04 June 2023
Market research plays a crucial role in gathering accurate insights about consumer wants and needs and evaluating the offerings of competitors. Without market research, marketers may rely on outdated or biased information, leading to flawed marketing strategies.
The fundamental marketing model
The fundamental marketing model is represented by what I call the marketing triangle.
The Marketing Triangle depicts the relationship between The Firm’s PRODUCT (or service), what the COMPETITORS OFFER, and the CONSUMER (or potential buyer).
Sales results (revenue) are achieved when the consumer purchases the firm’s product in preference to the competitors. The work of the marketer is creating this competitive advantage.
Achieving competitive advantage
However, to make marketing decisions that improve competitive advantage, the marketer must first understand…
- The consumer: who are they and what are their wants and needs?
- The competition: what other products and services are competing for the consumer and how does their offering compare to the firm’s?
Market research aims to answer these questions as accurately as possible.
Without formal market research the marketer must rely on previous knowledge of the market usually relying on internal subject matter experts and the marketer’s own perception of the market. This limited pool of knowledge may provide an out of date or biased view leading to a flawed marketing strategy.
The primary purpose of market research is for the development of competitive advantage by informing the development of marketing strategy.
Market research challenges
The main challenge in market research is to cost effectively obtain relevant information while enuring the information isn't biased through a flawed research process.
Other challenges include the research respondent objectivity problem. Asking people to think about why they purchase the way they do or to provide opinions about products taps into the logical or rational part of people's minds. However, much research reveals that human decision making is often driven by emotion and isn't rational. This is often seen in car buying, for example the person who buys a $250,000 BMW seven series and chooses diesel because it is more fuel efficient. There is no practical reason for buying a luxury car.
While market research has little to do with quantum physics, the observer effect is a useful analogy. The process of measuring something changes the result. Asking people market research questions places them in a state of mind that is different to the way they think when making purchasing decisions.
Market research questions (particularly low budget research) will likely elicit mostly logical responses rather then the true emotional drivers.
Emotion is important in marketing (even in B2B selling) which is why branding is so important.
This effect is more of a problem with consumer (B2C) products than B2B products and services where multiple people are involved (the so-called buying team). However, there may also be other non-marketing related influences such as personality clashes, political influence, even bribery and corruption.
Further, lack of statistical validity is a problem when an insufficient number of research respondents comprise the sample set.
These are not insurmountable problems, but the marketer who lacks experience or is constrained by budget is more vulnerable to these errors.
Types of market research
This involves collecting data directly from original sources. It can be further categorized into:
Surveys: Structured questionnaires administered to a sample of respondents to gather their opinions, preferences, and feedback.
Interviews: One-on-one or group discussions conducted to gain in-depth insights and understanding of consumer behaviors and motivations.
Observations: Systematic monitoring and recording of consumer behaviors, interactions, and patterns in real-life settings.
Experiments: Controlled studies conducted to test hypotheses and measure the impact of specific variables on consumer responses.
This involves analyzing existing data and information collected by others for a different purpose. It includes:
Market Reports: Published studies, industry reports, and market analyses that provide data and insights on market trends, competitors, and customer demographics.
Government Sources: Data and statistics collected and published by government agencies, such as census data, economic indicators, and trade reports.
Academic Research: Studies and papers conducted by researchers and scholars that provide valuable insights and findings relevant to specific industries or markets.
Online Databases: Accessing information from online sources, such as research databases, business directories, and social media platforms.
This focuses on understanding consumers' attitudes, opinions, beliefs, and motivations. It includes methods like in-depth interviews, focus groups, and ethnographic research.
This involves collecting numerical data to analyze and quantify consumer behaviors, preferences, and trends. It includes methods like surveys, experiments, and statistical analysis.
This aims to explore and gather initial insights and ideas to better understand a market or problem. It often involves qualitative research methods and can help in framing more targeted research questions.
This focuses on describing and understanding the characteristics and attributes of a target market or consumer segment. It provides a snapshot of current market conditions.
This seeks to establish a cause-and-effect relationship between variables. It helps determine how changes in one variable affect another and provides insights into consumer behavior and decision-making processes.