All business is conducted under conditions of risk and uncertainty. The success or failure of any business is dependent on a whole complex of factors; the economic situation, the changing tastes of consumers, the extent and nature of competitive activity are just a few of them.
Business decisions, and especially marketing decisions, are decisions about the future. Marketing has been described as ‘making the future happen’. Since the future cannot be totally known, the uncertainty cannot be completely removed, or the risks be precisely calculated.
However, it is asking for trouble not to use whatever information is available. Many facts can be known and unnecessary risk can thus be avoided.
For example, while a firm can very easily know how its own sales are progressing, this information is relatively meaningless without knowledge of the total size of the market and whether that is increasing or decreasing. A company may be confident in the knowledge of a rising sales curve but unaware of the fact that the total market is increasing at an even greater rate, so that really it is losing ground, with a reducing market share.
Often information on the total market for a product is freely available: government statistics, trade associations or similar sources. If it is not freely available in this way, market research techniques can be used to get it. But this is just one example of the vital necessity for information about the market situation.
The overwhelming reason for carrying out market research, however, is to keep open the channels of communication between customers and ourselves so that we can more effectively understand and then satisfy their needs.
Marketing Information Systems
In a well-ordered and sophisticated marketing-oriented organization marketing research will be part of a totally integrated marketing information system encompassing information derived from:
1. The internal accounting system, especially sales analysis;
2. Market intelligence or the capturing of information from many sources, including the media, industry reports, etc., regarding matters such as the economic situation and competitor activity;
3. Market research of all kinds:
a. What is the size of the market (in terms of volume and/or value) and is it decreasing or increasing?
b. What are the market shares of ourselves and our competitors and are these changing?
c. How is the size and trend of the market influenced by various factors (economic, social, seasonal)?
d. What is the composition of the market in terms of age groups, income groups, size of company or geographical area?
e. What are the main distribution channels and how do they function?;
4. Competitor Research:
a. What competitors are there and how do their product ranges, prices etc., compare?
b. What are their marketing strategies?
c. How are their products distributed, advertised, packaged?
d. How does their sales force operate?
e. Are any new competitors likely to enter the market?
5. Product Research:
a. Who are our customers and what are their needs?
b. Which products do consumers prefer and why?
c. Are proposed new products acceptable?
d. Do consumers have complaints about products presently on the market which could indicate a possible new product opportunity?
e. What is customer’s reaction to new product concepts?