The role of marketing research is to increase the effectiveness and decrease the risk of marketing efforts. Marketing decisions can be made without any input from customers, but decisions made by understanding customers often yield better results than if you don’t do research.
For example, 80% of all new product entries fail. A good marketing research program can help reduce the risk of that failure. It won’t eliminate it, because marketing research has not yet reached the stage when it is infallible and because people ignore or misinterpret the results of research, but it can reduce the risk. Failure of a new product costs a lot of money, which is why marketing research programs are worth the investment.
The best way to explain how this works is to look at the 4 P’s of Marketing and explain how Market Research can help with them in the context of launching a new product.
Price: A product may fail because it is priced too high or too low. Marketing research techniques have been developed to collect customer opinions on price. One commonly used technique is called the Van Westendorf model. However, the research is not infallible. I have seen products priced in a way that fits with the research and still be perceived as too highly priced. But usually the results are better than if you didn’t do the research.
Place: This is a neglected area of market research but perhaps with mobile technology this area will get more interest. It is important to know where your product is most likely to be purchased so that your product is distributed in the right way. I have seen products fail because the marketing department didn’t take “place” into account in a clear enough way and there haven’t been good tools for researching that.
Product: This, and promotion, are the areas that get the most attention in market research. The belief is that if you get the product and the advertising right, that a new product will succeed. Typical kinds of research done about the product in the consumer world are concept tests (where a written description is shown to respondents who rate how likely they are to buy the product) and product placement tests (where the consumers are given a product to try and rate.) Some companies efficiently screen multiple concept tests at one time. Then the top scoring concepts are given more attention and polish. Product testing is often skipped: It is one of the most expensive types of research plus some regulated products can’t be put into product testing, such as pharmaceuticals.
Promotion: For many years the major (and most expensive) form of promotion has been advertising. Market research can help you identify the key elements of developing an advertising campaign:
- Target audience- this one is key. When you do your concept testing for developing the product, you need to pay attention to who is most likely to buy the product. That should go into your forecast (to determine if you have a big enough target market for the product to be successful) and also inform your advertising. Advertising that doesn’t take into account who is likely to buy the product runs the risk of being annoying and unpersuasive
- Perceptions of product and category- in order to create great advertising, the ad agency needs to know how the customers feel about the category as it is. Do they have a problem with products in the category that your product can solve? If you don’t do research, you run the risk of making assumptions that are false, which can lead to failure.
- What is the most effective message to say about your product? Once you know how consumers think about your product, you can develop several options for your basic message. Testing the different options to find out which one is most compelling gives you a more informed basis on which to make this decision. This may be overlooked, because people want to jump straight to advertising and/or they may think the strategic focus is obvious. Getting the message right can have a huge impact on sales.
- What is the most effective way to say your message? Ads that say the same message can look and feel very different and have very different effectiveness at selling the product. Thus, an ad agency will usually create multiple “creative concepts.” Testing the final options for the creative concepts is one of the most creative types of research there is. There are many ways to do this from focus groups and one on one qualitative interviews to large scale ad tests to the new neuromarketing techniques. Problems crop up with this stage when you haven’t done the earlier stages. I’ve also written about some of the problems of testing ad concepts in another post. (Link here http://wp.me/p27tSX-1U )