Conducting Marketing Research

Good marketers need insights to help them interpret past performance as well as plan future activities. To make the best possible tactical decisions in the short run and  strategic decisions in the long run, they need timely, accurate, and actionable information about consumers, competition, and their brands. Discovering a consumer insight and understanding its marketing implications can often lead to a successful product launch or spur the growth of a brand

A series of novel consumer innovations through the years—including Kleenex facial tissues, Kotex feminine napkins, and others—have transformed Kimberly-Clark from a paper mill company to a consumer products powerhouse. Among the company’s recent successes was Huggies Supreme Natural Fit, named one of the most successful new product launches in 2007. Nearly three years of research and design were invested in the creation of the new diaper. After assembling a sample of new mothers from different parts of the country with different income backgrounds and ethnicities, Kimberly-Clark’s marketers conducted inhome

interviews and placed motion-activated cameras in homes to learn about diaper-changing routines. Seeing new moms constantly struggle to straighten a squirming baby’s legs when putting on a diaper led to the insight that the new diaper also needed to be shaped to better follow the curves of a baby’s body. Because mothers said they wanted their older babies to feel like they weren’t wearing a diaper, the new diaper also had to be thinner with a closer fit, so new polymers cut the width of the imbedded absorbent by 16 percent and stretch was added to the back waistband. When research also revealed that moms often used the cartoon graphics on another diaper to distract the baby during a diaper change, more active images of Disney-licensed Winnie the Pooh characters were added. The successful launch of the research-inspired innovation boosted Kimberly-Clark’s market share by one to two percentage points and significantly contributed to the company’s $4 billion-plus sales in diapers that year.

In this chapter, we review the steps in the marketing research process. We also consider how marketers can develop effective metrics for measuring marketing productivity.

The Marketing Research System

Marketing managers often commission formal marketing studies of specific problems and opportunities. They may request a market survey, a product-preference test, a sales forecast by region, or an advertising evaluation. It’s the job of the marketing researcher to produce insight into the customer’s attitudes and buying behavior. Marketing insights provide diagnostic information about how and why we observe certain effects in the marketplace, and what that means to marketers. of “makes me feel like a smart shopper,” its marketers used  those insights to develop their “Save Money, Live Better” campaign. Gillette’s Venus razor has become the most successful female shaving line ever—holding more than 50 percent of the global women’s shaving market—as a result of insightful consumer research that led to product design, packaging, and advertising cues that better satisfied female shaving needs.

Venus Razor As part of a $300 million budget for the development of its first razor designed solely for women, Gillette conducted extensive consumer research and performed numerous market tests. The razor, called Venus, was a marked departure from previous women’s razor designs, which had essentially been colored or repackaged versions of men’s razors. After research revealed that women change their grip on a razor about 30 times during each shaving session, Gillette designed the Venus with a wide, sculpted rubberized handle offering superior grip and control, and an oval-shaped blade in a storage case that could stick to shower walls. Research also indicated that women were reluctant to leave the shower in order to replace a dull blade, so the case was made to hold spare blade cartridges. When Gillette research later revealed four distinct segments of women shavers—perfect shave seekers (no missed hairs), skin pamperers, pragmatic functionalists, and EZ seekers—the company designed Venus products for each of them

Gaining marketing insights is crucial for marketing success. If marketers lack consumer insights, they often get in trouble.When Tropicana redesigned its orange juice packaging, dropping the iconic image of an orange skewered by a straw, it failed to adequately test for consumer reactions, with disastrous results. Sales dropped by 20 percent, and Tropicana reinstated the old package design after only a few months.

We define marketing research as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. Spending on marketing research topped $28 billion globally in 2009, according to ESOMAR, the world association of opinion and market research professionals.5 Most large companies have their own marketing research departments, which often play crucial roles within the organization. Procter & Gamble’s Consumer & Market Knowledge (CMK) market research function has dedicated CMK groups working for P&G businesses around the world to improve both their brand strategies and program execution, as well as a relatively smaller, centralized corporate CMK group that focuses on a variety of big-picture concerns that transcend any specific line of business.

Marketing research, however, is not limited to large companies with big budgets and marketing research departments. Often at much smaller companies, everyone carries out marketing research— including the customers. Small companies can also hire the services of a marketing research firm or conduct research in creative and affordable ways, such as :

1.	Engaging students or professors to design and carry out projects—Companies such as American Express, Booz Allen Hamilton, GE, Hilton Hotels, IBM, Mars, Price Chopper, and Whirlpool engage in “crowdcasting” and are sponsors of competitions such as the Innovation Challenge, where top MBA students compete in teams. The payoff to the students is experience and visibility; the payoff to the companies is a fresh sets of eyes to solve problems at a fraction of what consultants would charge
2.	Using the Internet—A company can collect considerable information at very little cost by examining competitors’Web sites, monitoring chat rooms, and accessing published data.
3.	Checking out rivals—Many small businesses, such as restaurants, hotels, or specialty retailers, routinely visit competitors to learn about changes they have made.
4.	Tapping into marketing partner expertise—Marketing research firms, ad agencies, distributors, and other marketing partners may be able to share relevant market knowledge they have accumulated. Those partners targeting small or medium-sized businesses may be especially helpful. For example, to promote more shipping to China, UPS conducted several in-depth surveys of the Chinese market to portray its complexities but also its opportunities for even small and medium-sized businesses.

Most companies use a combination of marketing research resources to study their industries, competitors, audiences, and channel strategies. Companies normally budget marketing research at 1 percent to 2 percent of company sales and spend a large percentage of that on the services of outside firms.Marketing research firms fall into three categories :

1.	Syndicated-service research firms—These firms gather consumer and trade information, which they sell for a fee. Examples include the Nielsen Company, Kantar Group,Westat, and IRI.
2.	Custom marketing research firms—These firms are hired to carry out specific projects. They design the study and report the findings.
3.	Specialty-line marketing research firms—These firms provide specialized research services. The best example is the field-service firm, which sells field interviewing services to other firms.

To take advantage of all these different resources and practices, good marketers adopt a formal marketing research process.

The Marketing Research Process

Effective marketing research follows the six steps shown in Figure 4.1. We illustrate them in the following situation

American Airlines (AA) was one of the first companies to install phone handsets on its planes. Now it’s reviewing many new ideas, especially to cater to its first-class passengers on very long flights, mainly businesspeople whose high-priced tickets pay most of the freight. Among these ideas are: (1) an Internet connection primarily for e-mail but with some limited access to Web pages, (2) 24 channels of satellite cable TV, and (3) a 50-CD audio system that lets each passenger create a customized in-flight play list. The marketing research manager was assigned to investigate how first-class passengers would rate these services, specifically the Internet connection, and how much extra they would be willing to pay for it. One source estimates revenues of $70 billion from in-flight Internet access over 10 years, if enough first-class passengers paid $25. AA could thus recover its costs in a reasonable time. Making the connection available would cost the airline $90,000 per plane

Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives

Marketing managers must be careful not to define the problem too broadly or too narrowly for the marketing researcher. A marketing manager who says, “Find out everything you can about firstclass air travelers’ needs,” will collect a lot of unnecessary information. One who says, “Find out whether enough passengers aboard a B747 flying direct between Chicago and Tokyo would be willing to pay $25 for an Internet connection for American Airlines to break even in one year on the cost of offering this service,” is taking too narrow a view of the problem.

The marketing researcher might even ask, “Why does the Internet connection have to be priced at $25 as opposed to $15, $35, or some other price? Why does American have to break even on the cost of the service, especially if it attracts new customers?” Another relevant question to ask is, “How important is it to be first in the market, and how long can the company sustain its lead?”

The marketing manager and marketing researcher agreed to define the problem as follows: “Will offering an in-flight Internet service create enough incremental preference and profit for American Airlines to justify its cost against other possible investments in service enhancements American might make?” To help in designing the research, management should first spell out the decisions it might face and then work backward. Suppose management outlines these decisions: (1) Should American offer an Internet connection? (2) If so, should we offer the service to first-class only, or nclude business class, and possibly economy class? (3) What price(s) should we charge? (4) On what types of planes and lengths of trips should we offer the service?

Now management and marketing researchers are ready to set specific research objectives: (1) What types of first-class passengers would respond most to using an in-flight Internet service? (2) How many first-class passengers are likely to use the Internet service at different

price levels? (3) How many extra first-class passengers might choose American because of this new service? (4) How much long-term goodwill will this service add to American Airlines’ image? (5) How important is Internet service to first-class passengers relative to other services, such as a power plug or enhanced entertainment?

Not all research projects can be this specific. Some research is exploratory—its goal is to shed light on the real nature of the problem and to suggest possible solutions or new ideas. Some research is descriptive—it seeks to quantify demand, such as how many first-class passengers would purchase in-flight Internet service at $25. Some research is causal—its purpose is to test a causeand- effect relationship.

Step 2 : Develop the Research Plan

The second stage of marketing research is where we develop the most efficient plan for gathering the needed information and what that will cost. Suppose American made a prior estimate that launching in-flight Internet service would yield a long-term profit of $50,000. If the manager believes that doing the marketing research will lead to an improved pricing and promotional plan and a long-term profit of $90,000, he should be willing to spend up to $40,000 on this research. If the research will cost more than $40,000, it’s not worth doing.10

To design a research plan, we need to make decisions about the data sources, research approaches, research instruments, sampling plan, and contact methods.

DATA SOURCES The researcher can gather secondary data, primary data, or both. Secondary data are data that were collected for another purpose and already exist somewhere. Primary data are data freshly gathered for a specific purpose or for a specific research project. 

Researchers usually start their investigation by examining some of the rich variety of low-cost and readily available secondary data, to see whether they can partly or wholly solve the problem without collecting costly primary data. For instance, auto advertisers looking to get a better return on their online car ads might purchase a copy of J.D. Power and Associates’ semiannual Power Auto Online Media Study, a survey that gives insights into who buys specific brands and where on the Web advertisers can find them.

When the needed data don’t exist or are dated, inaccurate, incomplete, or unreliable, the researcher will need to collect primary data. Most marketing research projects do include some primary-data collection.

Observational Research Researchers can gather fresh data by observing the relevant actors and settings unobtrusively as they shop or consume products.12 Sometimes they equip consumers with pagers and instruct them to write down what they’re doing whenever prompted, or they hold informal interview sessions at a café or bar. Photographs can also provide a wealth of detailed information.

Ethnographic research is a particular observational research approach that uses concepts and tools from anthropology and other social science disciplines to provide deep cultural understanding of how people live and work.13 The goal is to immerse the researcher into consumers’ lives to uncover unarticulated desires that might not surface in any other form of research.14 Firms such as Fujitsu Laboratories, Herman Miller, IBM, Intel, Steelcase, and Xerox have embraced ethnographic research to design breakthrough products.Here are three specific examples.

-	Bank of America’s ethnographic research that followed female baby boomers at home and while they shopped yielded two insights—women rounded up financial transactions because it was more convenient, and those with children found it difficult to save. Subsequent research led to the launch of “Keep the Change,” a debit card program that rounded purchases up to the nearest dollar amount and automatically transferred the added difference from a checking to a savings account. Since the launch, 2.5 million customers have signed up for the program, opening 800,000 new checking accounts and 3 million new savings accounts in the process
-	To boost sagging sales for its Orville Redenbacher popcorn, ConAgra spent nine months observing families in their homes and assembling their weekly diaries of how they felt about various snacks. In reviewing the results, ConAgra found a key insight: the essence of popcorn was that it was a “facilitator of interaction.” Four nationwide TV ads followed with the tagline, “Spending Time Together: That’s the Power of Orville Redenbacher
-	When package design firm 4sight, Inc., was hired by PepsiCo to come up with a new design for Gatorade’s 64-ounce package, its team initially assumed the package functioned as a “family pack” to be used for multiple servings to multiple users in the household. In watching moms in their homes, however, team members were surprised to find them taking the jug out of the refrigerator—for example, after a hard workout—and chugging it right there on the spot! That insight led to a totally different package design, one that could be easily gripped and grabbed.

Ethnographic research isn’t limited to consumer companies in developed markets. In a business-to-business setting, GE’s ethnographic research into the plastic-fiber industry revealed to the firm that it wasn’t in a commodity business driven by price, as it had assumed.

Instead it was in an artisanal industry, with customers who wanted collaborations at the earliest stages of development. GE completely reoriented the way it interacted with the companies in the industry as a result. In developing markets, ethnographic research also can be very useful, especially in far-flung rural areas, given that marketers often do not know these consumers as well.

The American Airlines researchers might meander around firstclass lounges to hear how travelers talk about the different carriers and their features or sit next to passengers on planes. They can fly on competitors’ planes to observe in-flight service

Focus Group Research A focus group is a gathering of 6 to 10 people carefully selected by researchers based on certain demographic, psychographic, or other considerations and brought together to discuss various topics of interest at length. Participants are normally paid a small sum for attending. A professional research moderator provides questions and probes based on the marketing managers’ discussion guide or agenda. In focus groups, moderators try to discern consumers’ real motivations and why they say and do certain things. They typically record the sessions, and marketing managers often remain behind two-way mirrors in the next room. To allow for more in-depth discussion with participants, focus groups are trending smaller in size.

Focus-group research is a useful exploratory step, but researchers must avoid generalizing from focus-group participants to the whole market, because the sample size is too small and the sample is not drawn randomly. Some marketers feel the research setting is too contrived and prefer to seek other means of collecting information that they believe are less artificial. “Marketing Memo : Conducting Informative Focus Groups” has some practical tips to improve the quality of focus groups.

In the American Airlines research, the moderator might start with a broad question, such as, “How do you feel about first-class air travel?” Questions then move to how people view the different airlines, different existing services, different proposed services, and specifically, Internet service.

Survey Research Companies undertake surveys to assess people’s knowledge, beliefs, preferences, and satisfaction and to measure these magnitudes in the general population. A company such as American Airlines might prepare its own survey instrument to gather the information it needs, or it might add questions to an omnibus survey that carries the questions of several companies, at a much lower cost. It can also pose the questions to an ongoing consumer panel run by itself or another company. It may do a mall intercept study by having researchers approach people in a shopping mall and ask them questions.

As we’ll discuss in more detail later in this chapter, many marketers are taking their surveys online where they can easily develop, administer, and collect e-mail and Web-based questionnaires. However they conduct their surveys—online, by phone, or in person—companies must feel the information they’re getting from the mounds of data makes it all worthwhile. San Francisco–based Wells Fargo bank collects more than 50,000 customer surveys each month through its bank branches. It has used customers’ comments to begin more stringent new wait-time standards designed to improve customer satisfaction.

Of course, by putting out so many surveys each month, companies may run the risk of creating “survey burnout” and seeing response rates plummet. Keeping a survey short and simple and contacting customers no more than once a month are two keys to drawing people into the data collection effort. Offering incentives is another way companies get consumers to respond. Both Gap and Jack in the Box offer coupons for discount merchandise or the chance to win a cash prize.

BEHAVIORAL RESEARCH Customers leave traces of their purchasing behavior in store scanning data, catalog purchases, and customer databases. Marketers can learn much by analyzing these data. Actual purchases reflect consumers’ preferences and often are more reliable than statements they offer to market researchers. For example, grocery shopping data show that high income people don’t necessarily buy the more expensive brands, contrary to what they might state in interviews; and many low-income people buy some expensive brands. And as Chapter 3 described, there is a wealth of online data to collect from consumers. Clearly,American Airlines can learn many useful things about its passengers by analyzing ticket purchase records and online behavior.

EXPERIMENTAL RESEARCH The most scientifically valid research is experimental research, designed to capture cause-and-effect relationships by eliminating competing explanations of the observed findings. If the experiment is well designed and executed, research and marketing managers can have confidence in the conclusions. Experiments call for selecting matched groups of subjects, subjecting them to different treatments, controlling extraneous variables, and checking whether observed response differences are statistically significant. If we can eliminate or control extraneous factors, we can relate the observed effects to the variations in the treatments or stimuli.

American Airlines might introduce in-flight Internet service on one of its regular flights fromChicago to Tokyo and charge $25 one week and $15 the next week. If the plane carried approximately the same number of first-class passengers each week and the particular weeks made no difference, the airline could relate any significant difference in the number of passengers using the service to the different prices charged.