Market Research Lecture 1: Decision Problems (3)and Research Questions

Decision Problems

• A decision problem is when management needs to decide on a course of action, such as:

  • Increasing or decreasing price.

  • Adding a new product flavor.

• The decision problem arises from a situation, such as losing money, which then triggers market research (MR).

• Market research gathers information to inform the decision, like pricing structures or customer tolerance.

• Example: If a company is losing money, should they raise or lower prices?

Research Questions/Problems

• The research question is what the research intends to answer.

• It stems from the decision problem and guides the market research.

• Example: Gathering research on what type of pricing structure to adopt and determining if that will cause the company to gain or lose customers.

Market Research vs. Marketing

• Market research: Understanding what's happening in the marketplace.

  • Example: Determining the average age of customers is 52.6.

• Marketing: Actions taken to influence the marketplace.

  • Example: Determining which ads work best to attract 52-year-olds to purchase a product.

Timeliness

• Timeliness is critical in market research. Companies often have insights into their financial situations 6-12 months in advance.

• Good management anticipates problems and starts market research early.

• Examples of companies facing financial issues:

  • Michelle's Patisserie declared bankruptcy.

  • Rex Airlines was in receivership.

• Even with market research, external factors (e.g., competitors beating you) can lead to business failure.

SWOT Analysis

• SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis plays a role.

• Strengths:

  • Apple has strong brand equity, ensuring new products like the iThermis sell well.

• Weaknesses:

  • The movie "Betterment" (monkey movie with Robbie Williams) was a good movie but targeted the wrong audience, leading to its failure in the U.S. market.

• Opportunities:

  • If Michelle's Patisserie closes, other bakeries or cafes (even mom and pop shops) have an opportunity to gain those customers.

• Threats:

  • Increased demand for vegan diets poses a threat to companies like Pie Face that sell meat pies. They can turn this into an opportunity by offering veggie pies.

Cost-Benefit Analysis

• Market research requires time, resources, and finances.

• The benefits of market research must exceed its costs.

• It should only be undertaken if there's a clear reason and potential for substantial benefit.

• Example: If a company is losing $5,000 a week, triggering market research costing $1 million might not be worthwhile.

• Good research costs money and takes time, so focus on collecting necessary data.

Key Motivators

• Market research aims to understand the key motivators behind purchases, which can be:

  • Rational.

  • Emotional.

• Measuring and quantifying emotions is challenging but crucial.

• Examples:

  • Buying coffee when tired (rational).

  • Buying a BMW to reward oneself (emotional).

• Getting to the root cause, even if emotional, is important.

When is Market Research Considered?

• Market research is considered when:

  • Planning for the future (new product development, new markets).

  • Addressing immediate problems (sudden sales decline).

• New product development meetings are common to look for opportunities and threats.

• Market research analysis comes in when sales drop suddenly in a region: Example sales in Europe have gone from 100,000,000 to 1,000,000.

Government and Company Sanctioned Research

• Market research can be sanctioned by government agencies or companies.

• Example: Analyzing the impact of first-time homebuyer schemes (stamp duty waivers) on house sales.

• Good market research helps organizations estimate and anticipate changes.

• Example: Examining how a stamp duty waiver affects sales in suburbs like Vaucluse (expensive) versus Campbelltown (less expensive).

  • If something is priced at 800,000, it gets a full stamp duty waiver; priced at 1,000,000, it gets 0%.

  • Effect on negotiations with real estate agents.

Marketing and Target Audience

• Market research informs marketing decisions, including the selection of visuals.

• Example: Using a picture of a "DINK" (double income, no kids) couple to advertise first-time homebuyer schemes.

• Targeting and using the correct images in the marketing campaign, such as using an image of a couple with a toddler for a Honda CRV is consistent with the people that are most often buying the vehicle.

Market Research Steps

• Steps in conducting market research:

  • Select methods (focus groups, surveys, social media monitoring) which are not mutually exclusive.

    • Good market research should include graphs, bar graphs, pie charts, etc.

    • Data visualization is huge.

• Data Collection: What to Measure

  • Age (specific age vs. age group).

• Aim: Inform management/decision-makers to decide on their decision problem and the market research should be written up and easy to read by decision-makers so they can make a decision easily.

Secondary Data

• Secondary data: Data gathered by someone else.

• Advantages: Cheap and readily available.

• Disadvantages: Cannot determine data veracity and if one area is 100% the same with another.