Market research

To better serve a target market, organizations must have relevant information about its field, business, its competition and especially their customers. The process of Market Research consists of defining the problem and research objectives, development of the research design, data collection, information analysis and presentation of results to management. In carrying out research, organizations must decide whether to collect data or use data already available. They must also decide what will be the approach of the research (observation, focus group, survey, experimental) and what instrument (questionnaires or mechanical devices) use.

The main reason for an organization to adopt market research is the discovery of a market opportunity. Once the survey is completed, the company must, carefully, evaluate their opportunities and decide which markets to enter. The marketing also depend on market research to determine what consumers want and how much they are willing to pay. They hope this process will give them a sustainable competitive advantage.

The European Society for Opinion and Marketing Research (ESOMAR) defines Market Testing as “a kind of controlled experiment conducted in a carefully selected geographic area to understand the impact of the marketing program on sales or profitability of a product or service.” For Achenbaum, Market Testing is “a controlled experiment, conducted in a limited but carefully selected part of a market whose goal is to predict the consequences on the sales or profits, both in absolute and relative terms, of one or more marketing actions proposed.”

The two definitions are very similar. Both point out that Market Testing is an experimental procedure and involves a careful selection of samples. They also highlight that the objectives of conducting a test on the market are to understand and predict various marketing activities, always focusing on optimizing profitability.

According to the American Marketing Association cited in McDaniel and Gates, “Market research is the function that links the consumer, the client and the public to the” marketer “through information – information they use to identify and define marketing opportunities and problems , generate, refine and evaluate marketing actions, monitor marketing performance, and improve understanding of marketing as a process. Marketing research specifies the information needed to address these issues; formulates the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications. ”

Still according to McDaniel and Gates, “The proactive management changes the marketing mix to fit the new patterns emerging in economic environments, social and competitive, while reactive administration waits until the change makes a big impact on the company to only then act”.

That is, in the case of a small business, this big impact can be fatal for the business, leading to bankruptcy. Hence the importance of market research and constant planning.


Implementation of Market Research

There are numerous possibilities of the use of market research. Here are some examples.

  • What is the best channel to distribute the product?
  • What is the relationship between occupied space and market share of a particular product?
  • The type of product in the vicinity of our market has implications on its sales?
  • Price placement – What is the effect on sales of an intended reduction in the price of a product?
  • Cannibalization – The launch of a new product line item will gain the sales of another product from the same company or the competitor’s?
  • What should be the effect of a new advertising campaign or sales promotion?
  • What is the relationship between the level of storage of the product in the home and the volume of consumption?
  • Which of the many options for advertising / promotions / new packaging / new brands / new flavors / new aromas / new colors / new labels / new designs etc. will make the consumer more aware of the product and should be adopted?

In all instances, the company avoids taking unnecessary risks by performing experiments to verify the results


Duration of a Market Test

The market tests usually last an average of six to twelve months. According to approach Mattar (2005), determining the duration depends on several factors, listed below:

  • Objectives of the test – number of hypotheses to be tested;
  • Repurchase cycle of the product – the test should last until it is able to be observed the behavior of the repurchase, as this indicates the impact of the product in long-term period and provides stability for the results;
  • Reaction probability of the competition – if the risk of the product being imitated is large, then the duration should be short;
  • Initial response of the consumer;
  • Test cost considerations – a comparison of costs to earnings and additional information will help determine the test duration;
  • Philosophy of the company. A more aggressive company may accept higher risks in launching a product. Since conservative companies may prefer to launch a product after conducting a market test to minimize the risks.


Criteria for selection of the area to be tested

There is not an ideal area for testing that represents the entire population of the test. Areas that should be looked for are the ones that have the greatest number of characteristics that come close to an ideal test market. Malhotra (2001) and Mattar (2005) recommend the following characteristics for a test area:

  • It should not be too small, for it needs to generate significant projections, but not so great as to make the test costly;
  • Be representative in social, demographic and economic profiles;
  • Be representative as to the behavior of consumption of the product;
  • Be representative as to the use of means of communication or media;
  • Be representative as for the level of competition;
  • Be relatively isolated in terms of media and physical distribution;
  • Have a normal historical development in the product class;
  • Be available to conduct marketing surveys and audits;
  • It should not be over-tested.