What is Marketing Research?
Definition: Marketing Research is the systematic collection, organisation, analysis and interpretation of primary or secondary data in order to find out the solutions to the marketing problems.
Many companies conduct marketing research to analyse the changes in the marketing environment by applying several statistical tools. Many companies use a combination of resources to study their competitors, industries, channel strategies and audiences. The data that is collected can either be primary data or secondary data. Primary data is also called first-hand data and secondary data is called second-hand data (available in books, magazines, journals, research reports, etc.)
A company normally spends 1% to 2% of company sales in marketing research and a large percentage of that is spent on services of outside firms.
Types of Market Research Firms
Marketing research firms fall into three categories
1. Syndicated service research firms
These firms gather consumer and trade information. This information is then sold for a fee.
Example – Neilsen, Kantar
2. Custom marketing research firms
Such firms are hired to carry out particular projects. Once hired to do a specific project they then design the study, conduct research and then report the findings.
3. Speciality line marketing research firms
These firms have specialities in providing specialised research services. A field service firm would be the best example for a speciality line marketing research firm as it sells field interviewing services to other firms.
Characteristics of Marketing Research
- Scientific method
- Research creativity
- Multiple methods
- Interdependence of models and data
- Value and cost of information
- Healthy skepticism
- Ethical marketing
Now let us look at each one of them briefly
1. Scientific Method
Effective marketing research always uses principles of the scientific method like careful observation, formulation of hypothesis, prediction and testing.
2. Research creativity
Marketing research develops innovative waves to solve a problem at its best.
3. Multiple Methods
Marketing researchers never overly rely on anyone method. Recognising the value of using multiple methods, they always use two or three methods to increase confidence in their results.
4. Interdependence of models and data
Successful marketing researchers recognise the underlying models guiding the type of information sought. They also realise that this is where the data can be interpreted from.
5. Value and cost of information
A concern for estimating the value of information against its cost shown by marketing researchers. The value of research is hard to quantify whereas costs are typically easy to determine.
The dependability and authenticity of the findings and managements readiness to accept and act on those findings is what determines the value and cost of information.
6. Healthy skepticism
A good marketing researcher should always be open to healthy scepticism towards slick assumptions made about a market by the managers.
They realise that marketing myths are the problem and are vigilant towards it.
7. Ethical marketing
Ethical marketing research benefits both parties, the sponsoring company and its customers. When marketing research is misused it can harm or annoy consumers increasing resentment towards the company.
It can also be viewed as an invasion of privacy by the customers or as a disguised sales pitch that will do nothing but infuriate them further.
Example of Market Research of Netflix
Netflix has a simple yet powerful approach to product innovation that it employs regularly. They frequently ask the members about their opinions and choices through online research experiments. This format of data-driven decision making and commitment to experimentation stretches through all levels of the company.
Through this experimentation, hypothesis and the results are religiously analysed. Almost all proposed changes to Netflix are tested through controlled a/B experiments.
Everything right from new recommendation algorithms, user interface features, content promotion tactics, the launch strategies for originals to new member signup process and payment methods, are tested through these experiments.
Whenever these A/B experiments are not possible, and specially to measure new marketing and advertising ideas, Netflix relies on quasi-experiments and causal inference methods.