal Ranking of items Mathematical properties Confined to a small number of tests using the mode and frequency
Placing brands of cooking Wide range of oil in order of preference nonparametric tests which test for order
Interval
Relative differences of Scoring products on a 10 Wide range of parametric magnitude between point scale of like/dislike tests items Absolute differences of Stating how much better All arithmetic operations magnitude one product is than another in absolute terms.
Ratio
Choosing format (a) would give rise to nominal (or categorical) data and format (b) would yield ratio scaled data. These are at opposite ends of the hierarchy of levels of measurement. If by accident or design format (a) were chosen then the analyst would have only a very small set of statistical tests that could be applied and these are not very powerful in the sense that they are limited to showing association between variables and could not be used to establish cause-andeffect. Format (b), on the other hand, since it gives the analyst ratio data, allows all statistical tests to be used including the more powerful parametric tests whereby cause-and-effect can be established, where it exists. Thus a simple change in the wording of a question can have a fundamental effect upon the nature of the data generated. Figure 1.6 provides a useful guide to making that final selection. Figure 1.6 Selecting statistical tests The individual responsible for commissioning the research may be unfamiliar with the technicalities of statistical tests but he/she should at least be aware that the number of samples, their dependence or independence and the levels of measurement does affect how the data can be analysed. Those who submit marketing research proposals involving quantitative data should demonstrate an awareness of the factors that determine the mode of analysis and a capability to undertake such analysis. Marketing researchers have to plan ahead for the analysis stage. It often happens that data processing begins whilst the data gathering is still underway. Whether the data is to be analysed manually or through the use of a computer program, data can be coded, cleaned (i.e. errors removed) and the proposed analytical tests tried out to ensure that they are effective before all of the data has been collected.
Another important aspect relates to logistics planning. This includes ensuring that once the task of preparing the data for analysis has begun there is a steady and uninterrupted flow of completed data forms or questionnaires back from the field interviewers to the data processors. Otherwise the whole exercise becomes increasingly inefficient. A second logistical issue concerns any plan to build up a picture of the pattern of responses as the data comes flowing in. This may require careful planning of the sequencing of fieldwork. For instance, suppose that research was being undertaken within a particular agricultural region with a view to establishing the size, number and type of milling enterprises which had established themselves in rural areas following market liberalisation. It may be that the West of the district under study mainly wheat is grown whilst in the East it is maize which is the major crop. It would make sense to coordinate the fieldwork with data analysis so that the interim picture was of either wheat or maize milling since the two are likely to differ in terms of the type of mill used (e.g. hammer versus plate mills) as well as screen sizes and end use (e.g. the proportions prepared for animal versus human food).
which is considered 'must know' information. Moreover, within their final report, experienced researchers will ensure that the greater part of the report focuses upon 'must know' type information.
Chapter Summary
Marketing research serves marketing management by providing information which is relevant to decision making. Marketing research does not itself make the decisions, nor does it guarantee success. Rather, marketing research helps to reduce the uncertainty surrounding the decisions to be made. In order to do so effectively, marketing research has to be systematic, objective and analytical. The manager or other individual initiating the research must provide guidance to the researcher in the form of a research brief. This document should state the purpose of the research, its objectives, the time by which it must be completed, the budget to which the researcher must work in developing the research design and the timing and frequency of any interim reports which the researcher is expected to make. Having read, questioned and understood the research brief the onus is then upon the marketing researcher to respond by preparing the research design. Research design begins with an accurate and, as far as is possible, precise definition of the problem. This is followed by the generation of hypotheses. There will then be an intermediate stage whereby the hypotheses are restated in a testable form, i.e. the null form. This will probably only be done if it is intended that statistical analysis is to be undertaken. Where the research is more qualitative in nature then it is still recommended that hypotheses should be developed. These should include alternative hypotheses; depending upon what is already known about the research problem one of three types of study might be undertaken, i.e. an exploratory study, a descriptive study or a causal study. Before proceeding further, the researcher has to develop an analysis plan. It is only when the analysis plan has been considered that fieldwork, in the form of data collection, should be undertaken. The final step in the research design would be to write the report. Customer oriented marketing researchers will have noted from the outset of the research which topics and issues are of particular importance to the person(s) who initiated the research and will weight the content of their reports accordingly.