Market Research

Today the world is defined by the term "information age." All businesses require accurate and timely information to be successful. Whether your company is large or small, the right amount of financing, equipment, materials, talent, and experience alone are not enough to succeed without a constant flow of the right business information.

Many large companies make market research into a very sophisticated and lengthy process, so that they can find out everything possible about their customers. For example, Philip Kotler, author and economist, writes in Marketing Management, "Coke knows that we put 3.2 ice cubes in a glass, see 69 of its commercials every year, and prefer cans to pop out of vending machines at a temperature of 35 degrees . . . We each spend $20 per year on flowers; Arkansas has the lowest consumption of peanut butter in the United States; 51 percent of all males put their left pants leg on first, whereas 65 percent of women start with the right leg; and . . .P&G once conducted a study to find out whether most of us fold or crumple our toilet paper. . ."

While you probably won't be able to afford a separate marketing research department to gather and monitor all the information that could possibly help you, all successful business owners must know their markets, competitors, customer wants and needs, and "what it takes to be competitive." It is not enough to know the answers to what, where, when, and how questions about our businesses. We also need to know why people buy our products and services. You should expect to budget at least a minimal amount of time and money for research, especially if you are starting a new business or branching out into a new direction.

Determine your market research needs and objectives. The first step in doing market research is to decide what you really need to find out. The kind of information you are seeking should determine the type of research you will do (although of course budgetary constraints will play a part in your decision).

Do you need to obtain a general feel for how key target buyers think about your product category and its various types of items, brands, and buying occasions? If so, interviewing groups of target buyers in focus groups may be the way to go, even though this type of research indicates only directional trends and may not be statistically reliable. Or is the confirmation of general trends in your industry sufficient? In that case, reading information from outside information services, industry trade associations, and industry experts may be all that you need to do.

You may wish to conduct blind tests of different formulas before finalizing recipes for a new product. In that case, you can do "laboratory" tests, where brands, packages, and names of products are not revealed to the test subjects, and achieve statistically reliable results at the 90 percent to 95 percent confidence level of predictability. Or perhaps you have completed extensive product development and testing and are now ready for a field test of your prototype products.

Market research procedures. Generally, market research procedures break down into the following categories:

These two main types of research can be further broken down into sub-categories, as follows:

Market research possibilities for small companies. As you can see in the chart above, there are many market research techniques available. However, some may not be affordable or appropriate for your company. Managers of smaller companies may have to be more creative and proactive in: