Marketing - Conducting Market Research and Developing a Strategy

Introduction
To survive in today's competitive marketplace, a business must understand and satisfy its customers' needs. To do this, a business must first conduct market research and then, based on the information gathered, implement a marketing strategy. This factsheet provides an overview only. For more information, read some of the many books on the subject, or take related courses or seminars.

Market research

Market research is an orderly gathering, recording, and analyzing of information about customers and markets. A business armed with solid market information understands current market conditions and its customers' needs, attitudes, and buying habits. The information becomes the foundation for sound business decisions, reduces risks, and exposes opportunities and problems. In general, market research focuses on three areas which help to assess the potential market:

Customers

Perhaps the single most important rule-of-thumb in market research is KNOW YOUR CUSTOMER--your target market. For example: Who are they? What are their ages, genders, lifestyles, average incomes? Where do they live and shop?

Competition

You should understand your competitors' strengths and weaknesses. What have they done in the past, and what are they doing now in the particular market? Estimate their sales volume, market share, and their reaction to new competition.

Environment

You should also assess political, economic, social, cultural, and technological influences. How do they affect your market? Do current trends and conditions help or hinder potential opportunities? For more information, see the factsheet 'You and Your Ideas'.

Sources of market information

Visit the Canada/Manitoba Business Service Centre, or your local library. A good place to begin is with trade publications which give market-related information for specific industries. Study Statistics Canada publications, as well as periodicals, books and magazines (there are directories for these). Talk to business people. Consider contacting other sources such as media outlets, business associations, or your local Chamber of Commerce.

Developing a marketing strategy  

Once you have gathered market information, define a set of realistic, measurable objectives. For example, a new hair salon might aim to obtain 300 customers within six months. After setting objectives, choose one of four marketing strategies based on the unfulfilled need in the marketplace and the strength of your competition:

Market penetration

You try to sell more of the same types of products to existing customers or to your competitor's customers. For example, a shoe store might advertise more, hold a seasonal sale, or open a second outlet.

Market development

You try to identify new markets for existing products already being made. The shoe store might take a van load of its work boots to nearby manufacturing plants to sell directly to its employees.

Product development

You try to introduce some new or additional products or new services to existing customers. The shoe store might start offering a selection of specialty shoe polishes.

Diversification

You look for new opportunities outside of your current products and existing customers. You diversify in new directions by adding new products that attract new customers. This often happens when a new owner sees a new opportunity. The shoe store might decide to offer orthopedic footwear (a new product and a totally new market). This particular strategy tends to be more risky than the others, but may also offer more rewards.

MARKETING MIX

The right product or service
A successful entrepreneur achieves a maximum profit by providing the right product or service, at the right price, in the right place, with the right promotion. This is known as the 'marketing mix'.
The right product or service starts with understanding customer needs. Besides selling just a product or service, you are also selling satisfaction. This 'total product concept' enables you to set yourself apart from others by stressing aspects such as quality or durability, level and type of service, colour, odour, or flavour.

The right price
The right price enables you to generate sales, cover costs and make a profit. Prices depend on the customer's willingness/ability to buy, the competition's prices, and the cost of the product/service.

There are four pricing strategies:

• Competitive (setting prices similar to the competition)
• New product (pricing either high or low initially, then changing the price once the market is established),
• Image/psychological (setting prices in line with your image or for a psychological reason), and
• loss leader (setting low prices on a few items to attract buyers).

The right place

Retailers
The physical location of a retail outlet is crucial. Consider factors such as cost, history of location, traffic flow, legal restrictions, services available, parking, accessibility, psychological barriers, and future outlook for the site.

Manufacturers
Manufacturers physically distribute their products to users through a channel of distribution depending on the product, the manufacturer's capabilities, and market characteristics. There are four channel types: direct (such as mail-order), one-stage (through retailers), traditional (to wholesalers then to retailers), and all-aboard (using an agent between the manufacturer and wholesaler).

The right promotion

The right promotion aims to inform, persuade, and influence customers to buy. Most businesses combine a variety of promotional activities in order to reach the largest number of target customers at an affordable cost.

Advertising
Point-of-sale, word-of-mouth and mass media (such as TV, radio, magazines, transit). Success usually depends on having clear objectives and identifying a target group. Combining different advertising forms can greatly increase effectiveness.

Sales promotion
Activities and devices which support salespeople and ad campaigns such as calendars, novelties, samples, contests, and point-of-purchase displays.

Publicity/public relations
Publicity is free media exposure through news reports. Public relations fosters good will, such as through donations.

Personal selling
Direct, face-to-face relationships with customers. Usually involves a product requiring a demonstration, or a high-priced product such as a house or car, or one requiring security (jewellery).

Monitoring and evaluating

• On a weekly basis, monitor the results of the marketing mix against sales  volume records, customer traffic volume, stock turnover, and cash flow.
• On a regular basis, evaluate the results against initial objectives such as whether or not you are actually meeting customer needs. Do not be reluctant  to adjust the marketing mix--this is almost always necessary.

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

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