Nwigwe, E. Collins
Easy Travel Sarl,
Douala-Cameroon.
E-mail: go.easytravel@yahoo.com
Abstract
The paper looks into the impact of market
research in the growth and development of business organizations with special
emphasis on third world countries. Recognizing the relevance of research in
business planning has become even more crucial in the current economic scenario
with funding getting difficult as banks and other financial institutions are
bound to put business proposition through a serious and rigorous assessment
process. A market is the totality of the present and potential customers of a
product or the totality of the market segment. Market research is defined in
this paper as the process of gathering, analyzing and interpreting information
about a market, a product or service to be offered for sale in that market.
Marketing is seen here as necessary activity that involves the entire business
and is vitally important to sound business health. Marketing consists of
individual and organizational activities designed to facilitate and expedite
exchanges so to achieve the goals of the producer/seller by servicing and
satisfying the customer’s needs. The knowledge of the type of products or
services to go into is one of the needs for market research. In addition,
customer’s taste is discovered during research. Market research consists of
primary and secondary research. Primary provides first-hand information while
secondary research consists of secondary data. This paper concludes that market
research provides the management with relevant, accurate reliable valid and
current information, stressing that accurate and thorough information is the
foundation of all successful business ventures because it provides a wealth of
information about the organization’s task environment.
Introduction
In
developing nations, national development requires a major re-ordering of human
society. The economy of any nation is as important as the lives of individuals
within the nation. To ensure this quality therefore, there is the need to keep
the economy buoyant at all times. While many business ideas blossom into
successful businesses, there are many others that did not move beyond the
business plan or offering memorandum. And among those that get funded and
started, many fail eventually. While there can be many reasons for business
failures, often these were due to flaws in the business concept or the business
model that rendered them vulnerable to the difficulties encountered.
Recognizing the relevance of research in business planning has become even more
crucial in the current economic scenario with funding getting difficult as
banks and other financial institutions and venture capitalists are bound to put
business proposition so through a most rigorous assessment process. Research
indicates that many ventures fail on account of market and industry factors.
Yet, very often there exist ambitious entrepreneurs starting ventures without
having researched the market and industry to determine the viability and
sustainability of the business concept (Agbonifoh, Ogwo and Nnolim, 1998).
However,
the importance of research stems from the fact that the success of a business
does not depend only on the entrepreneur’s perspective on the service or
product offered. It also depends greatly on what the customers want or need.
And here, the customers to be considered are the target customers and how they
would respond to your product or service. The litmus test to success will be to
know how well, how you can differentiate your product or service and provide
benefits that can bring customers to you (Bamgboye, 1995).
The main objective
of this paper is to do a theoretical review of the impact of market research in
a business organization especially as it relates to third world countries.
Conceptualizing Market Research
Market Research
is the process of gathering, analyzing and interpreting information about a
market, about a product or service to be offered for sale in that market. It is
also about the past, present and potential customers of the product or service.
Research into the characteristics, spending habits, location and needs of the
business’s target market, and the industry is Marketing Research. Market
Research is a subset of marketing Research (Kotler, 2004).
Marketing
research involves conducting research to support marketing activities, and the
statistical interpretation of data into information. This information is then
used by managers to plan marketing activities, gauge the nature of a firm’s
marketing environment and attain information from suppliers. Marketing
researchers use statistical methods such as quantitative research, qualitative
research, hypothesis tests, chi-square tests, linear regression, correlations,
frequency distributions, Poisson distributions, binomial distributions, etc.,
to interpret their findings and convert data into information (Ackoff and Emshoff,
l985).
More
so, the marketing research process spans a number of stages including the
definition of a problem, development of a research plan, collecting and
interpretation of data and disseminating information formally in form of a
report. The task of marketing research is to provide management with relevant,
accurate, reliable, valid, and current information (Kotler, 2004).
A
distinction should be made between marketing research and market research.
Market research pertains to research in a given market. As an example, a firm
may conduct research in a target market, after selecting a suitable market
segment. In contrast, marketing research relates to all research conducted
within marketing. Thus, market research is a subset of marketing research as a
whole and the particular competitors faced (Agbonifoh et al, 1998).
Accurate
and thorough information is the foundation of all successful business ventures.
This is because it provides a wealth of information about prospective and
existing customers, the competition, and the industry in general. It allows
business owners to determine the feasibility of’ a business before committing
substantial resources to the venture (Oseyomon, 2006).
Market research
provides relevant data to help solve marketing problems. A business will most
likely face problem an integral part of the business planning process. In fact,
strategies such as market segmentation (identifying specific groups within a
market) and product differentiation (creating an identity for a product or
service that separates it from those of the competitors) are impossible to
develop without market research (Oseyomon, 2006). Market research is therefore
important in the growth and development of business organizations in third
world countries.
Conceptualizing Marketing
Marketing is a
necessary activity that encompasses the entire business and is vitally
important to sound business health. It is viewing the entire business from the
customer’s viewpoint. It takes into account every aspect of the marketing mix
from the product to price distribution channels and marketing communications.
All these factors affect the customer’s response to a product or service
(Agbonifoh et al, 1998).
One
definition of marketing states that marketing is the process of planning and
executing the conception, pricing, promotion and distribution of ideas, goods
and services to create exchanges that satisfy individual (customer) and
organizational objectives (Baker, 2000). The concept of marketing as a business
philosophy defines marketing as a process that is intended to find, satisfy and
retain customers while business makes a profit (Oseyomon, 2006). But central to
all these definitions is the role of the customer and his relationship to the
product (i.e., whether he or she considers the product or service to meet a
need or want) (Baker, 2000).
Conceptualizing Marketing Environment
The term
marketing environment relates to all of the factors (whether internal,
external, direct or indirect) that affects a firm’s marketing decision-making
or planning and is subject of the marketing research (Kotler, 2004). A firm’s
marketing environment consists of two main areas, which are:
- Macro
Environment: The macro environment of a firm is the total environment less
the micro and task environment. It consists of a variety of external factors
that manifest on a large (or macro) scale. These are typically economic,
social, political or technological phenomena. A common method of assessing a
firm’s macro environment is via a PESTLE i.e., Political, Economic, Social,
Technological, Legal, Ecological analysis. Within a PESTEL analysis, a firm
would analyze national political issues, culture and climate, key macroeconomic
conditions, health and indicators such as economic growth, inflation, unemployment
etc, social trends/attitudes, and the nature of technology’s impact on its
society and the business processes within the society. (Agbonifoh, 2008) in
discussing the models for analyzing the environment gives the structural
approach, attribute approach, PEST approach, industry Life Cycle Analysis,
Michael Porter’s Five Forces Approach, The PEST model thus not include the
ecological environment while the legal environment is combined with the
political environment.
- Micro
Environment: A firm holds a greater amount though not necessarily total
control of the micro environment. It comprises factors pertinent to the firm
itself, or stakeholder closely connected with the firm or company. A firm’s
micro environment typically spans:
1. Customers/consumers;
2. Employees;
3. Supplier (Agbonifoh, 2008).
The Relevance of Market Research
Market
research is imperative for a company to know what type of products or services
would be profitable to introduce in the market. Also with respect to its
existing products in the market, good market research enables a company to know
if it has been able to needs and whether any changes need to be made in the
packaging, delivery or the product itself. This enables a company to formulate
a viable marketing plan or measure the success of its existing plan (Agbonifoh
et al, 1998).
Market Research as an Essential Management
Tool
Market research
consists of a plan that charts how relevant data is to be collected and
analyzed so that the results are useful and relevant for making marketing
decisions. Once the research and the related analysis are complete, the results
are communicated to management.
This
provides management with in-depth information regarding crucial factors that
have an impact on the target market and existing marketing mix. Market research
allows management to make the changes necessary for better results through
adopting a proactive approach (Kotler, 2004).
Types of market research
Market research
consists of two separate types of research that can be categorizes as:
¨
Primary;
and
¨
Secondary research.
Primary Research
Primary research
serves to provide information through monitoring sales levels and measuring
effectiveness of existing business practices like service quality and tools for
communication being used by the company. It carefully follows competitor plans
to gather information on market competition. Both primary and secondary
researches are essential to fulfill the company’s objectives (Bamgboye, 1995).
Secondary Research
Secondary
research involves collecting already published data to create a company
database that may serve to perform situation analysis. It helps to identify the
company’s competitors, perform a strategy for benchmarking. it also determines
the segments the company should target in view of factors such as demographics,
population, usage rate, life style and behavioural patterns (Kotler, 2004).
Data Collection Methods
Data collection
methods for marketing research are divided into quantitative and qualitative
methods. Quantitative studies use mathematical analysis, which can disclose
differences that are statistically significant. The sample size used is quite
large. Qualitative methods are used to provide a base for quantitative research
and help in quantitative research design development. They target problem
defining, generating hypotheses and identifying determinants. They consist of
one to one interviews to probe for personal opinions, beliefs and values and
serve to uncover hidden issues. The sample size in this method is small. The fact
is that you can not have a successful company without having the right data
about customers, products and the market in general. Market research is an
essential management tool for a viable business plan enabling any company to
survive and thrive in today’s fiercely competitive market conditions
(Machinvard, 2000).
Relationship between industry and market
research
Business plan
needs to be done both for the industry and market, It is necessary to
appreciate in this regard the differences between the two terms, i.e., market
and industry as often these two terms are used interchangeably or in a
composite way which is quite erroneous. The industry in which you plan to
operate is made up of all the sellers of the products and services that compete
with your product or service.
Market
comprises of all actual and potential customers for your product or service. To
fine tune the concept further, the available market comprises of those
potential customers who have both interest and ability to buy and your target market
is the part of the available market that you decide to pursue due to
limitations that may get imposed due to geographical or other constraints or
even by design to cater to a niche market (Bamgboye, 1995).
What to seek from industry
In Research, first
and foremost, it is necessary to define clearly the industry in which you will
be competing. In the scope, the content of the research work is stated. In the
area, the geographical location is stated. The scope nay he to do a market
research to determine the potential distribution and resellers and final
consumers of a product. The scope may be to study those in the brewing industry
in South Southern States of Nigeria (Unyimadu, 2006).
There
is the need to provide answers to the following questions:
1.
What is the current size of the
industry?
2.
What trends are being observed?
3.
Where does it fall from an
industry life cycle perspective’?
4. How
does the industry relate to the five competitive forces, i.e., new entrants,
buyers, suppliers, substitutes, rivalry among firms? (Bamgboye, 1995).
What to seek from market research
Analyzing the
market and potential customers is necessary in order to be able to position the
product or service in a way it can meet buyer needs also recognizing buyer
attitudes and behaviour.
Some
of the key questions market research should seek answers to are the following:
I. What needs of the customer will the
business address?
2. What benefits
will your product and service provide that others do not?
3. What
evidence exists that customers will buy your product or service?
4. How large is
the market you are targeting and is it likely to grow? (Kotler, 2004).
Assessing Research Findings
Research often
provides new insights on the business concept. It could also bring up w in the
business concept that was not evident earlier. It may be possible to fix the flaws by adopting the idea to market
needs. On the other hand, if that appears not to be possible, one should
explore other business opportunities (Baker, 2000).
Market
Research involves two types of data:
1. Primary information: This is the
research you compile yourself or hire someone to gather for you.
2. Secondary information: This type of
research is already compiled and organized for you. Examples of secondary
information include reports and studies by government agencies, trade
associations or other businesses within your industry. Most of the research you
gather will most likely he secondary (Unyimadu, 2006).
When
conducting primary research, you can gather two basic types of information:
exploratory or specific. Exploratory research is open-ended, it helps you to
define a specific problem, and usually involves detailed, unstructured
interviews in which lengthy answers are solicited from a small group of
respondents. Specific research, on the other hand, is precise in scope and is
used to solve a problem that exploratory research has identified. Interviews
are structured and formal in approach. Of the two, specific research is the
more expensive (Unyimadu, 2006).
When
conducing primary research using your own resources, first decide how you will
question your targeted group: by direct mail, telephone, or personal
interviews? If you choose a direct-mail questionnaire, the following guidelines
will increase your response rate:
Questions that are short and to the point
A questionnaire
that is addressed to specific individuals and is of interest to the respondent.
A questionnaire of no more than two pages (Unyimadu, 2006).
A
professionally-prepared cover letter that adequately explains why you are doing
this questionnaire. A postage-paid, self-addressed envelope to return the
questionnaire in. Postage-paid envelopes are available from the post office
(Unyimadu, 2006). An incentive could be 10 percent off your next purchase, to
complete the questionnaire; even following these guidelines, mail response is
typical low. A return rate of 3 percent is typical; 5 percent is considered
very good. Phone surveys are generally the most cost-effective. (Uriyimadu, 2006).
This is for mail questionnaires. Telephone questionnaires could even produce
fewer responses. For fall to fall or personal interview questionnaires, 95 —
100% response rates have been recorded (Unyimadu, 2006).
Some telephone survey guidelines:
Unyimadu (2006)
has observed that telephone survey is feasible in this era of GSM. Have a scrip
and memorize it — do not read it. Confirm the name of the respondent at the
beginning of the conversation. Avoid pauses because respondent interest can
quickly drop.
Ask
if a follow-up call is possible in case you require additional information. In
addition to being cost-effective, speed is another advantage of telephone
interviews. A rate of five or six interviews per hour is typical, but
experienced interviewers may be able to conduct more. Phone interviews also
cart cover a wide geographic range relatively inexpensive. Phone costs can be
reduced by taking advantage of less expensive rates during certain hours.
Personal interview
Unyimadu (2006)
has observed that the personal interview method of primary data collection is
the most feasible. One of the most effective forms of marketing research is the
personal interview. They can be either of these types:
Group Survey:
A group survey
is used mostly by big business, group interviews or focus groups are useful
brainstorming tools for getting information on product ideas, buying
preferences, and purchasing decisions among certain populations (Unyimadu,
2006).
The in-depth interview
These non-on-one
interviews are either focused or non-directive. Focused interviews are based on
questions selected ahead of time, while non-directive interviews encourage
respondents to address certain topics with minimal questioning (Yomere and
Agbonifoh, 1999).
Secondary
research uses outside information assembled by government agencies, industry
and trade associations, labour lotions, media sources, chambers of commerce,
and so on. It is usually published in pamphlets, newsletters, trade
publications, magazines, and newspapers. Secondary sources include the
following:
¨
Public
sources: These are usually free, often of icr a lot of good information,
and include government departments, business departments of public libraries,
and so on (Yoieiere and Aghonifoh, 1999).
¨
Commercial
sources: these are valuable, but usually involve cost factors such as
subscription and association fees, Commercial sources include research and
trade associations, such as Dun & Bradstreet and Robert Morris &
Associates, banks and other financial institutions, and publicly traded
corporations.
¨
Educational
institutions: These are frequently overlooked as valuable information
sources even though more research is conducted in colleges, universities, and
technical institutes than virtually any sector of the business community
(Yomere and Agbonifoh, 1999).
Public information sources
Government
statistics are among the most plentiful and wide-ranging public sources. One of
the best public sources is the business section of your public or local college
or university, library. The services provided vary from library to library but
usually include a wide range of government publications with market statistics,
a large collection of directories with information on domestic and foreign
businesses, and wide selection of magazines, newspapers and newsletters (Yomere
and Agbonifoh, 1999).
In
the Western World, almost every country government publishes population density
and distribution figures in accessible census tracts. These show the number of
people living in specific areas, such as precincts, water districts or even
ten-block neighbourhoods. Some countries publish reports that show the
population ten years ago, five years ago, and currently, thus indicating
population trends (Nwana, 2008).
Other
public information resources include local chambers of commerce and their
business development departments, which encourage new businesses to locate in
their communities. They will supply you (usually for free) information on
population trends, community income characteristics, payrolls, industrial
development and so on (Nwana, 2008). The bank as a resource should not be
overlooked. Bankers have a wealth of information at their fingertips and are
eager to help their small business customers get ahead.
Commercial information sources
Among the best
commercial sources of information, are research and trade associations.
Information gathered by trade associations is usually limited to that
particular industry and available only to association members, who have
typically paid a membership fee. However, the research gathered by the larger
associations is usually thorough, accurate, and worth the cost of membership.
Local
newspapers, journals, magazines, and radio and TV stations are some of the most
useful commercial information outlets. Not only do they maintain demographic
profiles of their audiences (their income, age, gender, amount of disposable
income, and types of products and services purchased, what they read, and so
on), but many also have information about economic trends in their local areas
that could be significant to your business. Contact the sales departments of
these businesses and ask them to send you their media kit, since you are
working on a marketing plan for a new product and need information about
advertising rates and audience demographics. Not only will you learn more about
your prospective customers, you will also learn more about possible advertising
outlets for your product or service.
Finally,
there are educational institutions that conduct research in various ways,
ranging from faculty-based projects often published under professors’,
by-lines, to student projects, theses, and assignments. You may be able to
enlist the aid of students involved in business classes, especially if they are
controlled in an entrepreneurship program. This can be an excellent way of
generating research at little or no cost, by engaging students who welcome the
professional experience either as interns or for special credit. Contact the
university administration and marketing or management studies departments for
further information (Nwana, 2008).
Marketing environment
The term
marketing environment relates to all of the factors (whether internal,
external, direct or indirect) that affects a finn’s marketing decision-making
or planning and is subject of the marketing research (Aghonilbh et al, 1998). A
firm’s marketing environment consists ci IWO main ecas, which are:
The Media: By contrast to the macro
environment, an organization holds a greater degree of control over these
factors.
Market segmentation
Market
segmentation pertains to the division of a market of consumers into persons
with similar needs and wants. As an example, if using Kellogg’s cereals in this
instance, Frosties are marketed to children. Crunchy Nut Cornflakes are
marketed to adults. Both goods aforementioned denote two products, which are
marketed to two distinct groups of persons, both with like needs, traits, and
wants (Aghonifbh et al, 1998).
The
purpose for market segmentation is conducted for two main issues. First, segmentation
allows a better allocation of a firm’s finite resources. A firm only possesses
a certain amount of resources. Accordingly, it must make choices (and
appreciate the related costs) in servicing specific groups of consumers.
Furthermore, the diversified tastes of the contemporary Western consumer can be
served better. With more diversity in the tastes of modern consumers, firms arc
taking noting the benefit of servicing a multiplicity of new markets. Market
segmentation can be defined in terms of the STP acronym, meaning Segment,
Target and Position (Haker, 2000).
Segment
Segmentation
involves the initial splitting up of’ consumers into persons of like
needs/wants/tastes. Four commonly used criteria are used for segmentation,
which include:
-
Geographical (e.g. country,
region, city, town, etc)
- Psychographic
i.e., personality traits or character traits which influence consumer behaviour
(Kotler, 2004).
-
Demographic (e.g., age, gender,
social-economic class, etc)
-
Behavioural (e.g., brand loyalty,
usage rate, ete)
Target
Once a segment
has been identified, a firm must ascertain whether the segment is beneficial
for them to service. The DAMP acronym, meaning Discernible, Accessible,
Measurable and Profitable, are used as criteria to gauge the viability of a
target market.
DAMP is
explained in further detail below:
• Discernable
— How a segment can be differentiated from other segments
• Accessible
— How a segment can be accessed via marketing communication produced by a firm.
• Measurable — Can the segment be quantified and its size
determined?
• Profitable
— Can a sufficient return on investment be attained from a segment’s servicing?
(Kotler, 2004).
Conclusion:
In conclusion
therefore, the relevance of market research in every business organization
cannot be overemphasized. When starting a venture, market research is needed to
know the viability and the sustainability of any business. It also helps to
know the market rules. The knowledge of the customer’s taste leads to success
of a business. Marketing research involves conducting research support
marketing research activities, and the satisfied interpretation of data into
information.
It
provides the management with relevant, accurate reliable valid and current
information. Accurate and thorough information is the foundation of all
successful business ventures because it provides a wealth of information about
the organization’s task environment. Since market research seeks to view the
entire business from the customer’s view would be known.
Market
research is imperative for a company to know what type of products or services
would be profitable to introduce in the market. Finally, market research
provides management with in-depth information regarding crucial factors that
have an impact on the target market and existing marketing mix.
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