Marketing research is often needed to ensure that we produce what customers really want and not what we think they want.

There are two main approaches to marketing. Secondary research involves using information that others have already put together. For example, if you are thinking about starting a business making clothes for tall people, you don’t need to question people about how tall they are to find out how many tall people exist—that information has already been published by the U.S. Government. Primary research, in contrast, is research that you design and conduct yourself. For example, you may need to find out whether consumers would prefer that your soft drinks be sweater or tarter.

Research will often help us reduce risks associated with a new product, but it cannot take the risk away entirely. It is also important to ascertain whether the research has been complete. For example, Coca Cola did a great deal of research prior to releasing the New Coke, and consumers seemed to prefer the taste. However, consumers were not prepared to have this drink replace traditional Coke.

Several tools are available to the market researcher—e.g., mail questionnaires, phone surveys, observation, and focus groups. Please see the chart for advantages and disadvantages of each.

Focus groups are useful when the marketer wants to launch a new product or modify an existing one. A focus group usually involves having some 8-12 people come together in a room to discuss their consumption preferences and experiences. The group is usually led by a moderator, who will start out talking broadly about topics related broadly to the product without mentioning the product itself. For example, a focus group aimed at sugarfree cookies might first address consumers’ snacking preferences, only gradually moving toward the specific product of sugarfree cookies. By not mentioning the product up front, we avoid biasing the participants into thinking only in terms of the specific product brought out. Thus, instead of having consumers think primarily in terms of what might be good or bad about the product, we can ask them to discuss more broadly the ultimate benefits they really seek. For example, instead of having consumers merely discuss what they think about some sugarfree cookies that we are considering releasing to the market, we can have consumers speak about their motivations for using snacks and what general kinds of benefits they seek. Such a discussion might reveal a concern about healthfulness and a desire for wholesome foods. Probing on the meaning of wholesomeness, consumers might indicate a desire to avoid artificial ingredients. This would be an important concern in the marketing of sugarfree cookies, but might not have come up if consumers were asked to comment directly on the product where the use of artificial ingredients is, by virtue of the nature of the product, necessary.

Focus groups are well suited for some purposes, but poorly suited for others. In general, focus groups are very good for getting breadth—i.e., finding out what kinds of issues are important for consumers in a given product category. Here, it is helpful that focus groups are completely "open-ended:" The consumer mentions his or her preferences and opinions, and the focus group moderator can ask the consumer to elaborate. In a questionnaire, if one did not think to ask about something, chances are that few consumers would take the time to write out an elaborate answer. Focus groups also have some drawbacks, for example:

Consumer behavior involves the psychological processes that consumers go through in recognizing needs, finding ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and, if so, which brand and where), interpret information, make plans, and implement these plans (e.g., by engaging in comparison shopping or actually purchasing a product).

The consumer faces numerous sources of influence. Often, we take cultural influences for granted, but they are significant. An American will usually not bargain with a store owner, while that is common practice in much of the World. Physical factors also influence our behavior. We are more likely to buy a soft drink when we are thirsty, for example, and food manufacturers have found that it is more effective to advertise their products on the radio in the late afternoon when people are getting hungry. A person’s self-image will also tend to influence what he or she will buy—an upwardly mobile manager may buy a flashy car to project an image of success. Social factors also influence what the consumers buy—often, consumers seek to imitate others whom they admire, and may buy the same brands. The social environment can include both the mainstream culture (e.g., Americans are more likely to have corn flakes or ham and eggs for breakfast than to have rice, which is preferred in many Asian countries) and a subculture (e.g., rap music often appeals to a segment within the population that seeks to distinguish itself from the mainstream population). Thus, sneaker manufacturers are eager to have their products worn by admired athletes. Finally, consumer behavior is influenced by learning—you try a hamburger and learn that it satisfies your hunger and tastes good, and the next time you are hungry, you may consider another hamburger.

Consumer choices are often influenced dramatically by values. Some consumers, for example, seek to "fit in with the crowd" and would like to own a car as similar as possible to that of the neighbor. Others, on the other hand, want to stand out. Terminal values reflect end states—e.g., a person wants to be affluent, while instrumental values reflect a chosen way of reaching the end values—e.g., a consumer may choose hard work as a way to gain wealth. In the consumption context, then, a consumer may choose to spend a great deal of money on buying and maintaining neat and professional attire, not because he or she is particularly interested in that appearance for its own sake, but rather because this will help the consumer be successful in his or her career. Core values are more deeply held than peripheral ones. Thus, a person may highly value honesty and avoid manufacturers that seem to make unwarranted claims, but only weekly hold a value of punctuality. In general, marketers will be more successful in appealing to core values.

Subculture often significantly influences the consumer. There are several potential ways that a society can be divided up. Some consumers are highly influenced by their ethnic origin. In some areas in Los Angeles, shopkeepers may transact all their business in a language of the predominant immigration patterns into the neighborhood. Virtual pets at first spread in the U.S. through Asian-American teenagers. Only after a while did the product diffuse into other ethnic groups. Occasionally, religious groups will influence consumers’ behavior, usually because a religion may set certain standards—e.g., some religions do not allow the consumption of alcohol, while others may disapprove of charging interest. The fact that many Americans spend a great deal of time with members of their religions in churches, synagogues, and mosques implies that members have a great deal of influence on each other. People in similar age groups also tend to have more influence on each other. This is particularly evident in the spread of fashion. Social status may also have some influence, as people may tend to emulate others in similar occupations or neighborhoods.

One way to look at social influence is though "reference groups"—people against which one compares oneself. Thus, a consumer may notice that all his friends are wearing a special kind of jeans and may expect to be ostrasized if he or she chooses to wear a different brand. Interestingly, however, one may also hold dissociative reference groups—people that one would not want to be compared to. For example, Cadillac has an image problem in being associated with older consumers, who are not considered "hip" enough by younger, upwardly mobile consumers that the firm would like to target. Thus, Cadillac ran the campaign "It’s not your father’s car."

Family may influence the consumer’s choices a great deal. Research has shown, for example, that there is a tendency for adult children to use the same brands that their parents used over time. In many cases, these brand choices are made without much conscious thought.

In marketing jargon, a consumer problem refers to a discrepancy between the ideal situation and reality. Thus, problems can range greatly in severity. One problem, for example, is that you are hungry. The problem is easily solved by eating. Other problems can be significantly more severe—for example, a consumer is scared that he will be rejected by his wife because he is growing bald. Note that problems can be solved in more than one way. Baldness could be served by obtaining a wig, medical treatment, buying a fancy car (as an alternative way to achieve attractiveness), or some other creative way.

One model of consumer decision making involves several steps. The first one is problem recognition—you realize that something is not as it should be. Perhaps, for example, your car is getting more difficult to start and is not accelerating well. The second step is information search—what are some alternative ways of solving the problem? You might buy a new car, buy a used car, take your car in for repair, ride the bus, ride a taxi, or ride a skateboard to work. The third step involves evaluation of alternatives. A skateboard is inexpensive, but may be ill-suited for long distances and for rainy days. Finally, we have the purchase stage, and sometimes a post-purchase stage (e.g., you return a product to the store because you did not find it satisfactory).

Consumer involvement will tend to vary dramatically depending on the type of product. In general, consumer involvement will be higher for products that are very expensive (e.g., a home, a car) or are highly significant in the consumer’s life in some other way (e.g., a word processing program or acne medication).

It is important to consider the consumer’s motivation for buying products. To achieve this goal, we can use the Means-End chain, wherein we consider a logical progression of consequences of product use that eventually lead to desired end benefit. Thus, for example, a consumer may see that a car has a large engine, leading to fast acceleration, leading to a feeling of performance, leading to a feeling of power, which ultimately improves the consumer’s self-esteem. A handgun may aim bullets with precision, which enables the user to kill an intruder, which means that the intruder will not be able to harm the consumer’s family, which achieves the desired end-state of security. In advertising, it is important to portray the desired end-states. Focusing on the large motor will do less good than portraying a successful person driving the car.

Additional information on consumer behavior.

Organizational buying usually involves more people than individual buying. Often, many people are involved in making decisions as to (a) whether to buy, (b) what to buy, (c) at what quantity, and (d) from whom. An engineer may make a specification as to what is needed, which may be approved by a manager, with the final purchase being made by a purchase specialist who spends all his or her time finding the best deal on the goods that the organization needs. Often, such long purchase processes can cause long delays. In the government, rules are often especially stringent—e.g., vendors of fruit cake have to meet fourteen pages of specifications put out by the General Services Administration. In many cases, government buyers are also heavily bound to go with the lowest price. Even if it is obvious that a higher priced vendor will offer a superior product, it may be difficult to accept that bid.

Segmentation, targeting, and positioning together comprise a three stage process, as depicted in the chart within the class notes. We first (1) determine which kinds of customers exist, then (2) select which ones we are best off trying to serve and, finally, (3) we implement our segmentation by optimizing our products/services for that segment and communicating that we have made the choice to distinguish ourselves that way.

Segmentation involves finding out what kinds of consumers with different needs exist. In the auto market, for example, some consumers demand speed and performance, while others are much more concerned about roominess and safety. In general, it holds true that "You can’t be all things to all people," and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable.

Note that segmentation calls for some tough choices. There may be a large number of variables that can be used to differentiate consumers of a given product category; yet, in practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus, we need to determine which variables will be most useful in distinguishing different groups of consumers. We might thus decide, for example, that the variables that are most relevant in separating different kinds of soft drink consumers are (1) preference for taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivity—willingness to pay for brand names; and (4) heavy vs. light consumers. We now put these variables together to arrive at various combinations.

Several different kinds of variables can be used for segmentation. Demographic variables essentially refer to personal statistics such as income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. Campbell’s soup, for instance, has found that Western consumers on the average prefer spicier soups—thus, you get a different product in the same cans at the East and West coats. Facing flat sales of guns in the traditional male dominated market, a manufacturer came out with the Lady Remmington, a more compact, handier gun more attractive to women. Taking this a step farther, it is also possible to segment on lifestyle and values." Some consumers want to be seen as similar to others, while a different segment wants to stand apart from the crowd. Another basis for segmentation is behavior. Some consumers are "brand loyal"—i.e., they tend to stick with their preferred brands even when a competing one is on sale. Some consumers are "heavy" users while others are "light" users. For example, research conducted by the wine industry shows that some 80% of the product is consumed by 20% of the consumers—presumably a rather intoxicated group. One can also segment on benefits sought, essentially bypassing demographic explanatory variables. Some consumers, for example, like scented soap (a segment likely to be attracted to brands such as Irish Spring), while others prefer the "clean" feeling of unscented soap (the "Ivory" segment). Some consumers use toothpaste primarily to promote oral health, while another segment is more interested in breath freshening.

In the next step, we decide to target one or more segments. Our choice should generally depend on several factors. First, how well are existing segments served by other manufacturers? It will be more difficult to appeal to a segment that is already well served than to one whose needs are not currently being served well. Secondly, how large is the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly growing segment is that it tends to attract competition). Thirdly, do we have strengths as a company that will help us appeal particularly to one group of consumers? Firms may already have an established reputation. While McDonald’s has a great reputation for fast, consistent quality, family friendly food, it would be difficult to convince consumers that McDonald’s now offers gourmet food. Thus, McD’s would probably be better off targeting families in search of consistent quality food in nice, clean restaurants.

Positioning involves implementing our targeting. For example, Apple Computer has chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot through its advertising to promote itself, through its unintimidating icons, as a computer for "non-geeks." In contrast, the Mace Utilities were aimed at computer "techies," and sophistication, rather than user-friendliness, was stressed.

Product

Products may be differentiated in several ways. Some may be represented as being of superior quality (e.g., Maytag), or they may differ in more arbitrary ways in terms of styles—some people like one style better than another, while there is no real consensus on which one is the superior one. Finally, products can be differentiated in terms of offering different levels of service—for example, Volvo offers a guarantee of free, reliable towing anywhere should the vehicle break down. American Express offers services not offered by many other charge cards.

Products often go through a life cycle. Initially, a product is introduced. Since the product is not well known and is usually expensive (e.g., as microwave ovens were in the late 1970s), sales are usually limited. Eventually, however, many products reach a growth phase—sales increase dramatically. More firms enter with their models of the product. Frequently, however, the product will reach a maturity stage, where little growth will be seen. For example, in the United States, almost every household has at least one color TV set. Some products may also reach a decline stage, usually because the product category is being replaced by something better. For example, typewriters experienced declining sales as more consumers switched to computers or other word processing equipment. The product life cycle is tied to the phenomenon of diffusion of innovation. When a new product comes out, it is likely to first be adopted by consumers who are more innovative than others—they are willing to pay a premium price for the new product and take a risk on unproven technology. It is important to be on the good side of innovators since many other later adopters will tend to rely on the innovators who are thought to be more knowledgeable about new products for advice.

It is sometimes useful to think of products as being either new or existing. Many firms today rely increasingly on new products for a large part of their sales. New products can be new in several ways. They can be new to the market—no one else ever made a product like this before. For example, Chrysler invented the minivan. Products can also be new to the firm—another firm invented the product, but the firm is now making its own version. For example, IBM did not invent the personal computer, but entered after other firms showed the market to have a high potential. Finally, products can be new to the segment—e.g., cellular phones and pagers were first aimed at physicians and other price-insensitive segments. Later, firms decided to target the more price-sensitive mass market.

An essential issue in product management is branding. Different firms have different policies on the branding on their products. While 3M puts its brand name on a great diversity of products, Proctor & Gamble, on the opposite extreme, maintains a separate brand name for each product. In general, the use of brand extensions should be evaluated on the basis of the compatibility of various products—can the same brand name represent different products without conflict or confusion? Coca Cola for many years resisted putting its coveted brand name on a diet soft drink. In the old days, available sweeteners such as saccharin added an undesirable aftertaste, implying a clear sacrifice in taste for the reduction in calories. Thus, to avoid damaging the brand name Coca Cola, Coke instead named its diet cola Tab. Only after Nutrasweet was introduced was the brand extension allowed. Research shows that consumers are more receptive to brand extensions when (1) the company appears to have the expertise to make the product [McDonald’s was not thought as credible as a photo-finishing service], (2) the products are congruent (compatible), and (3) the brand extension is not seen as being exploitative of a high quality brand name [e.g., one should not use a premium brand name like Heineken to make a trivially easy product like popcorn].

Distribution (also known as the place variable in the marketing mix, or the 4 Ps) involves getting the product from the manufacturer to the ultimate consumer. Distribution is often a much underestimated factor in marketing. Many marketers fall for the trap that if you make a better product, consumers will buy it. The problem is that retailers may not be willing to devote shelf-space to new products. Retailers would often rather use that shelf-space for existing products have that proven records of selling.

Although many firms advertise that they save the consumer money by selling direct and "eliminating the middleman," this is a dubious claim. The truth is that intermediaries, such as retailers and wholesalers, tend to add efficiency because they can do specialized tasks better than the consumer or the manufacturer. Because wholesalers and retailers exist, the consumer can buy one pen at a time in a store located conveniently rather than having to order it from a distant factory. Thus, distributors add efficiency by: