What is Marketing?

In the first section of our highly detailed Principles of Marketing Tutorials we lay the groundwork for our study of the field of marketing with a close look at marketing’s key concepts and the important tasks marketers perform.  We will see that marketing encompasses a wide array of business decisions that are essential to the success of nearly all organizations.

Coverage in this part of the tutorial includes a close examination of the definition of marketing.  A dissection of the key terms in the definition will show that marketing’s primary focus is to identify and satisfy customers in a way that helps build a solid and, hopefully, sustained relationship that encourages customers to continue doing business with the marketer.

We also will spend a short time on the history of marketing and see how it has evolved from a process centered on simply getting as many people as possible to purchase a product to today’s highly complex efforts designed to build long term customer relationships.  Additionally, we’ll see that marketing is not only important to individual organizations it also carries both positive and negative influences at a broader societal level.  Finally we look at what it takes to be a marketer in today’s world.

Welcome to Marketing

Welcome to the world of marketing and the Principles of Marketing Tutorials.  The main intention of this tutorial is to offer a straightforward examination of one of the most important, exciting and challenging business activities crucial to nearly all organizations. 

The Principles of Marketing Tutorials are ideal for anyone who is new to marketing as it covers all essential marketing areas.  By spending time with this tutorial the marketing novice will quickly gain the foundation needed to appreciate what marketers do and understand the full scope of marketing decision making.  For some, reading this tutorial may also offer insight into career options that exist in the marketing field.

Experienced marketers may also find this tutorial useful.  Often seasoned marketers tend to focus on just a few areas of marketing as part of their day-to-day activities and this tutorial may serve as a good refresher for areas of marketing for which they have not recently spent much time.

Before we get started we should mention that most of what we discuss applies to all types of businesses including those whose objective is to make money (i.e., for-profit businesses) as well as those not driven by a profit-making motive (i.e., not-for-profit organizations). However, the reader should be aware that we often use the terms organization, company, corporation, and firm interchangeably.  While the later three terms are often associated with profit-making businesses, the reader should understand the use of one of these terms does not necessarily limit the context of the discussion to for-profit businesses but may apply across all types of marketing situations including not-for-profits.

Definition of Marketing

Our starting point for learning about marketing is to begin with the basics and that starts with defining marketing.  Since marketing has been an important part of business for a long time we could consult one of the many hundreds of books written on the subject to locate a definition.  Or, as is more the custom today, we could search the Internet to see how marketing is defined.  Whether we search print or electronic form we will find that marketing is defined in many different ways.

Some definitions focus on marketing in terms of what it means to an organization, such as being the key functional area for generating revenue, while other definitions lean more toward defining marketing in terms of its most visible tasks, such as advertising and creating new products.

There probably is no one best way to define marketing, however, whatever definition is used should have an orientation that focuses on the key to marketing success – customers.

For the purpose of this tutorial we will define marketing as follows:

Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer.

Definition Dissected

Let’s examine our definition of marketing in a little more detail by looking at the key terms.

Strategies and Tactics - Strategies are best explained as the direction the marketing effort takes over some period of time while tactics are actionable steps or decisions made in order to follow the strategies established.  For instance, if a company’s strategy is to begin selling its products in a new country, the tactics may involve the marketing decisions made to carry this out.  Performing strategic and tactical planning activities in advance of taking action is considered critical for long-term marketing success.

Identify - Arguably the most important marketing function involves efforts needed to gain knowledge of customers, competitors, and markets (i.e., where marketers do business).  We will see throughout this tutorial how marketing research is utilized in all decision areas. 

Create - Competition forces marketers to be creative people.  When marketers begin new ventures, such as building a new company, it is often based around something that is new (e.g., a new product, a new way of getting products to customers, a new advertising approach, etc.).  But once something new is launched innovation does not end.  Competitive pressure is continually felt by the marketer, who must respond by again devising new strategies and tactics that help the organization remain successful.  For marketers, the cycle of creating something new never ends.

Maintain - Today’s marketers work hard to insure their customers return to purchase from them again and again.  Long gone (see our discussion of History of Marketing below) are the days when success for a marketer was measured simply in how many sales they made each day.  Now, in most marketing situations, marketing success is evaluated not only in terms of sales figures but also by how long a marketer retains good customers.  Consequently, marketers’ efforts to attract customers do not end when a customer makes a purchase.  It continues in various ways for, hopefully, a long time after the initial purchase.

Satisfying Relationships - A key objective of marketing is to provide products and services that customers really want AND to make customers feel their contact with the marketer is helping build a good relationship between the two.  In this way the customer becomes a partner in the transaction, not just a source of revenue for the marketer.

Value for Both Customer and Marketer - Value refers to the perception of benefits received for what someone must give up.  For customers, value is most often measured by how much benefit they feel they are getting for their money, though the value one customer feels may differ from what another customer feels even though they purchase the same product.  On the other side of the transaction, the marketer for a for-profit organization may measure value in terms of how much profit they make for the marketing efforts and resources expended.  For a successful marketing effort to take place both the customer and the marketer must feel they are receiving something worth while in return for their efforts.  Without a strong perception of value it is unlikely a strong relationship can be built.  Throughout this tutorial we will emphasize value and show ways marketers build value into the products they offer.

What Marketers Do

In order to reach the goal of creating a relationship that holds value for customers and for the organization, marketers use a diverse toolkit that includes (but is not limited to) making decisions regarding:

1. Target Markets – markets consist of customers identified as possessing needs the marketer believes can be addressed by its marketing efforts
2. Products – consists of tangible (e.g., goods) or intangible (e.g., services)  solution to the market’s needs
3. Promotion – a means for communicating information about the marketing organization’s products to the market
4. Distribution – the methods used by the marketer that enable the market to obtain products
5. Pricing – ways for the marketer to set and adjust the cost paid by the market to obtain products
6. Supporting Services – additional options that enhance a product’s value

While these decisions are shown with a number, the order of decision-making does not necessarily follow this sequence. However, as we will discuss, in almost all cases marketers should first identify target markets (#1) prior to making decisions #2 through #6 (commonly called the Marketing Mix) since these decisions are going to be directed toward satisfying the desired target markets.

Each option within the marketer’s toolkit is tightly integrated with all other options so that a decision in one area could, and often does, impact decisions in other areas.  For instance, a change in the price of a product (e.g., lowering the price) could impact the distribution area (e.g., requires increased product shipments to retail stores).

Additionally, options within the toolkit are affected by factors that are not controlled by the marketer.  These factors include economic conditions, legal issues, technological developments, social/cultural changes, and many more.  While not managed in the way marketers control their toolkit, these external factors must be monitored and dealt with since these can cause considerable harm to the organization.  Ignoring outside elements also can lead to missed opportunities in the market especially if competitors are the first to take advantage of the opportunities.  As part of the strategic and tactical planning process discussed above it is wise for marketers to pay close attention to the environment outside the organization.

Finally, as noted earlier, research plays a significant role in all marketing decisions areas.  As we will see in the Marketing Research Tutorial, marketing decisions should not be made without first committing time and resources to obtaining needed information.

History of Marketing

It is hard for many to believe, but when compared to economics, production and operations, accounting and other business areas, marketing is a relatively young discipline having emerged in the early 1900s.  Prior to this time most issues that are now commonly associated with marketing were either assumed to fall within basic concepts of economics (e.g., price setting was viewed as a simple supply/demand issue), advertising (well developed by 1900), or in most cases, simply not yet explored (e.g., customer purchase behavior, importance of distribution partners).

Led by marketing scholars from several major universities, the development of marketing was in large part motivated by the need to dissect in greater detail relationships and behaviors that existed between sellers and buyers.  In particular, the study of marketing led sellers to recognize that adopting certain strategies and tactics could significantly benefit the seller/buyer relationship.  In the old days of marketing (before the 1950s) this often meant identifying strategies and tactics for simply selling more products and services with little regard for what customers really wanted.  Often this meant companies embraced a “sell-as-much-as-we-can” philosophy with little concern for building relationships for the long term.

But starting in the 1950s, companies began to see that old ways of selling were wearing thin with customers.  As competition grew stiffer across most industries, organizations looked to the buyer side of the transaction for ways to improve.  What they found was an emerging philosophy suggesting that the key factor in successful marketing is understanding the needs of customers.  This now famous Marketing Concept suggests marketing decisions should flow from FIRST knowing the customer and what they want.  Only then should an organization initiate the process of developing and marketing products and services. 

The marketing concept continues to be at the root of most marketing efforts, though the concept does have its own problems (e.g., doesn’t help much with marketing new technologies) a discussion of which is beyond the scope of this tutorial.  But overall, marketers have learned they can no longer limit their marketing effort to just getting customers to purchase more.  They must have an in-depth understanding of who their customers are and what they want. 

The Role of Marketing

As we’ve seen the key objective of an organization’s marketing efforts is to develop satisfying relationships with customers that benefit both the customer and the organization.  These efforts lead marketing to serve an important role within most organizations and within society. 

At the organizational level, marketing is a vital business function that is necessary in nearly all industries whether the organization operates as a for-profit or as a not-for-profit.  For the for-profit organization, marketing is responsible for most tasks that bring revenue and, hopefully, profits to an organization.  For the not-for-profit organization, marketing is responsible for attracting customers needed to support the not-for-profit’s mission, such as raising donations or supporting a cause.  For both types of organizations, it is unlikely they can survive without a strong marketing effort. 

Marketing is also the organizational business area that interacts most frequently with the public and, consequently, what the public knows about an organization is determined by their interactions with marketers.  For example, customers may believe a company is dynamic and creative based on its advertising message.

At a broader level marketing offers significant benefits to society.  These benefits include:

• Developing products that satisfy needs, including products that enhance society’s quality of life
• Creating a competitive environment that helps lower product prices
• Developing product distribution systems that offer access to products to a large number of customers and many geographic regions
• Building demand for products that require organizations to expand their labor force
• Offering techniques that have the ability to convey messages that change societal behavior in a positive way (e.g., anti-smoking advertising)

Criticisms of Marketing

While marketing is viewed as offering significant benefits to organizations and to society, the fact that marketing is a business function operating in close contact with the public opens this functional area to extensive criticism. 

Among the issues cited by those who criticize marketing are:

Marketing Encourages People to Purchase What is They Do Not Need

Possibly the criticism most frequently made about marketing is that marketers are only concerned with getting customers to buy whether they want the product or not.  The root of this argument stems from the belief that marketers are only out to satisfy their own needs and really do not care about the needs of their customers. 

As we will discuss, while many marketers are guilty of manipulating customers into making unwanted purchases, the vast majority understand that undertaking such tactics will not lead to loyal customers and, consequently, is unlikely to lead to longer term success.

Marketers Embellish Product Claims

Marketers are often criticized for exaggerating the benefits offered by their products.  This is especially the case with the part of marketing that engages in customer communication, such as advertising and salespeople.  The most serious problems arise when product claims are seen as misleading customers into believing a product can offer a certain level of value that, in fact, it cannot. 

But sometimes there is a fine line between what a rational person should accept as a “reasonable exaggeration” and what is considered downright misleading.  Fortunately, many countries offer customers some level of protection from misleading claims since such business practices may subject the marketer to legal action.  Again, using such tactics is likely to lead to marketing failure as customers will not be satisfied and will likely not return.

Marketing Discriminates in Customer Selection

We will see later that a key to marketing success is to engage in a deliberate process that identifies customers who offer marketers the best chance for satisfying organizational objectives.  This method, called target marketing, often drives most marketing decisions, including product development and price setting.  But some argue that target marketing leads marketers to focus their efforts primarily on customers who have the financial means to make more expensive purchases.  They contend that doing so intentionally discriminates against others, especially lower income customers who cannot afford to purchase higher priced products.  This group ends ups being targeted with lower quality (and in some cases less safe) products or for some groups, no product options.

While this criticism is often valid, it is worth noting that while many “lower quality” products are inferior to current high-end products, comparison of their quality to similar products from just a few years ago shows there has been significant improvement.  For instance, low cost electronic equipment, such as digital cameras, offer more features compared to low cost cameras of just a few years ago.  Thus, while certain customer groups may not be the target market for certain new product offerings they may eventually benefit from higher-end products.

Marketing Contributes to Environmental Waste

In recent years one of the loudest complaints against marketing concerns its impact on the environment.  Those critical of marketing’s effect on the environment point to such issues as:

• the use of excessive, non-biodegradable packaging (e.g., use of plastics, placing small products in large packages, etc.)
• the continual development of resource consuming products (e.g., construction of new buildings, golf courses, shopping malls, etc.)
• the proliferation of unsightly and wasteful methods of promotions (e.g., outdoor billboards, direct mail, etc.). 

Marketers have begun to respond to these concerns by introducing “green marketing” campaigns that are not only intended to appease critics but also take advantage of potential business opportunities.  For example, auto makers see opportunity by creating new fuel efficient hybrid vehicles, the demand for which has accelerated in the last few years.  Also, certain retailers are finding financial opportunity and promotional value by asserting their marketing muscle to encourage customers to become more environmentally responsible.  This can be seen with retailers, such as Wal-Mart, that are shifting its inventory of light bulbs from standard incandescent types to more efficient fluorescent products.  It is expected that as environmental activism gains political clout and more consumer support, marketers will see even more opportunity to market environmentally friendly products.

Marketing Encroaches on Customers’ Right to Privacy

As we will see later in our discussion of Marketing Research, gathering and analyzing information on the market in which marketers conduct business is a vital step in making good marketing decisions.  Often the most valuable information deals with customers’ buying behavior and especially determining which factors influence how customers make purchase decisions. 

But to some consumer advocates digging deep into customer buying behavior crosses the line of what is considered private information.  Of most concern to privacy advocates is marketers’ use of methods that track user activity.  In particular, they are critical of the growing use of advanced technologies that allow marketers to gain access to customer shopping and information gathering habits.  For instance, marketers can use highly advanced techniques to track user activity on the Internet.  Some marketers do so using questionable practices, such as loading tracking software onto a user’s computer, without the knowledge or permission of the user.  One type of software called adware allows marketers to monitor users’ website browsing activity and use this information to deliver advertisements based on users Internet habits. 

Privacy issues are not limited to concerns with online tracking; marketers also use technique to track customers’ offline purchase activity.  One example of offline tracking occurs when retail stores match sales transactions to individual shoppers.  This is easy to do when customers use purchase cards (a.k.a. loyalty cards, discount cards, club cards, etc.) as part of the buying process.

Privacy issues are not restricted to marketing research.  Other areas of marketing have also experienced problems.  For instance, there have been several recent incidences, most notably those involving mishandled credit card payment information, where a breach in customer privacy has placed customers at risk. 

The issue of customer privacy is likely to become one of the most contentious issues marketers face in the coming years.  If this continues marketers may soon face greater legal limits on how they conduct business.

Ethics in Marketing

In addition to problems cited above, some critics also argue that the money-making motive of some marketers has encouraged many to cross the line in terms of ethical business behavior.  Ethics is concerned with what is right and what is wrong.  Many people assume that only actions that violate laws are considered unethical.  While it is true that illegal activity is also unethical, a business activity can be unethical even though no laws are violated.  For instance, some consider it unethical for marketing companies to aggressively promote unhealthy foods to children though such promotional practices are generally not viewed as illegal. 

Sometimes the line between what is considered ethical and unethical is difficult to distinguish since what is right and wrong differs depending on such factors as nationality, culture, and even industry.  For example, many websites offer users access at no monetary charge to their content (e.g., articles, videos, audio clips, etc.) but do so only if users register and provide contact information including email addresses.  Some of these sites then automatically add registrants to promotional email mailing lists.  Some view the practice of automatic “opt-in” to a mailing list as being unethical since customers do not request it and are forced to take additional action to be removed from the list (“opt-out”).  However, many marketers see no ethical issue with this practice and simply view adding registered users to an email list as part of the “cost” to customers for accessing material.

Marketing Code of Ethics

The call for marketers to become more responsible for their actions has led to the development of a code of ethics by many companies and professional organizations. 

A company code of ethics includes extensive coverage of how business is conducted by members of an organization.  For instance, Yahoo! lays out an extensive list of what is expected of their employees in their document The Guide to Business Conduct & Ethics@Yahoo!. Among the issues covered are:

• Business Relationships (“must never take unfair advantage of others through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practice”)
• Offering Gifts to Clients (“may not furnish or offer to furnish any gift that is of more than token value or that goes beyond the common courtesies”)
• Receiving Gifts From Clients (“must never request or ask for gifts, entertainment or any other business courtesies”)
• Business Communication (“should take care to avoid exaggeration, colorful language, guesswork, legal conclusions and derogatory remarks or characterizations of people and other companies”)
   

Marketers often join professional organizations for the purpose of associating with others who share similar interests.  These organizations include industry associations, whose membership is mostly limited to those who work within a particular industry, and professional services associations, whose membership consists of those who share similar job responsibilities.  Marketers joining these organizations often find that a code of ethics has been developed that is intended to be followed by all organization members.  For example, the Canadian Marketing Association lays out rules for its membership, which includes marketers from many for-profits and not-for-profit organizations, in its Code of Ethics and Standards and Practices. The Code discusses such issues as:

• Accuracy of Representation of Products (“must accurately and fairly describe the product or service offered”)
• Support of Claims Made About Products (“must be able to substantiate the basis for any performance claim or comparison“)
• Acceptability for Using the Word “Free” (“Products or services offered without cost or obligation”)
• Guidelines for Advertising Which Compares One Product to Another ("must be factual, verifiable and not misleading”)

Social Responsibility in Marketing

Most marketing organizations do not intentionally work in isolation from the rest of society.  Instead they find that greater opportunity exists if the organization is visibly accessible and involved with the public.  As we’ve seen, because marketing often operates as the “public face” of an organization, when issues arise between the public and the organization marketing is often at the center.  In recent years the number and variety of issues raised by the public has increased.  One reason for the increase is the growing perception that marketing organizations are not just sellers of product but also have an inherent responsibility to be more socially responsible, including being more responsible for its actions and more responsive in addressing social concerns.

Being socially responsible means an organization shows concern for the people and environment in which it transacts business.  It also means that these values are communicated and enforced by everyone in the organization and, in some cases, with business partners, such as those who sell products to the company (e.g., supplier of raw material for product production) and those who help the company distribute and sell to other customers (e.g., retail stores). 

In addition to insuring these values exist within the organization and its business partners, social responsibility may also manifest itself in the support of social causes that help society.  For instance, marketers may sponsor charity events or produce cause-related advertising.

Marketers who are pursuing a socially responsible agenda should bear in mind that such efforts do not automatically translate into increased revenue or even an improved public image.  However, organizations that consistently exhibit socially responsible tendencies may eventually gain a strong reputation that could pay dividends in the form of increased customer loyalty.

Characteristics of Modern Marketers

As we’ve seen, marketing is a critical business function that operates in an environment that is highly scrutinized and continually changing.  Today’s marketers undertake a variety of tasks as they attempt to build customer relationships and the knowledge and skill sets needed to perform these tasks successfully are also varied. 

So what does it take to be a successful marketer?  Obviously, at the center of a successful marketing career is an understanding of the important concepts that are discussed in the Principles of Marketing Tutorials.  But basic marketing knowledge is just the beginning, for today’s marketers must possess much more.  Among the most important knowledge and skills needed to be successful are:

Basic Business Skills

Marketers are first and foremost business people who must perform necessary tasks required of all successful business people.  These basic skills include problem analysis and decision-making, oral and written communication, basic quantitative skills, and working well with others.

Understanding Marketing’s Impact

Marketers must know how their decisions will impact other areas of the company and others business partners.  They must realize that marketing decisions are not made in isolation and that decisions made by the marketing team could lead to problems for others.  For example, making a decision to run a special sale that significantly lowers the price of a product could present supply problems if the production area is not informed well in advance of the sale.

Technology Savvy

Today’s marketers must have a strong understanding of technology on two fronts.  First, marketers must be skilled in using technology as part of their everyday activities.  Not only must they understand how basic computer software is used to build spreadsheets or create slide presentations, but in a world where information overload is a problem marketers must investigate additional technologies that can improve their effectiveness and efficiency, such as multifunction cellphones, GPS navigation services and web-based productivity applications.  Second, marketers must understand emerging technology and applications in order to spot potential business opportunities as well as potential threats.  For instance, the rapid growth of search engines requires marketers to firmly understand how these fit within an overall marketing strategy.

The Need for a Global Perspective

Thanks in large part to the Internet, nearly any company can conduct business on a global scale.  Yet, just having a website that is accessible to hundreds of millions of people worldwide does not guarantee success.  Marketers selling internationally must understand the nuances of international trade and cultural differences that exist between markets.

Information Seeker

The field of marketing is dynamic.  Changes occur continually and often quickly.  Marketers must maintain close contact with these changes through a steady diet of information.

In the remaining parts of the Principles of Marketing Tutorials we explore in further detail the key concepts and strategies that are consistent across nearly all industries and marketing jobs.  While reading the tutorial will not guarantee marketing success, it will certainly offer the foundation needed to be a Modern Marketer.

 

Marketing Research

Many organizations find the markets they serve are dynamic with customers, competitors and market conditions continually changing.  And marketing efforts that work today cannot be relied upon to be successful in the future.  Meeting changing conditions requires marketers have sufficient market knowledge in order to make the right adjustments to their marketing strategy.  For marketers gaining knowledge is accomplished through marketing research.

In this part of the Principles of Marketing Tutorials we begin a multi-part discussion of research in marketing.  We explore what marketing research is and see why it is considered the foundation of marketing.  This tutorial also looks at the elements of good research including factors that distinguish good research from poor.  We examine the risks associated with marketing research and see why it should be used to aid decision-making, but never used as the sole reason for making decisions.  Finally, we look at the trends shaping marketing research.

Note that in this tutorial we use the terms “marketing research” and “market research” interchangeably.  Many feel there is a distinct difference, with “marketing research” covering a broader array of research efforts associated with marketing decisions while “market research” is specific to understanding nuances of a particular market.  For the purpose of this tutorial we treat these as the same.

Importance of Marketing Research

Research, as a general concept, is the process of gathering information to learn about something that is not fully known.  Nearly everyone engages in some form of research.  From the highly trained geologist investigating newly discovered earthquake faults, to the author of best selling spy novels gaining insight into new surveillance techniques, to the model train hobbyist spending hours hunting down the manufacturer of an old electric engine,  each is driven by the quest for information. 

For marketers, research is not only used for the purpose of learning, it is also a critical component needed to make good decisions.  Market research does this by giving marketers a picture of what is occurring (or likely to occur) and, when done well, offers alternative choices that can be made.  For instance, good research may suggest multiple options for introducing new products or entering new markets.  In most cases marketing decisions prove less risky (though they are never risk free) when the marketer can select from more than one option.

Using an analogy of a house foundation, marketing research can be viewed as the foundation of marketing.  Just as a well-built house requires a strong foundation to remain sturdy, marketing decisions need the support of research in order to be viewed favorably by customers and to stand up to competition and other external pressures.  Consequently, all areas of marketing and all marketing decisions should be supported with some level of research. 

While research is key to marketing decision making, it does not always need to be elaborate to be effective.  Sometimes small efforts, such as doing a quick search on the Internet, will provide the needed information.  However, for most marketers there are times when more elaborate research work is needed and understanding the right way to conduct research, whether performing the work themselves or hiring someone else to handle it, can increase the effectiveness of these projects.

Examples of Research in Marketing

As noted, marketing research is undertaken to support  a wide variety of marketing decisions.  The table below presents a small sampling of the research undertaken by marketing decision area.  Many of the issues listed under Types of Research are discussed in greater detail in other parts of the Principles of Marketing Tutorials.

 

Marketing Decision	Types of Research
Target Markets	sales, market size; demand for product, customer characteristics, purchase behavior, customer satisfaction, website traffic
Product	product development; package protection, packaging awareness; brand name selection; brand recognition, brand preference, product positioning
Distribution	distributor interest; assessing shipping options; online shopping, retail store site selection
Promotion	advertising recall; advertising copy testing, sales promotion response rates, sales force compensation, traffic studies (outdoor advertising), public relations media placement
Pricing	price elasticity analysis, optimal price setting, discount options
External Factors	competitive analysis, legal environment; social and cultural trends
Other	company image, test marketing

Doing Research Right

Marketing research is a process that investigates both organizations and people.  Of course, organizations are made up of people so when it comes down to it, marketing research is a branch of the social sciences.  Social science studies people and their relationships and includes such areas as economics, sociology and psychology.  To gain understanding into their fields, researchers in the social sciences use scientific methods that have been tested and refined over hundreds of years.  Many of these methods require the institution of tight controls on research projects.  For instance, many companies survey (i.e., ask questions) a small percentage of their customers (called a sample) to see how satisfied they are with the company’s efforts.  For the information obtained from a small group of customers to be useful when evaluating how all customers feel, certain controls must be in place including controls on who should be included in the sample.

Thus, doing research right means the necessary controls are in place to insure it is done correctly and increase the chance the results are relevant.  Relying on results of research conducted incorrectly to make decisions could prove problematic if not disastrous.  Thousands of examples exist of firms using faulty research to make decisions, including many dot-com companies that failed between 1999 and 2002.

As one might expect, the trade-off for doing research right is the increase in cost and time needed to conduct the research.  So a big decision for marketers, when it comes to doing research, is to determine the balance between the need for obtaining relevant information and the costs involved in carrying out the research.

Research Validity and Reliability

As we discussed, not all research requires undertaking an elaborate study. But even marketers conducting small, informal research should know that any type of research performed poorly will not yield relevant results.  In fact, all research, no matter how well controlled, carries the potential to be wrong.  There are many reasons why research may not yield good results (a full discussion being beyond the scope of this tutorial), however, most errors can be traced to problems with how data is gathered.  In particular, many research mistakes occur due to problems associated with research validity and research reliability.

Research Validity

This problem with data gathering represents several concepts that to the non-researcher may be quite complex.  But basically validity boils down to whether the research is really measuring what it claims to be measuring.  For instance, if a marketer is purchasing a research report from a company claiming to measure how people prefer the marketer’s products over competitors’ products, the marketer should understand how the data was gathered to help determine if the research really captures the information the way the research company says it does.

While research validity is measured in several ways, those evaluating research results should keep asking this simple question: Is the research measuring what it is supposed to measure?  If the marketer has doubts about the answer to this question then it is possible the results should also be questioned.

Research Reliability

This problem relates to whether research results can be applied to a wider group than those who took part in a study.  In other words, would similar results be obtained if another group containing different respondents or a different set of data points were used?  For example, if 40 salespeople out of 2,000-person corporate sales force participate in a research study focusing on company policy, is the information obtained from these 40 people sufficient to conclude how the entire sales forces feels about company policies?  What if the same study was done again with 40 different salespeople, would the responses be similar?

Reliability is chiefly concerned with making sure the method of data gathering leads to consistent results.  For some types of research this can be measured by having different researchers follow the same methods to see if results can be duplicated.  If results are similar then it is likely the method of data gathering is reliable.  Assuring research can be replicated and can produce similar results is an important element of the scientific research method.

Risk in Marketing Research

The discussion above regarding doing research right shows that good marketing research, especially when it involves formal research projects, requires strict controls in order to produce relevant information.  Being relevant means the probability is high that the research results reflect what is happening now or might happen in the future.  But following the right procedures to produce a relevant study does not insure the results of research will be 100% correct as there is always the potential that results are wrong.

 

Because of the risks associated with research, marketers are cautioned not to use the results of marketing research as the only input in making marketing decisions.  Rather, smart marketing decisions require considering many factors, including management’s own judgment of what is best.  But being cautious with how research is used should not diminish the need to conduct research.  While making decisions without research input may work sometimes, long-term success is not likely to happen without  regular efforts to collect information.

Additionally, risk in research extends to research produced by others.  As we discuss in the Planning for Marketing Research Tutorial, the research process often includes using information initially gathered by other sources, such as market research firms.  However, in many instances the methods for collecting this information is not be fully disclosed, thus questions exist regarding research validity and reliability.  Marketers using research collected by third-party sources should do so with a reasonable level of skepticism.  In fact, it is wise for marketers to always make an effort to locate multiple information sources that address the same issue (e.g., two or more sales forecasts reports).  A good rule-of-thumb for all marketers is never to rely on one source for making definitive statements about a market.

Trends in Marketing Research

In recent years the evolution of marketing research has been dramatic with marketers getting access to a wide variety of tools and techniques to improve their hunt for information.  Below we discuss a few important trends shaping the marketing research field:

Gaining an Information Advantage

In its role as the foundation of marketing, marketing research is arguably marketing’s most important task.  Today marketers not only view research as a key ingredient in making marketing decisions they also consider information to be a critical factor in gaining advantage over competitors.  Because organizations recognize the power information has in helping create and maintain products that offer value, there is an insatiable appetite to gain even more insight into customers and markets.  Marketers in nearly all industries are expected to direct more resources to gathering and analyzing information especially in highly competitive markets.  Many of the trends discussed below are directly related to marketers’ quest to acquire large amounts of customer, competitive and market information.

Internet Technologies

To address the need for more information, marketing companies are developing new methods for collecting data.  This has led to the introduction of several new technologies to assist in the information gathering process.  Many of these developments are Internet-based technologies that include:

• Enhanced Tracking - The Internet offers an unparalleled ability to track and monitor customers.  Each time a visitor accesses a website they provide marketers with extensive information including how they arrived at the website (e.g., via a search engine) and what they did when on the website (e.g., what products were investigated).  In many ways the vast data available through Internet tracking has yet to be used by the majority of marketers.  However, as tracking software becomes more sophisticated the use of tracking data will be a routinely used research tool.
• Improved Communication – Not only is the Internet enabling marketers to monitor customers’ website activity, it also offers significant improvement in customer-to-company communication which is vital for marketing research.  For instance, the ability to encourage customers to offer feedback on the company’s products and service is easy using website popup notices and email reminders.  Also, as we discuss in the Planning for Market Research Tutorial, the use of the Internet for conducting online focus group research is expanding.
• Research Tools – A large number of Internet services have added options for conducting research.  These include the ubiquitous search engines, tools for conducting online surveys, and access to large databases containing previous research studies (i.e., secondary research).

Other Technologies

In addition to the Internet, marketing research has benefited from other technological improvements including:

• Virtual Reality and Simulations - Marketers can use computer developed virtual worlds to simulate real world customer activity such as store shopping.  While this type of research is mostly performed in a controlled laboratory setting, there are emerging virtual worlds on the Internet where marketers can test concepts and communicate with customers.
• Global Positioning Systems – GPS enables marketers to track inventory and even track mobile sales and service personnel.  Soon GPS will be a common feature of customers’ communication devices, such as cellphones, offering marketers the potential to locate and track customers.
• Data Analysis Software – As we will see in the Planning for Market Research Tutorial, research includes gathering information and it also involves analyzing what is collected.  A number of software and statistical programs have been refined to give marketers greater insight into what the data really means.

Affordable Research

For many years formal research projects were considered something that only the largest marketers could afford due to the expense of carrying out relevant research.  However, the technologies discussed above make it affordable for companies of all sizes to engage in research that were financially prohibitive  just few years ago.  For instance, surveying customers is quick and easy using one of the many online survey services which charge low fees to create, distribute and analyze results.

Merging of Data Sources

The wide range of technologies used to gather data has led to the creation of data centers where information is stored.  Today many of these data centers are sharing information with other centers in a manner that offers the marketer a fuller picture of their customers.  For instance, as we noted in the Managing Customers Tutorial, many companies have multiple contact points where customers can interact with the company (e.g., in-person, on the web, via phone call).  In the past the information gathered at these points was often stored separately so if a customer contacted the company through one contact point they may not be recognized if they also contacted the company through a different point. 

Companies now see the value in knowing what customers do across all contact points and work to integrate customer information.  Additionally, some marketers are going outside their own data collection and seek information on their customers from other sources, such as information provided by credit card companies.  This information is then merged with the company-owned information to get a fuller picture of customer activity.

Privacy Concerns

The continual demand for customer information, along with advances in technology and the merging of information sources, has lead marketing organizations to gather information in ways that raise concerns among privacy advocates.  Many customers are unaware of the amount and nature of the data marketers collect.  As new information gathering techniques and technologies emerge customer response to issues of privacy may determine whether these methods are feasible or forbidden.

Respondent Cooperation at Issue

The growing concern with privacy is leading many customers to limit their participation in a company’s research activities.  This includes customers choosing not to respond to company requests to take part in research studies that may come via telephone or email solicitation.  Customers are also becoming more aware of how their Internet activities are tracked and are responding by using techniques to restrict marketers tracking efforts.  For example, marketers can place small data files called cookies on customers’ computer and then use this to track user activity.  Many customers are learning to disable the cookies and, in doing so, limit the marketer’s ability to track customer activity.

Research as a Promotional Tool

While most people do not equate marketing research with promotion, the fact is many companies are discovering research can also function as a major promotional tool.  The practice of distributing company-produced research reports to potential customers and the news media has been used for a number of years in scientific and technology industries. In recent years the practice has expanded into many other fields, particularly among firms involved in consulting, healthcare and financial industries.  Such reports often provide readers with information related to product features and benefits, comparisons with competitor’s offerings and target market perceptions.  These reports are produced using high quality graphs and charts backed up by carefully created narratives that proudly emphasize the company’s strengths.

Unfortunately, many research reports produced for promotional reasons are not scientific and thus may not carry much value.  While many companies claim the research supports their products, many of these claims may in fact be more fluff than substance since they are not grounded in good research methods.

 

Preparing a Market Study

This part of the Principles of Marketing Tutorials provides information and guidelines that professionals and students should consider when presented with the task of researching a market. What follows is NOT a marketing plan. Rather what follows is a market study, a component within the larger marketing plan.  (For more information on developing a marketing plan see the How to Write a Marketing Plan Tutorial.) Thus, the information provided should not focus so much on what is being planned but on what has been learned about the market.

However, you can allude to what you plan to do in order to set the stage for why you are collecting certain types of data. For example, you can say "Product X is planned to target a specific segment of the XYZ market, consequently, we have investigated certain aspects of this market." Those interested in following these guidelines should not limit themselves to what is shown. Feel free to include more if it is appropriate.

The guidelines apply to almost all products and services. Additionally, these guidelines can be adjusted in order to be used as a study of a company as a whole and not just products/services. Please note this is an ever evolving set of guidelines so you may want to check back on a regular basis for any updates.

General Format – Parts 1-3

1. Objective of the Research

• one paragraph explanation of why the research is being done, what you hope to learn and for what purpose the information may be used

2. Description of the Market

• General Description - one paragraph
• Target Market(s)
  • Why this particular market(s) was chosen
  • Who are they - complete profile (e.g., demographics, psychographics, behaviors)
  • What benefits do they seek (i.e., what points-of-pain or problems are being solved)
  • What factors can affect their purchase or use decision
  • What attitudes do they have about the products/services currently or not currently offered
  • How is the product used
• Products and Services that appeal to the target market
  • In general terms (not particular brands) what is currently appealing to this market
  • If there are no current providers, what types of products/services may appeal to this market (i.e., what is used now to solve the problem).

3. Market Metrics

• Size estimates (current and future) for:
  • Overall market
    • Current size
    • Potential size
    • Actual penetration of current products/service within the total market
  • Individual market segments
    • Current size
    • Potential size
    • Actual penetration of current products/service within the total market
  • Usage rates
    • Frequency of product purchases
• Growth estimates (current and future) for:
  • Overall market
  • Individual market segments

General Format – Parts 4-5

4. Competitive Analysis

• Summary of Current Competitors
  • Listing by market share ranking (by each target market if possible)
• Current Competitors - full analysis of top competitors including:
  • Products & Services (e.g., description, uniqueness, pricing, etc.)
  • Market share
  • Current customers
  • Positioning and promotion strategies
  • Partnerships/Alliances/Distributors
  • Recent news
  • SWOT Analysis - Strengths, Weaknesses, Opportunities & Threats
    • It is extremely important to focus attention on the SWOT section of this report. While most other information in this report can be gleaned from company and secondary materials, much of what appears in the SWOT section is based on the researcher’s own perceptions of the competitor based on the information collected. Consequently, this is often one of the hardest areas of the report to write.
  • And other information as shown in the examples in the next section
• Potential Competitors
  • Explanation (though not as detailed as Current Competitors) on who they are or maybe and why they are seen as potential competitors

5. Additional

• Extraneous Variables
  • Discuss factors that may affect this market (e.g., technological, social, governmental, competitive, etc.)
• Market Trends
  • What is expected to happen

Guidelines for Doing a Competitive Analysis

The competitive analysis section can follow a format that is shown below. In practice we recommend this section be a single-spaced, two-column report that is limited to a single sheet of paper (both sides used). Consequently, font size is generally 10 point or less.

This report would be made for each of the major competitors. While most of this report focuses on the overall analysis of the competitor, you should recognize that you are primarily interested in how this information may impact your company and, specifically, a product or product line. Thus, you should make sure, where possible, to focus your information on how it impacts the markets in which your product competes.

Note each sub-section within a section will contain 1-5 sentences that explain the sub-section.

• General Company Information - includes name, location (headquarters, other locations of importance), website address
• Summary of Business – includes sections that summarize the company, business units and nature of business
• Business Overview – includes sections on history, ownership structure, types of businesses, mission, strategy/objectives, key executives
• Recent News/Developments – important company developments within last 6-12 months (e.g., reports from news sources, press releases, financial statements)
• Financial and Market Share Analysis – includes sections on corporate performance, trends, market share for product
• Marketing – includes sections on products and services offered, target markets, positioning, customers/users, pricing model, promotional efforts, sales force, and distribution
• Other Issues – includes sections on technology capability, partnership arrangements, intangible issues
• Competitors – list key competitors facing this company
• SWOT – strengths, weaknesses, opportunities and threats

Presenting the Market Study

When a formal marketing study is to be presented in a written form we suggest the following guidelines.

The formal document is preferably in a double-spaced format but that is not a requirement. The plan is recommended to be delivered in a large binder and should include the following:

• Section One - contains written report with Title Page, Table of Contents, Executive Summary, Body of Report and Endnotes that contains full citations. Include charts or graphs in body of document, however, if there is a page count limit it is generally suggested only small graphics go in the main body and the rest be placed in an Appendix section. Make sure all pages in the body are numbered. Preferably this section can itself be bound (e.g., spiral) and inserted in the large binder. This way just this section can be removed.
• Section Two - if needed include an Appendix for larger graphics and other important materials such as a survey, tabulations, etc.
• Section Three - (optional) all referenced documents, websites, etc. (printed out if possible) are included here. Try to section off these documents using tabs. For large documents, such a large research reports, place in a folder that has holes for the binder. For things that can’t be included, such as books, it is suggested that a photocopy of the book’s title page, copyright page and then the page(s) from which material is referenced.
• All Files - (optional) A storage device of some kind (e.g., floppy disk, CD, DVD) containing the files used (e.g., word processing, spreadsheet, slides, downloaded articles, etc.).

Other Points

• The information provided in a market study should be based on research collected AND NOT on one’s own perceptions, guesstimates or other unsupported statements. The only exception to this may be within the SWOT analysis, however, even most of this should be supported with some evidence.
• If you are unable to find certain information it is probably a good idea to make this known so the person reading the report would know of this potential limitation of the market study. Obviously you need to collect good research so you do not end up having too many of these statements.
• It is generally a good idea to define important terms and concepts when you first introduce them.  This will benefit those reading the report who may not possess knowledge in this area. Alternatively, you can create a glossary or definition section in the Endnotes area of the report. 
• Where necessary explain how the research was conducted or how data was collected (e.g., explaining how survey was done).
• Make note of any limitations of secondary research (research you obtained from other sources) that you used. Unless there are very significant limitations you can generally include this as an endnote.
• If you are investigating a new/different way of doing something with present customers, then you will need to provide a discussion of the cost/benefit of alternative options. That is, what will customer give up to use something new versus what they will get from using the new product.
• Remember to reference as much as is needed. We recommend using endnotes instead of footnotes. Endnotes appear next to the sentence, word, quote, number, etc. but usually not as a superscript and usually in parenthesis like this (1). The full reference would appear at the back of the report in an Endnotes section.