Understanding the Importance of Market Research. (Read Carefully)

Understanding the Importance of Market Research

In this paper, we will be taking a brief look at what market research is and why companies consider it so valuable. We will take a close look at focus groups and surveys as data gathering techniques used in market research, and we will ask Miles Goodrich, a market research professional with Sprint Marketing, to help us answer a few questions about the subject. Finally, we will discuss how we can apply this information to help ensure our success in the market simulation project.

Overview of Market Research

Market research sounds simple; gather information about the wants or needs of consumers pertaining to a specific product. Analyze the information and decide if there is sufficient need or desire for the proposed product, and if those in the market will be able to afford it, simple, right? Wrong!

Market research improves the companies understanding of consumers, the competition within the market, and the market itself. Not only will it tell you which products or services are in demand, but also it may show what tactics to use to remain competitive within the specified market. Good market research can also give you information to help reduce risks, spot potential problems, and identify other opportunities (SBA, 2014).

There are two different types of data in market research; they are primary data, and secondary data. Primary data is simply new data, research that is started for a specific product or company. Secondary data is pre-existing data that is found and repurposed for a new company or for a new product for an existing company (Kleiman, 2014). Since it is estimated that only fifteen percent (15%) of all products offered by companies will be “New-to-the-World” products, a lot of market research uses secondary data simply to save time and money (Boyer, Frohlich, & Holt, 2005).

From the two types of data research, we get two methodologies; question-based and observation-based research. Question-based research is the act of asking potential customers questions, usually in the form of a survey. Observation-based research is watching what customers are buying or ordering from other providers (Kleiman, 2014).

Within the two methodologies, there are two approaches to choose from; qualitative or quantitative. The Qualitative approach is typically a smaller sample that cannot be generalized accurately into a whole. This is usually done by focus groups or detailed interviews and is used to stimulate ideas or find early problems with a new product. The Quantitative approach is a larger sample used to create a hypothesis about a demographic (Kleiman, 2014).

This data all has value to a company. It can help management decide whether a new product is going to profitable to the company, if there are problems coming that need to be fixed, when to stop offering a product or service, how to stay competitive, what the trends are, and more. The value varies though from one company to another based on several criteria. How willing management is to act on the data, and how accurate is the data are large factors. How much does the data help with the decision making process, what are the possible outcomes, and what is the level of risk help to determine the value as well. Finally, how will the competition react, and how much time and money was spent to get the information will play a role in the value of the data (QuickMBA, 2010).

Two Data Gathering Techniques of Interest

Market research as a whole is very interesting to me because I have owned a couple companies in the past and I plan to own another again soon. Knowing how to do market research, and what ask when doing the research could mean the difference between success and failure the next time I decide to try my hand at starting a company. I have a lot of ideas, the biggest problem for me is deciding which idea to pursue, market research will help me with that.

Focus groups and surveys are two types of data gathering techniques I am interested in learning more about. Focus groups interest me because you can gather a great deal of information from them, but you have to know what questions to ask, and how to interpret the answers. With focus groups you can bring in a new product and get several opinions on the product and find out why they have that opinion, you can also get some good ideas of ways to improve the product. Focus groups are typically made up of random people off the street, so they are not bias in any way. What I am interested in finding out is how to get a focus group together and how to create the right questions to ask.

Surveys are very similar to focus groups and pose some of the same problems. How do you decide what questions will give you the best and most accurate results for what you are researching? Surveys can also be used to hit a larger population, especially if used in social networking, but how do you know that the answers you are getting from social networks pertain to your product and are accurate? How do you know that you have asked the right questions to get the answers you need?

Introducing Miles Goodrich

Miles Goodrich is a market research specialist for Sprint Marketing. Sprint Marketing has provided my wife’s employer, Streamline Plastics, with all of their market research data for about 20 years. Miles is the member of a team of researchers and analysts that work to gather everything Streamline Plastics needs whenever they are launching a new product, or whenever they want to see how things are going from an analytical point of view.

I have never met Miles, my wife simply recommended I contact Sprint Marketing and talk to someone there for this project. Miles was the one who answered the phone. When I told him who my wife was, who she worked for, and what I needed for this project, he was more than happy to give me twenty minutes of his time to answer my questions. Following are the questions I asked him and his summarized answers.

I. Since our current economy is a Global Marketplace, how hard is it to factor in international influences into your market data?

A) Well, it’s hard to understand international influences. The easiest way is to start with stuff that already exists from the region you are trying to study, and then go forward from there. No matter how you look at it though, foreign lifestyles, beliefs, and trends can be hard for us to understand or follow especially when trying to do research for a brand new product. There are a lot of tools that can be used to help out though, International partners or offices and the internet are a major part of what we do when trying to get foreign information. My Dad was in marketing his whole life, to be honest, I have no idea how they got this data before the internet. But most companies back then weren’t global either so I guess it didn’t matter.

II. How has social networking changed how you gather your primary data? How has it affected your sampling plan? What affect has it had on the sampling error and cost?

A) Are you talking about open social networks like Facebook and stuff? Or industry specific networks and blogs? OK, so believe it or not, Facebook and some of the other open networks are actually quit handy when it comes to doing surveys. You don’t want to come out and just post a survey though because your data will be skewed and it will be too hard to tell how accurate the data is. Put your survey on a website, we have a special one designed specifically for surveys. Then you point others to take the survey. Those who take the time to follow the link and read the survey instructions will usually answer the survey the best they can. This also allows you to get a count of how many actually answered the survey so you can figure out your sample size and error. This is actually a fairly cheap way to get a large survey, it has certainly helped to get the most diverse and cost effective sample. Other than that, I stay away from Facebook. Sorry, no I am not a fan.

III. Do you find that most of your work is gathering secondary data that fits your client’s needs?

A) Oh, yeah…absolutely, however, secondary data is really only good to get you going in the right direction. Once you have the data, you almost always have to add to it or tweak it to fit exactly what you need. If you have to add to it, you are dealing with primary data, and that is time consuming. On the bright side though, the secondary data gave you a place to start and an idea of what you are looking for. Most of the secondary data you get will be old too, at least too old to use by itself, you have to update it so it is current if nothing else.

IV. Have you been involved in focus groups? If so, how accurate were they? How hard was it to come up with the questions? Did they help your client?

A) We have had some good focus groups and some that were a complete waste of time and resources. Mostly though, if you get a good group, they are good. And the information you get is very accurate because you are able to ask questions about their answers. Most of the questions we ask are impromptu, we feed off of their reaction and ask them questions based on reactions, emotions, comments, and other things that we see going on during the session. A lot of times we will only start off with a couple initial questions and the session could go on and on for a long time because of the physical feedback we are getting. They really are fun. Oh, yes, they are very helpful to our clients, especially when trying to get ideas for new or updated products.

V. How helpful are surveys to your clients?

A) Very, they use them to see how they are doing and what they can do to improve. We use all kinds of surveys, online, public, and paper. Especially if we are working with a storefront, paper surveys work great because they can put all over the store or on the back of the receipt. If you combine paper and online surveys, you can get some great numbers too.

Conclusion

I have found that this information helps me to understand what we are looking at when we view the market research in the Marketplace Simulation. This helps us to make decisions on what to change to make our products better, increase sales, increase our brand, and surpass our competition. In my opinion, few things can help a company succeed more than good market research and knowing how to use that data to implement the necessary changes.

References

Boyer, K. K., Frohlich, M. T., & Holt, T. G. (2005). Chapter 7: Marketing--Tapping Customers' Latent Desires. In K. K. Boyer, M. T. Frohlich, & T. G. Holt, Extending the Supply Chain (pp. 155-169).