The first part of any effective marketing plan is situation analysis. This provides the foundation for deciding on appropriate marketing objectives, strategies and plans. Research tells you why these recommendations are right. Without it, you operate blindly.
Situation analysis requires research in these areas:
1. Market Definition- A description of the market for the product(s) or service(s).
2. Market Segmentation- Who are the buyers and users? Size of segments.
3. Macroanalysis- Economic, social, political factors affecting the business.
4. Microanalysis- Sales, trends, marketing mix (product, price, promotion, distribution, packaging, target customer) for the firm and competitors.
5. SWOT- Firm's strengths/weaknesses, market opportunities/threats.
6. Customer Profile- Customer needs, habits, buying patterns, attitudes.
A reliable way to conduct research is through professional research or polling agencies. In some cases, you can do it yourself, which allows you to stay close to the market; but in other cases, as you'll see below, linking up with a professional service helps you make the best, objective decision.
There are four approaches to research, presented in order of declining reliability. Each is illustrated by a case (companies will remain nameless for confidentiality's sake):
Quantitative Research - Known as "The Gold Standard," this is the ultimate research tool, because it is carried out with a pool of respondents large and representative enough to allow the use of standard statistical tests. While expensive, you can bank on the results.
Beware: quantitative studies are best done by professionals. Why? Because it ensures the quality of the survey's answers and prevents bad or, worse, false information coming from it.
Let's take a case: one financial services company was interested in introducing a new financial product. Knowing little about the product line, they wanted to learn which products people currently had and which they preferred. They also wanted to understand the differences in habits and practices between current buyers and non-users: how much they bought/didn't buy and why, how much they would pay/how often, and, of course, the best way to sell to them. They contacted a research agency which designed the questionnaire and then interviewed over 600 respondents. Armed with the results, this company selected the appropriate marketing mix elements for the new product.
Qualitative Research - Known also as "Good, Cheap and Easy," entails exploratory testing among a small number of people, and is often used by companies to get a feel for customer language and to provide leads for follow-up research among a larger and more representative sample of respondents.
The most common qualitative studies are one-on-one interviews and/or focus group discussions with 6-10 people in a room. The trick to doing it yourself is getting the questionnaire right and avoiding bias during the interviews.
Here's a case: some colleagues and I visited one central European manufacturer of large parts for specialized planes - a market with limited producers and limited buyers. Because of their product's high costs, they could only work on a limited number of projects at any one time, and they had to be done perfectly. This company did the right thing by having on-going dialogues with all its customers around the world. The firm's representatives visited their clients regularly on-site and asked questions such as, "How are we doing?" "What can we do better?" "Where can we help you out?"
This firm's approach worked, as it landed a multi-million dollar production order.
"Second-Hand Information" - Scour existing sources of data to do your research. Industry associations, government agencies, statistical books, newspaper and magazine articles, and colleagues in similar businesses are great research sources.
Recently, my colleagues and I worked with a large construction materials company to evaluate their possible multi-million dollar investment in a new production line.
Their research strategy was to gather relevant articles from the press, studies by industry trade associations, and information from key distributors.
Using this approach, the company successfully developed sales volume projections for the next 10 years, and concluded that the investment could work if they negotiated two points with a foreign partner - two findings they would not have reached if they hadn't done the research.
"When All Else Fails" - If there's no better data available, then you must adopt this approach. Hearing this at meetings, though, I can usually feel my stomach knot up, not because this approach can't work, but because making decisions solely on how one feels increases the risk of failure.
Take this example: a central European producer of machine parts developed a new product - a lid designed to attach to and reseal a soda can after opening. They thought this would be perfect for people who don't finish their soft drinks but want to save them for later.
Without in-use consumer testing and based on their own judgement, they planned to produce one million of these items. But when it was time to give these samples a try, some people couldn't screw them on...Problem One. Then when others turned them over, they leaked...Problem Two. Seeing potential Problem Three, the company abandoned the project and focused on machine parts.
That's research. Prepare in advance and you won't be surprised - or get caught with a leaking gadget.
"Marketing in the Trenches" appears monthly. Next month's column will focus on "Deciding: Feel the Fear and Do it Anyway." Stewart Glickman is Practice Leader, Marketing and Sales, SBBAC Consulting (USAID-funded). Tel: 07-366-355. Fax: 07-366-384. e-mail: stewart@sbac.sk
