2 – Understanding the Marketplace and Consumers

Introduction

Many people feel that organisations can thrive if they are confident in managing their internal systems, such as business processes, commodities movement, and internal quality and cost control techniques. Most organisations focus a significant portion of their efforts on managing internal controllable aspects, although they must respond to and adapt to external environmental changes. Though businesses cannot considerably influence the external environment, companies can respond to broader social and ecological changes, likely impacting their business in the short and long run. A company must understand both the market and its customers thoroughly.

Modern marketers employ Marketing Information Systems (MIS) to grasp the marketplace and consumers. MIS analyses different managers’ information needs and creates the necessary information from supplied data in real time regarding competition, prices, advertising, sales, distribution, and market intelligence, among other things. In this sophisticated, data-driven age, most information systems are computer programs. These allow marketers to better understand their customers, potential customers, and competition. New applications are being created at an increasing rate.

This subject will introduce you to numerous aspects of an organisation’s marketing environment. In addition, you will study how organisations employ to analyse the marketplace and how companies use MIS and market research to get customer intelligence.

2.1 Environmental Analysis

The environment is extremely important in business, particularly in marketing. Because the marketing environment is continuously evolving, new opportunities and dangers emerge. A marketer must correctly analyse the environment and build a marketing mix that is appropriate for it. The ultimate goal of the environmental study is to help the firm develop a strategic response to environmental changes. Strategic planning can help the company achieve its goal of capitalising on ecological possibilities.

2.1.1 Structure of the Marketing Environment

The consumer is at the heart of all corporate activities and, hence, at the centre of the marketing environment. With its resources and policies and its competitors, suppliers, and other intermediaries, the organisation surrounds the customer with its own market offering. This marketing microenvironment is influenced by the microenvironment, which includes the government, technological, political, social, and economic elements.

Marketing Environment

2.1.2 Micro and Macro Environment

Two types of environmental variables can impact a company’s marketing operations. Some of these forces are outside the firm’s control, and the organisation has minimal influence over them. The other form of force originates within the organisation and can be managed by it. As a result, the marketing environment is separated into two key components:

1. Macro environment: Demographics and economic conditions, socio-cultural influences, political and legal systems, technological changes, and so on comprise the macroenvironment. These include the broad environment, which influences the operations of all firms.
2. Micro environment: Suppliers, consumers, marketing middlemen, etc. These are special to the business or corporation in question and have a short-term impact on its operations.

Constituents of Macro Environment

Constituents of Micro Environment

2.2 Environmental Scanning

Environmental scanning, often called ecological monitoring, is obtaining information about a company’s surroundings, analysing it, and anticipating the impact of any predictable ecological changes. Marketing success relies heavily on a company’s ability to synchronise its marketing programmes with environmental changes.

The following are the primary components of environmental scanning:

1. Analyze the external environment
2. Customer Research
3. Examine your competitors
4. Market research
5. Examine the company

2.2.1 External Environmental Analysis

The external environment is classified into two categories: macroenvironment and microenvironment.

Macro Environmental Analysis

Demographic Environment

Population factors such as size, growth rate, age distribution, religious composition, literacy levels, and aspects such as workforce composition, household patterns, regional characteristics, population shifts, and so on must all be studied because they are all part of the demographic environment. The following considerations should be made:

1. What demographic changes will impact the industry’s market size?
2. Are there any demographic patterns that indicate opportunities or threats?

Economic Environment

The economic climate determines the market’s strength and size. In an economy, purchasing power is determined by current income, prices, savings, money circulation, debt, and credit availability. The structure of income distribution determines marketing opportunities. The most crucial factor to consider is the impact of the economic outlook and inflation on corporate operations.

Government Environment

Government policies heavily influence and direct business. As a result, the type of government in charge of a country significantly impacts business and marketing.

1. What modifications and regulations are possible, and what influence will they have?
2. What are the political dangers of conducting business in a government jurisdiction?
3. What government incentives may be offered that may impact business?
4. What potential taxes and tariffs may be imposed, and how will they affect business?

Legal Environment

Firms seek to operate in countries with a robust legal framework, such as the United States. Marketers must have a solid understanding of the laws that protect consumers, businesses, and organisations. Laws such as the MRTP, Consumer Protection Act, Intellectual Property Rights, FEMA, and Labor Laws, among others, can significantly impact corporate operations.

Political Environment

Political pressure groups impact and limit organisations, as demonstrated by the cases of Enron in Maharashtra and KFC in Karnataka. Special interest groups and political action committees pressure businesses to pay more attention to consumer, minority, and women’s rights.

Cultural Environment

A society’s beliefs, values, and norms govern how individuals and organisations interact. A culture’s essential values, such as the American value system of effort, charity, and honesty, tend to be enduring. Marketers find it difficult to change these basic principles, which significantly impact marketing operations since they set the stage for marketing activity and consumer response.

Technological Environment

Technology is essential to governing and modifying human culture and influencing the future. Technology has altered how people think, work, and unwind. A man may realise his ambition of landing an astronaut on the moon’s surface, travelling to the opposite side of the world in hours, and even investigating the wonders of the solar system. Man is extending the human life span with the most recent advances in genetic engineering. With the introduction of the Internet and telecommunication systems, technology has altered how people communicate, and with the revolution in communications has come new ways of doing business. This creates new business prospects, while consumers benefit from fierce rivalry among manufacturers. For the technological environment, the following variables must be considered:

1. The pull of technological progress
2. Possibilities created by technological innovation
3. Technological development risk and uncertainty
4. The role of R&D in a country and the R&D budget of the government

Global Environment

The global environment is likewise changing rapidly. The new concept of the worldwide village has altered how individuals and organisations interact with one another. The emergence of international terrorism can quickly convert a thriving economy into a sluggish one. The increasing migratory patterns of the workforce and growing offshore operations are changing the dynamics of corporate operations. In contrast, WTO measures have changed how states do business with one another, opening markets and announcing the arrival of a new global economic order.

Micro Environmental Analysis

This is also known as the task environment, and it impacts daily business and marketing. While changes in the macroenvironment have a long-term impact on a company, the effect of microenvironmental changes is seen practically instantly. Organizations must closely analyse and monitor all microenvironmental aspects to respond to rapid change and remain competitive.

Consumer

According to Peter Drucker, businesses aim to create and retain customers. As a result, the consumer takes centre stage in the marketing environment. Marketers must actively monitor and analyse changes in consumer tastes and preferences to cater to (if not predict) their purchasing behaviours.

1. What is the consumer value system?
2. What advantages is the customer seeking?
3. Who are the end users?
4. What are their purchasing habits?

Competitors

Competition shapes business. Studying the competitive landscape, particularly threats from competition is crucial for marketers.

1. Who are the rivals?
2. What are their current company strategy and goals?
3. Who are the most tenacious and formidable rivals?

Market

The market’s current and potential size, growth prospects, and attractiveness will be analysed. The marketer should research the trends and developments and the necessary success criteria in the market he operates. The following are critical issues:

1. Market cost structure
2. The market’s price sensitivity
3. Market technological structure
4. The market’s current distribution method
5. Has the market reached maturity?

Suppliers

Suppliers have a crucial role in the microenvironment. They influence the industry’s cost structure through their bargaining power and significantly shape industry competition. Organisations must also decide on “outsourcing” versus “in-house” production, depending on the supplier environment.

Intermediaries

Intermediaries significantly impact the marketing environment and can be considered the most potent determining force in business. In many situations, buyers are unaware of the maker and purchase the goods from well-known middlemen such as Wal-Mart in the United States and Pantaloons in India.

Public

The general public is a significant factor in the microenvironment, and marketers must carefully analyse their opinions, values, beliefs, and attitudes to build an appropriate marketing plan for items that are appropriately tailored to fit the needs of the target consumer sector. Marketers use the media to influence consumer likes and preferences in a type of reverse engineering process.

2.2.2 Customer Analysis

The crucial question for a company is, “Who are our customers?”

1. Existing
2. Potential

Consequently, the first logical step in strategic market planning is to analyse the consumer, i.e., to understand customer motivation, unmet needs, and segmentation.

Customer Segmentation

1. Who are the most important customers?
2. Which consumers are the most profitable?
3. Who are the likely customers?
4. How could we divide our clients into distinct strategic business groups?

Customer Motivation

1. What benefit does the product/service provide that customers value the most?
2. What are the actual purchase objectives of the consumer, i.e., what wants do they seek to satisfy?
3. What are the motivational priorities of the customer?
4. Are there any changes in the customer’s tastes and preferences? Why?

Customer motivation analysis begins by identifying reasons for a specific segment and then determining the relative relevance of the motives. Finally, we must determine the motivations that will influence the development of the business strategy.

Price Sensitivity of Customers

There is a clear distinction between customers primarily concerned with pricing and those who are prepared to spend more for higher quality, better features, and superior performance.

Automobiles, for example, range from Maruti to Mercedes. Airline service is divided into three classes: first, business, and economy. The section determines the strategy in each circumstance.

Unmet Needs

An unmet need is a consumer requirement that the existing product offering does not satisfy. Unmet needs are strategically significant because they represent opportunities for enterprises to enhance their market share, enter a market, or establish new markets.

Customers may be unaware of unmet needs because they have grown accustomed to the inherent limitations of present equipment. Unmet requirements that are not visible may be more challenging to uncover. Still, they might also represent a more significant opportunity for an ambitious startup because established enterprises will be under less pressure to respond. The objective is to push or apply new technologies to uncover unfulfilled demands.

Palm-top computers, bloodless surgery, and commercial space travel are a few examples of previously unmet needs that have been satisfied.

2.2.3 Competitors Analysis

“Nothing concentrates the mind like the constant sight of a competition who wants to wipe you off the map,” stated Wayne Calloway, former CEO of PepsiCo.

“Who exactly are our rivals?”

Is a tour operator competing against a male outfitter? Is a business school directly in competition with an insurance company? Perhaps the answer is yes if we consider them all vying for a piece of the consumer’s wallet.

As a result, competitor analysis is the second step of external analysis to gain insights that will impact the product-market investment decision. The study recognises emerging or possible rival moves that produce risks, opportunities, or strategic uncertainty. Identifying current and potential competitors is the first step in competitor analysis. After identifying competitors, the objective is to comprehend them and their plans, i.e., to analyse their strengths and weaknesses and strategic groups of competitors.

Who are the opponents?

1. Who do we generally compete against?
2. Who are our most ferocious rivals?
3. Who manufactures the alternative products?
4. Who are the prospective competitors?
5. What can be done to deter them?

Examining the Competition

1. What are their goals and strategies?
2. What are the impediments to admission and exit?
3. What is their pricing strategy?
4. Do they have a financial edge or disadvantage?
5. What are their advantages and disadvantages?
6. What are their strengths and weaknesses?

Recognizing the Competition

To better understand rivals, consider analysing them along numerous aspects, such as their size, growth and profitability, image and positioning plan, and level of commitment. By evaluating data on important customer motivation, large cost components, mobility constraints, and the value chain, consider the characteristics of successful and failed organisations. Market research and other sources, such as trade journals, trade sources, consumers, and suppliers, can provide information about competitors.

2.2.4 Market Analysis

“Imagining the future could be more significant than analysing the past.” “I venture to claim that today’s organisations are not resource-bound, but rather imagination-bound,” says C.K. Prahalad of the University of Michigan.

Market analysis is based on customer and competitor studies, which determine market response to present and potential participants and help understand market dynamics.

An Overview of Market Analysis

Market analysis is typically performed along the following dimensions:

1. Actual and potential market size: The size of important sub-markets; the potential market comprises the usage gap.
2. Market growth rate: The driving forces behind sales and growth rate forecasting.
3. Market viability: The intensity of competition is influenced by existing rivals, supplier power, customer power, replacement products, and potential entrants
4. Cost structure: Analyze the value added by the manufacturing step and watch how it changes and the effect of the learning curve.
5. Distribution system
6. Trends and developments
7. Key success factors: What abilities and competencies are required to compete today and in the future?
8. Market competitiveness refers to competition among existing enterprises, whether new entrants pose a potential threat, whether substitute products are available, and the power of the customer and supplier groups.

2.2.5 Organizational Analysis

The following three factors have a substantial impact on the organization’s market performance:

1. The organization’s existing market position, namely how successfully it has positioned itself.
2. The characteristics of environmental opportunities and risks
3. The organization’s resource capabilities to capitalise on opportunities and its ability to protect itself from threats.

Each business unit must establish a marketing information system to follow trends and developments that can be classified as opportunities or dangers in a continuously changing environment. The corporation must assess its strengths and weaknesses in the context of environmental opportunities and threats, i.e., conduct a SWOT analysis.

SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis—

The following boxes indicate what to look for when assessing a company’s strengths, weaknesses, opportunities, and dangers.

It has been said that after doing the SWOT analysis, managers frequently fail to make the strategic decisions that the conclusions necessitate.

Example: A Brief SWOT analysis of Pepsi

Strengths: Branding, diversification and distribution

Weaknesses include an overreliance on US markets, low productivity, and product recalls.

Opportunities include expanding the product line, expanding internationally, and boosting the snacks and bottled water market.

Threats include a drop in carbonated beverage sales, the impact of government regulations, and rivalry with Coca-Cola.

2.3 The Concept of Marketing Information Systems

The phrase ‘Marketing Information Systems’ refers to software used by an organisation to manage and organise information obtained from numerous internal and external sources. MIS analyses different managers’ information needs and creates the necessary information from supplied data in real-time regarding competition, prices, advertising expenditures, sales, distribution, and market intelligence, among other things. Marketing databases, marketing intelligence systems, marketing research, and information offered by independent information vendors are examples of information sources for MIS.

2.3.1 Components of a Marketing Information System

A Marketing Information System (MIS) is designed to combine diverse pieces of data into a cohesive body of information. An MIS is more than just raw data or valuable information for decision-making, as we will see shortly. An MIS also provides strategies for understanding the information provided by the MIS. Furthermore, an MIS is more than a data collection system or a collection of information technologies, according to Kotler’s definition: “A marketing information system is a continuing and interacting structure of people, equipment and procedures to gather, sort, analyse, evaluate, and distribute pertinent, timely and accurate information for use by marketing decision makers to improve their marketing planning, implementation, and control”.

Marketing Information Systems and its Sub-Systems

This MIS model is explained by first describing its four primary essential parts: internal reporting systems, marketing research systems, marketing intelligence systems, and marketing models. While the degree of sophistication of the MIS varies – with many in the developed world being computerised and few in the developing world – it is suggested that a fully-fledged MIS should have these components, regardless of the methods (and technologies) of data collection, storage, retrieval, and processing.

Marketing Information Systems and its Sub-systems

Internal reporting systems: Every business that has existed for any time has a lot of information. However, this information is frequently underutilised because it is compartmentalised, whether in the form of an individual entrepreneur or the functional departments of more prominent firms. Information is typically classified according to its nature, such as financial, production, personnel, marketing, stockholding, and logistical data. Often, the entrepreneur or various individuals working in the functional departments holding the data do not see how it might benefit decision-makers in other functional areas. Similarly, decision-makers may fail to see how information from different functional areas might assist them and hence neglect to request it.

Marketing research systems: The textbook’s central theme has been marketing research in general, and only a little more needs to be added here. Marketing research is the proactive gathering of information. The company that commissions these studies does so to solve a perceived marketing problem. In many circumstances, data is collected with a specific goal, such as addressing a well-defined problem (or a problem which can be defined and solved within the course of the study). The other type of marketing research is continuously monitoring the marketing environment rather than focusing on a single marketing problem. These monitoring or tracking operations are ongoing marketing research studies that frequently involve panels of farmers, customers, or distributors from which the same data is collected regularly. While the orientation of an ad hoc study and continuous marketing research vary, they are both proactive.

Marketing intelligence system: Market intelligence is not as targeted as marketing research. A marketing intelligence system is a collection of techniques and data sources that marketing managers use to sift information from the environment for decision-making. This scanning of the economic and corporate environment can be accomplished in several methods, including the following:

1. Unfocused scanning: The manager exposes himself/herself to potentially beneficial information through what he/she reads, listens to, and observes. While the manager’s behaviour is unfocused and without a defined goal, it is not accidental.
2. Semi-focused scanning: Once again, the manager is not actively seeking specific bits of information, but he or she reduces the range of scanned media. For example, the management may give greater attention to economic and business journals, broadcasts, and so on while paying less attention to political, scientific, or technological media.
3. Informal search: This refers to an attempt to collect information for a specified goal that is pretty limited and unstructured. For example, the marketing manager of a company considering importing frozen fish from a neighbouring country may make informal queries about frozen and fresh fish pricing and demand levels. This search would be unstructured, with the manager enquiring with traders he or she meets and other ad hoc contacts in ministries, international aid agencies, trade groups, importers/ exporters, etc.
4. Formal search: This is a deliberate, methodical search for information. The data will be needed to solve a specific issue. While this type of activity appears to be similar to marketing research, it is carried out by the manager rather than a professional researcher. Furthermore, the breadth of the search is likely to be much narrower and less extensive than marketing research.

Marketing intelligence is the domain of agricultural entrepreneurs and top managers. They must scan newspapers, trade magazines, business journals and reports, economic projections, and other media. Furthermore, it requires management to communicate with producers, suppliers, customers, and rivals. Nonetheless, the practice of observing and conversing is primarily informal.

Some businesses will take a more systematic approach to obtaining marketing information, training their sales force, after-sales people, and district/area managers to be aware of competitors’ behaviour, client complaints and requests, and distributor problems. Businesses with vision will also urge intermediaries, such as collectors, retailers, traders, and other middlemen, to proactively relay market intelligence to them.

Marketing Models: There must be a mechanism for evaluating information within the MIS to guide decisions. These models may or may not be computerised. Typical tools include:

1. Time series selling modes
2. Models of brand switching
3. Linear programming is third.
4. Models of elasticity (price, income, demand, supply, etc.)
5. Models of regression and correlation
6. Models of Analysis of Variance (ANOVA)
7. Analysis of Sensitivity
8. Discounted cash flow
9. ‘What if’ spreadsheet models

The analytical subsystem of the MIS consists of these and related mathematical, statistical, economic, and financial models. A small investment in a desktop computer is sufficient to allow an organisation to automate data analysis. Some models are stochastic, incorporating a probabilistic element, and others are deterministic, with no role for chance. Brand switching models are stochastic in that they represent brand decisions in probabilities. In contrast, linear programming is deterministic because the relationships between variables are expressed in precise mathematical terms.

For instance, 3M, whose most well-known products include Post-it Notes and Scotch tape, operates in over 60 countries. It recently launched a $30 million online information system, and its senior executives rely on it for information.

2.4 Computer Networks and Internet

Today’s computer networks give marketers instant access to data sources and give customers real-time information about products and performance. Marketers can exchange e-mails with employees, clients, and suppliers through such networks.

For example, online information services such as Compu Serve and America Online often provide customers access to e-mail, discussion forums, files for downloading, chat rooms, databases, and other associated research materials. Marketers can join “mailing lists” that regularly distribute electronic newsletters to their computer screens.

This improves communication with a marketer’s customers, suppliers, and staff while expanding the possibilities of a company’s marketing information system. Only subscribers get access to online information services. However, the Internet provides for the global exchange of e-mails, discussion in newsgroups on nearly any subject, file downloads, chat rooms, etc. A well-maintained database lets a business analyse client needs, preferences, and behaviour. It also aids in finding the appropriate target clients for direct marketing initiatives.

2.5 Data Mining and Data Warehousing

Data mining automatically analyses vast amounts of data in a data warehouse. This is analogous to mining valuable metals from mountains of mined ore. The goal is to find relevant patterns of information that could otherwise be missed or go unnoticed using modern computational capability. Data mining generates a client database, which is critical for any carefully focused target-marketing activity. Data mining also leads to the creation of databases on resellers, distribution channels, media, and so on.

Example: A Midwest grocery chain employed Oracle software’s data mining capabilities to study local purchasing patterns. They noticed that when males purchased diapers on Thursdays and Saturdays, they also purchased alcohol. Further investigation revealed that these customers frequently completed their weekly grocery shopping on Saturdays. However, on Thursdays, they only purchased a few items. The shopkeeper decided that they bought the beer to be available for the subsequent weekend. The supermarket chain might use this newly acquired information to increase income. They could, for example, move the beer display closer to the diaper exhibit. They could also ensure that beer and diapers were offered at total price on Thursdays.

Data warehousing stores subject-based, integrated, non-volatile, time-variant data supporting managerial choices. It is a central repository for clean, consistent, and summarised data acquired from various operating systems. Organizations are gathering vast amounts of information or data, possibly faster than they can use. As a result, all collected data or information must be processed, categorised, and warehoused so that it can be retrieved meaningfully when needed.

For example, you can create a sales-focused warehouse to understand your company’s sales data. You may use this warehouse to answer queries such as “Who was our best customer for this item last year?” Because of the flexibility to define a data warehouse by subject matter, in this example, sales, the data warehouse becomes subject-focused.

2.6 Marketing Intelligence Systems

Keeping up with macro-environmental changes and competition in today’s fast-paced corporate environment is increasingly challenging. A marketing intelligence system refers to the systematic and ethical methodology, techniques, and sources that marketing managers use to obtain and analyse daily information about various events in the marketing environment, such as competitors and other business trends. This intelligence is gathered from multiple sources, including newspapers, trade journals, business periodicals, and conversations with suppliers, channel members, customers, other managers, and sales force representatives.

Regarding competitive intelligence, the widespread consensus is that more than 80% of information is public knowledge. Competitors’ annual and financial reports, statements by company leaders, government records, trade organisations, online databases, and other popular and business press are the most essential sources of competitive intelligence. The organisation can take specific procedures to gather high-quality marketing intelligence. The organisation should take steps to train and motivate field sales staff about the types of information needed to report on any relevant market developments regularly. Aside from the sales staff, the organisation can take the initiative to encourage channel members to share critical information. In addition, the corporation can buy competitors’ products and attend trade shows.

The following are some critical questions that managers should ask concerning competitive intelligence:

1. How quickly does the competitive environment in our industry change? How critical is it to stay current on these changes?
2. What are our company’s competitive intelligence objectives?
3. Who are the most critical competitive intelligence clients? Who should be informed about the intelligence effort?

In this sophisticated, data-driven age, most information systems are computer programmes. These allow marketers to better understand their customers, potential customers, and competition. This enables marketers to be more productive while also establishing and maintaining a competitive advantage. New applications are being created at an increasing rate. The ultimate goal of most such systems is to provide marketers with enough information about each specific consumer and the competitive backdrop to fine-tune their marketing efforts to serve the target market better and meet the client’s needs precisely. This is every marketer’s ultimate goal.

2.7 Marketing Research Process

While the Marketing Information System manages the flow of relevant information to marketing department decision-makers, marketing research is concerned with providing information for marketing decision-makers.

Sometimes, marketing managers encounter no simple solutions to various marketing problems. Formal marketing studies of specific challenges and possibilities may be required. Marketing research is designed to address specific marketing problems or opportunities. It aids in identifying consumer needs and market segments, provides information necessary for developing new products and formulating marketing strategies, enables managers to measure the effectiveness of marketing programmes and promotional activities, develops economic forecasting, and aids in financial planning and quality control. Research that is conducted without clearly defining the problem and objectives frequently ends in a waste of time and money.

Companies adopt systematic systems for gathering, documenting, and analysing data from secondary and primary sources to assist managers in making decisions when conducting marketing research.

Companies collect a wide range of information during the marketing research process. According to David G. Bakken, it is simple to think about all of this in terms of the three Rs of marketing:

1. Obtaining New Customers.
2. Retaining Existing Customers
3. Recovering Lost Customers

Researchers investigate various market segments to attract new clients and offer the products and services consumers require and desire. To retain clients, marketers may conduct customer satisfaction surveys. Marketers understand the importance of maintaining excellent client relationships to achieve long-term sales outcomes. Regaining lost clients can be a difficult task. It requires creative marketing and excellent communication. The information gathered about the first and second R aids in recovering lost clients.

“Marketing Research is the function that links the consumer, customer, and public to the marketer through information—information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process.”

—Definition by American Marketing Association, according to Tull and Hawkins, 6th Ed.

“Marketing research is a formalised means of obtaining information for marketing decisions.”

—Donald S. Tull and Del I. Hawkins, Marketing Research, 1993

The six phases mentioned should be seen as an overall method for conducting marketing research and not as a set of rules that must be followed for every project. Decision-makers must carefully assess each stage and examine how it might be appropriately altered to handle a specific problem or opportunity. The marketing research process contains numerous potentials for error; as a result, all persons who use research results must be well-informed and critical users of information derived from such research results.

The quality of inputs is what distinguishes good research from flawed research. To ensure that the study is neutral and the results are reliable to aid decision-making, knowledgeable and critical users of research should ask several essential questions before implementing the survey and, if necessary, once the survey is completed:

1. Are the research aims appropriate in light of the problem or opportunity? Will the information gathered be sufficient to meet those goals?
2. Is the data source selection appropriate? Where appropriate, are they readily available, and are less expensive data sources used? Is qualitative research designed to supplement and ensure the accuracy of quantitative research?
3. Is the planned study design approach (qualitative and quantitative) acceptable for addressing the research objectives?
4. Are the questionnaire scales acceptable and allow the necessary measurement to achieve the research objectives? Are the questions structured neutral enough to perform a survey, interview, or focus group? Is the sample size appropriate for the research objectives? Is there any known bias in the sampling plan or means of contacting respondents? Are the analyses as outlined before doing the research appropriate?

The research process consists of defining a marketing problem or opportunity and setting research objectives, deciding on a study design, establishing a data collection approach, finalising the sampling procedure, collecting data, analysing data, and presenting a report.

Steps in Marketing Research Process

2.7.1 Define the Marketing Problems and Set Objectives

The first step focuses on determining the nature and boundaries of a negative or positive scenario or inquiry. It requires the marketing manager and researcher to analyse the situation and precisely describe the problem to be handled. “A well-defined problem is half solved,” as the saying goes. However, defining a marketing problem is not always easy because the true issue is not always apparent to decision-makers. The problem must be identified and carefully stated.

Marketing departments, especially large organisations, maintain Marketing Information Systems (MIS), which provide a constant and structured flow of information for marketing-related decisions. Firms with little knowledge frequently find it difficult and time-consuming to define the problem appropriately, and good research on the wrong topic wastes money and effort.

Problem Definition

The company’s sales are falling, and profits are not being generated as projected. Last year, our market share in men’s jeans fell by 10%, while our market share in men’s footwear fell by 12%. According to studies, we are losing revenue to competitors in the same industry, and clients are uncertain about our market position. We must consider how we will position ourselves in the future market.

The statement defines the particular and quantifiable issue the research project must address. All five questions aid in specifying relevant objectives for which the research should supply the information decision-makers require to decide on a new positioning strategy for the marketer. This would help the company build appropriate marketing plans and advertising and promotion methods to communicate the new positioning to audiences in the target market(s), allowing it to reclaim the lost market position and boost profitability.

The study objective specifies what data is required to solve the problem. The first step in developing a promising research project is to narrow a comprehensive, ambiguous problem down to a precise researchable statement. An explicit characterization of the problem, followed by the establishment of relevant and explicit objective(s), aids in determining what type of fundamental research approach would be acceptable.

Based on the above-mentioned problem characterization, we can formulate a clear statement of research objective(s):

Research Objectives

We must determine the following:

(1) Who are our customers?

(2) Who are the competing brands’ customers?

(3) What do our and our competitors’ customers like and hate about us?

(4) How do we currently stand in the eyes of our customers? And

(5) What must we do to explain and improve existing customer perceptions?

2.7.2 Design Research Project

Marketing research design specifies procedures for acquiring and analysing data required to help recognise or react to a problem or opportunity. Both individuals who use research and those who do it should be informed of why the study is being conducted.

The research design should be carefully created to obtain accuracy and gain relevant information from marketing research, and tight data collection and tabulation standards should be followed. To be valid, the marketer must verify that the data acquired is valid and reliable. Validity implies that the research must genuinely measure what is being studied.

For example, if a market has 5 million people and a researcher displays a prototype of a mixer-grinder to only ten people, and eight of them say they enjoy it, this equates to an 80 percent favourable attitude.

However, a sample size of this size is insufficient for a minimal sample, and the prototype provided to them would most likely prejudice their response. The test cannot be regarded as credible because it could yield a different result if done with another ten people. A reliable test signifies that similar results can be produced if the research is repeated.

For example, an MBA entrance exam is reliable if a student receives similar results after taking it a second time. The sample procedures, the design of the survey questionnaire, the data tabulation approach, and the method of analysis all impact validity and reliability.

According to Tull and Hawkins, many researchers have found that dividing research into three categories is advantageous based on the information needed. These are mentioned briefly below:

Exploratory Research

This type of research seeks to determine the general nature of the problem and comprehend the variables involved correctly. In cases where managers have severe doubts about a marketing problem and require additional information, exploratory research tends to rely more on secondary data, such as company databases and publicly available data, questioning experienced and knowledgeable persons inside or outside the company, such as salespeople and resellers, and so on. It can be carried out with a small sample size, such as convenience or judgment samples. Exploratory research studies are especially beneficial for addressing broad issues and producing a more specific educated or informed guess, known as a hypothesis, which is a statement that defines how two or more quantifiable variables, such as age, attitude, and buying behaviour, are related.

Descriptive Studies

Such investigations have a broader scope. In such investigations, information is gathered from a representative sample of respondents, and the data collected is analysed statistically. Such analyses typically require substantial prior knowledge and assume the problem is well-defined. Descriptive studies are expected in marketing research and can range from broad surveys of consumers’ age, education, and occupation to market-potential studies, product usage studies, attitude surveys, and media research.

For example, how many people purchased a Maruti Zen last month, or how many adults aged 18 to 25 visit McDonald’s four times each week and how much they spend.

Such research could aid in the development of new products or services. Accuracy is crucial in such research since errors might lead to misleading results for marketing decision-makers. To reduce the likelihood of such errors, great attention should be given to the sampling technique, questionnaire design, and information reporting.

Causal Research (Experimental Research)

As the name implies, such research projects are carried out to determine the cause-and-effect link between various variables. Assume variable X is the cause of variable Y. To verify or disprove this, the researcher must attempt to keep all other variables in the experiment constant except X and Y. If a marketer wishes to learn about the impact of rising income and lifestyle changes on the purchase of a more costly car model, the results may demonstrate that rising income levels and lifestyle changes have a positive impact on sales. Daniel C. Smith and C. Whan Park published the results of a study designed to test the theory that brand extensions boost new product market share. According to the survey, brand extensions contribute positively to market share.

A study could be carried out in a laboratory setting, such as a central location, to respond to experimental factors. It could include interview rooms, one-way mirrors, video equipment, tape recorders, etc. These kinds of studies are known as laboratory experiments.

Consumers may be invited to a tasting room to test the effect of different amounts of sweetness in a soft drink on consumer taste preference. The researchers would have respondents try multiple kinds of soft drinks and then score their preference for each level of sweetness. Variables can be controlled in a laboratory setting. However, a laboratory setting differs from the actual world, where various factors influence market choice.

A field experiment is conducted in a natural context, such as a shopping mall. The field setting allows researchers to evaluate marketing decisions more directly. However, respondents may be influenced by elements outside the researcher’s control, such as weather or other occurrences. If respondents are asked to evaluate planned future commercials, their evaluation may be impacted and biased by their previous review of competing advertisements. Researchers cannot control all variables in a field experiment except for a few.

2.7.3 Data Collection Approach

In marketing research, there are four fundamental data collection methodologies: secondary data, observation data, survey data, and experimental data. The type of data collected might be classified as secondary or primary.

Data Collection Alternatives

2.7.4 Sampling Plan

A sample design covers three issues: who will be surveyed (sampling unit), how many will be surveyed (sample size), and how the respondents will be picked (the sampling procedure). Deciding who to survey (sampling unit) necessitates the researcher defining the target population (universe) that will be sampled.

For instance, if Sahara Airlines performs a survey, should the sampling unit consist of business travellers, vacationers, or both? Should travellers under the age of 30 be interviewed? Research validity depends on interviewing the correct target market or possible target market.

Because study time and resources are limited, it is nearly impossible to investigate all population members. However, the research must consider the entire cosmos (the target population). Researchers collect the necessary amount of data by sampling. They choose a small number of units (samples) that they believe will accurately represent the features of a population. A sample must generally be large enough to achieve accuracy and stability. A larger sample size ensures more consistent results. However, reliability can be attained even with tiny samples, such as 1% of the population. Random probability and non-probability samples are the two primary categories of sampling procedures.

Probability and Non-Probability Samples

Probability sample
Simple random sample Stratified random sample Cluster or area sample	Every member of the population has an equal chance of being selected. The population is divided into mutually exclusive groups (such as gender and age), and random samples are drawn from each group. The population is divided into mutually exclusive groups (such as city and village), and the researcher draws a sample from each group to be interviewed.
Non-probability sample Convenience sample   Judgement sample Quota sample	The researcher selects the most accessible population members to interview and obtain information (such as shoppers in a departmental store). The researcher uses her/his judgement to choose population members who are good prospects for accurate information (such as doctors). The researcher finds and interviews a predetermined number of respondents in several categories (e.g., 50 males and 50 females).

Random Probability Sampling

Random probability sampling has the highest accuracy since all units in a population have a known and equal chance of being chosen. In a lottery, for example, when all ticket numbers are jumbled up, each number should have an equal chance of being chosen. The problem with this system is that each unit (person, family, etc.) must be identified, named, and numbered to have an equal chance of being chosen. Customers of widely distributed items frequently find the task prohibitively expensive. Researchers use stratified sampling to divide the population of interest into groups, or strata, based on some common attribute and then conduct a random sample within each group. Area sampling is stratified sampling in which researchers split the population into geographic areas and randomly select units within those areas for a sample.

Non-probability sampling entails: This sampling approach is more straightforward, less expensive, and takes less time than probability sampling; hence it is widely used by researchers. This method relies on the researcher’s discretion, and portions of the population have no known chance of being chosen; therefore, there is no guarantee the sample is representative, and the researchers cannot be as sure of the validity of the responses. Most marketing or advertising research scenarios necessitate general measurements of data, and a non-probability approach of interviewing suffices to determine shopping preferences, customer attitudes, image perceptions, and so on. Quota, judgement, and convenience sampling are examples of non-probability sampling approaches.

Difference between Quantitative and Qualitative Research

	Qualitative Research	Quantitative Research
Main techniques used for data collection	Focus groups and in-depth interviews	Surveys and scientific sampling
Kinds of questions asked	Why? Through what thought process? In what way? What other behaviour or thoughts?	How much? How many?
Interviewer’s role	The interviewer must carefully and quickly frame questions and probes, responding to whatever respondents say. Highly trained professionals are required	A critical role is essential, but interviewers need only be able to read scripts. They should not improvise or deviate. Little training is required; responsible personnel are most suitable.
Questions asked	The position of questions may vary in sequence and phrasing from group to group and in different interviews. New questions are included, and old ones are dropped	There must be no variation. This must be the question for each interview, and the sequence and phrasing of questions must be carefully controlled.
Number of interviews	There are fewer interviews, but the duration of each interview is more	Many interviews to ascertain a scientific sample that is worth projecting
Nature of findings	Develop a hypothesis, gain insight, explore language options, refine concepts, add numerical data, and provide diagnostic for advertising copy.	Test hypothesis, arrange factors according to priority, and furnish data for mathematical modelling and projections.

The budget and confidence level necessary for the study findings determines the number of participants surveyed (sample size). Large samples, on average, produce more accurate results than small samples. If the sampling technique is acceptable, sample sizes of less than 1% of a population can yield valid results.

How should respondents be picked (sampling method)? A probability sample should be used if the researcher wishes to generalise the findings to the entire population. A non-probability sample might be used if the findings are to be “representative” of the population.

2.7.5 Information Analysis

It is critical to recognise that raw data alone does not serve the aim of marketing research. After collecting study data, it is time to get meaningful insight from the findings. The data is tabulated for analysis by the researcher. Simple frequency counts or percentages are frequently utilised at this stage. Mean, median, mode, percentages, standard deviation, and coefficient of correlation may be used in statistical analysis. Thanks to computers, more complex analytical tools, such as significance tests, factor analysis, multiple determinant analysis, and regression analysis, are now possible.

Data cross-tabulation can reveal how males and females differ in some types of behaviour. Statistical interpretation illustrates how broadly responses differ and what the distribution pattern is regarding the variable being measured. Marketers rely on estimations of predicted inaccuracy from genuine population figures when analysing data. Marketing research’s analysis and interpretation phase requires human judgement and intuition to accept or reject the research findings.

2.7.6 Present the Findings

Report writing necessitates objectively examining the data to see how well the gathered facts fit the study objectives to answer a stated marketing problem. In most situations, it is extremely difficult and highly unlikely that research will provide all of the information required to address the identified marketing challenge. It may be necessary to emphasise the lack of completeness and its reasons.

The study report presents the findings and suggestions and is often a formal, written document. To begin with, the report includes an executive summary because senior management may be unable to read the complete detailed analysis. The summary highlights the essential findings and suggestions from the research. The decision-makers might refer to the relevant details addressing problems of interest. When marketing decision-makers understand research techniques and procedures, they can better blend research findings and personal experience.

Aside from the executive summary, the report should ideally include the marketing problem and objectives, sampling technique and sample size, data collection tools, data sources, analytical tools employed, research findings and their interpretation, and suggestions. It is not commonplace for marketing decision-makers to request that the researcher be present utilising a computer or transparencies. The researcher must be aware of the decision-makers’ backgrounds and research abilities. To make it easier for research consumers, concise explanations in plain language should be provided without technical research or statistical terminology. Before producing the report, it can be beneficial to consult with research users.