Chapter Five

Marketing and new venture development

5.1. Marketing research

Marketing research is the process or set of processes that links the consumers, customers, and
end users to the marketer through information — information used to identify and define
marketing opportunities and problems; generate, refine, and evaluate marketing actions;
monitor marketing performance; and improve understanding of marketing as a process.
Marketing research specifies the information required to address these issues, designs the
method for collecting information, manages and implements the data collection process,
analyzes the results, and communicates the findings and their implications.

It is the systematic gathering, recording, and analysis of qualitative and quantitative data about

issues relating to marketing products and services. The goal of marketing research is to identify
and assess how changing elements of the marketing mix impacts customer behavior. The term
is commonly interchanged with market research; however, expert practitioners may wish to
draw a distinction, in that market research is concerned specifically with markets,
while marketing research is concerned specifically about marketing processes.

Marketing research is often partitioned into two sets of categorical pairs, either by target
market:

 Consumer marketing research, and

 Business-to-business (B2B) marketing research

Or, alternatively, by methodological approach:

 Qualitative marketing research, and

 Quantitative marketing research

Consumer marketing research is a form of applied sociology that concentrates on understanding

the preferences, attitudes, and behaviors of consumers in a market-based economy, and it aims
to understand the effects and comparative success of marketing campaigns.

1|Page
Thus, marketing research may also be described as the systematic and objective identification,
collection, analysis, and dissemination of information for the purpose of assisting management
in decision making related to the identification and solution of problems and opportunities
in marketing.

Role of marketing research

The task of marketing research (MR) is to provide management with relevant, accurate,
reliable, valid, and current information. Competitive marketing environment and the ever-
increasing costs attributed to poor decision making require that marketing research provide
sound information. Sound decisions are not based on gut feeling, intuition, or even pure
judgment.

Marketing managers make numerous strategic and tactical decisions in the process of

identifying and satisfying customer needs. They make decisions about potential opportunities,
target market selection, market segmentation, planning and implementing marketing programs,
marketing performance, and control. These decisions are complicated by interactions between
the controllable marketing variables of product, pricing, promotion, and distribution. Further
complications are added by uncontrollable environmental factors such as general economic
conditions, technology, public policies and laws, political environment, competition, and social
and cultural changes. Another factor in this mix is the complexity of consumers. Marketing
research helps the marketing manager link the marketing variables with the environment and
the consumers. It helps remove some of the uncertainty by providing relevant information
about the marketing variables, environment, and consumers. In the absence of relevant
information, consumers' response to marketing programs cannot be predicted reliably or
accurately. Ongoing marketing research programs provide information on controllable and non-
controllable factors and consumers; this information enhances the effectiveness of decisions
made by marketing managers.

Traditionally, marketing researchers were responsible for providing the

relevant information and marketing decisions were made by the managers. However, the roles
are changing and marketing researchers are becoming more involved in decision making,
whereas marketing managers are becoming more involved with research.

2|Page
Characteristics of marketing research

Marketing research is systematic

Thus systematic planning is required at all the stages of the marketing research process. The
procedures followed at each stage are methodologically sound, well documented, and, as much
as possible, planned in advance. Marketing research uses the scientific method in that data are
collected and analyzed to test prior notions or hypotheses. Experts in marketing research have
shown that studies featuring multiple and often competing hypotheses yield more meaningful
results than those featuring only one dominant hypothesis.

Marketing research is objective

It attempts to provide accurate information that reflects a true state of affairs. It should be
conducted impartially. While research is always influenced by the researcher's research
philosophy, it should be free from the personal or political biases of the researcher or
the management. Research which is motivated by personal or political gain involves a breach
of professional standards. Such research is deliberately biased so as to result in predetermined
findings. The objective nature of marketing research underscores the importance of ethical
considerations. Also, researchers should always be objective with regard to the selection of
information to be featured in reference texts because such literature should offer a
comprehensive view on marketing. Research has shown, however, that many marketing
textbooks do not feature important principles in marketing research.

Classification of marketing research

Organizations engage in marketing research for two reasons: (1) to identify and (2) solve
marketing problems. This distinction serves as a basis for classifying marketing research into
problem identification research and problem solving research.

Problem identification research is undertaken to help identify problems which are, perhaps, not
apparent on the surface and yet exist or are likely to arise in the future like company image,
market characteristics, sales analysis, short-range forecasting, long range forecasting,
and business trends research. Research of this type provides information about the marketing

3|Page
environment and helps diagnose a problem. For example, The findings of problem solving
research are used in making decisions which will solve specific marketing problems.

The Stanford Research Institute, on the other hand, conducts an annual survey of consumers
that is used to classify persons into homogeneous groups for segmentation purposes.
The National Purchase Diary panel (NPD) maintains the largest diary panel in the United
States.

Standardized services are research studies conducted for different client firms but in a standard
way. For example, procedures for measuring advertising effectiveness have been standardized
so that the results can be compared across studies and evaluative norms can be established. The
Starch Readership Survey is the most widely used service for evaluating print advertisements;
another well-known service is the Gallup and Robinson Magazine Impact Studies. These
services are also sold on a syndicated basis.

Customized services offer a wide variety of marketing research services customized to suit a
client's specific needs. Each marketing research project is treated uniquely.

Limited-service suppliers specialize in one or a few phases of the marketing research project.
Services offered by such suppliers are classified as field services, coding and data entry, data
analysis, analytical services, and branded products. Field services collect data through the
internet, traditional mail, in-person, or telephone interviewing, and firms that specialize in
interviewing are called field service organizations. These organizations may range from small
proprietary organizations which operate locally to large multinational organizations with
WATS line interviewing facilities. Some organizations maintain extensive interviewing
facilities across the country for interviewing shoppers in malls.

Coding and data entry services include editing completed questionnaires, developing a coding
scheme, and transcribing the data on to diskettes or magnetic tapes for input into the computer.
NRC Data Systems provides such services.

Analytical services include designing and pretesting questionnaires, determining the best means
of collecting data, designing sampling plans, and other aspects of the research design. Some
complex marketing research projects require knowledge of sophisticated procedures, including

4|Page
specialized experimental designs, and analytical techniques such as conjoint analysis and
multidimensional scaling. This kind of expertise can be obtained from firms and consultants
specializing in analytical services.

Data analysis services are offered by firms, also known as tab houses, that specialize in
computer analysis of quantitative data such as those obtained in large surveys. Initially most
data analysis firms supplied only tabulations (frequency counts) and cross tabulations
(frequency counts that describe two or more variables simultaneously). With the proliferation
of software, many firms now have the capability to analyze their own data, but, data analysis
firms are still in demand.

Branded marketing research products and services are specialized data collection and analysis
procedures developed to address specific types of marketing research problems. These
procedures are patented, given brand names, and marketed like any other branded product.

Types of marketing research

Marketing research techniques come in many forms, including:

Ad Tracking – periodic or continuous in-market research to monitor a brand’s performance

using measures such as brand awareness, brand preference, and product usage. (Young, 2005)
Advertising Research – used to predict copy testing or track the efficacy of advertisements for
any medium, measured by the ad’s ability to get attention (measured with Attention Tracking),
communicate the message, build the brand’s image, and motivate the consumer to purchase the
product or service.
Brand equity research — how favorably do consumers view the brand?
Brand association research — what do consumers associate with the brand?
Brands attribute research — what are the key traits that describe the brand promise?
Brand name testing – what do consumers feel about the names of the products?
Commercial eye tracking research — examine advertisements, package designs, websites,
etc. by analyzing visual behavior of the consumer
Concept testing - to test the acceptance of a concept by target consumers
Cool hunting - to make observations and predictions in changes of new or existing cultural
trends in areas such as fashion, music, films, television, youth culture and lifestyle

5|Page
Buyer decision making process research — to determine what motivates people to buy and
what decision-making process they use; over the last decade, Neuro marketing emerged from
the convergence of neuroscience and marketing, aiming to understand consumer decision
making process
Copy testing – predicts in-market performance of an ad before it airs by analyzing audience
levels of attention, brand linkage, motivation, entertainment, and communication, as well as
breaking down the ad’s flow of attention and flow of emotion. (Young, p 213)
Customer satisfaction research - quantitative or qualitative studies that yields an
understanding of a customer's satisfaction with a transaction
Demand estimation — to determine the approximate level of demand for the product
Distribution channel audits — to assess distributors’ and retailers’ attitudes toward a
product, brand, or company
Internet strategic intelligence — searching for customer opinions in the Internet: chats,
forums, web pages, blogs... where people express freely about their experiences with products,
becoming strong opinion formers.
Marketing effectiveness and analytics — Building models and measuring results to
determine the effectiveness of individual marketing activities.
Mystery consumer or mystery shopping - An employee or representative of the market
research firm anonymously contacts a salesperson and indicates he or she is shopping for a
product. The shopper then records the entire experience. This method is often used for quality
control or for researching competitors' products.
Positioning research — how does the target market see the brand relative to competitors? -
What does the brand stand for?
Price elasticity testing — to determine how sensitive customers are to price changes
Sales forecasting — to determine the expected level of sales given the level of demand. With
respect to other factors like Advertising expenditure, sales promotion etc.
Segmentation research - to determine the demographic, psychographic, cultural, and
behavioral characteristics of potential buyers
Online panel - a group of individual who accepted to respond to marketing research online

6|Page
Store audit — to measure the sales of a product or product line at a statistically selected store
sample in order to determine market share, or to determine whether a retail store provides
adequate service
Test marketing — a small-scale product launch used to determine the likely acceptance of the
product when it is introduced into a wider market
Viral Marketing Research - refers to marketing research designed to estimate the probability
that specific communications will be transmitted throughout an individual's Social Network.
Estimates of Social Networking Potential (SNP) are combined with estimates of selling
effectiveness to estimate ROI on specific combinations of messages and media.

All of these forms of marketing research can be classified as either problem-identification

research or as problem-solving research.

Methods of marketing research

Methodologically, marketing research uses the following types of research designs:

Based on questioning

Qualitative marketing research - generally used for exploratory purposes — small number of
respondents — not generalizable to the whole population — statistical significance and
confidence not calculated — examples include focus groups, in-depth interviews, and
projective techniques.

Quantitative marketing research - generally used to draw conclusions — tests a specific

hypothesis - uses random sampling techniques so as to infer from the sample to the
population — involves a large number of respondents — examples include surveys and
questionnaires. Techniques include choice modeling, maximum difference preference scaling,
and covariance analysis.

Based on observations

Ethnographic studies — by nature qualitative, the researcher observes social phenomena in

their natural setting — observations can occur cross-sectional (observations made at one time)
or longitudinally (observations occur over several time-periods) - examples include product-use
analysis and computer cookie traces.

7|Page
Experimental techniques - by nature quantitative, the researcher creates a quasi-artificial
environment to try to control spurious factors, then manipulates at least one of the variables —
examples include purchase laboratories and test markets

Researchers often use more than one research design. They may start with secondary research
to get background information, then conduct a focus group (qualitative research design) to
explore the issues. Finally they might do a full nationwide survey (quantitative research design)
in order to devise specific recommendations for the client.

5.2. Marketing intelligence

'Marketing intelligence (MI) is the everyday information relevant to a company’s markets,

gathered and analyzed specifically for the purpose of accurate and confident decision-making
in determining market opportunity, market penetration strategy, and market development
metrics. Marketing intelligence is necessary when entering a foreign market.

Marketing intelligence determines the intelligence needed, collects it by searching environment

and delivers it to marketing managers who need it. Marketing intelligence software can be
deployed using an on-premises or software as a service (SaaS, or cloud-based) model. These
systems take data from disparate data sources, like web analytics, business intelligence, call
center and sales data, which often come separate reports, and put them into a single
environment. In order to collect marketing intelligence, marketing managers must be in
constant touch with relevant books, newspapers and trade publications. They must talk to
various stakeholders like customers, distributors and suppliers. In addition to this they must
also monitor social media and carry out online discussions. Marketing managers can design
reports that correlate and visualize data coming from a variety of departments and sources
(even, in some cases, external data.) This allows them to see current key performance
indicators in real time (or as quickly as sources provide data) and analyze trends, rather than
wait for analysts to deliver periodic reports.

Marketing intelligence systems are designed to be used by marketing managers and often
viewed by employees throughout an organization. They may have user interfaces that closer
resemble consumer software than the software around individual data sources, which are

8|Page
designed for use by analysts. Business intelligence for example, can collect highly accurate,
timely, granular data, but often requires IT support to build and edit custom reports.

Organizationally, marketing intelligence can be the name of the department that performs both
the market intelligence and competitor analysis roles. Business intelligence of any kind may
also be their responsibility, in tandem with (or solely performed by) the Finance department,
for measuring market share and setting growth targets, the mergers and acquisitions group for
exploring acquisition opportunities, the legal department to protect the organization's assets
or research and development for cross-company comparison of innovation trends and the
discovery of opportunities through innovative differentiation.

Steps to be taken by a Company to improve its Marketing Intelligence

(1) Train and Motivate Sales Force: A company's sales force can be an excellent source of
information about the current trends in the market. They are the "intelligence gatherers"
for the company. The acquired facts can be regarding the company's market offerings,
whether any improvements are required or not or is there any opportunity for new
products, etc. It can also provide credible source to know about competitor activities,
consumers, distributors and retailers.
(2) Motivate Distributors, retailers, and other intermediaries to pass along important
intelligence: Specialists are hired by companies to gather marketing intelligence. In
order to measure the quality of production, the way the employees are behaving with
customers, quality of facilities being provided; retailers and service providers send
mystery shoppers. Firms can also assess the quality of customer experience with the
shops with the use of mystery shoppers.
(3) Network Externally: Every firm must keep a tab on its competitors. Competitive
intelligence describes the broader discipline of researching, analyzing and formulating
data and information from the entire competitive environment of any organization. This
can be done by purchasing the competitor's products, checking the advertising
campaigns, the press media coverage, reading their published reports, etc. Competitive
intelligence must be legal and ethical.
(4) Set up a customer advisory panel: Companies can set up panels consisting of customers.
They can be the company's largest customers or representatives of customers or the

9|Page
 most outspoken customers. Many business schools set up panels consisting of alumni
who provide their knowledge and expertise and help in constituting the course
curriculum.
(5) Optimal usage of Government data resources: Governments of almost all countries
publish reports regarding the population trends, demographic characteristics,
agricultural production and a lot of other such data. All this data must be or can be
referred to as base data. It can help in planning and formulating policies for the
companies.
(6) Information bought from external suppliers: Certain agencies sell data that can be useful
to other companies. For example, television channels will require information on the
number of viewership, ratings of TV programs, etc. An agency which calculates this
information and generates this data will provide it to companies that need it.
(7) Collect Competitive Intelligence through online customer feedback: Customer's view
about a product is most essential for any company. Ultimately it's the customer who's
buying the product. Hence customer feedback must be taken. Online platforms like chat
rooms, blogs, discussion forums, customer review boards can be used to generate
customer feedback. This enables the firm to understand customer experiences and
impressions. It becomes easier for companies to apply a structured system to do so as it
can then scan out the relevant messages without much of a trouble.

With the above steps being applied, a company's marketing intelligence system will prove to be
beneficial to its effective functioning.

5.3. Competitive analysis

A competitive analysis is a critical part of your company marketing plan. With this evaluation,
you can establish what makes your product or service unique--and therefore what attributes you
play up in order to attract your target market.

Evaluate your competitors by placing them in strategic groups according to how directly they
compete for a share of the customer's dollar. For each competitor or strategic group, list their
product or service, its profitability, growth pattern, marketing objectives and assumptions,

10 | P a g e
current and past strategies, organizational and cost structure, strengths and weaknesses, and size
(in sales) of the competitor's business. Answer questions such as:

Who are your competitors?

What products or services do they sell?
What is each competitor's market share?
What are their past strategies?
What are their current strategies?
What types of media are used to market their products or services?
How many hours per week do they purchase to advertise through the media used in this
market?
What are each competitor's strengths and weaknesses?
What potential threats do your competitors pose?
What potential opportunities do they make available for you?

A quick and easy way to compare your product or service with similar ones on the market is to
make a competition grid. Down the left side of a piece of paper, write the names of four or five
products or services that compete with yours. To help you generate this list, think of what your
customers would buy if they didn't buy your product or service.

Across the top of the paper, list the main features and characteristics of each product or service.
Include such things as target market, price, size, method of distribution, and extent of customer
service for a product. For a service, list prospective buyers, where the service is available,
price, website, toll-free phone number, and other features that are relevant. A glance at the
competition grid will help you see where your product fits in the overall market.

5.4. Marketing strategies

Marketing strategy is the fundamental goal of increasing sales and achieving a

sustainable competitive advantage. Marketing strategy includes all basic, short-term, and long-
term activities in the field of marketing that deal with the analysis of the strategic initial
situation of a company and the formulation, evaluation and selection of market-oriented
strategies and therefore contribute to the goals of the company and its marketing objectives.

11 | P a g e
Developing a marketing strategy

The process generally begins with a scan of the business environment, both internal and
external, which includes understanding strategic constraints. It is generally necessary to try to
grasp many aspects of the external environment, including technological, economic, cultural,
political and legal aspects Goals are chosen. Then, a marketing strategy or marketing plan is an
explanation of what specific actions will be taken over time to achieve the objectives. Plans can
be extended to cover many years, with sub-plans for each year, although as the speed of change
in the merchandising environment quickens, time horizons are becoming shorter. Ideally,
strategies are both dynamic and interactive, partially planned and partially unplanned, to enable
a firm to react to unforeseen developments while trying to keep focused on a specific pathway;
generally, a longer time frame is preferred. There are simulations such as customer lifetime
value models which can help marketers conduct "what-if" analyses to forecast what might
happen based on possible actions, and gauge how specific actions might affect such variables
as the revenue-per-customer and the churn rate. Strategies often specify how to adjust
the marketing mix; firms can use tools such as Marketing Mix Modeling to help them decide
how to allocate scarce resources for different media, as well as how to allocate funds across a
portfolio of brands. In addition, firms can conduct analyses of performance, customer
analysis, competitor analysis, and target market analysis. A key aspect of marketing strategy is
often to keep marketing consistent with a company's overarching mission statement.

Marketing strategy should not be confused with a marketing objective or mission. For example,
a goal may be to become the market leader, perhaps in a specific niche; a mission may be
something along the lines of "to serve customers with honor and dignity"; in contrast, a
marketing strategy describes how a firm will achieve the stated goal in a way which is
consistent with the mission, perhaps by detailed plans for how it might build a referral network,
for example. Strategy varies by type of market. A well-established firm in a mature market will
likely have a different strategy than a start-up. Plans usually involve monitoring, to assess
progress, and prepare for contingencies if problems arise.

12 | P a g e
Diversity of Strategies

Marketing strategies may differ depending on the unique situation of the individual business.
However, there are a number of ways of categorizing some generic strategies. A brief
description of the most common categorizing schemes is presented below:

Strategies based on market dominance - In this scheme, firms are classified based on their
market share or dominance of an industry. Typically there are four types of market dominance
strategies:

 Leader  Follower
 Challenger  Nicher

Market introduction strategies

"At introduction, the marketing strategist has two principle strategies to choose from:
penetration or niche"

Market growth strategies

"In the early growth stage, the marketing manager may choose from two additional strategic
alternatives.

Market maturity strategies

"In maturity, sales growth slows, stabilizes and starts to decline. In early maturity, it is common
to employ a maintenance strategy (BCG), where the firm maintains or holds a stable marketing
mix"

Market decline strategies

At some point the decline in sales approaches and then begins to exceed costs. And not just
accounting costs, there are hidden costs as well; as Kotler (1965, p. 109) observed: 'No
financial accounting can adequately convey all the hidden costs.' At some point, with declining
sales and rising costs, a harvesting strategy becomes unprofitable and a divesting strategy
necessary"

Early marketing strategies

 Product differentiation  Cost leadership

13 | P a g e
  Market segmentation  Innovation strategies

Innovation strategies deal with the firm's rate of the new product development and business
model innovation. It asks whether the company is on the cutting edge of technology and
business innovation. There are three types:

 Pioneers  Late followers

 Close followers

Growth strategies
In this scheme we ask the question, "How should the firm grow?". There are a number of
different ways of answering that question, but the most common gives four answers:

 Horizontal integration  Diversification

 Vertical integration  Intensification

These ways of growth are termed as organic growth. Horizontal growth is whereby a firm
grows towards acquiring other businesses that are in the same line of business for example a
clothing retail outlet acquiring a food outlet. The two are in the retail establishments and their
integration lead to expansion. Vertical integration can be forward or backward. Forward
integration is whereby a firm grows towards its customers for example a food manufacturing
firm acquiring a food outlet. Backward integration is whereby a firm grows towards its source
of supply for example a food outlet acquiring a food manufacturing outlet.

5.5. International markets

An international market is defined geographically as a market outside the international borders

of a company's country of citizenship. A company, to the extent that it is a legally distinct
entity from its owners like a corporation, is usually a citizen of the country where it is
organized. IBM, for example, was formed in the United States. Thus, any geographic area
outside the territorial boundaries of the United States where IBM conducts business is IBM's
international market. The conceptual opposite of an international market is the
company's domestic market, which is the geographic region within the national boundaries of
company's home country

14 | P a g e
15 | P a g e