The Importance of Market Research for your Business
By David Castlegrant
In 25 years, as a consultant for over 200 small businesses, I have found very few, maybe 5%, had a consistent marketing strategy. Even fewer reported doing any direct marketing research. Most companies rely on their experience rather than a segmentation strategy to target potential customers. Other than the advice from advertising media salespeople, very little study is applied to marketing communications, tag lines, jingles, or other visual/audible hooks. Most companies utilize what can be described as a “spitball” approach to marketing: toss it out there and wait to see what “sticks.” Most companies rely on anecdotal and management experience for their marketing research.
Market research can capture valuable information about customers and competitors, suppliers and resellers, and trends in public perception. Data collected from market research activities can then be used to guide decisions. For example:
- Is it targeting the right market(s) effectively?
- Does the company use a segmentation strategy?
- Does it target all the segments it should be targeting?
- Is the company providing the right products?
- Does it provide the proper level of quality?
- Are pricing objectives appropriate?
- Is it using the right pricing strategy?
- Does the price project the desired image?
- Does the price hurt or help the company’s success?
- Are the company’s promotions objectives appropriate?
- Are marketing communications using the right message and using the right media?
- Is it reaching the right audience?
For market research to deliver qualified information, there must be front end planning to determine the requirements for the study. Management must form a consensus on research goals through brainstorming needs and service gaps to identify areas for investigation. Research goals must be clear so that the results will be meaningful and address areas needing improvement. Market research results can then be input to be used in deploying action plans
ys assume that people know how they feel. Thus, it is important that a structured approach to design and analysis be employed.
First, the design of questions should be based on research objectives: what information are you hoping to gain from the survey? You can survey customers and include specific questions about demographics such as age, gender, income levels, interests, attitudes, opinions, geographic segmentation, reference groups, which are social groups that a person looks to when forming their lifestyle and behavior.
Keep questions to a minimum so that it can be thoughtfully completed within five to seven minutes. Plan to survey at least 50 customers but, test the survey first, using employees to make sure the questions have a logical flow, are not ambiguous, and are free from grammatical errors.
Survey administration can be via paper and pencil (exit or entrance survey) or through an online service such as Survey Monkey. When using online surveys, links can be imbedded in email communications to the respondent and they can take the survey at their leisure.
Survey data analysis requires study of both descriptive and inferential statistics (descriptive statistics evaluates and then describes the data from the survey. Inferential statistics allows for rational deductions made from the data you will collect with your survey.) Demographics and descriptive data include:
- Total number of male vs. female respondents
- Age range of respondent
- Income level of respondents
- Education level of respondents
- Own or rent (housing of respondents)
Attitudes and opinions; likes and dislikes; wants and needs; should also be included in your survey. These questions should be set up with a simple 5 point Likert scale labeled as: strongly agree, agree, neither agree or disagree, disagree, strongly disagree.
Finally, include some open ended questions because these will yield thematic trends and sometimes produce unique “outliers” that may have significance when further discussed openly during data analysis.
Utilizing inferential statistics, which are based upon the descriptive analysis, allows you to draw some conclusions about how the survey results apply to a broader audience. For example, in a survey of 50 customers who are asked if they like or dislike vanilla ice cream, the results would show a large portion of the sample saying they love vanilla ice cream. The next steps would be to determine how a sampling of your core market trading area might respond. There is no need to do further statistics to respond to this portion of the capstone but draw some assumptions from their analysis (A is A, or A is not always A).
In the above example, if I wanted to get fancy, I would look at the mean age of 50 respondents to my survey and the portion of male vs. female. Then I would search for the most current Census Bureau demographics for my core market trading area and see what portion of this population matched my study. I could then draw some assumptions if I found similar results if I tested a sample population from the larger area. I would need to be cautious, however because there may be more older or younger people than the mean in my 50 respondent study and this may throw off my trading area study results if I try to compare the two (A is not always A).
Survey Monkey will display much of this data in easy to read charts and graphs. You can also download the data as an XLS or CSV file. From here you can represent your stats in more sophisticated charts, histograms, etc. that might better represent your descriptive stats. You can also do hypothesis testing, regression, etc., However, to do regression analysis, you will need continuous data.
Market research needs to be part of the management tools used to run any business. Without market research, those at the helm will never quite know what factors drive customers to purchase or to not purchase the merchandise in their store; or even more importantly, will determine if customers even enter their store or e-commerce site.
David Castlegrant has extensive work experience as an executive retail operations manager, university professor and business consultant. Over 200 for profit, non-profit and higher education organizations have been served since the establishment of David Castlegrant & Associates in 1992.