Marketing Research and Policies

Because of the dynamic nature of marketing activities, Manufacturers and intermediaries are continuously faced with the necessity of making decision on a variety of problems. Such decision should be based upon adequate and pertinent information, interpreted in the light of previous experience, prevailing conditions, and likely future developments. Moreover, they should conform to the general polices under which the business operates.

To many surprises, Marketing had gone beyond Manufacturers and intermediaries. Marketing is now within the circuits of people with ideas, who are able to think and convince their client, buyers or consumers over a particular product, and such product must be able to meet the satisfaction of the buyer. Such are people that are fits to be called a Marketers or Promoters.

To an increasing degree, marketing policies are being formulated and marketing decisions made on the firm foundation of scientific research. This research furnishes the information which, when properly evaluated, enables the marketing executive to take effective action to accomplish the desired objectives. Nevertheless, despite the tremendous growth in marketing research activities, which has taken place since World War II, the potential benefits of such research are still not being fully realized.

The nature of marketing research

Like many other terms in the broad field of marketing, both practitioners and students of the subject have used “marketing research” loosely. Consequently, it seems advisable to define the term as it is used throughout this book. Marketing research is the employment of the scientific method in the solution of marketing problems. A definition formulated by the committee on definitions of the American marketing association uses the term to include ‘the systematic gathering, recording, and analyzing of data” about marketing problems. To this latter definition, as indicated by the discussion of the two paragraphs that follow, the present authors would add one other essential element: the making of recommendations for solving the problem.

Function of marketing research

As pointed out previously, the successful performance of the marketing task requires that management must establish general policies, and make many day-by-day decisions concerning the problems with which it is faced. As a general rule, such policies and decision will not prove satisfactory unless management (1) has clearly define each problem and has the facts concerning it, (2) analyzes these facts correctly so as to discover the relationship among them and to interpret their meaning in the light of existing and likely future conditions, and (3) exercise good judgment in formulating courses of action based on the evidence. The functions of marketing research are to provide the necessary facts. Analyze them, and interpret their significance. In addition, the research frequently suggests the policy or decision that the facts and analysis seem to indicate, although final responsibility for the policy or decision lies with general management and not with research.

The nature of marketing research may also be indicated by an analogy. In present-day warfare, it would be quite unthinkable for a general to send hid troops into battle without a complete report from his intelligence staff. This report should “acquaint him with every important feature of the battle ground, and with an accurate and up-to-the minute picture of the strength and disposition of the opposing forces.” In other words, it would provide the general with the facts of the situation. In addition the report would analyze the facts so as to show how rapidly troops might be from point A to point B, how the enemy might react to attack at point C, and so on. Finally, the report might suggest one or more possible programs for the attack. In the marketing field, the research report should fulfill the same function as the intelligence report in the military area.

Marketing Research, Statistics, and Decision Making. It is quite clear from the foregoing that increasingly, research is being used as an aid to judgment in reaching marketing decisions. The usual approach is to collect whatever information is available from secondary sources, plus that which can be justified from a cost point of view from primary sources, and make this available to the management group. Thus, before deciding whether to introduce a new product, statistics may be gartered and evaluated, based on tests several markets. Likewise, a new price for a product may be tried out in two or three markets, with the resulting information on sales playing a role in the final decision as to the proposed price policy.

In a few instances, even greater use of statistical information has been made through what is known as Bayesian statistics or analysis. Essentially, this approach involves three steps: (1) the development of a list of the alternative results that a certain decision may bring about, (2) a statistical or mathematical analysis of each of the alternatives in terms of its impact on profits, and (3) the selection of the most profitable alternative if other factors are equal.

The Bayesian analysis may be illustrated by the case of a manufacturer seeking the “best” price to place on his product. Based on the judgment of the firm’s executives as to possible retaliation by present competitors, the likelihood of new competitors in the field, and demand elasticity for the product, sales possibilities were develop for each year of a five-year period, using four different prices. Over four hundred possible sales results were gradually evolved, each of which was submitted to a careful statistical analysis’ to its profitability. In reaching a final decision, the management of this firm would select the most profitable alternative, unless it felt there were other offsetting factors that did not show up in the analysis.

It should be emphasized again that no statistical analysis can lead to a decision independent of the judgment of management. Statistics and the result of marketing research are aids to judgment.

Marketing Research a Continuing function

Most firms on continuing basis is evidence even if it were used for the determination of basic policies only should use that marketing research. Such policies are constantly on trial, and as conditions change, different policies may be required. Continuous marketing research is necessary to keep general policies in line with current developments.

The necessity for continuous marketing research is even more evident because of its use in connection with day-to-day problems. Therefore, manufacturers and intermediaries are increasingly aware of the need for continuous research activities in connection with their marketing problems. Manufacturer and intermediaries are increasingly aware of the for continuous research activities in connection with their marketing problems. As markets become more competitive, as company officers recognize the need for additional facts upon which to base their decisions, and because of carefully planned and conducted research studies are made available, even greater attention is certain to be concentrated on marketing research.

The truth of these statements is well demonstrated by the findings of surveys conducted by the American Management Association and the American Marketing Association. Although the various studies are not exactly comparable, they clearly show the trend. Whereas 20 percent of the companies surveyed had organized marketing research department in 1940, two decades later 59 percent of producers of industrial goods and 62 percent of the consumers goods manufactures had such departments. Generally, organized research is still more common in large firms than in small ones. As to the cost of doing research, manufacturers of consumers’ goods typically spend about 0.2 percent of sales, and producers of industrials goods less than 0.1 percent of sales. Thus, despite the increase of marketing research activities, far fewer dollars are devoted to such research than to industrial research (so called “research and development,” or R&D), which takes about 2.5 percent of the manufacturers’ sales dollar.

Some limitation of marketing research

Despite its rapid growth in recent years, marketing research is not the cure-all for all company problems related to distribution. Moreover, to yield satisfactory results, its chief limitation should be recognized and accepted. This limitation may be conveniently group under six headings, as follows:

Lack of Understanding of Marketing Research

Although it may well be agued that lack of understanding of the values of marketing research on the part of business management should not be treated as one of its limitation, the facts remains that this lack of understanding constitutes one of the chief reason why marketing research has not grown even more rapidly than it has since 1945. Until management has greater knowledge and appreciation of the benefits, which well-conceived research projects can yield, and until it is willing to approve the expenditure of sufficient funds to enable careful studies to be made on significant problems facing a particular company, marketing research will fail to realize its full potential. In other words, the executives of many companies still look with skepticism on marketing research, consider it as something new and unproved, and need to be “sold” on its usefulness as a tool in formulating their programs. In addition, those so-called “researchers” who go “roaring about the world making promises and giving guarantees to solve … many problems to which research can only contributes information, and perhaps, some risk-reduction” do not dissipate their lack of understanding.

Interval between Inception of Study and Its Completion, and Resulting Executive Impatience

This limitation was well stated some years ago in a publication of the American management association:

Marketing research projects may require a considerable interval between their inception and completion, and the result of such research may not become apparent for some time-possibly months or even years after a study has been completed… Business executives, in general, have learned that research studies in such field’s chemistry and engineering may extend over long periods: but it is often characteristics of these same executives to underestimate seriously the amounts of spadework that must be done in investigating the major angles of a major sales or marketing problem. They fail to grasp the facts that it is necessary to develop and certain hypotheses, even though the data may be very difficult to obtain and the results may prove inclusive or negative. The resulting executive impatience with the research staff, through lack of understanding and appreciation of the work and the problems involved in the conduct of a scientific study tends at times to discourage dependable research and to stifle the urge of research personnel to explore vital, if more tenuous, avenues of employment.

Difficulty of Actually Appraising Dollar Value of Results

In most instances, it is impossible to translate the value received from marketing research into dollars and cents. Many executives hesitate to make expenditures when the results are so intangible.

Absolute Preclusion and exactness

It is extremely difficult-in many cases impossible-to assemble accurate data or to interpret them with absolute exactness, since marketing research deals with a wide variety of conditions which are highly dynamic, and since it involves numerous variables Thus, although the major automobile companies spent large sums on customer research, they did not see the market for the compacts car until it became obvious to every one through the success of other small-car manufacturers. In spite of the progress made recently, marketing research must proceed much further before it can be considered an exact science.

Another approach to this same limitation on marketing research is to remind ourselves that research never really solves the problem. In many cases, the gathered are necessarily incomplete. Say one authority: “we can never have all the facts to cover all contingencies in a forecast.” Again, an analysis of the facts may point to several possible solutions. Put another way, and to repeat the point for the sales of emphasis, management as a substitute for good judgment can never use marketing research. A decision to act [in a particular way] or not to act must always be partly rational and party visceral. There will always be a last step involving personal courage, personal commitment, and personal responsibility.

Limited Supply of Qualified Research Men

The successful performance of marketing research requires that qualified individuals must carry it out. Currently, there are not enough of them, and the recent growth of research has aggravated this problem. Consequently, too much research is now being performed by staffs whose results lead business firms to look with mistrust at the whole field of marketing research. Too many researchers become pre-occupied with techniques, begin research activity before being sure it is necessary to solve the problem, fail to grasp the complete the complete marketing picture facing a firm, make ineffective presentations of their studies to management, and neglect to take the initiative in suggesting many studies which would be helpful to top management. Others lack the creative spirit necessary to plan and carry out research so that maximum benefits can be achieved from it. Still another reason for in competency in this area is that operating executives carry out too much research. These men frequently have little time that can be devoted to research; as a result, much of their research activity is superficial.

Too Little Basic Marketing Research

The use of marketing research as the basis of both policy and day-by-day decisions is limited by our lack of marketing knowledge based on pure or basic research in this field. There is so much we need to know about such fundamental matters as why and how consumers respond to various appeals, what really motivates sales and other marketing personnel, and the limits or lack of limits of consumer wants. To date, individual researchers or scholars and university bureaus of research have carried out most of this type of basic research, although the research departments of individual firms and trade associations have contributed. As for the

Future, much is currently expected of the marketing science institute which was established in 1962 by nearly 30 major companies, each of whom pledge $20,000 annually for five years. It is the hope of many marketing scholars that the institute will concentrate on the development fundamental knowledge in the marketing field rather than on the mere application of what we already know.

Marketing research procedure

Careful and logical procedure is fundamental to the success of any marketing research project. The value of the results obtained will vary directly with the thought and preparation that go into the planning and organizing phase of the work. Although no two marketing research projects are exactly alike, since each project is designed for a particular purpose and thus have peculiarities of its own, most project pass through comparable steps in their formulation and execution.

Steps in Marketing Research

The more common of the steps in marketing research may be described briefly as follows:

Discovery and definition of the problem. No research can be undertaken, of course, until the problem upon which information is desired has been discovered and the objectives precisely stated. Moreover, all pertinent data within the company, which relate to the particular problem, should be studied, so that its setting may be understood. These tasks are not as simple as they may appear, and they need to be given close attention

In the majority of cases, perhaps, the problem subjected to marketing research are discovered directly by the major executives of the firm. The management of a chain-store company, for example, may decide that it wishes to open more units, and so it assigns the job of suggesting an expansion program to its marketing research staff. There the problem is thoroughly discussed and defined. On the other hand, the general manager of a large wholesale house (or manufacturers) believes he is not securing all the sales he should from a particular market, and requests a study to determine the potential sales for the market in question. To an increasing extent, however, business management is relying upon directors of marketing research to originate projects in anticipation of management’s needs and to undertake the necessary study without being requested to do so. Nevertheless, even in such cases, before the study actually get under way, it is customary for the research director to “clear” the project with other company executives.

Decision on the Practicality of Solving the Problem. This step necessitates close study of the significance of the problem, a preliminary investigation of available materials bearing upon its solution, and discussion among members of the research staff, company officers, customers, and other persons in whom the research director has confidence. It also includes a summary of the information that would have to be gathered in the light of the objectives, and a review of the approximate methods that would be employed in the process of making the study. Once these jobs have been done, judgment can be as to the solvability of the problem and the cost involved.

Study and Appraisal of Secondary Material Available. If the preliminary investigation referred to above results in a decision to go ahead with the project, the next logical step is to assemble, analyze, and appraise all-important available information on the particular subject. Frequently, it will be found that sufficient relevant data are available and that no additional studies will be needed. The cost of gathering such information, of course, are much less than the cost of obtaining needed facts “in the field”; consequently, this course should be explored thoroughly at the outset.

Planning the Gathering of Primary Material. When the published material has been reviewed and found inadequate for the purposes intended, a plan should be drawn up for securing data from primary sources. Unless great care is taken in preparing this plan, material of little value may be gathered and at considerable expense. This step involves determining the information to be gathered, the methods to be used in collecting it, the size, and composition of the sample, the scheduled for study, the preparation of the necessary forms, the selection, and training of investigators, and so on. Sometimes, it is desirable to conduct a ”pilot” test of the plan before all investigators are placed in the field, to make more certain that the study will produce the needed information.

Deciding on the Sample. No step in planning a survey is more important than deciding upon the sample to be employed, that is, the number and kinds of people or firms to be covered. As a practical matter, the representativeness of the samples determines the validity of the conclusion and thus the value of the entire investigation. Briefly stated, the general law of sampling is as follows: a moderately large number of items taken at random from a very large group is almost sure to have the characteristics of the larger group. It is important to note that the sample be adequate to insure statistical reliability.

Actual Gathering of the Material. This step refers to the methods and devices employed in obtaining the data desired. Broadly speaking, it involves decisions on the procedure to be followed, the form of investigation to be used-that is, for example, mailed questionnaires or personal interviews, or both-the selection and training of investigators, and similar matters. Since these topics are discussed in a later section of this chapter, they will not be considered at greater length here.

Summary and Analysis of Facts. When the information has been collected, it should be summarized and analyzed. The first step in this connection is the editing of the forms upon which the information is recorded, so that only those, which are properly filled out, are used. When editing has been completed, the data should be reviewed to determine their adequacy and statistical validity. If these tests are passed, usually the next step is tabulation. If the forms are properly coded when the information was planned, tabulation will be relatively simple. If coding has not been done previously, it is necessary to perform this task promptly.

Interpreting Data and Formulating Recommendations. It is in connection with the interpretation of the information and the formulation of recommendations that the real ability of the marketing research man is tested. This statement is true even for relatively simple research projects; it becomes of even greater significance when the researchers is called upon to interpret the results of such studies as are involved in motivation research because of the numerous variables involved. In all cases, his recommendation will be based upon his understanding of the data interpreted in the light of his own previous experience and that of the company he represents. Only supportable conclusions, well founded in facts, are acceptable. To test the logical foundation of any interpretation, the researchers need to ask such questions as the following: Does all the evidence support the interpretation, or are there some critical exceptions? Is it possible that the relationship is the results of chance rather than recurring factors? Is it possible to set up a small-scale experiment to test the proposed interpretation?

All recommendations should be subjected to careful scrutiny and re-appraisal before they are released. They should be reviewed in staff meetings of the research department if the particular concern has such a department. If the research is conducted by an outside organization, all person participating in a major capacity should review the recommendations before they are incorporated in a formal report.

Preparing the Research Report. Marketing investigations typically culminate in a report which is presented to the executives and which often recommends specific courses of action. This report should present clearly the results of the investigation and demonstrate conclusively the soundness of the recommendations. To these ends, it should be well planned and organized, and should be effectively presented, with proper emphasis at the points desired, and with special attention given to conciseness and precision in the use of English.

To conserve top management’s time, many successful research men make good use of a brief summary of their recommendations. As well as important facts and relationships revealed by the study. This summary seldom exceeds one or two pages. Data supporting the findings are furnished on supplementary sheets. In some instances, the summary reports are presented orally to key executives, with the supporting data handed out as needed in responses to questions from those at the meeting. Following the oral presentation, the complete written report may be distributed.

During recent years, there has been a substantial growth in graphics presentation, Pretoria report and panel presentation. These have into the effectiveness of the presentation.

Despite the importances of the report, all too often it is not given adequate attention by those engage in marketing research. The results of an excellent investigation may be buried in a poorly organized, lengthy, and dull report. Alternatively, the report may be in a language not understood by its readers. Consider the potential impact of this sentence, which was included in one research report: the forgoing demographic parameters fail on the criterion of silence, forcing us to establish new critical dimension for correlation computation.

The Follow-Up. Final decision regarding acceptance of the report‘s recommendation is made by top executives of the concern for whom the researches undertaken. The market research director (if the firm has one; otherwise some designated individual) has the responsibility, however, of seeing that his report is not “sidetracked” because of the pressure of current activities on his superior officers. Since the investigation was conducted to obtain useful information on a particular problem or problems, the time, effort, and expenses have been wasted unless the recommendation lead to a course of action. Getting action is especially difficult when the findings and recommendations are contrary to the opinion and belief of to executives. Under such conditions-and assuming adequacy and reliability of data and logic interpretation-, the markets research director or the individual responsible for the recommendations should be fully prepared to support them and do what he can to bring about their adoption

Sources of marketing information

In the previous section, it was pointed out that the gathering of information from secondary and primary sources is so important that this subject would be treated in a separate section. Since secondary source are commonly investigate before primary source are explored, they will be treated in this order.

Secondary Sources

Libraries. Some business firms have developed extensive library

Facilities of their own. In such libraries, they have accumulated files of the leading trade papers covering their field of operation, report of private studies made by research agencies and other firms, and outstanding books of value to their employee. Where such a company library is available, it represents the first and most convenient source for investigating secondary material. In practically all cases, however, the firm’s library facilities will be so limited that other libraries must be used. Public libraries, especially those in larger cities, constitute fertile fields for marketing research workers. Sometimes, trips must be made to the more specialized business school libraries or those maintained by such publication as printers’ ink. Through bibliographies, through card indexes, and through publications indexing books, periodical articles and newspapers the researchers can locate the needed material. Also of great aid are the “marketing articles in review” and the “book reviews” section of the journal of marketing.

Trade Publications. The researchers to the trade papers should give special attention. Such papers have had a considerable development in this society, and most of them have improved substantially in recent years. Although many still devote quite some space to “trade gossip,” most of them go to great expense to report the facts that are available concerning their particular fields. Some even conduct detailed studies of subject in which their readers are interested. In fields where responsible trade papers exist, they may constitute one of the most valuable secondary sources for many investigations.

Government Publications. Increasingly, publication of the government-are becoming a valuable secondary source of information for marketing research projects. Government Publication; a more limited listing is offered semimonthly in selected government publication; and all federal publications relating directly to marketing are included in the monthly marketing information guide, along with those of local and state governments, private business, professional groups, and institutions. State government publication are also listed in the monthly checklist of state publications, which is issued by the library of congress; and various state libraries maintain index cards through which a wide variety of publications can be located.

Trade Associations. Trade associations have long played an important role in gathering information for their members, other executives, government agencies, and the public. The role gained added significance during the national recovery administration era of 1933-1935and also during the world war II and thereafter, when government to represent their respective industries in more or less official capacities called upon trade associations. Some organizations increased their research activities in order to gain the information needed for presentations before governmental agencies. Through regular and special publications, these reports are made available to member and, in many cases, to the public. However, trade association services of a research nature are not limited to such activities. Statistical service in the form of financial and operating cost surveys, regular and special publication, educational activities, and others too numerous to mention constitutes task currently being performed.

Primary Sources.

When secondary sources of information have explored fully and additional data are still required, the marketing researcher turns to primary sources; that is, he makes plans for the collection and use of material directly from “the field.” The more common primary sources of information are a company’s own records, its sales clerks, its dealer and prospective dealers, its competitors and other businessmen, and the users and potential users of its products.

Company records. It is but natural for the research director of a given concern to turn first to its own company records for pertinent data or any given problem. For many research projects, these records will provide valuable material. If a study is being made of customer’s acceptance of a particular product, for example, it will be very helpful to have sales broken down according to various markets. Another study may call for knowledge of past expenditures for advertising, classified according to media. On the other hand, the trend in total cost of marketing a product may be needed. Still again, sales and sales clerks’ selling costs, classified by sales clerks, may be required. These are illustrations of but a very few of the many uses to which a firm’s records may be put.

Sales clerks. Any sign conducting research will find its own sales clerks and those of its dealers or suppliers a productive and worthwhile source of data. since they come directly into touch with buyers, salesmen are in a position to report on buyer reaction to price and style changes, and to judge the impact of proposed policies concerning channel of distribution, exclusiveness of distribution, agreement with distributors, advertising, credit, and similar matters. Seeking the advice of sales clerks on such matters is more than a means of aiding the marketing research staff to devise a suggested program; it also is an important morale builder. Such action makes the sales clerks feels that their knowledge is valuable and appreciated, that they have a part in establishing the firm’s policies, and that their company deserves their best services.

Dealers and prospective dealers. Manufacturers or wholesalers engage in marketing research frequently find that their dealers constitute an important source of information. The advisability of using such a source should always be considered in relevant situations. Dealers are in close contact with their customers and are position to supply firsthand knowledge of reactions to the various product and marketing policies of their supplier. Like sales clerks, dealers have definite opinion and they welcome the opportunity to express them.

Competitors and businessmen. On occasion, it is necessary and possible to seek primary information from competitors. A food chain seeking to clarify the thinking of its top executives on future expansion policy may set its research department to work asking executives of other chains about their policies on this particular issue. A manufacturer may seek information from a few of is rival on credit policies. Sometime the data desired are such that immediate competitors hesitate to release them. In such cases, the data may be obtained from comparable firms doing business in other areas and from “representative figures” or other information supplied by various research bureaus.

Ultimate Consumers and Industrials Users. Since the ultimate consumers and industrial users is the focal point of marketing activities, many marketing research studies involve a direct approach to such consumers and users.

In the field of industrial goods a relatively large unit of purchase, the deliberation prior to buying decisions, and the number of executives whose opinions influence such decision all serve to emphases the importance of studying the industrial user when research in this field is being conducted.

Another example of a source for learning the ultimate consumer’s opinions and attitudes in marketing research studies is the consumer’s panel. Although there are occasions on which the consumer group may be temporary, is that it is formed for a specific test, more often, perhaps, the group is established on a more or less permanent basis. Only an exceptional marketing firm can afford the permanent panel for its purposes alone, since the maintenance of a panel may cost from $5,000 to $30,000 or even more a year. Their clients can secure the services of such panel from time to time through advertising agencies or research organizations, which maintain them for use.

Gathering Information from Primary Sources

Once the researcher knows the more important primary source of information, he is in the position to evaluate them in the light of his particular problem and to proceed with plans to obtain the desired information from them.

Business Trips. Many business firms gathered firsthand material during trips of their executives that have been planned for the purpose. In other cases, the material is merely a by-product of buying or selling trips to central markets. When trips are specially planned to gather needed material, arrangement should be perfected well in advance, appointment made, and the informants notified of the type of information being sought, so that it will be available at the proper time.

In other instances, the same formalized planning may be unnecessary. For instance, the owner of a small dress shop may be in the process of reaching a decision as to his price policy in the months immediately ahead. Shall he “clear out” a large part of his present stock at markedly reduced prices, or will the existing price level hold for some time? His thinking on this matter may be clarified by investigations while he is in the New York market to make purchases. There, he may visit stores and manufacturers of various sizes and talk with sellers and (store) buyers of women’s dresses. By noting policies of other stores- as expressed both by what they are doing and by what they say they are going to do-the store operator is engaging in marketing research.

Informal counts. Nearly as informal as the research conducted as the by-product of the business trip is the simple enumerating type of research, which so frequently provides valuable data as a base for marketing decisions. An example of this is afforded by the traffic count used by some chain store in selecting locations for new units. An observer may be stationed near a proposed site to counts the individuals who pass a certain periods of the day. Based on previous experience with the type of people who patronize the kind of stores operated by his company, his report may also contain comments as to the likelihood that those who pass by will become customers in the proposed store.

The style count is another illustration of this same research technique. In an instance an observer is asked to record the number of women’s hats noting the different styles, material, and so forth-as women pass a location. The resulting information is of value in determining fashion trends. Another phase of this technique is the “pantry inventory” used by observers who are sent are sent from house to house in an effort to determine consumer buying habits for specific products.

A somewhat more formalized but related method is often put into practice by means of the telephone. Such is the case in many studies of television and radio listening habits, in which a number of homes are called to discover the programs tuned in at particular times. These studies, of course, make effective use of statistical procedures in obtaining adequate samples.