Why do some companies not make a commitment to marketing and marketing research in their operations? Some are afraid that it is too expensive; some so not want to make an investment that will only pay off in several years; some are afraid that while they are researching the potential for the product, the competition will get a head start; others are afraid that if the work is contracted to an outside firm, the results will be complicated and take a long time; and yet others do not see the need to seek additional opinions or information other than their own on the market feasibility of proposed new products or services.
At SRC, we see many inventors and entrepreneurs with new product ideas. Only one in about sixty of these ideas successfully reaches the marketplace. This ratio can be improved by investing in marketing research. At SRC, we have used marketing research to address problems that businesses face every day, for example:
- Does the proposed technology or product solve a problem, fill a need, or satisfy a want for the customer?
- For a new product in the design stage - what combination of product features, colours, and designs will appeal to the most customers at the lowest cost and highest quality?
- What is the total size of the market in Canadian/U.S./global unit sales or dollars so that the total investment can be justified?
- What are the trends in this market - increasing, declining, or stable?
- How are purchasing decisions made by buyers?
- What price are the customers willing to pay to have their need or want filled?
- How should the product be distributed?
- What are the substitutes for this product?
- What strategies are the competition employing?
Marketing research can save you money if it determines that there is not sufficient demand for the product that you have conceived. It is far better to spend $5,000 on a market research feasibility study and drop the idea, than to invest $200,000 on product development, then run out of funds and have to drop the product because sales did not take off as expected. If it costs $200,000 to develop your product, then an estimated ten times that much is required to commercialize the product.
There are many tools, techniques, and new methodologies available to marketing professionals to simplify and improve the results and accuracy of collecting, analyzing and interpreting data, such as statistical processing software. The sequence of the marketing research process is explained below:
1. Formulate the Problem,
2. Determine the Marketing Research Design,
3. Design the Data Collection Method,
4. Design the Sample to be Surveyed and Collect the Data,
5. Analyze and Interpret the Data Report the results and Recommend Actions to be taken.
Marketing research done internally, or by an outside firm, can range from a few hundred dollars to hundreds of thousands of dollars, depending on the complexity and the extent of the study. Some marketing research studies can be done in a cost and time effective manner. Not every study has to take months of time and cost thousands of dollars. There are many sources of secondary data and on-line databases that are in place to answer questions for you. For example, if you have conceived a product idea that would help farmers with their operations, an indication of the size of the total potential market could be obtained by determining the total number of grain farms in North America. If there is not sufficient secondary information available, then primary data can be collected through direct mail, personal or telephone interviews with industry experts, customers, distributors, or competitors.
Using marketing professional, who have contacts and who are experienced in conducting marketing research, will provide unbiased results. You must still take part in the planning and execution of marketing research to ensure that the results meet your requirements. Setting the objectives is a key joint effort between the business owner/decision maker and the professional. Conducting marketing research will not unconditionally guarantee success because there are many concerning factors, but it certainly improves you chances.
Written by: Pauline Patenaude,MBA, CMC
Published: SRC Newsletter, May 1996