|
|
A Desiscion-Making Perspective on Marketing research – How Research Supports Marketing Decisions
Marketing decisions involve issues that range from fundamental shifts in the positioning of a business or the decision to enter a new market, to narrow tactical questions of how best to stock a grocery shelf. The context for these decisions is the market planning process that proceeds sequentially through four stages: situation analysis, strategy development, marketing program development, and implementation. This is a never-ending process, so the evaluation of past strategic decisions serves as an input to the situation assessment. Figure 1-1 suggests some elements of each stage. During each stage, marketing research makes a major contribution to clarifying and resolving issues, and choosing among decision alternatives. The following sections describe these steps in more detail and describe the information needs that marketing research satisfies.
Situation Analysis
Effective marketing strategies are built on an in-depth understanding of the market environment of the business, and the specific characteristics of the market. The depth of these information needs can be seen from the list in Table 1-1 of the requirements of a major consumer packaged goods manufacturer.
The macroenvironment includes political and regulatory trends, economic and social trends, and technological trends. Marketing researchers tend to focus on those trends that impact on demand for products and services. For example, the most important influences on the demand for consumer packaged food products during the 1980s were
• Demographic shifts, including a record number of aging adults that were increasingly affluent and active.
TABLE 1-1
Scope of Situation Assessment for a Consumer Goods Manufacturer
I. Market Environment
a. Technologies? How else will customers satisfy their needs?
b. Economic trends? Disposable income?
c. Social trends? What are the trends in age, marital status, working women,
occupations, location, and shifts away from the center city? What values
are becoming fashionable?
d. Political and regulatory? New labeling and safety requirements.
II. Market Characteristics
a. Market size, potential, and growth rate?
b. Geographic dispersion of customers?
c. Segmentation? How many distinct groups are there? Which are growing?
d. Competition? Who are the direct rivals? How big are they? What is their
performance? What is their strategy, intentions, and likely behavior with
respect to product launches, promotions, and the like?
e. Competitive products? Their nature and number?
f. Channel members? What is the distribution of sales through
supermarkets and other outlets? What are the trends? What are they
doing to support their own brands?
III. Consumer Behavior
a. What do they buy? A product or service? A convenience, shopping, or
specialty good? A satisfaction . . . ?
b. Who buys? Everybody? Women only? Teenagers (i. e., demographic,
geographic, psychographic classification)?
c. Where do they buy? Will they shop around or not? Outlet types?
d. Why do they buy? Motivations, perceptions of product and needs,
influences of peers, prestige, influence of advertising, media?
e. How do they buy? On impulse, by shopping (i. e., the process they go
through in purchasing)?
f. When do they buy? Once a week? Everyday? Seasonal changes?
g. Anticipated change? Incidence of new products, shifts in consumers’
preferences, needs?
• Rapid changes in family structure as a result of delayed marriages, working wives, and a high divorce rate.
• Shifts in values as consumers became preoccupied with their own economic and emotional well-being.
These trends resulted in increased concerns about the quality of food, nutrition value, personal fitness, and “naturalness.” Equally influential were shifts in food consumption patterns toward “grazing” or snacking, and more away-from-home eating.
Understanding the customers—who they are, how they behave, why they behave as they do, and how they are likely to respond in the future—is at the heart of marketing research. It is the responsibility of this function to
be the experts on how to learn about customers. Increasingly marketing researchers are being asked to turn their talents to understanding the behavior and intentions of competitors. Since much data are available from public sources, marketing researchers are well positioned to work with other functions as part of competitor analysis teams.
A major responsibility of the marketing research function is to provide information that will help detect problems and opportunities, and then, if necessary, to learn enough to make decisions as to what marketing program would result in the most response. An opportunity might be presented by the sense that customers are increasingly dissatisfied with existing products. Marketing research could be asked to detect the dissatisfaction and perhaps determine how many people are dissatisfied and the level and nature of that dissatisfaction.
A variety of research approaches is used to analyze the market. Perhaps the simplest is to organize information already obtained from prior studies, from magazine articles that have been filed, and from customers’ comments to a firm’s sales representatives. Another approach is to have small groups of customers, called focus groups, discuss their use of a product. Such discussion groups can provide many ideas for new marketing programs.
When a problem or opportunity has been identified and it is necessary
VINTAGE OPPORTUNITIES FOR A WINEMAKER
Taylor California Cellars used extensive survey research to identify opportunities in the premium generic wine business. By following the implications they were able to build a 100 million dollar business between 1980 and 1985. When planning began in 1977 the competitors, such as Almaden and In-glenook, were basing their strategies on research showing that wine drinkers knew little about wine and drank it mainly during social, romantic or celebratory occasions. This research said little about frequent wine drinkers. While they were only 4 percent of all wine drinkers they accounted for 53 percent of consumption. Taylor management wanted to learn much more about this group. Further research found that the frequent drinkers were much more interested in taste-related attributes such as crispness, bouquet and dryness, than in the symbolic role of wine. At the time of this research no other brand was addressing these benefits. One finding—that 58 percent of the target market had recently attended a wine tasting—became the basis for the advertising campaign “The Great California Wine Tasting.” This theme was an ideal way to impart a message of superior taste.
to understand it in more depth, a survey is often employed. For example, to understand the competitive position of Quebec in the tourism market, a survey was conducted to determine the benefits sought by visitors and nonvisitors as well as the risks they perceived. The results identified a large group who felt highly insecure in new and/or foreign environments and were not attracted by the appeals of uniqueness in culture, traditions, and architecture used by Quebec to differentiate its product.
Strategy Development
During this stage the management team of the business decides on answers to three critical questions. Marketing research provides important contributions to these answers:
1. What business should we be in? Specifically, what products or services should we offer? What technologies will we utilize? Which market segments should we emphasize? What channels should we use to reach the market? These are far-reaching choices that set the context for all subsequent decisions.
These questions have become especially compelling in markets that are mature and saturated, including most packaged goods but also household appliances, automobiles, and services such as banking and air travel. One sure route to growth in this competitive environment is to create highly targeted products that appeal to the tastes of small-market segments. Research supports this search for niches with large-scale quantitative market studies that describe buying behavior, consumer beliefs and attitudes, and exposure to communications media. Large samples are needed to delineate the segments, indicate their size, and determine what the people in each segment are seeking in a product.
2. How will we compete? Next the management team has to decide why the business is better than the competition in serving the needs of the target segment, and what has to be done to keep it in front. Competitive superiority is revealed in the market as either differentiation along attributes that are important to target customers, or the lowest delivered cost position. Otis Elevator is able to dominate the elevator business by using information technologies to provide superior service response and preventive maintenance programs that reduce elevator breakdowns—attributes that customers appreciate.
Marketing research is essential for getting answers to three key questions about differentiation: What are the attributes of the product or service that create value for the customer? Which attributes are most important? How do we compare to the competition?
The attributes of value go well beyond physical characteristics, to encompass the support activities and systems for delivery and service that make up the augmented product. In the lodging market, the key attributes are honoring reservations on time, good value for money, and the quality and amenities of the guest rooms. Each market has unique attributes that customers employ to judge the competitive offerings, that can only be understood through careful analysis of usage patterns, and decision processes within that market. This knowledge comes from informed sources, and in-depth surveys of customers.
UNDERSTANDING A SPECIALIZED INDUSTRIAL MARKET
A chemical manufacturer in southern Europe began integrating forward into specialty chemicals in 1981. Their first move was almost abortive, for they entered the complex market for Factifiers, a key component of adhesives, with little idea of customer requirements and no clear positioning. Belatedly they undertook a major study of about 120 European adhesives manufacturers. Exploratory interviews with the buyer and major specifier in some of these prospects identified six product specific attributes affecting choice: softening paint, viscosity, color stability, starting color, tack, and price. Beyond these quantifiable variables they found that the supplier’s product range, service support, geographical coverage, and overall reputation for reliability determined which supplier to choose.
The research also found that adhesive makers had to buy from several sources of factifiers because none could meet the requirements of the diversity of applications from packaging and woodworking to nonwoven goods. Eventually they found nine different profiles of values (attributes) being sought. Then the size, growth, strength of competition and their relative ability to compete was judged for each segment, as a prelude to choosing a target market.
An understanding of competitive advantage also requires detailed knowledge of the capabilities, strategies and intentions of present and prospective competitors. Marketing research contributes here in two ways: identifying the competitive set and collecting detailed information about each competitor. Some ways of
undertaking competitive intelligence work are discussed in Chapter 2.
3. What are the objectives for the business? An objective is a desired performance result for a business that can be quantified and monitored. There are usually objectives for revenue growth, market share, and profitability. Increasingly firms are adopting objectives for service levels (e.g., speed of response to quotations) and customer satisfaction. Marketing research is needed to establish both the market share and the level of customer satisfaction. Sometimes share information—we have x percent of the y market—is readily available from secondary sources. This is not always possible if the served market is different from the standard definition, or share is defined in dollar sales terms rather than unit volume.
Marketing Program Development
Programs embrace specific tasks, such as developing a new product or launching a new advertising campaign. An action program usually focuses on a single objective in support of one element of the overall business strategy. This is where the bulk of ongoing marketing research is directed. An idea of the possibilities and needs for research can be gathered from Table 1-2, which describes some of the representative program decisions that utilize information about market characteristics and customer behavior.
To illustrate some of the possible research approaches that are employed we will focus on the series- of market research studies that were conducted to help Johnson Wax Company successfully introduce Agree Cream Rinse in 1977 and Agree Shampoo in 1978. The story begins with a major market analysis survey of hair-care practices conducted in the early seventies. The study showed that there was a trend away from hair sprays but a trend toward shampooing more frequently and a growing concern about oily hair. This led to a strategic decision to enter the shampoo and creme rinse market with products targeted toward the “oiliness” problem. This decision was supported by other studies on competitive activities in the market and on the willingness of the retailers to stock new shampoos.3
A total of 50 marketing research studies conducted between 1975 and 1979 supported the development of these two products. A series of focus-group discussions was held to understand the oiliness problem and people’s perceptions of existing shampoo products. The firm was particularly interested in learning about teenagers, since most of its products were sold to homemakers. One goal of these focus groups was to get ideas for a copy
TABLE 1-2
Developing the Marketing Program—Representative
Decisions That Draw on Marketing Research
1. Segmentation decisions
Which segment should be the target? What benefits are most important to each segment?
Which geographic area should be entered?
2. Product decisions
What product features should be included? How should the product be positioned? What type of package is preferred by the customers?
3. Distribution decisions
Which type of retailer should be used? What should be the markup policy? Should a few outlets be employed or many?
4. Advertising and promotion decisions
What appeals should be used in the advertising? In which vehicles should the advertising be
placed? What should the budget be? What sales promotions should be used, and when
should they be scheduled?
5. Personal selling decisions
What customer types have the most potential? How many salespeople are needed?
6. Price decisions
What price level should be charged?
What sales should be offered during the year?
What response should be made to a competitor’s
price change?
theme. Subsequently, more focus groups were held to get reaction to the selected advertising theme, “Helps Stop the Greasies.” Several tests of advertising were employed in which customers were exposed to advertisements and their reactions were obtained. In fact, over 17 television commercials were created and tested.
More than 20 of the studies helped to test and refine the product. Several blind comparison tests were conducted in which 400 women were asked to use the new product for two weeks and compare it to an existing product. (In a blind test, the products are packaged in unlabeled containers and the customers do not know which contains the new product.)
Several tests of the final marketing program were conducted. One was in a simulated supermarket where customers were asked to shop after they
had been exposed to the advertising. The new product, of course, was on the shelf. Another test involved placing the product in a real supermarket and exposing customers to the advertising. Finally, the product was introduced using the complete marketing plan in a limited test area involving a few selected communities including Fresno, California, and South Bend, Indiana. During the process, the product, the advertising, and the rest of the marketing program were being revised continually. The effort paid handsome dividends: The Agree Creme Rinse took a 20 percent share of the market for its category and was number one in unit volume, while the Agree Shampoo also was introduced successfully.
Implementation
The beginning of the phase is signaled by a decision to proceed with a new program or strategy and the related commitments to objectives, budgets, and timetables. At this point the focus of marketing research shifts to such questions as:
Did the elements of the marketing program achieve their objectives?
How did sales compare with objectives?
In what areas were sales disappointing? Why?
Were the advertising objectives met?
Did the product achieve its distribution objectives?
Are any supermarkets discontinuing the product?
Should the marketing program be continued, discontinued, revised, or expanded?
Are customers satisfied with the product?
Should the product be changed? More features added?
Should the advertising budget be changed?
Is the price appropriate?
For research to be effective at this stage, it is important that specific measurable objectives be set for all elements of the marketing program. Thus, there should be sales goals by geographic area; distribution goals, perhaps in terms of number of stores carrying the product; and advertising goals, such as achieving certain levels of awareness. The role of marketing research is to provide measures against these objectives and to provide more focused studies to determine why results disappointed or surpassed expectations.
Often underlying this phase of marketing management is uncertainty
about the critical judgments and assumptions that preceded the decision. For example, in 1982, Xerox, Canon, and IBM each launched new products into the office copier market. Prior to this, some companies had emphasized very large copiers, while others had ignored this end of the market. One reason for these differences in strategic emphasis was a fundamental assumption as to whether customers tended to centralize or decentralize their processing of copies. In response to this uncertainty, the companies undertook research studies with the dual purpose of measuring the acceptability of the new product entries and of monitoring the copy processing policies of the target customers.
There is overlap among the phases of the marketing process. In particular, the last phase, by identifying problems with the marketing program, and perhaps opportunities as well, eventually blends into the situation analysis phase of some other follow-up marketing program.