All rights reserved Copyright © Paul Hague Paul Hague is hereby identified as author of this work in accordance with Section 77 of the Copyright, Designs and Patents Act 1988 This book is published by Grosvenor House Publishing Ltd 28–30 High Street, Guildford, Surrey, GU1 3HY. www. grosvenorhousepublishing. co. uk
This book is sold subject to the conditions that it shall not, by way of trade or otherwise, be lent, resold, hired out or otherwise circulated without the author’s or publisher’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser. A CIP record for this book is available from the British Library ISBN 1-905529-30-9 Contents
Page Preface Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Bibliography The Basics of Market Research Research Objectives Research Design An Introduction to Research Methodologies Introduction to Qualitative Research Introduction to Quantitative Research Introduction to Sampling An Introduction to Questionnaire Design Turning Data into Findings Reporting and Communicating Findings Professional Development and the Market Research Industry 3 5 19 39 59 75 94 112 129 150 164 177 187 1 2 Preface
I was fortunate to find market research. It is the only work I have ever done and it has kept me interested all my life. My first job was with the Dunlop Rubber Company, where I had the title “Marketing Executive” and where I spent happy days researching markets for the General Rubber Goods Division. I remember, as if yesterday, my very first assignment; I was asked to research the market for dock bay seals. I had no idea what they were and, as a new graduate, was too timid to ask. Furthermore, it was 1969 and there were few text books telling me how I should go about the task.
I soon learned that with a tongue in my head I could easily ask and keep asking and eventually I would find the answers. I found out that dock bay seals are foam rubber surrounds that fit around loading bays so that trucks can reverse against them and make a seal to stop warm air getting into cold stores. This led me to cold store operators and soon I was speaking to them and building a picture of the market. It was like being a commercial detective and I was hooked. I moved from Dunlop to a steel company and there I learned the trade of an industrial (now business to business) market researcher.
Then, with terrifyingly few years of experience under my belt, I set forth on my own and established Business & Market Research, a market research agency which carried out all types of ad hoc consumer and business to business surveys. Twenty five years later I sold B&MR and after a short period as a consultant, formed B2B International where I have worked for the last eight years. This potted history of my career is to convey to you my enthusiasm for the subject of market research. Over the 35 years I have been working, I have probably managed more than 2,000 research projects.
Each one different, but with more common ground between them than you may think. They all had a research design geared to a set of objectives. All had a method that in many cases involved a mixture of secondary and primary research or qualitative or quanti3 tative research. In every case, data had to be analysed and clearly reported to the sponsor so that they could move forward with more confidence and less risk in making decisions. If you are reading this book you will have an interest in market research. Possibly you have a market research project to complete and need help with how to go about it.
You may be studying for a business degree and market research is part of your course. You may be taking the Market Research Society/City & Guilds Certificate in Market & Social Research. Whatever the case, I hope that the knowledge that I share with you in this book will help you succeed. This is an introductory text covering the whole subject of market research. Anyone with a serious interest is urged to broaden their knowledge by reading widely and the references at the end of the book point to where you can obtain more detail.
The book is designed around the curriculum for the Market Research Society/City& Guilds Level 2 Certificate in Market & Social Research and, as a complement to this book, readers will find it very helpful to sign up for the on-line course on http://www. mrs. org. uk/training/online. htm. There are three main sections to the book: • An introduction to market research – covering the basics of market research, setting research objectives, research design and an introduction to research methodologies.
The tools of the market researcher – covering qualitative and quantitative tools, sampling, interviewing methods and questionnaire design. Completing the market research process – covering data analysis and interpretation, reporting and communicating the findings and a background to the market research industry. • • In writing the book I pay tribute to my former partner in business, Peter Jackson, who shared the authorship of many of the previous books I have written. Peter is now, deservedly, walking the hills of Devon.
Many times when writing I have referred back to his notes and always found them instructive and helpful. So too I have drawn on much of the good material written in books and white papers by Nick Hague, Matt Harrison and Carol-Ann Morgan, my colleagues at B2B International. Paul Hague B2B International, Stockport March 2006 4 Chapter 1 The Basics of Market Research Introduction In this chapter you will learn about: • • The role of market research in helping business decisions through the systematic and objective collection of data. The applications of market research and how many studies are to elp show the size of markets, to measure the satisfaction of customers with products, to guide new product development and to show people’s use of and attitudes to products. The Market Research Society’s Code Of Practice which sets out guidelines for protecting people who are interviewed and clients who commission research. The Data Protection Act that protects enforces data collection and analysis procedures to ensure that people’s wishes for confidentiality and anonymity are upheld. • • The role of market research Goodness knows when market research was “invented”.
It would be reasonable to suppose that for ever, sensible people in business have researched their markets. They will have asked their customers what they want and asked them if they are satisfied with the products and services they supply. They will have done some crude assessment of the potential for their products. They will have judged the best price to charge by carefully watching the competition. Customers always have been the most important part of a business. Today, if you do not put the customer at the centre of your business, you will, over time, have no business.
In other words, market research or market intelligence has always been with us. 5 However, market research is a bit more than the informal assimilation and interpretation of intelligence that is a natural consequence of keeping eyes and ears open. Market research is structured and purposeful. It is the systematic and objective collection and interpretation of data to help reduce risk in marketing decisions. As with all definitions, this one is loaded with meaning. Market researchers do not just poke around in a market to see what is going on.
They have research designs and plans. They are therefore systematic in what they do. Furthermore, they seek to uncover the truth which may be hidden under a pile of assumptions or bias. It is the researcher’s task to be objective. Market researcher’s stock in trade is data. Good market research should not stop with data. Data are the collection of facts and opinions that are accumulated in the Key point survey process. This needs converting to Good market information so that it tells us something. research turns data More than this it needs to become intelliinto intelligence. ence so it helps us make smart moves. Market researchers collect statistics and opinions; they then work out what these data mean, and draw conclusions which lead to improved business decisions. Figure 1. 1 The Role Of Market Research This widely accepted definition of market research makes the subject a relatively new tool in business planning. References to market research as we know it begin to be made around the turn of the last century. The first nationwide market research survey – into grain production – was carried out in the USA in 1879 by advertisers N W Ayer & Son. Since that time, the market research industry has benefited from advances in psychology, sociology and technology. The development of marketing as a key business element has also had an important impact on the development of both market and social research. The result is that market and social research now encompass a wide range of quick and reliable ways of gathering information to help improve decision making. In the 1930s the audit firms of Nielsen and Attwood developed techniques for measuring sales of consumer goods through retailers.
Subscribers to these audits were able to track the market size for their products and calculate their market shares. The market research industry was born. How market intelligence helps in business decision making All businesses need information to guide decision making. Managers desperately trying to understand increasingly complex and global markets, need more useable information than ever before. Because of this, the research sector plays a valuable role in the commercial, social and political world today. This information can be likened to that which we need when we are driving.
The dials on the dashboard are the equivalent of the financial barometers that tell us what sales and profits we have achieved while the map on the front seat is the market research report that shows us the best way forward. In a world where there are very few technological secrets, it is not surprising that cans, computers and cars all look the same. Commercial success is dependent more than ever, not on technological superiority, but on a better understanding of customers’ needs and using this information to guide decision making. Sometimes research needs are obvious.
You are launching a new product and you need to know customers’ reactions. Will they like it? Will they buy it? How much will they pay? How much will they buy? What will trigger their purchase? Launching a product without this information and basing it on internal hunches and opinion (usually optimistic) could be a disaster. It is sometimes easier to look from the outside into a company and recognise their need for research than to arrive at this realisation when on the inside. Managers of companies build a picture of their 7 markets in their head.
They feel that they know what is going on better than any outsider can tell them. There can be significant prejudice and resistance to research from people who have vested interests in an operation. Market research is the map by which businesses can navigate. In the same way that maps can be large or small scale, market research can be high level or detailed. Of course, the map doesn’t guarantee that you will arrive safely at your destination because you have to successfully avoid collisions and ensure no wrong turnings. In some cases the map may lack the detail that is required or even be out of date. Key point
Understanding customers’ and potential customers’ needs through market research is one of the best ways to obtain a sustainable competitive advantage. Obviously market research is concerned with decisions in the marketing function rather than in production or financial management. Because marketing is so central to any business, the consequences of marketing decisions spill over and affect other functions. Also, the techniques that are used in market research can be used in some other areas of the business. For example, human resources departments frequently use market research to measure the satisfaction of employees in the company.
Market research can provide useable information needed to support management decisions. It also provides a way for management to keep up a dialogue with customers and shareholders. You can use market research to find gaps in markets, assess new opportunities, develop new products and services, assess market potential and diagnose strengths and weaknesses or pros and cons. Market research is also important to not-for-profit businesses, for example in developing new identities for national charities or locating leisure facilities, like a local council’s new swimming pool.
The British Market Research Association collects statistics on the commissions received by agencies in the UK. The figures supplied by the agencies account for around a half of the total commissions received by agencies and give a good indication of the applications for the research. Nearly half (46%) is research with non-consumers and buyers in business account for the major part of this, the rest being largely accounted for by research with the medical profession. The other 54% of the commissions are from surveys with the general public and here there are four important categories of research: • • • • Market measurement Customer satisfaction surveys New product development Usage and attitudes surveys The spending on these different categories of research is shown in figure 1. 2. Figure 1. 2 Analysis Of Turnover Of BMRA Members, 2002 Note: these figures are based on returns from around two thirds of the BMRA sales turnover, representing around half the UK market research industry turnover. Think about What decisions are made in your organization that could benefit from market research?
What are the drivers that result in market research been used in your organization, and what are the barriers that stop it being used? The structure of the market research industry Market research is bought by companies to help market the goods and services they produce and by government organisations to assist policy making. It is estimated that the total spend on market 9 research by UK companies and organisations is just over ? 1 billion per annum. As we have seen in figure 1. 2, there is a significant expenditure on research with business to business respondents. In Figure 1. we see the breakdown of the industry by the nature of the client – remember many consumer companies such as Philips Lighting, or Shell, have significant turnover with businesses and carry out a good deal of business to business research. The percentage of companies that commission market research and have no consumer face is actually quite small and around only 10% of the total pie. The figures shown are the value of ad hoc and continuous market research bought-in from specialist market research suppliers and excludes research carried out by non-specialists such as management consultancies.
Nor does it include the value of work carried out “in house” by people who do their own collection of data. Spending on market research by pharmaceutical companies has doubled in the last five years and now leads all other sectors. Figure 1. 3 Share Of Market Research Expenditure By Nature Of Client, 2002 Source: BMRA data The demand for market research services has grown rapidly through the late years of the twentieth century though there are signs that some sectors of this youthful industry are now maturing.
As well as the variation in demand for market research by sector, there are enormous differences in the spending on market research between user organisations and in the way they organise the market research function internally. At the top, in terms of expenditure, are organisations which each spend several millions every year on 10 market research. These include some of the very largest commercial companies and the Government (albeit spread through many departments and agencies). Research buyers of this scale, often have central market research departments which act as service providers to the line management throughout their organisations.
These departments not only act as professional buyers of market research but also carry out the analysis, interpretation and communication of the data within their organisations. There is a trade association representing the interests of these larger buyers of market research – the Association Of Users Of Research Agencies (AURA). If a company is not large enough to justify its own market research specialist, the buying and control of research may be carried out by business managers who need the information.
Apart from market research bought by individual organisations to meet their own needs, there is a significant expenditure by industry groups collectively. Trade associations may commission ad-hoc or continuous research and in some areas there are special joint research programmes to meet industry wide information needs – media research is the most notable example of this with much audience and readership data obtained in this way. As well as users and suppliers of market research, there are some types of organisations which fall somewhere in between.
The most significant of this group are advertising agencies who commission research on behalf of their own clients and may build-in such as advertising testing and evaluation into the planning of major campaigns. The largest advertising agencies often have their own research departments staffed by professionals and involved in the development of sophisticated techniques for media and advertisinglinked research (Admap is a monthly journal specialising in this area). The market research society code of practice The Market Research Society (MRS) in the UK is the largest body of market research professionals in the world.
The MRS has established a “code of practice” that covers the ethical aspects of market research, responsibilities to fellow members of the bodies setting the codes, clients, survey respondents and the public at large. The MRS code is taken seriously by all professional researchers and even if they are not personally members of the Society, they are likely to 11 subscribe to the principles embodied in this code. A copy of the code is obtainable from the MRS and research users should be familiar with its main provisions since it affects and to some extent restricts the user/supplier relationship.
Some important aspects of the Code in this respect include the following: • Information can only be collected from respondents by fair means. Respondents must be honestly and comprehensively told that the information is for research purposes and that their participation is entirely voluntary. They are asked to give their consent. The only exception to this is observation, including mystery shopping, where the observed behaviour is public (eg shoppers looking in a window). Information given by respondents is confidential and may not be passed, in an identifiable form, to anyone outside the agency carrying out the research.
This includes the client. Confidentiality even extends to the identity of respondents. This requirement, therefore, largely excludes using formal market research (as understood by the MRS) to build up personal details of potential customers and producing lists or databases that can be used in subsequent marketing. The requirement for confidentiality can, however, be relaxed with the freely given and express permission of the respondent at the time of the interview and there are some differences in interpretation for business respondents.
Equally if the research sponsor – the client – asks for confidentiality and it is promised, it must be respected. Furthermore, the results of research carried out for specific clients is confidential to that client and may not be disclosed to others or used to the benefit of other clients. The Code also sets standards for reporting the results of research including that any results must be supported by adequate data. Research agencies cannot, for example, be asked to lend their name to promotion claims (.. the results of market research shows that our brand was rated consistently better… which are untrue or not backed by research data. Agencies are required to safeguard all data to meet the requirements for confidentiality and ensure that records are kept for a reasonable time to allow queries arising from the research to be answered. • • • • 12 Think about How do you feel about being interviewed by a market researcher? How would you feel if somebody pretended to be a market researcher but was actually trying to sell you something? What part of the MRS Code is most important to you? Implications of the data protection act
The 1998 Data Protection Act (DPA) came into force in October 2001. Market research is subject to the statutory provisions of the Data Protection Act (at least when any of the data is computer processed and this covers virtually all research data). The Act effectively gives legal force to some of the provisions of the MRS Code (eg in relation to how personal data is collected and processed by all methods). Key definitions The following definitions are important if you are to understand how the Data Protection Act (1998) relates to market and social research. Personal Data: this is any information which can be used to identify an individual person. Examples of your personal data include your name and your address. On its own, your age is not personal data because it alone cannot identify you. Processing of Data: this covers a number of activities, including collecting or gathering data from individuals, recording the individual’s data and carrying out any type of work using the data by whatever means1. Data Subject: This relates to the individual person.
For example, if you have given your personal details to join a store’s loyalty card system, you are a data subject. Data Controller: This is the person who makes decisions about how and why personal data will be processed. For example, in a company which has a database of its customers, at least one person must be identified as being responsible for how that data is used. Notification: All data controllers in the UK must register with the UK’s Information Commissioner and inform the commissioner about the full range of types of personal data • • • 13 which they or their organisations hold. This registration process is called ‘notification’. • Transparency: All data controllers must ensure that data subjects know exactly why their data is being collected and how it will be used. In other words, they must ensure that there is ‘transparency’ for the data subject. Informed Consent: Before data is collected, individuals must understand why the interviewer or researcher needs the information and how this information will be used. They must then agree to give the required information.
This is called giving ‘informed consent’. • Key principles There are very strict guidelines which govern the gathering, recording and storing of personal data for market and social research. These include: • • Personal data must be processed in accordance with the law. It can only be used for the purposes for which it was gathered. This means that a researcher cannot use the same personal data for two different projects, unless the respondent was informed about the second project at the original interview.
Researchers and clients can only ask for information which is relevant and necessary for the purpose of the research. Personal data cannot be transferred outside the European Economic Area (EEA) unless it is protected by very specific safeguards. This means that if your organisation is based outside the EEA it must meet very strict guidelines in order to access data held in the UK. • • Getting full consent from respondents is important because it is difficult to get permissions changed after the research has been completed (and may be unlawful).
Primary data collected in a market research project can only ever be used for market research purposes. Both clients and researchers need to understand this restriction. For example, if a group discussion on the topic of customer service has been videoed as part of a market research project, the client cannot use the video later as part of a customer service training programme for staff. 14 The 1998 Act does not apply to data held about corporate or other types of organisation but it does apply to sole traders and partnerships are regarded as individuals – for example plumbers who work from home.
Individuals in their corporate capacity do have data protection rights. Data collection conditions Strict rules govern the ways in which data is gathered from individual respondents: • The respondent must always give his or her informed consent to being interviewed. This means that he or she must understand why the data is being collected, and how it will be used before agreeing to the interview. If you think you may want to interview a respondent for a second time, you must always get permission for this re-interview at the initial interview.
This means that, if you forget to ask a question in the first interview, you cannot recontact the respondent unless you have already gained their permission. You must always have the respondent’s permission before passing any of their personal data on to another agency. This means that you cannot give the names or addresses – or any other personal data – of your respondents to any other person or organisation if the respondent has not given permission. Clients who commission research can only use the respondents’ personal data for the purposes for which the respondent has given permission.
For example, a client company cannot send information about its products to a respondent who has not agreed to be added to its marketing mailing list. Data controllers (not data processors) have prime responsibility and clients are the data controllers for customer databases. Research agencies are data controllers for any lists they buy or acquire rights for, any databases created from scratch, and any new databases created (for example, by merging any client-supplied data with survey results and all data collected during research as long as it remains linked to individuals).
Remember that there may be more than one data controller per project! • • • • 15 • A direct marketing agency will typically generate mailing lists for a client who will subsequently try to sell to the named individuals. A market research agency operating to the Industry Code of Conduct is not allowed to release the name of respondents, where the client’s intention is to try and sell to them. Think about Do you have any responsibility for collecting or entering data on individuals into computers? Are you a Data Controller in the terms of the Data Protection Act?
Do you need to register with the Information Commissioner? How to comply If you do any of the following then you will need to notify your data controller or the DP Registrar: • Sample from client databases to which you add any research findings or data on things like contact or availability • Have your own list of respondents or buy other lists Hold any data collected during a research project in a manner in which it remains linked to data subjects Create your own databases (from scratch, through purchase or through addition to a client’s database for example)
Key point Almost all people working in market research need to register their company with the Information Commissioner. • • • Own identifiable data You probably don’t need to notify if you: • • Never hold identifiable data in any form Never conduct any processing in your own name How do you notify? UK notification helpline: 01625 545740 UK notification online: www. informationcommissioner. gov. uk 16 The fee is ? 35 a year, renewable annually.
In your notifcation you will need to include: • • • • Purpose (description of category of processing) Data subjects (people about whom data is processed) Data classes (types of data being processed) Recipients (to whom data may be disclosed) Quality standards Linked to ethical issues covered by the codes of practice is the question of quality standards in market research. Clearly research, if it is to be of any use, must be carried out to at least a minimum standard.
There can be little debate that the foundation of reliable market research is the quality of interviewing. Questionnaire design and other office based activities certainly effect the output but so does how well and conscientiously individual interviewers carry out their work. Yet these workers are not of professional standing and often have only limited training before starting work. Moreover, face to face interviewers (phone interviewers are in a different position) work largely unsupervised and with limited contact with head office.
Also they often work part time and for several companies and this could effect their loyalty to any one organisation. A specific scheme called the Interviewer Quality Control Scheme (IQCS) has been in place for several years with the objective of developing and raising fieldwork standards. The detailed requirements of the Scheme change year to year but include: • Minimum training periods for new interviews and a requirement that even experienced interviews have some training on starting work for another company.
Monitoring of interviewers’ work through independent recontacting of a sample of respondents (back checking) – the purpose of this is especially to ensure that interviews are not just made up by a dishonest interviewer (rare but not completely unknown). Appraisal of interviewers’ work including by on-going accompaniment by trained supervisors or head office staff. Office based systems to ensure that all the above is carried out. • • • These requirements are as set out for face to face interviewing; there are comparable IQCS requirements for phone interviewing. Agency 17 embership of the scheme involves an annual visit by IQCS inspectors to ensure that the requirements are being met. Whilst vital, fieldwork is only part of the research process and it has been increasingly recognised that published standards (which can be independently assessed) also have a place in activities such as client contact and contracting, research design and planning, data processing and reporting. Market Research Quality Standards Association (MRQSA) is an all-industry body which brings together a number of trade and professional bodies, including the MRS.
MRQSA was set up to develop minimum standards for market research, data collection and data processing. These standards have now evolved into BS7911. SCARY STORY A member of the public complained that a government department had disclosed her name and address to a market research company for the purposes of conducting research and that subsequently, a representative from the market research company visited her home to interview her. She felt that the Department had breached the Data Protection Act 1988 and had made her data available without her consent to a private firm.
On investigation of the complaint it was found that the market research company had been given a list of customers’ names and addresses that were selected at random from the Department’s databases for the purpose of this survey only. Everyone had received a letter from the Department informing them about the survey, and indicating that data provided in interviews would be held in the strictest confidence by the market research company and that the names of those participating would not be disclosed to the Department.
Fortunately for both the government department and the market research company, they were registered with the Information Commissioner and had complied with the Data Protection Act by informing the respondents that data would be held confidential. However, it is a scary moment if an investigation is instigated so it is important to register and understand the implications of the Act. 18 Chapter 2 Research Objectives Introduction In this chapter you will learn about: • How market research can be used to help organisations grow by finding new markets for their products or new products for their markets.
How to separate out the aims of market research from the research objectives and the research questions. How to define a problem that can be solved by market research. How to write a brief for a market research project. What to expect in a market research proposal and how to choose between alternative proposals. • • • • Decisions that can be guided by market research There are four directions a company could look to expand its business. • It can seek more business from its existing customers by aiming to grow its market share with the products that are already in its portfolio.
Customer satisfaction studies are commonly carried out to identify opportunities in this box. It can seek expansion by taking its traditional product range into new markets. For example it can seek expansion in 19 • export markets where it hasn’t previously had any sales. Market research can help here by providing information on the size of the opportunity, the competition, the best route to market and so on. • It can seek to persuade existing customers that they should buy different products or services – a sort of product line extension.
In this case, market research could explore the needs of customers for the products that are contemplated for the extended portfolio. It can explore the possibility of selling new products to a new range of customers. Since this is the most speculative of options, market research plays a vital role in showing the complete map of people’s needs, how they are currently being satisfied or not, their likelihood of buying new products or services etc. • These four opportunities for business expansion are identified in Figure 2. Figure 2. 1 A Strategic Framework For Market Research In Business Expansion 20 “High level” business questions that can be answered by market research Note: this framework was first promoted by Igor Ansoff as the “product-market matrix” in the Harvard Business Review in the Sept/Oct edition of 1957. It has become one of the most popular matrices and is used to identify the basic alternatives strategies which are options for a firm wanting to grow All businesses face marketing problems or opportunities.
Think of some examples where you believe that companies should be using market research and probably are not. What are the main areas where you believe market research has an application? These problems could be located in a framework such as the Ansoff grid or they may address fairly high level questions of a type that are frequently asked in the board room. Examples of such questions are: Financial problem solving • • • How can we reverse a fall in sales (or achieve an increase in sales)? How can we obtain more profit from the product/service?
How can we improve the satisfaction of our customers so that loyalty is improved? Meeting opportunities • How can we improve our offer to customers (the product/service, the delivery, the guarantees, the service support etc)? What is the optimum price we should charge? How can we segment the market so that we can better satisfy customers’ needs? What is the best route to market? How can we persuade people to buy our products when they are being tempted in other directions? How can we increase our sales in other territories? Which new products or services could we offer to our customers? • • • • • 21 Evaluation and diagnosis • • • What is the cause of the fall off in sales and/or profitability? Why are people rejecting our product in favour of those from other companies? What are the triggers that would cause people to buy our products/services (or the barriers that are stopping them)? These “high level” questions are often the way that a market research need is expressed by senior management and it is the market researcher’s responsibility to convert these to research objectives that can be answered by a study.
In addition to these high level questions, there are many detailed questions that can be answered by market research and these are listed as follows: Detailed questions that can be answered by market research The market and its structure • • • • The market size (usually broken down by segments) The route to market (through the value chain) The companies that compete in the market (and their market shares) The numbers of consumers (again broken down by segment) Consumer needs and satisfaction • • • Factors that trigger the purchase of the product (or service) Factors that influence the choice of supplier The importance of specific issues on the selection of supplier (such as product quality, availability, price, brand etc) Consumers satisfaction with the product (or service) Product information • Products that are purchased 22 • • • Un-met needs (new product opportunities) Attitudes to new products (either in concept, as prototypes or in their finished form) Packaging of the product Price information • • Prices of the products (list and net) Price sensitivity (elasticity) of the product Values attached to various aspects or components of the offer Promotion information • • • • • • Sources through which consumers and potential consumers acquire their information on products and services Messages that trigger an interest in the products/services Attitudes to different adverts including new adverts Awareness of advertising Effectiveness of different forms of advertising Readership of different media
Distribution information • • • • • Role of different levels in the value chain Price levels and margins in the value chain Factors that prompt merchants and distributors to stock products Marketing and merchandising within the value chain Availability and stocking levels in the value chain Segmentation opportunities • • Demographics of the population in terms of age, gender, income group, location Behaviour of the population in terms of how they buy (eg frequency of purchase, place of purchase, size of purchase etc) 23 •
Needs of the population in terms of what drives their selection of a supplier (eg often referred to as the drivers behind the decision such as convenience, bargain hunters, safety seekers etc). Think about Think about a problem in your organisation that could benefit from market research. Write down the broad aims of the research, the research objectives that must be achieved to meet the aim and some key questions that should be answered by the research. Defining market research problems Key point Most research projects that go wrong do so because the fundamental problem that has lead to the research has not been fully understood or defined.
Every research project should have a defined and explicit objective which clearly states why the research is being carried out. All other aspects of planning and carrying out the research flow from this objective; in other words if they do not contribute towards achieving this objective they almost certainly should not be undertaken. The objective should relate to the marketing decision which will have to be made or the problem that needs a solution (and decision). Getting the client to spell out their issue and identify the heart of the problem, is half the battle when running a research project.
A problem defined is a problem half solved! Three questions determine if the research needs to take place: • • • What research exists already? What research is needed? Can the research readily be undertaken? The objectives of research can range from helping a company improve its satisfaction rating amongst customers, to finding new markets for its products through to helping with the launch of new products. Let’s take an example of a company that is suffering with 24 stagnant sales. The objective of the research is to find out the cause of the stagnant sales and how to get them moving upwards.
Where the starting point for the research is a problem (or potential problem/opportunity) rather than a clear-cut decision to be made, an effective approach is to think of and list as many objectives as possible for the research. In other words develop alternate hypotheses. This may be done by the researcher but better still at a “brainstorming” of all the key staff involved. The researcher may make a specific contribution to this process based on the results of previous research in related areas. He or she may also usefully act as a facilitator at that meeting.
Possible reasons for the company’s stagnant sales could be: 1. 2. 3. 4. 5. 6. 7. The market is declining. The prices of the company’s products are too high relative to the competition. The benefits that the company is offering in terms of its products and services relative to the competition are too low. The company is losing customers because of a failure in its products or services. The people who are buying the company’s products are old and retiring. New buyers do not know of the company. The company’s image is tired and old fashioned. The company’s sales force is not active.
With only a little effort, the list of hypotheses generated is likely to be quite extensive and probably more than can be sensibly covered in any one research project. This would mean that some selection will have to be made of the hypotheses which are to be covered in the research project. This is likely to be based on a judgement of which is the more likely explanation of the problem; evidence that is already available – including from previous research as well as from more informal sources – may enable some hypotheses to be confidently discounted.
For example, in the above listing, if there haven’t been any complaints, it could reasonably be assumed that hypothesis number 4 is not valid. However, the sales force could be constantly reporting that the prices are too high against the benefits that are being offered. This could point to the hypotheses which do seem worth researching and will be the basis of a valid research objective. 25 To write out clear objectives you need information about the background of a problem. You might find this in internal records like sales reports, complaint statistics and customer service feedback forms.
Usually though, you must get this by talking to the client and asking lots of questions. What really lies at the root of the problem which the client is describing? In many cases, the client may not have identified the root of the problem correctly. The researcher therefore needs to get as much background information as possible about the client’s organisation and their market. What is the background to the market, or to the issue? and What factors led to the current problem? A useful framework for identifying the links between a problem and a research objective is shown in Figure 2. . Write down a high level question that you think your company or organisation would like to answer. Then think through all the factors that could be causing this question to arise for your company or organisation. Finally, think through all the information that you need to fully understand the problem and the level of knowledge that your company holds on the subject. Figure 2. 2 Worksheet for identifying links between a problem and research objective 26 Think about In your market, what do you think drives people to use your company/organisation?
Is it the quality of your products or services, your prices, the ease with which you do business with them, your delivery etc? Make a list of all the possible factors. Now assign a weight to these factors to indicate how important they are to the customer. Do so by spending points out of 100 across the different factors – you can spend the points how you like but you must spend all 100. What would be the implications to your company if you are wrong in this assessment? How easy or difficult would it be to ask customers why they choose (or don’t choose) your company and to get an honest and useful answer?
Defining a research objective To meet the defined objective, a range of information will be required and will in turn be an input into the decisions which will be eventually made. For a given objective the information list, with only a little thought, will soon be quite long; possibly too long. For example, in the case of the company with the stagnant sales, the information objectives could be as follows: Establish the reasons for stagnant sales and suggest means by which sales can be increased. The demographics of who is buying the product at present compared to the demographics of people buying competitors’ products Satisfaction of customers and potential customers with the products they are buying Attitudes of customers and potential customers towards the value for money of the products from different suppliers Features about the product that customers would like to see improved The awareness amongst potential customers of product Factors that would prompt potential customers to buy from the company. • • • • • 27
This list is by no means exhaustive and other information headings may also be considered important. There is no such thing as an absolutely right or wrong coverage although the effectiveness of the research will be shaped by what is included or left out. Often the problem is not so much that headings are left out but that the coverage is too broad in relation to the research resources that are available (in particular the budget and the timetable). The initial “wish list” of headings may, therefore, need pruning or separating into what is absolutely vital to know and what is of lesser importance.
Taking time and effort in defining the coverage of the research is essential if the results are to truly assist the decision making process. In addition, however, a well defined research coverage is of practical value in latter stages of the project and particularly at the questionnaire design stage. With the coverage defined and listed much of the work involved in developing a questionnaire is already done. Key point Pinpoint the objective of the research and exactly what information is required at the outset. The brief, the proposal and their importance to the project Not all companies can afford the services of market research agencies.
Indeed, there are many occasions when market intelligence is required but the business decision does not justify a large and extensive research project. In these cases some desk research could be carried out or a small number of exploratory interviews may suffice (see Chapter 4). It does not matter if the research project is a DIY job or project that is to be outsourced, it is good practise to prepare a market research brief. The brief is the statement that sets out the background to the research and what objectives it is hoped will be met. It is helpful to write down (perhaps on one or two sides of paper) answers to the following: 1.
Why do this market research? What action will be taken when the research is completed? This is arguably the most important part of the brief as it will allow the researcher to work out all the other things that are required such as the specific information that will be useful (see item 5 below) 28 2. What has caused this problem or led to this opportunity? Here it is helpful to describe the history that has led up to the research. A description of the product/service is important and so too it would be good to talk about the way that the market is changing 3.
What is known about the area of research already? It can be helpful to the market researcher to be aware of what is already known and then they can build on it and not waste money or time re-inventing it. Also, knowledge on the structure and behaviour of a market allows the researcher to be more precise in their proposals. For example, most sponsors of research have carried out some desk research or have internal reports that provide views of the market. This could be made available to the researchers who are planning a research programme if they need a deeper understanding of the market. . Target groups for the research? Survey research has to be targeted at someone. The target for interviews needs to be scoped precisely. If they are householders, should they be people who have bought a product or who are thinking of buying a product? Should they be buyers or specifiers? Should they be multiple purchasers or not? When the various target groups are listed there is a temptation to say – “yes, all of these” but remember that the greater the scope of the project the more it will cost and (usually) the longer it will take. 5.
What specific information is needed from the research? (e. g. market size, trends, buying behaviour, customer needs, segmentation) The person wanting the market research has almost certainly got some key information gaps that need filling. Listing them will help the professional market researchers work out if they are the right ones required for the decision and action that is planned. The professional market researchers can be expected to flesh out the information objectives with their own suggestions as they know better than anyone what can and can’t be achieved by market research. . What is the proposed budget? Seldom are there unlimited funds for research and more often there are very limited funds. In this case it is helpful to know what the budget is, for otherwise the researchers could design a full and comprehensive plan that delivers detail and accuracy to meet the action 29 and information requirements, only to be sent back to the drawing board because there is only ? 15,000 (or whatever). 7. Are there any initial ideas for the research method? A client who is sponsoring a research project may well have a method in mind.
Now is also the time to say if there is distrust of telephone interviews and a preference for face to face or if focus groups would be well received. 8. Are there any reporting requirements? Increasingly the default method of reporting in the market research industry is a set of presentation slides which doubles as the presentation and the report. Researchers have no problem writing a narrative report but they would typically have to charge an extra three or four days of their time for its preparation – incurring a cost of a few thousand pounds. 9. When are the findings required?
Most research has a demanding timetable and sometimes this can be punishing. The dates by which the research is required should be specified so that even if they are really difficult, the research supplier can try to be accommodating, perhaps with an interim debrief or regular reporting sessions. The research brief should be a dialogue and even the most thorough brief covering all the issues listed will generate some additional questions from the researchers. This is healthy and to be expected as it indicates that the problem is being thought through.
Someone who is unsure about methods or budgets for a research project may wish to talk to a market research agency before they write the brief to find out what is possible and how much it might cost. A sample brief from a manufacturer of commercial vehicles is shown in Figure 2. 3. Figure 2. 3 Request For Proposal – Researching Attitudes To The Vigour Range Of Commercial Vehicles Background Information Truck Master offers a comprehensive range of commercial vehicles. From 7. 5 to 44 tonnes, there is a variety of standard chassis to suit every UK road transport application. 0 Launched in 2003, the Truck Master Vigour series was the most technologically advanced, comprehensive and fully integrated range of trucks ever built. The Vigour range was developed with one aim in mind – to produce a truck with total capabilities in terms of operating costs, comfort, safety, performance and environmental compatibility that are superior to anything its competitors can offer – now or in the immediate future. The Vigour product range currently stands at 65 models. Objectives The overall goal of the study is to measure the Vigour ownership experience.
Specific objectives include providing detailed information on: Fuel consumption Reliability Technological features Driver comfort The after-sales experience – Servicing Parts availability Road-side assistance The overall relationship with dealer The product experience – Project Design Agencies should provide proposals based upon two options: Option 1 – 100 CATI telephone interviews (20-minute maximum length) with a sample of operators. 2 sub-segments of 200d, 2005 registration Vigour trucks. Questionnaire to include a selection of open-ended questions.
Option 2 – Telephone interviewing based on 2 larger sub-segments of 50 operators. Initial tele-depth interviews may also be considered to aid the development of the main CATI questionnaire. Agencies should list these tele-depths as a separate investment. Deliverables Summary report and verbatim comments from tele-depths (if depths are commissioned as part of this study). 31 Structured questionnaire to include both pre-coded and open-ended questions. Telephone interviews with operators from sample provided (approx. 500 names). Prepare and produce tabulations.
Verbatim output from open-ended questions. Prepare report of the key findings. Presentation of results at Truck Master Headquarters (please quote as a separate option). Project Timetable Request for proposal distributed Proposals due at TM UK Agency selected Briefing meeting 8th May 19th May 22nd May w/c 22nd May Company/Agency Interaction This brief has been sent to three agencies. Sponsors of this will be available throughout May for any queries that may arise. The proposal The proposal is the document, prepared by whoever will carry out the research.
It is, as the name suggests, a proposal for carrying out a project and becomes the basis of the contractual obligation between the sponsor and the research agency. There are usually six main sections to a proposal. The introduction The first section states the background and circumstances that have led to the research project being considered. The researchers may carry out some secondary research to “add value” to the brief and to provide additional context and understanding to the subject. 32 The objectives The next section of the proposal describes the objectives of the project both in summary and in detail.
Figure 2. 4 presents an example of objectives prepared for a company that wants market research to show shoppers’ attitudes to a retail park. Figure 2. 4 Objectives For The Mount Pleasant Retail Park Study The main reasons for carrying out the research on the Mount Pleasant Retail Park are as follows: • • • To get a better understanding of who the customers are and where they are coming from. To find out why they come, and what they think of the retail sites they have visited. To find out how the retail park can be better adapted to customers’ and potential customers’ needs.
Using this information our Client can: • • • • • Rectify weaknesses and build on strengths (eg in promotional campaigns) Strengthen the loyalty of existing customers Pull in new customers or those that are occasional visitors Use the information to pull in new clients to the vacant shops Justify to existing clients that they have a good deal with the shops they have leased Answers to the following questions will be obtained: • • • • • • Who is in the shopping party? Who made the decision to visit the retail park today? What was the principal purpose of the visit? Where have you come from?
How far have you travelled in distance and time? How did you learn about the retail park in the first instance? How did you get here – which mode of transport did you use? 33 • • • • • • • • • • How many times have you visited in the last three months – that is since the beginning of February? Which outlets/shops did you visit today? How long have you spent here? What would have made you stay longer? How much did you spend (a) on food or drink and (b) on things to take away with you? What did you particularly like about the park? What did you dislike about it? Where would you have gone today to shop if you had not come here?
When do think you will visit again? How likely are you to recommend the retail park to a friend or relation? The methods This section describes the methods that will be used and offers reassurance that the design is the most appropriate for the research problem. The choice of methods will usually be a compromise between the accuracy that is required and the budget that is available. The section needs to describe the methods in terms of: will the method be qualitative, quantitative or both? will data be collected by telephone, face to face interview or self completion questionnaires? hat will be the structure and the accuracy of the sample? It also needs to justify the choice of the recommended method. Time schedule The proposal will state a timetable for the research, usually outlining the important milestones. Costs The proposal will provide a quotation of the cost of the research and may offer options for different sizes of samples or different numbers 34 of focus groups. Sometimes incentives are offered to respondents and this is separated out in the costing. It is quite normal for a research agency to ask for terms of payment that include invoicing 50% on commission with the balance on completion.
This helps the cash flow of agencies that incur large fieldwork costs over the two to three months period of the project. Credentials Finally, a proposal will state the experience of the researchers carrying out the work. Usually short biographies are provided of the research team that will be responsible for the project. Selecting the preferred agency It is quite normal for three agencies to be asked to quote for a project. The person or team that is commissioning the research will need some criteria for choosing an agency to carry out the work. One of the bids may be so utstanding (or two of them may be so poor) that there is only one contender. Usually, however, it is hard to choose and the sponsor has to make a tough evaluation of the proposals. An example of an evaluation sheet is shown below. A refinement of the evaluation tool is to apply a weight with a score that indicates the importance of each criterion. These weights can, of course, be modified according to the needs of the research sponsoring company. Figure 2. 5 Checklist For Evaluating Market Research Proposals A score of 5 is excellent and 1 is very poor.
Criteria Importance 10 15 20 15 25 15 100 35 Agency 1 Agency 2 Agency 3 Interest and enthusiasm shown for the project Understanding of the problem shown by the agency Experience and reputation of the agency in the field of study Thoroughness and quality of the proposal Robustness of the proposed method Value for money Total Score Think about What would you look for from a market research supplier? Make a list of the criteria that you think would be important and spend points to indicate the importance of these criteria to you. Key point Most decisions in business do not need market research.
Market research should be used for important decisions and where the way forward isn’t clear. 2. 10 things to think about when considering a market research project 1. Ask yourself why the market research is needed – what will you do with it when you have got it? If the answer to this is at all unclear, re-consider your belief that you need market research. Ask around to find out if your company already has any reports/studies in this area. In some areas, data which is a few years old is still valid. Certainly, the background of knowledge from earlier studies can be very useful as guides to the size and structure of the market.
Find out if there are any published studies in this field which can be purchased off the shelf. There are directories (eg MARKETSEARCH) which list published studies. If you know anyone who has commissioned market research (of this type) before, ask them for their advice. There is no substitute for experience and there may be someone close by who has ‘been there’ before. Prepare a written brief – one page will do – stating the background to the problem/opportunity, the action which will be taken, the key goals you want the research to achieve and any critical questions you would like answering.
If you have a timetable limitation or budget, it would be helpful to state this in the brief for otherwise the agency may pitch way off mark. Also, if you have any specific expectations such as certain deliverables, state what they are in the brief so the agency can respond. 3. 4. 5. 36 6. If you think that the research requires external help from an agency, talk on the phone to a couple of agencies to discuss the implications and cost of the project. If necessary, refine the brief and send it to a small number of agencies (three is reasonable).
Expect follow up from the agencies and be concerned if you don’t get it. They may want to meet face to face if it is a large and complicated project, otherwise, phone contact is normal. Allow at least one week and up to two weeks for the agency to come back with its proposals (sometimes called ‘return of brief’). This will state the agencies understanding of the background to the research (they should add to your brief and not just regurgitate it), the research aims and objectives, the methods (this is the crucial bit and you should expect some detail here – ho will be interviewed, how and in what numbers), the timing and cost. Also, it is normal for the proposal to give a profile of the team which will be leading the study and their experience in this type of work. Choose your agency on the basis of who you think can best carry out the work. Their ability to collect sound information is just as important as whether or not they have worked in your market before. The quality of the interviewing team is crucial. Cost is also an issue and this can vary considerably depending on methods chosen, contingencies which are built in, their hunger for work etc.
Be prepared to personally explain to those agencies that haven’t got the job why the business has gone elsewhere. Try to give them a suitable and not insulting explanation – you may want to work with them in the future. (The fact that there can only be one winner is a good reason for not asking too many agencies to quote – you are sure to leave some bad taste behind as the agencies will have put in at least two days unpaid work in preparing their proposals). 7. 8. 9. 10. Hold a commissioning meeting with the winning agency and, at this early stage, arrange milestones and reporting sessions.
It will drive the study and ensure that it comes in on time. Make sure you speak to the agency frequently throughout the study. Quiet clients get pushed to the back of the queue. 37 SCARY STORY A company e-mailed a brief to a large number of market research agencies clipped from ESOMAR’s site. The company was interested in selling plastic gnomes to garden centres. The brief was structured and clear as to its requirements. It wanted to know how many garden centres sold gnomes, what prices they charged, where they bought them from and a host of other questions.
It was very specific about the method that should be used and asked for a quotation for carrying out 1,000 interviews with garden centres throughout the UK. The brief laid out the required timetable which was for the research to be commissioned on the 16th November with data available on the 13th January. In the event, no proposals were received by the company. Agencies were put off by three things: • It had been mailed to dozens of agencies. This implied a disregard for the considerable collective time of all the agencies that would be required to prepare thorough proposals when only one had the chance of being awarded the job.
There are only 3,000 garden centres in the UK and a considerable number of these belong to one group. The suggested method would not have been feasible and in any case was seriously exces