A Concise Guide to Market Research

When Toyota developed the Prius – a highly fuel-efficient car using a hybrid petrol/electric engine – it took a gamble on a grand scale. Honda and General Motors’ previous attempts to develop frugal (electric) cars had not worked well. Just like Honda and General Motors, Toyota had also been working on developing a frugal car but focused on a system integrating a petrol and electric engine. These development efforts led Toyota to start a development project called Global twenty-first century aimed at developing a car with a fuel economy that was at least 50% better than similar-sized cars. This project nearly came to a halt in 1995 when Toyota encountered substantial technological problems. The company solved these problems, using nearly a thousand engineers, and launched the car, called the Prius, in Japan in 1997. Internal Toyota predictions suggested that the car was either going to be an instant hit, or that the take-up of the product would be slow, as it takes time to teach dealers and consumers about the technology. In 1999, Toyota made the decision to start working on launching the Prius in the US. Initial market research showed that it was going to be a difficult task. Some consumers thought it was too small for the US, some thought the positioning of the controls was poor for US drivers, and there were other issues, such as the design, which many thought was too strongly geared toward Japanese drivers.

Executing professional market research requires good planning. In this chapter, we introduce the planning of market research projects, starting with identifying and formulating the problem and ending with presenting the findings and the follow-up (see Fig. 2.1). This chapter is also an outline for the chapters to come.

In the previous chapter, we discussed some of the key theoretical concepts and choices prior to collecting data such as validity, reliability, sampling, and sample sizes. We also discussed different types of data. Building on Chap. 3, this chapter discusses the practicalities of collecting data. First, we discuss how to collect quantitative and qualitative secondary data. Subsequently, we discuss how to collect primary data through surveys. We also introduce experimental research and some basics of primary qualitative research.

In the previous chapter, we learned about descriptive statistics, such as means and standard deviations, and the insights that can be gained from such measures. Often, we use these measures to compare groups. For example, we might be interested in investigating whether men or women spend more money on the Internet. Assume that the mean amount that a sample of men spends online is 200 USD per year against the mean of 250 USD for the women sample. Two means drawn from different samples are almost always different (in a mathematical sense), but are these differences also statistically significant?

Regression analysis is one of the most frequently used tools in market research. In its simplest form, regression analysis allows market researchers to analyze relationships between one independent and one dependent variable. In marketing applications, the dependent variable is usually the outcome we care about (e.g., sales), while the independent variables are the instruments we have to achieve those outcomes with (e.g., advertising). Regression analysis can provide insights that few other techniques can. The key benefits of using regression analysis are that it can:

Grouping similar customers and products is a fundamental marketing activity. It is used, prominently, in market segmentation. As companies cannot connect with all their customers, they have to divide markets into groups of consumers, customers, or clients (called segments) with similar needs and wants. Firms can then target each of these segments by positioning themselves in a unique segment (such as Ferrari in the high-end sports car market). While market researchers often form market segments based on practical grounds, industry practice and wisdom, cluster analysis allows segments to be formed that are based on data that are less dependent on subjectivity.

Communicating results is a critical step in a market research project. This includes giving clear answers to the research questions and recommending a course of action, where appropriate. The importance of communicating marketing research results should not be underestimated. Even if the research has been carefully conducted, spending too little time and energy on communication makes it difficult for clients to understand the implications of the results and to appreciate the study’s quality. To communicate the findings effectively, these need to be comprehensible to clients who may know little about market research and who may even be unfamiliar with the specific market research project. Hence, the communication must provide a clear picture of the whole project and should be relevant for the audience.