As the leading drink supplier in the world, the Coca-Cola Company constantly seeks to improve existing products and develop new products. To align this strategy with the corporate mission of ‘refreshing everyone who is touched by our business’, the Coca-Cola Company conducts market research to identify consumer wants and needs.
Barclays, a global bank, provides financial products and services, including insurance and retail banking to individuals and businesses in 56 countries. To attract new student accounts, Barclay conducted market research to better understand the needs of this target market.
Market research involves gathering information about customer needs and wants, the environment in which customers live and work, and the types of products and services used in that ‘market’. Market research has become a critical business strategy over the years, regardless of the industry. Market research, done right, can give any business a competitive advantage.
Market research answers key questions. Who are our customers (i.e., the target market)? What do they want and when do they need it? Why is the product or service important to them? What’s the best way to get the product or service to the customer? And, where are the high volume users?
Market research identifies products used by consumers, giving businesses insight into the products of their competitors. Taken altogether, market research can reveal ways in which a market is changing, which helps inform business strategy.
Used to support business decisions, market research is used to identify the need for new products and services. It clarifies thinking during product development and is used to keep a company on the cutting edge. It can also help rejuvenate a product brand. Market research is used to discover effective ways to protect consumers and identifies ways to offer more efficient and customer-friendly service.
Market research generally consists of primary and secondary research. Primary research is that which you gather yourself or hire a market research firm to gather on your behalf. Common methods used in conducting primary research include online or mailed questionnaires, telephone or in-person interviews and focus groups.
Primary information can be both quantitative and qualitative. Questionnaires usually yield quantitative or numeric data while in-person interviews and focus groups yield more qualitative or descriptive data.
When conducting primary research, companies must ask themselves if they have the internal resources and expertise to develop questionnaires. If so, can they develop an objective, valid, and reliable instrument? Do they have the in house capability to clean the data that is incomplete, invalid, or unreliable?
Companies also must consider whether they have the resources to conduct interviews, which are labor and time intensive. Do they have the resources and objectivity needed to conduct focus groups? If not, a market research firm external to the company should be brought on board.
The Internet and social media have made market research easier and less expensive than ever before. Companies are able to easily connect with infinite numbers of customers at the click of a mouse. Companies are able to gather massive amounts of information from online questionnaires. It is important, then, that companies clearly define the purpose of the questionnaire and ensure that each question asked relates directly to that intent. This helps focus the market research and ensure meaningful results.
When designing questionnaires, companies must pay attention to item wording, format and order. They must create a logical flow and context within the questionnaire. Items must be worded in ways that invite people to answer the question and not worry about looking socially irresponsible.
Questionnaires give people time to think about their responses; it is impossible to know, however whether the desired individual is responding to the questionnaire or engaging the help of others to provide feedback. It is impossible to know, but important to control for, hence, one drawback of the method.
When using questionnaires for the purpose of market research, it is possible to grant consumers anonymity or confidentiality. This is more difficult to provide when using interviews and focus groups, a more public forum.
Interviews may be structured, where the same questions are asked of everyone, or unstructured, where the interviewer is free to pursue relevant lines of questioning. Interviews may be conducted by telephone or in person. Telephone interviews can provide useful information but, as with the questionnaire, the respondent may or not be the individual from whom feedback is actually sought.
With the preponderance of ‘do not call’ lists, dwindling numbers of consumers wish to be contacted by phone for the purpose of market research. Phone interviews can reach a broad audience but are expensive, given interviewer recruitment and training.
Focus groups provide a powerful way to clarify information obtained on questionnaires or during interviews. If the company conducts focus groups in house, it must be objective in its approach. Participants often share what they think the company wants to hear instead of what they really want to say for fear of being socially undesirable. Social desirability becomes less of an issue if the market research is conducted by a market research firm, a third party.
The Kellogg Company is the world’s leading producer of cereals, manufacturing in 18 countries and selling product in more than 180 countries. Kellogg’s is a market oriented company, not a product oriented company. This means that Kellogg’s does not develop a product and then find a market for it. Rather, Kellogg’s focuses on the needs of its customers and develops a product for them.
In 2003, Kellogg’s launched a new product called Crunchy Nut Clusters. Of the thousands of products launched every year very few ever reach market; to beat the odds, market research is essential.
Using focus groups, Kellogg’s showed consumers prototypes of new food ideas that included a crisp latticework product and a nutty triangle. The focus groups revealed consumer attitudes and feelings about the prototyped foods; this helped Kellogg’s form potential flavors and textures for the new product.
Kellogg’s then created story boards with product ideas and descriptions. Large groups of consumers studied the boards before rating each idea using numeric scales. In this way, Kellogg’s quantified which ideas consumers liked best and least.
Once Kellogg’s selected the best idea, they created a prototype recipe which was again refined based on additional qualitative and quantitative questionnaires. Additional testing was done with consumers to come up with the final packaging for the Crunchy Nut Bites.
“Prior to conducting any project, it’s necessary to decide if custom market research is truly the best choice. If it is the best option for your project, the next step is to think precisely about defining project goals,” says Kathryn Korostoff, author of Practical Market Research Planning Considerations. “Market research is truly a garbage in/garbage out process; start with clear goals, and your chances for market research success are excellent.”
Market research brings with it a host of ethical considerations. Given the ease of gathering information online or sending a recorded message through millions of phone lines, companies must be truthful, ensure the privacy of their customers and respect confidentiality.
In the spirit of full disclosure, companies must tell customers when information is being gathered. Companies must make clear the extent to which they use consumer information in targeted advertising. And, companies must respect the privacy of those consumers who ‘opt out’ or are on the ‘do not call’ lists.
The second type of market research is that of secondary research – drawing on information that already exists, having been gathered by another (secondary) source. These sources vary by sector but can usually be divided into the following three categories: public, educational, and commercial sources. A word of caution about using secondary sources of information, however, is that the information you find may not have been gathered for the same purpose for which you seek information; a careful look between the lines is required.
Public sources of secondary information about a company generally include governmental agencies, chambers of commerce, unions, professional associations, and the business reference section of the public library. Educational sources include post-secondary institutions of higher education, who often conduct more research than any business could. Commercial sources include trade associations, publicly traded corporations, financial institutions, Dun and Bradstreet, and the Society Corps of Retired Executives of the Small Business Administration.
Government agencies offer statistics for your market research that are second to none. The Department of Commerce publishes the U.S. Global Outlook, which traces the growth of 200 industries and provides five-year forecasts for each; it also provides information about domestic and foreign markets via its International Trade Administration branch. The Statistical and Metropolitan Area Data Book provides statistics for metropolitan areas, cities and counties.
The North American Industry Classification System (NAICS) is the standard used by federal agencies in classifying businesses to collect data from, analyzing the data, and publishing the data related to the U.S. business economy. Developed under the Office of Management and Budget, it affords comparability in business statistics between the countries of North America.
Market research reports include trends, forecasts, market estimates, technical analyses, and statistical tables. There are many guides and handbooks available to support market research efforts across industries. These include the Retail Business Market Research Handbook which offers year-end and historical data by sector, trends, retail brand valuations, shopper satisfaction, and profiles of shopping malls.
Such reports are also available to help support business decisions to expand business internationally. A report such as Market Research in China provides companies with information about the scope, size, disposition, and growth of the market in China; it also supplies information on target markets and forecasting to help with logistics.
Commercial sources of information include trade associations. Although an annual membership fee is often required, the comprehensive statistics and information to be gained are more than worth the cost of admission. The Encyclopedia of Associations published by Gale Research and Business Information Sources, published by the California Press are reliable resources for locating trade associations.
Educational institutions are also good secondary sources of information when conducting market research, since both faculty and student research can be far reaching. Fostering relationships between business and education is an added bonus.
Zurich® is a financial services group headquartered in Zurich, Switzerland; it employs 60,000 people and serves customers in more than 170 countries. It offers insurance for vehicles, buildings, businesses, and people; it also offers services for investments and risk management. Zurich® offered a free helpline service called HelpPoint, provided to customers both outside of and within the company.
To better understand and address the needs of existing and potential customers, Zurich conducted primary and secondary market research.
Primary research included interviews conducted with 7,000 customers, non-customers, and insurance intermediaries from eight countries, which revealed opinions as well as expectations of the company. Zurich® also conducted primary research with its employees in 45 workshops to better understand how it could differentiate itself from its competitors.
Results showed that all customers wanted to feel valued; they wanted to be treated as individuals in a relationship with a trusted insurance provider.
In conducting secondary research of existing information, Zurich® used county government reports and market research done by Nielsen about the insurance industry, which revealed that 61% of Internet users relied on online communities to recommend products and services. Zurich® subsequently made the decision to change its website to support HelpPoint.
Throughout both primary and secondary market research, Zurich® repeatedly heard customers say they wanted reliable help from their insurance provider. Zurich® made the business decision to equate its brand with ‘help’, upgrading existing services, expanding new divisions, and developing new customer-focused services.
Market research is at its best when the company and/or market research firm listens to consumers while observing them use a product or engaging in the provided service. Watch for success; look for frustration. Talk with consumers about what worked and what did not. Ask for suggestions. Take the feedback, create prototypes, and get more feedback. Walk the talk.
Market research can drive development of products and services, marketing strategy, and expectations for service and organizational change. NBRI can help you conduct market research to inform your business decisions. Contact us now at 800-756-6168.
Terrie Nolinske, Ph.D.
National Business Research Institute