Articles
ACR TODAY: How Market Research works
There is often some misunderstanding as to how market research works, when it is necessary, who should do it and how reliable it ultimately is? Future articles will address all of these questions, but market research as it applies to business to business and industrial markets, follows a well tested set of techniques and principals.
The first stage in any market research project is to establish what is already known about the topic, be it a market product, or competitors. This is almost always conducted through desk research, but by desk research we mean more than is quite often stated in textbooks. To establish what is already known about a market you need to become familiar with government based statistics, legislative organisations such as BSRIA and BSI, as well as the range of market research companies with published reports on specific markets including H and V, such as Frost and Sullivan, Keynote, MSI etc, but that is not all.
We have increasingly found that to add value to our clients in the industrial markets desk research can incorporate more than simply identifying information already held in the public domain. Conducting informal interviews amongst opinion formers, editors of journals and most importantly customers and competing suppliers can be invaluable in developing assessments of market size, the segments of that market by volume or value or gaining a clear over view of the trends in that market. This presents an industrial client with a very clear picture of how that market is to be defined and where the priorities for commercial opportunity and further research are to be seen.
There is a practical skill in finding and drawing together relevant information particular to the project and at the same time discarding what is not relevant. Although this work can be conducted internally if the right skills and the time available is internally held, it may be surprising to know that we are frequently involved these days in conducting this part of the research. This involvement does have the benefit of helping us to get to grips with a market prior to identifying and conducting the necessary primary research (to be discussed in more detail in a later article).
So lets assume that you have conducted this very important desk research stage, where does a company such as yours go from there? Well, sometimes the information that has already been obtained either internally or using an external agency can be sufficient for commercial decisions to be made. However, the issues that are thrown up can require a specific piece of primary research to be conducted to complete the picture before a strategy can be developed. The range of potential topics for primary research is extremely wide but the techniques used to obtain the information are quite specific.
Increasingly my own company is involved in research using the telephone. Frequently this research is amongst our clients, existing customers both in the UK, Europe and the Far East, as well as companies who are potential customers. The research is conducted anonymously, ie. the clients name is not revealed until at least the end of the interview, so that the findings are as unbiased as possible.
The telephone questionnaire is sometimes quite complex and requires a good degree of skill in its design, so that the end interviews are both credible and sensible to the respondent and answer the objectives set by our clients. Sample sizes in industrial markets are often not that large, sometimes 100-150 interviews, but who is interviewed is absolutely critical to ensure that major and smaller clients are represented in what we call the ´sample frame´. Representation of the different customer groups and their decision making units is as a result of discussions between the agency conducting the research and the client.
In case there is anyone who still believes that they understand their customers and that independent research is unnecessary, let me recount a case of one of our clients a major blue chip company involved in the environmental field, who was suffering significant decline in a relatively short period in both enquiries and orders. Information from the field indicated to them that the market was holding up and that the problem was unique to my client. Our research conducted over a matter of days with their customers and the internal sales force, confirmed that their end user markets were actually in severe decline (partly due to the strong £) and indeed the problem was not unique to our client. This was of great value to the senior management in discussions with their holdings board and probably saved one or two executives jobs. To conclude you cannot always believe what your customers tell you, because they are your customers!
Other techniques used in industrial market research include postal surveys and face to face interviews. The former is cheaper than telephone research but much more unreliable for reasons that can best be summed up by those who have an axe to grind, are the most likely to respond in a postal survey, but what of the silent majority.
With face to face interviews on the other hand the situation is almost the opposite, with total control over those respondents that you wish to interview and a very detailed in depth interview is possible compared with the telephone. Unlike postal surveys, however, the cost of conducting face to face interviews is considerably higher than telephone research. So for all but the most complex interviews, telephone research is favoured these days.
The future may well involve increasing market research being conducted over the internet, using Email as a form of response. However, it is early days and still developing at present.
In conclusion market research, while it employs sometimes complex statistical techniques is in essence very simple. It is a vehicle for obtaining vital information for management to make decisions. Market research should be seen as a beacon shedding light on the issues concerning management. It is a guide to decision making, not a substitute. The alternative is a towel over your head in the dark or its commercial equivalent. Always remember people will often tell you what they think you want to hear, not what they believe particularly when commercial relationships are at stake.
