Understanding of the customer and his behavior patterns is essential to the development of marketing strategies. Consider­able data will be the best available at the time of publication, it is subject to change as our dynamic economy changes.

4.1. What Is Marketing Research?

Marketing research, in essence, combines, insight and intui­tion with the scientific method to solve the many problems which face marketing management. In this task, the marketing researcher has at this disposal analytical tools from other dis­ciplines: sociology, psychology, statistics, economics and accounting, among others.

4.2. Nine "Most Important" Activities

One comprehensive study of marketing research practices de­veloped the following nine activities as the "most important".
These activities are listed in the order of their relative impor­tance to the marketing researchers surveyed.

1.  Analysis of territorial potentials.

2. Competitive position of company products.

3. Analysis of market size.

4. Customer acceptance of new products.

5. Variations in territorial yield.

6. New products demand estimates.

7. Economic research.

8. Comparative studies of competitive products.

9. Determining market characteristics.

These nine areas obviously require considerations of the mar­keting mix (or alternate mixes) planned by the marketing manager. A good marketing research man must be more than just a specialist in survey design or statistical techniques.

He also must be familiar with marketing strategies so that his research can be action-oriented. Such a researcher is in a position to tackle problems on customer behavior and each o\' the four P's and at the same time keep in mind the interrelation of these elements.

Marketing research is sometimes seen solely as an aid to plan­ning, but it is more than this. Research can help marketing management in its control and execution functions. It is espe­cially important in aiding the control function, since an analysis of the effectiveness of previous plans may lead to new plans. This circular procedure needs "feedback" from marke­ting research. If business is considered as a total system of action requiring planning and continual reevaluation of plans, than it is clear that marketing research is an important part of business management.

4.3. Illustrations: Marketing Research

Before discussing procedure let us see how marketing research might be applied in practice.

A BAKING MIX. The first example concerns the manufactu­rer of a new easy-to-use baking mix. Management had selected apartment dwellers, younger couples and those too busy to cook as target markets; it was supposed that these people would be most interested in this new product. Preliminary analysis showed that these consumers, if they responded as an expected, were numerous enough to make the baking mix profitable.

During the following months, sales and promotional efforts were aimed exclusively at these markets. The results were very disappointing. Assuming the promotion to be adequate, the manufacturer "guessed" that the product itself might be unacceptable. At this point, a consumer survey was taken. The results were surprising. The target consumer were not particu­larly interested in the baking mix. Instead, the best market turned out to be those families who do their own cooking. They like the convenience of the mix, for preparation of a quick dish when in a hurry.
The original choice of target markets, based upon executive opinion, was in error. It led to an unsuitable plan and wasted promotional expense. This manufacturer, who had tried to reach the wrong markets with a good product, quickly changed his plans after the research facts were in. Preliminary informa­tion about consumer thinking might have avoided this costly error.

QUALITY SHOES. Management of a manufacturer of quality shoes felt sure that most sales would be to wealthy men and women and designed its marketing mix accordingly. Without further research or a systematic sales forecast, promotion was aimed at this high-income market. When these efforts were not particularly successful, the firm analyzed the sales in one large city. These figures showed, to everyone's surprise, that only a small fraction of its sales were made to the high-income group. Per capita sales were nearly as good in the much larger how-income groups. As a result, the marketing mix was changed to appeal to this larger target market and achieved considerable success.
In both these cases, Product and Price were apparently adequ­ate, but Promotion was misdirected and in the shoe case. Place was probably poor. The marketing concept which involves the use of marketing research whenever feasible rejects such a crude, trial and error approach.

4.3.1. Product Research

Marketing research is particularly valuable and is used extensi­vely in the Product area. Taste, flavor and texture tests are frequently used on new food products. And tests may be run to determine ease of handling, color, noise, smoothness, texture, etc., of other products.

Tests are often made on consumer preferences for different brands and packages. Packages may be tested for such factors as color, size, general appearance, convenience and durability. The nature of the package may be especially important if consumers expect to use it for other purposes after it has served its original use. "Canister coffee tins", which may serve as cookie or storage cans, are an example.

4.3.2.  Place Research

In the Place area, too, the relative effectiveness and cost of various methods of distribution can be analyzed. Cost analysis may be especially important in determining which alternative is most profitable or best meets company objectives. In addi­tion, a survey may be necessary to discover the probable reaction of customers to various methods ofdistribution. The market potential itself may vary according to methods of distribution and place of final sale.

4.3.3.  Promotion Research

In the Promotion area, many types of studies are used today. The profitability and effectiveness of various methods of routing salesmen may be investigated. Or the company may wish to compare the relative effectiveness of using its own salesmen against using independent sales personnel. The drawing power of various types of advertising and advertising media may be evaluated.
Research is constantly being conducted by advertising agencies to support their advertising campaigns and develop new ones. Themes, illustrations and copy are all evaluated.

4.3.4. Price Research

In the Price area, demand and cost studies are used to deter­mine the "best" price in the light of the company's objectives. Competitors' price structures and the potential reaction of competitors to new pricing policies must also be considered.

4.4. The Scientific Method And Marketing Research

Why do we relate the scientific method and marketing research? Does this mean that we are seeking to formulate absolute scientific laws about marketing? Not at all. The busi­nessman simply seek to make the "best" decision possible and this cannot be done consistently without a logical approach. The scientific method is such an approach. In marketing, it forces the analyst to follow certain procedures which reduce the possibilities of slipshod work and reliance on "intuition".

This approach seek to develop and test hypotheses such as: "There is no significant difference between Brands A and B." Of course, exploratory research sometimes merely seeks back­ground information or hypotheses to be tested. But research usually is decision-oriented and this implies testing alternati­ves even if it is simply a question of whether to act or not. The application of the scientific method helps the marketing manager develop and test the best hypothesis possible. This method takes a common-sense but rigorous approach to formulating hypotheses, testing them, modifying them, testing them again and so on. Note that the feedback principle is applied throughout.
The scientific method consists, basically, of four stages:

1.        Observation.

2.        Formulation of hypotheses.

3.        Predication of the future.

4.        Testing of the hypotheses.

4.5. A Nonmarketing Example
To illustrate these stages in a simple Nonmarketing case con­sider a college student who develops a painful swollen ankle after a skiing accident. The ankle could be bruised, sprained or broken. What should he do? If he goes to a doctor, he will pro­bably find the doctor following the scientific method:

1. Observation:

   Pain seems to increase if foot is twisted, but pain is not unbearable.

4.6. A Marketing Example
Let us now use the same framework, to show how a business­man might use this method. A men's shirt manufacturer had no major immediate problems, but he was alert to opportunities. The approach he took is shown below:
1.Observation:Notice some competitors' sales increasing and many competi­tors shifting to a new plastic-wrapping.
2.  Formulation of a hypothesis:   Assumes his products are similar and that plastic                                                                 wrap­ping is sole cause of sales in creases.
3.Prediction of a future:  His sales ought to increase if he shifts to the new  wrap­ping.
4. Testing the hypothesis: Produce some shirts in new package and
market-test them.

The market test showed that his prediction was correct sales did increase. But what if they had not increased? In the answer to this lies one important merit of the scientific approach. Through careful control (making certain that the test was cor­rectly designed and run) and study of the results, we should be able to isolate the reason the test failed and probably to see where the hypothesis misses the mark.

In this case, either one of the hypothesis could have been wrong. Either increased sales by competitors were not caused by the new wrapping or this manufacturer's products were not similar. Assuming that the first hypothesis was wrong, further research might show that competitors' sales were rising simply because their promotion had been more successful. Or if the second hypothesis proved incorrect, it might be possible to isolate in what ways the product differed and to capitalize on these points.

4.7. Four-Step Approach To Marketing Research

In  marketing research, there  is  four-step use of scientific
method:
¦    Definition of problem,

1.        The situation analysis,

2.        The informal investigation,

3.        The formal research project.

Observation, the first stage in the scientific method, is used du­ring the first three marketing research steps. Once the problem is defined, formulation of hypothesis takes place, perhaps du­ring the situation analysis or informal investigation. Prediction of the future takes place anytime before a formal research pro­ject is planned. And test of a hypothesis is completed in the formal research project unless, as frequently happens, manage­ment decides that the findings of the situation analysis and/or informal investigation solve the problem.

Relation of Scientific Method to Marketing Research

                                          Definition of problem, Situation analysis
                                                 Informal investigation

Formulation of hypothesis                                          formal research
                                                                              Situation analysis
                                                                              Informal investigation

Prediction of the future                                Formal research (planning)
 (action implications)                                    Situation analysis

                                                                  Informal investigation

testing hypotheses                                      Formal research (planning)
                                                                 Formal research (Unless management
                                                                 is satisfied with an earlier but more
                                                                 intuitive solution.)

                                                    Table 1

Actually, then, the scientific method pervades marketing re­search. Table 1 may help us see the relationships. The precise meaning of these terms is explained in the following pages. It should be emphasized again that this orderly procedure helps keep clear in our own minds what we are doing. Mastery of this approach will greatly improve the student's ability to plan and  visualize the execution of marketing research projects.

4.8. Definition Of The Problem

The definition of the problem is the most important and often the most difficult job of the marketing analyst. It is slow work, requiring careful observation and consuming sometimes well over half of the time spent on a research project. But the time is well spent if the problem is wasted effort; it may even lead to more costly consequences, such as the introduction of a poor product or the use of an ineffective advertising approach.

Problem definition sounds simple, but unfortunately it is not. It is easy to mistake the isolation of symptoms for the definition of the problem. For example, if from sales analysis a company discovered that sales were decreasing significantly in certain territories while sales expenses were remaining constant and as a result, profits were declining sharply, would it be helpful to define the problem as: how can we stop the sales decline? Probably not.
While this is the broad problem, it is equivalent to asking how to lower a patent's temperature instead of first trying to iden­tify the cause of the fever. Here we must discover why sales were declining. Sales might be deficiencies, inadequate sup­port by company sales personnel, prices which are out of line with competition, ineffective advertising or something else. If one or more of these factors can be isolated as the real problem then the marketing executive is on the way to an effective solution.

The underlying causative problem may be very elusive. In the isolation of his own office, the marketing manager may deve­lop several likely causes of the basic problem alternatives he can work on. But without further investigation and evidence, he should not assume too quickly that he has defined the real problem. Instead, he should develop several possible problems and than go on the next step, trying to discover which of these is the fundamental cause of trouble.

4.9. Situation Analysis

When the marketing researcher feels that he has begun to focus on the problem, he can proceed to this next step. He need not ( and probably should not) commit himself comple­tely to any particular problem as yet. Throughout this and the following steps, he should think of the problems he has isola­ted as subject to revision or restatement in the face of new facts. This rethinking is continuous. Even after he has develo­ped and tested a hypothesis by formal research, it is possible that new factors will arise so that a new statement of the problem and a new hypothesis test may be necessary.

In the situation analysis, the analyst tries to "size up the situa­tion" but without talking to outsiders. He talks to informed executives within his own company and studies and evaluates internal company records. He also uses libraries for all available published material. This work is vital, since the analyst must be thoroughly familiar with the environment in which he must work.

He analyzes information about his own company, its products, the industry, the specific markets in which they are operating, their dealers, their own promotion and their competitors' acti­vities. The libraries contain vast stores of information, but once the researcher has begun to narrow the scope of his problems, he can look for specific kinds of information.
Unless he knows what he is looking for, the researcher may be overwhelmed by the information available within his own company and in the libraries.

4.10. Informal Investigation

During the informal investigation, the analyst is still attemp­ting to define his problem and formulate hypotheses. Now he goes outside of the company and the library and begins to talk to informed people, sometimes including customers. By informed we mean intelligent and efficient retailers, whole­salers, customers and other knowledgeable people in the industry. No formal questionnaires is developed, as the analyst is not yet testing hypotheses (except intuitively.)

When considering the development of machine tool products, for example, it might be desirable to talk to a few machine operators, plant superintendents in more efficient factories, design engineers at independent research organizations or universities and perhaps good industrial distributors who have close contact with many potential customers.
While these talks would be informal, they may help the analyst develop his problem and hypotheses. By this time, he should have the problem area narrowed down. This is impor­tant, because asking informed people to discuss general problems will not be productive. The more specific the ques­tion, the more specific the answer which can be expected.

The virtues of the informal investigation are that it lakes little time and may be very informative. Moreover, it is inexpensive compared with a large-scale survey.

On the basis of the information gathered in a situation analysis and informal investigation, the analyst should now be formulating his specific hypotheses. The analyst may be able to refine his hypotheses at this point, developing an answer to his problem without further research. This is especially likely in the industrial goods area, where there are a limited number of customers who behave fairly rationally. Their views may be well represented by a few informed people in the industry.

If a management must make a decision quickly if it cannot wait for a formal test then well-considered hypotheses may have to serve as the basis for an intuitive solution. Sometimes, speed is more important than precision. This makes care in the preliminary steps even more important.

4.11. An Example of the Procedure Thus Far

A cereal manufacturer was concerned with the sales of his hot cereal product. General indications were that children, espe­cially teenagers, were not eating hot cereals. Such a trend, if allowed to continue, might mean a serious loss of sales over a period of time. An objective was established: to increase con­sumption of hot cereals by teenagers.

On the basis of part research and experience, the company management decided that the best way to accomplish this objective was through an advertising campaign. What theme should be adopted in such a campaign was not clear, however. The problem seemed to be: what was the best advertising theme for arresting the decline in teen-age consumption of hot cereal?

Before definitely accepting this problem definition, the researcher discussed teen-age consumption of hot and cold cereal with the sales manager, advertising manager and the advertising agency account executive. He also studied previous research studies on cereal advertising and consumption.

All of these sources indicated that teenagers ate less hot cereal Per capita than other age groups and tended to eat cold cereal and/or eggs. One explanation of the preference for cold cereals was the ease of preparation. But since the executives did not think teenagers prepared their own breakfasts, this did not seem to account for the difference in teenagers' breakfast habits. Nevertheless, the researcher noted lack of convenience as a possible hypothesis.

While a search of trade literature added little, discussion with retailers showed that they felt teenagers rejected hot cereals as "old fashioned."
The next step was to talk with teenagers themselves. Informal interviews with them confirmed what the retailers said. It also indicated that teenagers did not like the taste of most hot cereals, thinking of them as something their parents had made them ate when they were younger.

The analyst previously had talked with the company dietitian, who suggested advertising themes based on the energy value and stick-to-the-ribs quality of hot cereals. But talks with teen­agers showed that they had not the slightest interest in energy or vitamin content of hot cereals. In fact, they had a kind of medicinal attitude toward hot cereals, regarding them as some­thing one might eat when sick or recovering from illness.

Interviews with housewives tended to confirm these ideas, but indicated a more favorable attitude hot cereals, despite their lack of convenience.

Note that only a situation analysis and informal investigation were used so far. No formal research project had been un­dertaken as yet. The researcher was still attempting to develop hypotheses (themes), which might be tasted in a formal research project to determine the one (or ones) which would be most effective. Formal research to test hypotheses could then lead to the recommendation that one theme appeared to be better than the others.

The research thus far was crucial in the development of a formal research project. Yet it was not marked by costly and lime-consuming "busy work", perhaps involving several thou­sand questionnaires asking consumers why they did not eat hot cereals or what they like about these cereals.

If the situation analysis and informal investigation had been unsatisfactory or inconclusive, than perhaps it would have been necessary to conduct a formal research project just to learn more about consumer behavior and attitudes. In other words, if nothing were known about the consumer, the problem definition might revolve around consumer behavior rather than specific promotional themes.

4.12. Planning The Formal Research Project

If the analyst has failed to reach a solution by this time, which frequently happens, then he must develop a formal research project. There are three basic methods which he could use:

1.        The observation method,

2.        The survey method,

3.        The experimental method.

Each method is appropriate for different kinds of problems. Unless the problem is complex, only one would be used in a single project. It is the analyst's task to choose which method is to be used, depending upon problem characteristics as well as the time, funds, facilities and personnel which he has available.
The observation method avoids talking directly to people, recognizing the possible pitfalls in direct questioning. Some­times asking questions cannot be avoided, however. Then a good survey can be very preceding methods. Its distinguishing characteristics is its more rigorous design, which usually inclu­des an establishing control groups and advanced statistical techniques.

4.12.1. Observation Method

In pinpointing the problem, we have been using observation asking ourselves what is happening inside and outside the firm. When designing the research project, it is logical to con­tinue using observation. This differs from the earlier type of observation, however, in that it is focused on a particular and well-defined problem rather than a broad activity.
Here the researcher avoids talking to the subjects. If a retailer or a bread manufacturer were interested in bread-buying beha­vior in supermarkets, for example, he could station a man at the bread counter to observe, what takes place. If he were inte­rested in the length of deliberation and the choice of a brand, the amount of label reading that takes place or the extent of multiple purchases, this observer could obtain the information.

In other situations, movies are taken of consumers under var­ying situations and then their behavior can be analyzed care­fully by running the films at very slow speeds or actually analyzing each frame. This might be useful, for example, in studying product selection in a supermarket or department store.

Or if a supermarket operator were interested in the distance customers traveled to his store, he could take down license numbers in the parking lot. The address of all license holders could be obtained at the state license bureau and plotted on a map; the density of the dots would show where the traffic was coming from. Further, ifa shopping center were being consi­dered for a particular corner, the traffic flowing by this loca­tion could be counted in an attempt to measure potential.

The Audiometer permits adaptation of the observation met­hod to radio and television audience research. This machine is attached to the radio and/or the TV set in the homes of selected families and records when the set is on and what station is turned on.

This method does not "observe" whether anyone is listening or viewing, however. Also the sample sizes normally used may not be adequate to yield the precise ratings users would like. This is basically a matter of economics, however. If users want more accurate ratings, more families will have to be audited and this may make the information too costly.

The distinguishing characteristics of the observation method are that;

1.        no one is directly questioned, as in survey method,

2.        no formal plan is developed to give consumers alternatives or obstacles which might require them to change their nor­mal behavior, as in the experimental method.

4.12.2. Survey Method

Here, as the name implies, surveys are used. The researchers feel that to solve their problems they must talk directly to some one. Sometimes surveys are for testing hypotheses, but they may also be just exploratory efforts to size up the situation before doing more research. Such an exploratory survey might provide the background data which in another case would already have been located during the situation analysis. Usually some type of questionnaire is designed. But some unstructured surveys use only a series questions intended to guide to interviewer. Thereafter he "plays it by ear." The desi­rability of these various approaches will be discussed below.

There are basically three types of surveys:

1.        telephone,

2.        mail-e-mail,

3.        personal interview.

Each has its advantages and disadvantages.

Telephone Surveys: telephone interviews are effective for obtaining quick answers to short, simple questions, especially when it is not important to identify the respondent or to know any of the characteristics of the person or family. If consumer characteristics (such as age, income, condition of personal be­longings, household furnishings or family composition) have a bearing on the analysis, then another survey method may be more appropriate.
Telephone interviewing is relatively low in cost and is satisfac­tory where the researcher is primarily interested in people who are likely to own telephones.

Mail-E-Mail Surveys: the questionnaire is useful when exten­sive questioning necessary. This is especially true if potential respondents are widely scattered. With the questionnaire, the person can take all the time he wishes to complete the ques­tions and may be more willing to fill in personal or family characteristics. Unfortunately, the response rate on question­naires is not very high unless there is extensive follow-up or unless the questionnaire is especially interesting.
Mail-E-Mail questionnaires are inexpensive ifa large number of person respond. Conversely, they may be quite expensive if the response rate is poor, as it typically is or if extensive fol­low-up   is   required.   With   questionnaires,   moreover,   it   is difficult to probe for additional answers or to encourage respondents to elaborate on particular points.

Personal Interview Surveys: The personal interview is frequ­ently used because most people would rather talk than write. A personal interview survey may be more expensive per inter­view than a mail or telephone survey, but it offers the interview a chance to probe deeply on certain questions.
It also enables the interviewer to follow new lines of thought which might not have been anticipated earlier. New hypot­heses or even new problems might be uncovered in the personal interviews. There is the opportunity for the inter­viewer to judge socio-economic characteristics from observa­tion and to follow up people who are not at home the first time or those who would ordinarily answer mail questionnaires. In this sense, the researcher has greater control over his simple and the results of a personal interview survey may be much more "representative" of the persons to whom the researcher has addressed it.

4.12.3. Experimental Method

The observation method avoids approaching the customer, while the survey method relies primarily upon direct interview.
The experimental methods utilize either or both of these methods.

The major difference, as the name implies, is that experiments are set up. Statistical controls may be used in a market test so that random variations can be factored out by statistical analy­sis. Or mathematical models, perhaps utilizing computers, can be developed for simulating customer behavior or total marketing system behavior.

While detailed discussion of these techniques is beyond the scope of this book, they are becoming increasingly important in applied marketing management and the challenge this career otters.

The experimental method is often used in traditional sales and use tests. In a sales test, for example, a new product might be tried in one store, city, state or region, while the marketing mix was held constant elsewhere. If a sales change takes place in all territories, only the net change in the trial territory will be attributed to the new factor. This method has been used by retailers to test packaging, displays, pricing promotional plans, new products and store equipment."

By this method, a bread manufacturer or retailer could check the importance of positions in different stores. Some bread deliverymen on commission have done this on their own. They have found that a front position increases sales so much that they have been known to pay a store clerk (out of their own pocket) to come to the bread display occasionally and move their company's bread to the front.

In other situations, use tests may be developed. Potential customers are given the same or different products in different packages. Then their response is analyzed using various statis­tical techniques.
A method which may hold promise is to have a representative group of customers play experimental games in which various products, prices or other alternatives are offered in turn. This is not fully realistic, but some interesting and encouraging results have been obtained.

For three primary reasons, the experimental method is not used much at the present time. First, it takes time, when most marketing decisions must be made quickly. Second, it may be more costly. And third, many marketing researchers have not had the statistical and mathematical training required to conduct such tests effectively. This latter factor is being over­come rapidly and it is to be expected that this type research will become more common as more skilled researchers are trained and enter the field.