If you're a business owner, you need to know your clientele. Watch this lesson to understand the purpose and role of marketing research strategy in an overall marketing plan. This might be just the info you need!
Detective Sam Lombardo is faced with a huge mystery! The local consignment kid clothing shop in town is in danger of going out of business after 21 years. The owner is heartbroken and wants to know what has happened to her business. Detective Lombardo will use precise marketing research steps to figure out the culprit. Marketing research is the process of planning, collecting and analyzing data relevant to a marketing decision.
Marketing Research Business Uses
There are many ways that marketing research can help Detective Lombardo solve the store mystery. First of all, marketing research can be invaluable in improving the quality of decision-making. What should the consignment shop owner do to save her business? Should she cut prices, increase advertising, improve customer service or do something else entirely? Marketing research is also excellent at tracing problems. Detective Lombardo can follow the steps to figure out WHY the store is doing so poorly. Perhaps the answer lies with growing competition or online stores?
The consignment store owner is also very interested in keeping her current customers. Marketing research can help find ways to keep her existing clients and find ways to increase their purchases. Consumers can be surveyed and asked many questions that could lead to a solution. Lastly, marketing research can be used to help understand trends and environmental changes. For example, it could show the Detective that people prefer buying kids' clothes on the Internet now instead of in a store.
Identifying and Formulating the Problem
Detective Lombardo's first step in the marketing research process is to figure out the problem. The major problem facing the consignment shop is declining sales. The Detective needs to analyze WHY the sales are declining and if the store is able to be saved. The major thrust of the problem-recognition step is identifying what information can help determine how to solve the problem. Detective Lombardo will search for secondary and primary data to help him make an educated recommendation.
Secondary data is data previously collected for any purpose other than the one at hand. Our Detective will start examining data such as sales receipts, invoices, competitive information, online consumer information, economic trends, etc. This data is free and will save the owner time and money. After plenty of research, the detective was not able to find the reason why consumers were not visiting the store the way they used to. The Detective decided he needed primary data in order to get the real culprit!
Research Design & Gathering Primary Data
The secondary research that Detective Lombardo found was helpful in creating a report that has led to some additional questions. He discovered that trends show more consumers were buying used clothes on eBay and through Craigslist. He also found economic trends that showed that overall consumer spending has consistently decreased over the past three years. Planning the research design and gathering primary data is needed to fully understand the situation. Primary data is information that is collected for the first time and is used for solving the investigation. The biggest issue with primary data is that it is very expensive because the researcher is conducting his or her own research from scratch.
Detective Lombardo must decide on the type of primary research he will conduct for the store. One of his choices is survey research. It is when a researcher interacts with people to obtain facts, opinions, and attitudes. The types of surveys include in-home personal, mall intercept, telephone, mail, Internet, and executive. Detective Lombardo does not have the time to visit consumers at their home, so he has eliminated that type of survey. He also does not care for using a mail survey because most consumers throw away mail surveys, plus the time it would take to get a response would be much too long. The executive survey would also be more fitting if this was about asking professionals about a specific problem. Mall intercept is a good start, as the detective could gather a large response very quickly from intercepting people shopping and asking their opinions about the store nearby.
Besides using a survey, there are other ways for Detective Lombardo to gather primary data. Detective Lombardo has spent time on designing a survey for his mall intercept. He has decided to use open-ended questions for the survey, which means that the interview question encourages an answer phrased in the respondent's own words. Detective Lombardo wanted to know exactly why people were not shopping at the consignment store. He rejected the use of closed-ended survey questions because then the respondents would have to choose from a limited list of responses such as 'yes' or 'no.' He did add one scaled-response question at the end of the survey. It is a closed-ended question designed to measure the intensity of a respondent's answer. He asked: 'Would you describe the consignment store as the best place to shop in town for clothes?' The answer selections would consist of strongly agree, agree, neutral, disagree, or strongly disagree.
Detective Lombardo also conducted some observational research. This was done in the store to figure out if there were additional circumstances for the decrease in sales. He was able to people-watch and see how the consignment shop employees handled the customers. Again he gained some new information that he planned to share with the store owner. His last effort was to hire mystery shoppers to pose as customers and gather observational data about the store. They interact as a customer would and report their findings.
Detective Lombardo chose to take the time to do one final research study called a focus group. A focus group is a type of personal interview where seven to ten people are randomly recruited by phone to form a group. This group is then invited to a research facility where they represent the target market and can give their opinions on a series of topics or questions. The focus group members are usually offered $50 to participate in the session, and the session is also videotaped for further analysis. The hopes are that having a group interaction will reveal more helpful data. Detective Lombardo already recruited and ran a focus group.
Focus groups are videotaped interviews of seven to ten people
There are two other methods of primary research design that Detective Lombardo could have used. Ethnographic research is the study of human behavior in its natural context and involves observing behavior in a physical setting. Detective Lombardo could have also conducted a detailed experiment where he would have altered one or more variables while observing the effects on another variable (usually sales). He could have asked the store manager to run a 30% off sale one week and then the next week run a Buy One Get One Free sale and see if either promotion increased sales.
Collecting & Analyzing the Data
Detective Lombardo was able to collect all of the data himself for this study. Some companies hire field service firms to handle the interviewing of respondents. They would then start to process the data as well.
Detective Lombardo needed to spend some time analyzing the data before he finalized his recommendations. He could have used advanced statistical software of cross tabulation to delve into the answers. Cross tabulation is a method of analyzing data responses from questions in relation to the responses from additional questions. He can then see if there is an important relationship. For example, he could look at if gender or a respondent's income affect whether they purchased from the store in the last month.
Preparing & Presenting the Report
Detective Lombardo has done an excellent job with researching why the consignment shop's business has decreased this year. He now needs to present his findings in a professional manner, preferably PowerPoint slides. He also needs to convince the store owner to follow his recommendations based on his credible findings. Detective Lombardo's results show that although Craigslist, online consignment retailers and even social media have stolen some of the consignment shop's clients, there is actually a larger issue facing the store. His surveys, mystery shopping, and focus groups all point to poor customer service and badly trained employees. Most of the results showed that people wanted to continue to shop at the store but had been turned off by the employees' rudeness and lack of customer service, Detective Lombardo recommended that the store owner replace employees with better trained, more experienced retail workers.
Six weeks have gone by since Detective Lombardo presented his findings to the owner. He has decided to check back in with the store owner to see if his recommendations increased store sales. The store owner was very happy to see him and told him that his findings were correct. The owner instituted a training program and hired more experienced sales people. Store sales were up over 15% from the last month and she hoped that things would continue to improve as positive word of mouth spread in the community. Another case solved!
Marketing research is the process of planning, collecting, and analyzing data relevant to a marketing decision. There are valuable ways that marketing research can help businesses. The steps in the marketing research process are to identify the problem, plan a research design, collect data, analyze data, prepare and present the report, and follow up.
After watching this lesson, you should be able to identify each part of a marketing research strategy, and apply them to business uses.