Marketing Research in Practice

Most of the topics I have written about discuss the concepts of marketing research in theory. Today, I want to give you an overview of how marketing research works in practice. Marketing research from a practical standpoint should be discussed periodically because the realities of business are constantly changing and the ideal approach to research and the feasible approach can be very far apart.

Recently, I submitted a bid to a prospective client, who was looking to conduct a survey from a population that was difficult to reach. My bid came up higher than was expected. The department who was to execute the findings of this survey was on a tight budget. Yet, I had to explain the largest cost driver was hiring a marketing research firm to provide the sample. One faction within the company wanted to move ahead at the price I quoted; another wanted to look for ways to reduce the scope of the study and hence the cost. The tradeoff between cost and scope is often the first issue that emerges in the practice of marketing research.

Much of the practice of marketing research parallels what economists have long referred to as “the basic economic problem:” limited resources against unlimited wants. Thanks to the push for company departments to work cross-functionally, there have never been more stakeholders in the outcome of marketing research, with each function having its own agenda from the outcomes of the research. The scope of the study can expand greatly because of the many stakeholders involved; yet the time and money available for the study are often finite.

Another issue that comes up is the selection of the marketing research vendor. Ideally, a company should retain a vendor who is strong in the type of research methodology that needs to be done. In reality, however, this isn’t always possible. Many marketers don’t deal enough with marketing research vendors in order to know their areas of expertise; many believe that every vendor is the same. That’s hardly the case. Before I started Analysights, I worked for a membership association. The association had conducted an employee satisfaction survey and retained a firm that had conducted several. As part of the project, the employee research firm would compare the ratings to those of other companies’ employees who took a similar survey. However, most of the employers who called on this firm to conduct surveys were financial institutions – banks in particular – and their ratings were not comparable to those of the association. As a result, the peer comparison was useless.

Moreover, picking a vendor who is well-versed in a particular methodology may not be possible because they do it so well, that they charge a premium for the service. Hence, clients are often required to develop second-best solutions.

There are many other political issues that come up in the practice of marketing research, too numerous to list here. The key to remember is that marketing research provides information, and information provides power. The department with control of the information has great power in the organization, which results in less than ideal marketing research outcomes.

To ensure that your marketing research outcomes come as close to ideal, it is necessary to take a series of proactive steps. First, get all the stakeholders together. Without concern for money and time, the stakeholders as a group should determine the objectives of the study. Once the objectives are set, the group needs to think through the information they need for those objectives. Collectively, they should distinguish between the “need to know” and the “nice to know,” information and first go with the former. Generally, about 20% of the findings you generate will provide nearly 80% of the actionable information you need. It’s always best to start with a study design whose results provide the greatest amount of relevant, actionable information at the smallest scope possible.

Once the stakeholders are on board for the objectives and the information they must obtain for the objectives, then there should be some agreement on the tradeoffs between the cost of executing the research, the sophistication of the approach, and the data to be collected. Then timeframe and money should be considered. Once the tradeoffs have been agreed to, the study scope can be adjusted to meet the time allotted for the study and the budget.

Marketing research, in theory, focuses on the approaches and tools for doing marketing research. In practice, however, the marketing research encompasses much more: office politics and culture; time and budget constraints; dealing with organizational power and conflict; and identifying the appropriate political and resource balance for conducting the study.

Results from Nonprobability Samples Can Be Quite Useful, Despite Limits

In marketing research, samples are often taken of the population because surveys of everyone is neither feasible nor cost-effective. Researchers often rely on two types of sampling methods: probability and nonprobability. Probability sampling
methods are those in which members of the population have a known chance – or probability – of being selected for the sample. Nonprobability sampling methods are more subjective. The probability of someone selected for a nonprobability sample is not known or cannot be determined. In fact, the sampling process for nonprobability samples is much less formal.

Wherever possible, researchers prefer probability samples because they give an idea of how effectively the sample represents the population, and their results can easily be generalized to the entire population. With nonprobability samples, however, there’s no way to know how well the sample represents the population; any statistical analysis on the sample cannot be extrapolated to the population. Yet there are times when probability samples are not possible: either funds are not available, or time is of concern, or the population is hard to find or otherwise hidden. In those cases, marketing researchers must rely on nonprobability sampling approaches, like mall intercept surveys, convenience sampling, or referral sampling.

Despite their inability for generalization to the population, nonprobability samples can still provide valuable information. While the findings from nonprobability samples cannot be used for inferential purposes, they can be used for exploratory purposes. For instance, the owner of a sports bar may invite some of his patrons to sample some new beer brands he’s considering putting on tap. He might ask the patrons what they like and dislike about the new brands. If the owner notices that middle-aged male customers seem to like the Imperial Stout brand that is being sampled, the owner may consider the times of evening and days of the week when many middle-aged men are in high patronage at the bar, and then offer the Imperial Stout to see if it has any takers. Similarly, if customers are gravitating towards lighter, or sweeter beers, the owner may look to see if his selections on tap are lacking in these qualities. He may even consider testing more beers of those varieties.  In this case, the nonprobability sampling produced directional insights.

Sometimes, a population is hidden. If, for instance, you were trying to market a home remedy type of product to alleviate an embarrassing condition (such as hemorrhoids, erectile dysfunction, jock itch, or nail fungus) and you wanted to see how receptive people would be for using it, you might rely on a self-selection or referral sampling approach. You might place a special coupon in or on the package encouraging the user to participate in a brief study. You might also invite people to the study through newspaper or billboard ads.

While the people you get to participate in your study may not be representative of all people who suffer from the malady your product claims to remedy, they are nonetheless, from your relevant population. If several people complain that your remedy burns, or leaves a foul odor, or doesn’t last long, it doesn’t matter whether or not the results can be generalized. After all, if you want your product to be well-received by its intended customer, you want to minimize those complaints before you go to market. So then you might look to see if there’s a less abrasive ingredient you can substitute without diluting the effectiveness of your remedy. Another nice thing about these “hidden population studies” is that those people who participate in the study could point you in the direction of others suffering from the condition, enabling you to build a database for future studies and marketing. They may even provide you with insights about the population you’re interested in, so that you can do a full-scale study using a probability sample later.

Although results drawn from nonprobability samples have severe limitations, they shouldn’t be  discounted. Results from nonprobability sampling can provide directional information, lead you to your relevant customer base, enable you to see a problem from a different angle, and discover new ways of approaching a business problem. Such results can even lay the foundation for future probability study surveys. In addition, you can still get a lot of useful information in a short time with limited funds. As long as you critically evaluate your findings by knowing which groups were systematically excluded and which were overrepresented, and verifying that other researchers – using different samples and approaches – have replicated the findings you have generated, you should be OK.

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Research Findings are Like Manure: They Work Better When You Spread Them Around

One of the biggest mistakes companies do when conducting marketing research is conducting it in a vacuum. At many companies, the marketing department will often execute a marketing research study for either its own information, or upon request from another department. The findings of the research may also be beneficial to other parts of the company, but rarely do departments share the information. This concentration of information often leads to silos and exacerbates organizational politics. Marketing research expert Larry Kilbourne considers this data myopia – the failure to share survey findings – one of “Seven Survey Sins,” referring to it as the “Mr. Magoo Syndrome.”

Repurposing research and sharing it within the organization produces immense benefits. The sharing of the information facilitates better planning, creates buy-in from and fosters consensus among cross-functional groups, creates accountability, avoids duplication, fosters a shared purpose, and enhances the company’s agility in responding to problems and opportunities. Imagine that an insurance company with a captive sales force wanted to conduct a survey of its sales office managers. Specifically, the insurance company’s marketing department wants to know how the company stacks up against the competition in various territories.

Specifically, the marketing department would like to know who each branch sales manager considers to be the three main competitors in his/her agency’s territory, the policy features that are most important to customers and prospects in that territory, an estimate of how many potential policy sales are lost to the competition in those territories, and where they feel their main competition is beating them in terms of product features and benefits. The marketing department conducts the survey and uncovers a wealth of information. Who can benefit from it besides the top executives who commissioned the research?

Each branch agency

The marketing department should start with each branch sales manager. The sales manager might want to know whether his/her problem with a specific competitor is unique to his/her office or common to several others. Moreover, the manager might want to know where his/her office stands with respect to the rest of his region or the entire company. The findings can also help the manager plan for improvement.

Actuarial and Underwriting

The insurance company’s actuaries can also benefit from the findings. If branch sales managers in the company’s Pacific Northwest territory complain of losing too many long-term care insurance policy sales to Insurer X on the basis of price or ease of acceptance, the actuaries can review the underwriting criteria and assess whether the company is being too risk averse in that territory, or whether Insurer X is being too aggressive.

Advertising

If the insurance company faces aggressive competition in certain areas, the Advertising department can benefit from changing its strategy in those areas. It might try advertising in different newspapers, utilize direct mail or email marketing, etc.

Human Resources, Training, and Recruitment

Sharing the findings of research can also shape a dialogue between branch managers and the home office to understand what is needed to increase sales. This can often result in a refinement in training and recruiting needs for various territories. For example, if the company is losing to Insurer X in the Seattle market, it may well be due to the experience of Insurer X’s agent force, which could be experienced insurance sales professionals, professionals with a successful track record in sales careers in any industry, or naturally extroverted people with a knack for selling. If this is the case, the insurance company’s HR department could start recruiting agents with similar characteristics. It may also identify ways to change performance requirements so that the company can get rid of underperforming agents. The company can also devise new training programs to increase agent performance, and create new incentive plans.

The list of groups within the organization with whom the marketing department could share the findings is far from comprehensive. Marketing research should never be conducted in isolation, but should be used for the greater good of the organization. Whenever a company conducts marketing research, it should always have a predetermined plan for what to do with the information, the departments that could benefit from it, and ideas on how to act on the findings, whether good or bad.

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Secondary Research Can Enhance Primary Research

Most of the marketing research a small business owner or startup entrepreneur does is secondary: research that has already been conducted by another entity for some other purpose, and later published in mass media sources. Often, businesses rely upon secondary research for marketing information because conducting their own primary research can be very expensive. While one must be careful to understand the purpose for and methodology by which the secondary research was conducted, it can be quite beneficial in many ways, including enhancing primary research. Secondary research provides the following benefits:

Setting the Stage for Future Primary Research

Sometimes you have no clue what you’re trying to find. Let’s say that you want to start a coffee shop in your town, but because of the likes of Starbucks and Caribou Coffee, you’re not sure whether your market is saturated, or if there is a way to differentiate yourself. Secondary research can be an invaluable tool to help you explore. The Yellow Pages, the Web sites of chain stores – Starbucks, Caribou, Dunkin’ Donuts, McDonald’s – selling coffee, and the entertainment sections of newspapers can tell you how much competition you’re facing.

Secondary research might even be able to help you identify demographics of your community that you can use to your advantage. You examine the Census Bureau’s demographic data for the ZIP codes within a five-mile radius of your proposed location. You notice from other sources that there are about 10 competing eating and drinking establishments like those we named above. But from the Census data, you uncover a sizeable ethnic Middle Eastern or Eastern Mediterranean population. You might be able to refine your business concept to be a coffee shop that specializes in selling Eastern Mediterranean style coffees, or medium- to highly- acidic variety coffees, as is common in the Middle East. Now, you can do some basic primary research like small-scale surveys and focus groups to members of the community to see how receptive they would be to a coffee shop with that theme.

Reducing the Scope and Cost of Primary Research

Why spend $20,000 on a full-scale primary research project if you can find available data to meet a large amount of your needs? For example, you’re trying to find out what types of Middle Eastern coffees are selling well in the area. Conducting a survey can be very costly. But if you can find out what you need to know from trade publications covering the food and beverage industries, you might be able to save yourself quite a bit of time and money. Assume you read that a few kinds of Middle Eastern coffees are selling well – or are on an increasing trend – in various parts of the country. Now, you might order a few pounds of each, and then invite local residents to do a taste test and give their thoughts. Your secondary research has saved you thousands of dollars and several days of fieldwork.

Putting Primary Research Results in Perspective

You can even use secondary research to help validate what you find in your primary research. If you were to conduct a survey of your coffee shop’s customers and ask them what kinds of pastries you might serve in your shop, you might see a lot of responses suggesting berry-flavored cobblers and scones, pastries containing cinnamon or cardamom, and even some chocolate. By doing your secondary research, you will also find that, in the Eastern Mediterranean, berries, cinnamon, and cardamom are common flavor pairings, since coffees of that region tend to have berry- and wine-like characteristics, with some element of spice and cocoa. Secondary research, in this case, has validated what your primary research is indicating.

Most times, secondary research is all the marketing research you’ll need to do. However, when you need to do primary research, a good, ongoing system of secondary research can help you discover new information so that you can explore and pursue different avenues in your primary research; fill in several blanks in your research so that you need not reinvent the wheel; and complement any primary research so you can substantiate its findings.

Assessing Your Competitive Edge

While the two things no person can ever escape are death and taxes, a business owner has a third thing he/she can’t escape: competition. Keeping a close eye on your competition and assessing your strengths and weaknesses with respect to it should not only be part of your business and marketing plans, but also part of an ongoing process for continuous improvement. Today, we will discuss how you can monitor your competition thoroughly and seamlessly.

Identify Sellers of Products Similar to Yours

Let’s assume you own a children’s toy store. Who else sells toys in your area? The Yellow Pages can give you a listing of many other toy retailers. You might even obtain a list of other toy retailers through local Chambers of Commerce, industry trade associations, and the like. But toys can be purchased in several places outside of toy stores. Depending on the type of toys you sell, you’re also competing with mass merchants like Wal-Mart and Target, department stores, supermarkets, and catalog retailers. You first have to know your product, and who it is aimed at, in order to determine your relevant competition.

Determine the Factors Driving Customer Perception

When buying toys like the ones you’re selling, what do customers look for? What factors influence their decision? Certainly the features of your product; but also the retail price, quality, perceived value, novelty (especially for toys!), convenience, and the customer’s experience at your store, and the store’s location, hours, and credit policy, to name several.

Next, you need to determine how much weight to assign each factor in terms of its importance to the customer. After all, you could have the longest store hours of any toy store in town, but what good is that if store hours is of little importance to your customers?

You can estimate the weight of each factor by interviewing members of your target market, conducting surveys, mystery shopping your competition (to see if there’s a pattern of factors they seem to be emphasizing in their sales pitches), and looking at past customer complaints and inquiries.

Determine the Factors Driving Operational Advantages

Many companies may sell the same product or service, but rarely do they operate the same way. Most businesses have more financial resources, use different marketing tactics, or distribute their products differently than others. Much like customer perception factors, you need to compare these different operational factors between your business and your competitors. You also need to weight these factors.

Collect the Data

Mystery shop your competition. Visit their Web sites. Visit their stores (or have your spouse, children, siblings, or friends do so), and compare their customer service, the quality of their merchandise, etc. Ask casual questions that can elicit clues about the competition. Read up on any news about your competition. Check to see if they are located in Dun & Bradstreet’s Million Dollar Database, or in ReferenceUSA. These sources can provide information about the competition’s sales volume, square footage (sometimes), and employee counts.

Talk to their customers (discreetly, casually, and unstructured, of course!); and if you and your competition sell several of the same toys, suppliers can provide valuable information about your competition. Populate your weighted factors with the data you’re learning about each competitor for each of those factors.

Compare and Contrast

Where are you strong with respect to your competition? Where are you weak? Sometimes, your strongest areas can offset your weakest ones. For example, price may be an important factor in the sale of your toys. Maybe you can’t beat your main competitor on price. But your store might offer easier credit terms, a layaway plan, or better customer service. Perhaps you specialize in getting certain toys on your shelves before the rest of the toy stores in town do. Your strengths are your selling points.

Never Stop Watching Your Competition or Your Industry

Now that you know where you stack up against your competition, you must keep checking it regularly. Business is dynamic and nothing stays the same. Set a time frame to re-evaluating your business with respect to the competition. Will you do it monthly? Quarterly? Annually? It depends on the nature of your industry. The frequency you choose is generally not as important as the consistency in which you do your evaluations. Also, keep monitoring changes in your industry. New regulations on the sale of toys, shortages in manufacturing supplies, and tariffs on imported toys can easily and drastically alter your competitive position.

In summary, assessing your competition is not something you do just one time for your business plan; you need to monitor your competition on a consistent basis. Consistent competitive intelligence keeps your business nimble, gives you ideas for improvement, keeps you abreast of changes in your industry, and most of all, keeps you focused on your customers.

Analysights Can Make Competitor Intelligence a Snap!

Monitoring you competition – whether it’s for your business plan – or for ongoing purposes can be a daunting task. If you need to better understand your competition but have no idea where to begin, or if you need to set up a system for ongoing competitor intelligence, call Analysights. We can help you design a competitor monitoring system that is both thorough and easy to maintain. For more information, visit www.analysights.com or call us at (847) 895-2565.