Lesson 1.2 - Market Research

Lesson 1.2

MARKET RESEARCH···························

DESCRIBE how to conduct effective market research.

IDENTIFY the various methods used to collect primary and secondary data.

EXPLAIN the six steps in the research process.

The purpose of embarking upon an entrepreneurial venture often is to make a profit. Unfortunately, this was not the case for the Eatery, a food marketing school store in Detroit, Michigan. The advisor was concerned about the store's recent decline in sales. She felt sales were down because the staff was unmotivated. Student employees felt sales were down because of the decision to stop selling grocery items. Both sides were incorrect.

A market research study showed that sales were low because of the new customer rotation schedule. The rotation schedule was implemented for crowd control. Students had been allowed to frequent the store with a pass from their teacher. Now, the entire class had to report to the store at an assigned time. Rather than wait for their assigned time to visit the store, students brought their own food or used the vending machines.

To regain customer loyalty, the school store implemented a different strategy to satisfy customer needs while managing loss prevention. As a result, sales increased the following year.

Working in a group, describe how you would use market research to prevent financial losses in your store. Design a questionnaire.

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MARKETING INFORMATION SYSTEM

If your school store is to succeed and make a profit, it must meet the needs of its customers. Every business starts with this basic marketing philosophy. However, if you do not know who your customers are and what they want, you cannot satisfy them. A good marketing information system will aid in providing the school store with answers needed to implement a marketing concept, solve problems, make decisions relating to the store's marketing mix, develop a customer profile, forecast sales, and maintain store image. This is done through market research.

MARKET RESEARCH LEADS TO MARKET ANALYSIS Market research is a process designed to identify solutions to a specific marketing problem by systematically gathering and analyzing data. Before launching a new school store or adding a new product to your product mix, you should conduct an analysis to minimize risk and enhance chances of success. The market research analysis should be conducted again after the study has been implemented to determine if it is effective.

Market research does not require that you have special skills.

If you can ask questions , record data, and take time to understand what it means, then you and other students can conduct market research. This can be done by simply paying attention to current buying trends. You can learn a great deal about customer buying habits by watching and talking to current customers.

What is the purpose of conducting market research?

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DATA COLLECTION

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Market research is only as valuable as the actual data that is collected and the resources used to gather that data. Businesses that obtain reliable market research data are better able to make sound decisions.

In collecting data for your research, you need to know where and how to obtain information. There are two types of data that can be collected-primary and secondary data.

PRIMARY DATA Primary data is information collected for the first time to analyze a specific situation. This type of data can be either subjective data or measurable data.

Subjective data is useful, but it cannot be statistically analyzed.

For example, if your school store wanted to use market research to determine its image, your staff could conduct a group interview with 10 to 12 participants to provide you with instant feedback.

You should repeat this group interview method at least three additional times.

Measurable data is more reliable because statistical analysis can be conducted. For example, you could create a survey asking your customers to tell you what they expect and want from your school store. Follow these guidelines in developing the survey:

To serve their customers better, the hotel industry conducted a survey to learn what features were most important to consumers when choosing a hotel for a vacation. Americans put nonsmoking rooms first (40%). Twentyfour-hour access to food (36%), in-room amenities such as coffee makers and hair dryers (34%) , athletic facilities (31 %), and "good evening facilities" (26%) followed.

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Keep it simple and easy to read.

Ask closed-end questions.

Get a large sample before tabulating the results.

Give respondents some kind of reward or incentive, such as a coupon, for completing your survey.

• Construct the survey so that the results can be used in as many ways as possible. For example, names and addresses can be used for a mailing list, or ages can determine your target customer's age.

1.2 Market Research

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THE ULTIMATE SURVEY

1. Have you shopped in the Ultimate Boutique since its grand re-opening in October? _ __ If NO, check all that apply.

Prices are too high.

I dislike the merchandise.

The store has poor customer service.

I do not have the funds available to purchase merchandise.

I prefer shopping at a well-known store.

2. What price would you be willing to spend for the following? $._ __ _ Sweater Slacks $_ _ __ Denim outfit $_ _ __ Designer fragrance $_ _ __ Fleece jogging suit $_ _ __ 3. What brand names do you currently wear and would like to see offered in the store? _ _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ __ __

4. Identify your favorite designer. men's fragrance - - - - - - - - -- - - - - - - - -women 's fragrance - - - -- - - - - - - - - - - - -5. How much of a discount do you think students should receive when making a purchase? %. (Note : Be realistic. The store must make a profit. School staff members receive a 10% discount.)

6. Are you aware of the following services offered by the Boutique to convince customers to make a purchase? Check all that apply.

Gift certificates 30-day layaways Alterations Customer holds (up to one week) Acceptance of MasterCard, Visa, and Discover Acceptance of personal checks with proper identification

See how these guidelines are applied in the sample survey above from the Ultimate Boutique in Detroit, Michigan.

Primary Research Methods Primary data may be collected using either the survey method, observation method, or experimental method.

Surveys Personal interviews, telephone interviews, and mail interviews are examples of surveys. Personal interviews are the most popular type of survey. You will receive the most accurate information by speaking directly to the consumer. Telephone interviews are not as popular because people become easily annoyed and impatient. Mail interviews are a perfect way to reach consumers who are hard to reach by telephone or in person.

Observation By using the observation research method, the actions of people are watched and recorded. Customers and their buying habits can be observed and recorded by store personnel, cameras, or scanners.

Experimental Method The experimental method observes the results of changing one or more marketing variables while keeping other variables constant. For example, if students at your school created gift baskets to sell during Valentine's Day and you wanted to compare the effectiveness of two different packaging designs, you The Internet has changed the way would show two similar groups of consumers the gift basmarket research is being kets containing the same products but with different packconducted. Each day innovative aging. You then would measure the results of the groups' techniques and new ways of responses. gathering traditional data are

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SECONDARY DATA Information that already has been collected for purposes other than your current research project is secondary data. Secondary data is quicker, easier, and less expensive to collect than primary data. If you are interested in conducting market research, you should check secondary data first. If you collect enough secondary data, your school store may not need to collect primary data.

Secondary Research Methods Secondary data is available through external sources such as government sources, community organizations, trade associations, trade publications, commercial research engines, and general business resources. The public library also is a great place to start collecting data. Some reference materials to consider include:

emerging. It has been estimated that by 2005, Internet market research will account for nearly 50 percent of all market research revenue in the United States.

Conducting market research on the Internet makes follow-up studies easier. It also slashes labor and time-intensive research activities and costs including mailing, telephone solicitation, data entry, data tabulation, and reporting .

THINK CRITICALLY In what ways can the use of Internet surveys be advantageous to your school store?

• Sales and marketing magazines will allow you to obtain a survey of buying power containing information on every county in the U.S. with a population of more than 10,000.

This information includes total population, number of households, median cash income per household, and total retail sales for various types of businesses.

• The U.S. Department of Commerce has regional service offices that can provide you with pertinent information. Federal and state governments also publish reports on specific industries.

Use the American Statistics Index (ASI) to gather government statistics or the U.S. Industrial Outlook to review a general economic outlook of the growth rates for the coming year.

• Trade associations serve specific industries and are great sources of information. Consult Gales Encyclopedia of Associations or the National Trade and Professional Associations of the United States. These publications offer information on more than 30,000 trade associations.

• Business publications, including newsletters and pamphlets, exist for every industry and can be used to gather data on current trends in your industry. Other general business resources include Standard & Poor's Industry Survey, Predicasts F&S Forecasts, and the Consumer's Index.

• Other sources include local chambers of commerce and the marketing departments of local colleges and universities.

Instructors who teach at career technical centers also are great sources of information.

• Internal sources consist of information found inside the school store. They can include sales staff, customer records, sales data, want slips, financial statements, inventory records, and customer complaints.

What are the three methods of collecting primary data?

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THE RESEARCH PROCESS An effective research plan involves six steps. Following these six

steps will help you make good buying decisions.

Use the Market Research lesson to discover how to use surveys to learn about your potential customers and your competitors. Try to spend the least amount of money to obtain specific market research information.

For more information, go to knowledgematters.com

• Identify a need or def1ne the store's problem. For example, if your school is planning to open a store that sells school spirit wear, you need to find out what the students and staff want.

Survey your target market and check the competition.

• Obtain primary and secondary data. Collect information from trade publications, government and community organizations, surveys, interviews, and observations.

• Organize your data. Set up charts and record the results of the collected data in a report form.

• Analyze your data. Ask yourself some basic questions such as: What need is the store going to fulfill? Who is going to buy or use the products or services? How many people are in the selling chain?

• Recommend solutions. Create a written report that outlines the findings of your market research and recommend solutions to the problem.

• Implement a plan of action. Evaluate the research results and put a plan into action.

What are the six steps in the research process?

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1 Research Your Market