Market research: Key tool for correct decision making

Marketing involves the identification of customers’ needs and the development of products and marketing strategies to satisfy those needs. If this is to be accomplished, it is necessary to acquire information for sound decision making.

This is the role of market research which can be regarded as a risk reducing activity. Risk cannot be eliminated but it can be reduced by intelligence gathering and analysis. Market research is an essential complement to product/service research. It is important to discover the features of the product/service that a customer regards as essential. As the business organization exists in a dynamic environment, it must seek intelligence on the changes in the market and how best it can respond

to these trends.

Put in the broadest terms, market research if the process of investigating a market in order to find out:

The sales prospects for a particular product or group of products,

How to achieve success with that product or group of products.

All too often market research goes no further than compiling a mass of statistics and other facts about a market. This is of little real value. Facts must be weighed and interpreted, conclusion drawn. These must be clear and specific enough for management to make basic decisions about committing itself to a market and to draw up marketing plans. In other words, market research should be a practical exercise.

Market research can be carried out either before or after an attempt has been made to penetrate a market. It can be conducted by, or for, an individual company, a group of companies or government agencies. It may be concerned with physical products or with services, such as tourism.

A market research can show how people in the developing countries carry out market research into export markets. It will concentrate on the types of research that can be carried out by people without specialized training and within a relatively limited budget. And it will deal with the kind of products and problems likely to concern developing countries.

Even in the home market, it is all too easy that a company to make costly errors of judgment. It can decide to manufacture a product and spend a lot of money going into production only to find that very few people buy the product. Or it can manufacture a product which although saleable still fails to sell because the company goes about marketing it the wrong way—channeling it through the wrong distributors, setting an unrealistic price, using the wrong appeals in advertising or making other marketing errors.

Market research can provide information which help a company avoid such mistakes. Market research is not only important in home market, it is also vital in foreign markets. Very few people know even the simple facts about the geography, culture and economy of foreign countries other than their own homeland. Even fewer have at their fingertips all the details, which can tell them whether or not their goods will sell in a particular market.

So it is essential that export markets are carefully researched before a decision is made to enter them---it must be realized that foreign markets are different from home market. Market research can be used to identify any differences and assess how important the differences are to us.

Of course there are times when the most direct way is the best way and market research can be bypassed. For example, if a company plans to export a range of necklaces made of wooden beads and could produce some trial lots at little costs, it might be sensible to do without market research and simply try to sell the necklaces to test the market. This would at least indicate whether the product is acceptable although the company should collect lot of additional information, before committing itself to the market—or deciding not

to do so.

If the necklaces had failed in the particular market, the cost might have been less than the cost of market research to come to the same conclusion. So before deciding to spend a large sum of money on market research, a company should estimate the costs of making a mistake. If a mistake would cost less than the cost of the research, then it might be worth then the risk.

On the other hand it would be foolish to spend millions of dollars on building a factory to manufacture a new product or to spend a lot of money in trying to penetrate into a new market, without investing a few thousand dollars in market research to discover whether the product can be sold at a high enough price and in a satisfactory value. In more specific terms , market research can give companies the answers to questions like these:-

Which country offers the best prospects for the company’s products/services?

How much of the products / services can be exported in a particular market?

What changes should have to be made in a product / service to increase sales?

How much should have to be changed in a product / service to increase revenue at different prices?

How should the company market its product/service?

How much will it cost to achieve the target?

Market research is a valuable tool for government agencies. A trade promotion organization like Export Promotion Bureau of Bangladesh should use market research to formulate its programme of overseas promotion and to decide which product should get priority in its incentive programming. An investment promotion organization should take market research findings into account when deciding which sector should get help to develop.

A planning body can use market research to help predict foreign exchange earnings of different sectors and to lay guidelines for export oriented development. An agricultural agency can use market research to help identify suitable cash crops that can be encouraged. In other words, market research can help governments find the answers to questions as these:-

Which sectors should get priority in investment and export promotion?

In which market the sector should concentrate the promotional efforts?

What kind of marketing assistance is needed by which sector?

Among the companies and governments that use it , these are few questions about the value of investing in market research, whatever arguments there might be about some of the techniques used or the quality of a particular job. The major areas of market research are shown below:-

Many companies and governments do not use market research. This is particularly true of small companies which have been operating more or less successfully in their home market. One reason may be that, rightly or wrongly they believe they cannot afford it.

An organization’s management may appreciate the value of market research but do not have the personnel to undertake it and are unsure how to get it done by professional market researchers. Many government agencies do not appreciate the value of market research rather they believe it to be an unnecessary luxury.

Many entrepreneurs believe that they have a good product and therefore people buy it. However, when they try to enter into an export market, they may be surprised to find severe competition. Product that appeared ‘good’ in the domestic markets might be unacceptable in foreign markets. The product failed to meet the level of competition or failed to meet the level of quality.

An appreciation of the value of market research stands when a company or organization realizes that to be successful, it must offer products which the prospective buyer wants, not supply products he wishes to sell. However, this is not to say that market researchers are always right.

The writer is former Director General, EPB. He can be contacted at [email protected]