Understanding Market Research
Defining Market Research
Market research involves systematic data collection and analysis to comprehend the needs and preferences of a specific market. This data aids business owners in making informed decisions about strategies, operations, and potential clientele.
The Process of Market Research
Market research follows a structured process to gather and analyse market data for sound decision-making, identifying niche problems, and opportunities within a business landscape.
Research Objective
A clearly defined research objective serves as the cornerstone, ensuring that the study addresses specific problems or questions pertinent to the business landscape.
Data Sources
Market research utilises primary and secondary data sources. Secondary sources, typically cost-effective and widely available, constitute published data. Conversely, primary sources entail data collected specifically for the research objective.
Data Collection Instrument
Constructing a data-collection instrument is crucial for gathering primary data, usually through observational studies or questionnaires. Pre-testing these instruments ensures their efficacy and suitability before implementation.
Sample Size and Design
Quality outweighs quantity in sample size, aiming to represent the entire population of interest. Sampling methods include random sampling, area sampling, and quota sampling, strategically selecting individuals based on shared characteristics or specific locations.
Understanding Marketing Essentials
Marketing Mix Principles
Understanding your company, its operations, clientele, and products is vital for market comprehension. The marketing mix, represented by the four Ps—Product, Place, Price, and Promotion—integrate to form a cohesive marketing strategy.
The 4Ps of Marketing
- Price: Determined by production costs, demand, and market dynamics. It can be utilised for differentiation and brand enhancement.
- Product: The item sold, crucial for meeting performance standards.
- Place: Refers to points of sale, emphasizing visibility and ease of purchase, whether in physical or online locations.
- Promotion: Strategies used to communicate the product to the target market.
The Expanded Marketing Mix
The digital age has introduced additional Ps to the marketing mix:
- People: Identifying demand within the target market and the importance of employees’ belief in and contribution to a business.
- Physical Evidence: Brand perception and establishment, creating a market presence and identity.
- Process: Organisational systems affecting service execution and cost minimisation.
USP and Brand Positioning
- Unique Selling Proposition (USP): Differentiating factor from competitors, offering compelling benefits to consumers.
- Brand Positioning: Establishing consumer reasons to choose a brand, ensuring uniqueness, significance, and sustainability across all market touchpoints.
Competitive Brand Positioning
Understanding and leveraging competitive advantages to position your brand effectively in the marketplace. Essential for business strategy and creating value for customers.
Understanding Customer Analysis
Importance of Customer Analysis
Understanding your customer base is fundamental for business growth. Analysing your customers helps define your target market and how best to engage with them.
Three Key Objectives
- Identifying Target Customers: Defining the customer base your business caters to.
- Understanding Customer Needs: Analysing what customers require.
- Aligning Products/Services with Customer Needs: Demonstrating how your offerings fulfil customer requirements.
Demographics
Understanding customer demographics is pivotal for business success. It influences product/service design, pricing, and marketing strategies. Factors like income, age, residence, transportation, and family status significantly impact business decisions.
Psychographics
Psychographics delve into personality, values, and attitudes. It involves studying consumer preferences, desires, and psychological criteria. This data helps in understanding customers’ personality traits, aspirations, and fears, guiding product/service development and marketing strategies.
Customer Purchase Funnel
The customer purchase funnel represents the journey from leads to customers, highlighting various stages:
- Awareness: Introduction to potential customers through marketing efforts.
- Interest: Engaging potential customers with useful information.
- Consideration: Nurturing leads as prospective customers.
- Purchase: Conversion of prospects into customers.
- Loyalty: Establishing brand advocacy and long-term customer loyalty.
Attention Economy
In an attention economy, the battle for consumer attention is fierce. Attention scarcity arises from increased demands on attention and decreasing attention spans. Marketers strive to create engaging, relevant content to capture and retain consumer attention in this competitive landscape.
Exploring Competitive Analysis
Importance of Competitive Analysis
Understanding your competition is crucial for highlighting your unique selling points and gaining an edge in the market. It forms a part of business and marketing strategies, aiding growth plans.
Types of Competitors
- Direct Competitors: Sell similar goods/services to the same market.
- Indirect Competitors: Offer substitute products/services or items used as alternatives.
- Potential New Entrants: New businesses entering your market.
Information Sources for Competitive Analysis
Gather data from:
- Google: Search competitors’ names for articles and insights about their operations.
- Site Visit: Visit competitors’ outlets to observe offerings, workforce, and customer engagement.
- Marketing Materials: Collect marketing tools, brochures, or ads to understand their promotional strategies.
- Local Newspapers: Check for articles, awards, job announcements, or expansion plans about local companies.
Assessing Competitive Advantage
Consolidate gathered information into a report to identify advantages and improvement opportunities over competitors. Ask crucial questions about competitors’ strategies, strengths, weaknesses, threats, and opportunities.
Tools for Competitive Analysis
Perceptual Mapping
- Attributes: Perceptual maps use consumer perception to position products/services based on attributes.
- Understanding Consumer Ranking: Helps understand consumer perception of companies in relation to their characteristics and competitors.
- Market Gap Identification: Identifies gaps in the market where products/services could be positioned to meet consumer desires.
SWOT Analysis
- Strengths: Internal, positive attributes within your control.
- Weaknesses: Internal factors detracting from your value proposition.
- Opportunities: External factors contributing to potential business growth.
- Threats: External risks beyond your control that might affect business strategy.
SWOT analysis evaluates ideas based on internal and external factors, offering a comprehensive view of business positioning and potential areas for improvement or expansion.
Understanding Market Segmentation
Importance of Market Segmentation
Defining your target market is crucial for effective selling. Market research aids in understanding and serving the market optimally.
Purpose of Market Segmentation
Segmenting a market enables targeted marketing efforts towards prospects most likely to purchase your offering, ensuring the best return on marketing investment.
Methods for Determining Market Segmentation
Segmentation assists marketers in targeting specific customer groups effectively, offering insights into customer needs and behaviour, guiding marketing strategies, and aiding in long-term planning.
Criteria for Effective Segmentation
Effective segments are internally homogeneous, identifiable, accessible, and possess effective demand, ensuring a substantial customer base and the ability to reach and cater to their needs.
Steps in Targeting Markets
Step 1: Identify Market Segments
Separate general markets into smaller groups based on shared characteristics or variables to locate specific customer needs within a product group.
Step 2: Choosing Market Segments
Critically evaluate identified segments based on factors like size, growth, company capabilities, and alignment with the company’s mission.
Segmentation Variables and Examples
| Segmentation Variable | Examples of Variables Measured | Comments |
|---|---|---|
| Geography | Region, mobility, cultural differences | Basic descriptor often insufficient for meaningful consumer segmentation |
| Demographic | Age, sex, income, education | Important for later advertising media decisions |
| Psychographic | Personality traits, attitudes | Directly linked to purchase motivation and product usage |
| Behavioural | Occasions, loyalty | Provides a rich profile integrating variables into consumer routines and lifestyle |
Developing Marketing Strategy
Analysis of market segments leads to different target marketing strategies:
- Undifferentiated or Mass Marketing: Appeals to one large market with a single strategy, not popular due to diverse customer needs.
- Differentiated or Segmentation Marketing: Targets multiple smaller markets with unique strategies.
- Concentrated or Niche Marketing: Uses a single strategy for very small markets not served well by larger firms.
- Customised or Micro-Marketing: Appeals to targeted customers with individualised marketing programs, thriving in the online sphere.
Analysing the Business Environment
Understanding Environmental Analysis
Environmental analysis is a strategic tool that identifies external and internal elements impacting an organisation’s performance. It aligns strategies with the firm’s surroundings.
Impact of Environmental Changes
Daily market changes, beyond control, influence businesses significantly. Continuous analysis of the trade environment and market is crucial.
Macro Environmental Factors
Every business is impacted by macroenvironmental forces. Identifying these forces directly affecting a business involves understanding and analysing them.
PESTEL Analysis Framework
PESTEL analysis, encompassing political, economic, social, technological, environmental, and legal factors, aids in assessing and monitoring external environmental factors.
Political Factors
Government policies and stability, trade, fiscal policies, and taxation impacting industries and organisations.
Economic Factors
Interest rates, employment rates, raw material costs, and foreign exchange rates impacting the economy and organisational profitability.
Social Factors
Emerging social trends, changing demographics, education levels, and cultural shifts affecting customer needs.
Technological Factors
Technological innovations influencing markets, distribution, manufacturing, and logistics.
Environmental Factors
Influence of ecological aspects, including climate, recycling, carbon footprint, and sustainability.
Legal Factors
Health and safety laws, consumer rights, advertising standards, and product safety.
Advantages and Disadvantages of PESTEL Analysis
Advantages
- Simplifies understanding of the business environment
- Develops strategic thinking
- Helps in threat reduction and identifying opportunities
Disadvantages
- May oversimplify data
- Requires regular updates and varied perspectives
- Relies on assumption-based data
Micro Environmental Research
The micro environment, also known as the task environment, includes external forces directly impacting businesses.
Micro Environment Factors
- Suppliers’ influence
- Impact of resellers
- Buyer behaviour and needs
- Competition analysis
- General public’s influence
Porter’s Five Forces
Michael Porter introduced this tool to analyse an industry’s attractiveness and profitability. It identifies five competitive forces impacting a business environment.