Chapter 4: conducting marketing research and
forecasting demand
The Marketing Research Process consists of six steps:
i. Define the research objectives and problems
ii. Develop the plan for your research
iii. Collect the information
iv. Analyze the information
v. Present the findings
vi. Make the decision
These steps will be further explained in this chapter.
Step 1: Define the problem, the alternative decisions, and the research
objectives.
Step 2: Develop the research plan. In this step the most efficient plan for acquiring the
needed information will be developed. In order to design a research plan there has to be
made decisions about the data sources and the research approaches, sampling, and contact
methods.
The researcher can gather primary data, secondary data, or both.
Primary data: new information gathered by the researcher self.
Secondary data: data collected for another purpose and already existing.
There are six ways that a researcher can collect primary data:
1. Observational Research: observing the relevant actors and settings and gather the
data.
2. Focus Group Research: a gathering of 6 to 10 people carefully selected based on
certain demographic, psycho-graphic, or other considerations. They will be brought
together to discuss various of topics and are usually paid a small sum for attending.
3. Ethnographic Research: a particular observational research approach with the goal to
penetrate the researcher into consumers lives to uncover unarticulated desires that
might not surface in another form of research.
4. Behavioral Data: actual behavior usually gives a more accurate image.
5. Experimental Research: This is the most scientifically valid research, designed to
capture cause-and-effect relationships by eliminating competing explanations of the
observed findings.
6. Survey Research: researchers can undertake surveys to learn about people’s
knowledge, beliefs, preferences and satisfaction.
There are two main instruments in collecting primary data:
Questionnaires: a set of questions presented to correspondents
Qualitative Measures: relative unstructured questions that permit a range of possible
answers. The advantage over questionnaires is that more answers are possible.
There is however an increasing interest in qualitative methods. It is interesting to get into
consumers mind and find out what they feel and think. This can be done with the following
measures:
Word associations: what comes to mind when subjects hear a brand’s name.
Projective techniques: People get a incomplete stimulus and are asked to complete it.
Visualization: people are required to make a collage from pictures to represent their
perceptions.
Brand personification: ask respondents what kind of person they feel the brand is
like.
Laddering: ask the respondent a series of “why” questions to reveal deeper, more
abstract goals of the customer.
Sampling plan: When the research approach and instruments are chosen, the researcher
must design a sampling plan. This calls for three decisions:
1. Sampling unit: Who should we survey?
2. Sample size: How many people should we survey?
3. Sampling procedure: How should we choose the respondents?
There are several contact methods how a researcher can contact the subjects: by mail, by
telephone, in person, or online.
Online research has the advantage that it is inexpensive, fast, versatile and respondents
tend to be very honest because of the feeling of anonymity.
Step 3: Collect the Information
Step 4: Analyze the Information
Step 5: Present the Findings
Step 6: Make the Decision
More and more organizations are using a market decision support system to help their
marketing managers make better decisions. MDSS Marketing Decision Support Analysis
(MDSS) is a coordinated collection of data, systems, tools, and techniques with supporting
software and hardware by which an organization gathers and interprets relevant information
from business and environment and turns it into a basis for marketing action. It helps
managers interpret relevant information and turn it into a basis for marketing action.
Measuring Marketing Productivity
A wide variety of measures to assess marketing effects are employed by marketers.
Marketing metrics is the set of measures that helps them quantify, compare and interpret
marketing performance.
In order to estimate more precisely the effects of different marketing investments,
Marketing-mix models can be used to analyze data from a wide variety of sources.
Firms can also make use of Marketing Dashboards. These are visually displays of the
information. There are two key marked-based scorecards that reflect performance and
provide possible early warning signals:
1. A customer-performance scorecard: shows how well customer think the company is
doing.
2. Stakeholder-performance scorecard: shows the satisfaction of various stakeholders.
Measuring Demand
Market demand: the total amount that would be bought by a defined customer group in a
defined geographical area in a defined time period in a defined marketing environment
under a defined marketing program.
Market penetration index: the comparison between the potential demand level to the
current level of market -demand . A high index means an increase in price competition and
lower margins.
Share penetration index: the comparison between the potential market share to the current
market share. (When low, underlying factors e.g.: lows bran awareness, low brand
availability, benefit deficiencies, too high price.)
Market forecast: the market demand that corresponds to the (one) level of industry
marketing expenditure that will actually occur.
Market potential: the limit approached by market demand as industry marketing
expenditures approach infinitely for a given marketing environment. In order to find this
organizations may use the product penetration percentage figures.
Company demand is the company’s estimated share of market demand at alternative
levels of company marketing effort in a defined time period.
Company sales forecast: the level of company sales expected based on chosen marketing
plan and an assumed marketing environment; this results from an assumed marketing
expenditure plan.
Sales quota: the sales goal set for a product line, company division, or sales representative.
(good to stimulate sales effort).
Sales budget: a conservative estimate of the volume of sales expected. It is primarily used
for making current purchasing, production, and cash flow decisions.
Company sales potential: the sales limit approached by organization demand as
organization marketing effort increases relative to that of competitors. It is often less than
market potential.
Estimating current demand requires the determination of four factors: (1) total market
potential, (2) area market potential, and (3) industry sales and (4) market shares.
Total market potential – the maximum amount of sales that might be available in a given
time period to all firms in an industry, under a given level of industry marketing effort and
environmental conditions. Total demand can be estimated through the chain ration method,
which involves multiplying a base number by several adjusting percentages.
Area market potential: The market potential in certain territories and the allocation of
budget among the territories.
Market-Buildup Method – for business marketers.
Multiple-Factor Index Method – for consumer marketers.
Forecasting methods for future demand include: buying expert opinions, market tests, time-
series analysis, and statistical demand analysis.
