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Marketing Research vs. Market Research
These terms often are used interchangeably, but technically there is a difference. Market
research deals specifically with the gathering of information about a market's size and
trends. Marketing research covers a wider range of activities. While it may involve
market research, marketing research is a more general systematic process that can be
applied to a variety of marketing problems.
The Marketing Research Process
Once the need for marketing research has been established, most marketing research projects
involve these steps:
1. Define the problem
2. Determine research design
3. Identify data types and sources
4. Design data collection forms and questionnaires
5. Determine sample plan and size
6. Collect the data
7. Analyze and interpret the data
8. Prepare the research report
The decision problem faced by management must be translated into a market research problem
in the form of questions that define the information that is required to make the decision and
how this information can be obtained. Thus, the decision problem is translated into a research
problem. For example, a decision problem may be whether to launch a new product. The
corresponding research problem might be to assess whether the market would accept the new
The objective of the research should be defined clearly. To ensure that the true decision
problem is addressed, it is useful for the researcher to outline possible scenarios of the research
results and then for the decision maker to formulate plans of action under each scenario. The
use of such scenarios can ensure that the purpose of the research is agreed upon before it
Marketing research can classified in one of three categories:
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These classifications are made according to the objective of the research. In some cases the
research will fall into one of these categories, but in other cases different phases of the same
research project will fall into different categories.
Exploratory research has the goal of formulating problems more precisely, clarifying
concepts, gathering explanations, gaining insight, eliminating impractical ideas, and
forming hypotheses. Exploratory research can be performed using a literature search,
surveying certain people about their experiences, focus groups, and case studies. When
surveying people, exploratory research studies would not try to acquire a representative
sample, but rather, seek to interview those who are knowledgeable and who might be
able to provide insight concerning the relationship among variables. Case studies can
include contrasting situations or benchmarking against an organization known for its
excellence. Exploratory research may develop hypotheses, but it does not seek to test
them. Exploratory research is characterized by its flexibility.
Descriptive research is more rigid than exploratory research and seeks to describe
users of a product, determine the proportion of the population that uses a product, or
predict future demand for a product. As opposed to exploratory research, descriptive
research should define questions, people surveyed, and the method of analysis prior to
beginning data collection. In other words- who, what, where, when, why, and how
aspects of the research should be defined. Such preparation allows one the opportunity
to make any required changes before the costly process of data collection has begun.
There are two basic types of descriptive research: longitudinal studies and cross-
sectional studies. Longitudinal studies are time series analyses that make repeated
measurements of the same individuals, thus allowing one to monitor behavior such as
brand-switching. However, longitudinal studies are not necessarily representative since
many people may refuse to participate because of the commitment required. Cross-
sectional studies sample the population to make measurements at a specific point in
time. A special type of cross-sectional analysis is a cohort analysis, which tracks an
aggregate of individuals who experience the same event within the same time interval
over time. Cohort analyses are useful for long-term forecasting of product demand.
Causal research seeks to find cause and effect relationships between variables. It
accomplishes this goal through laboratory and field experiments.
Data Types and Sources
Before going through the time and expense of collecting primary data, one should check for
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secondary data that previously may have been collected for other purposes but that can be
used in the immediate study. Secondary data may be internal to the firm, such as sales invoices
and warranty cards, or may be external to the firm such as published data or commercially
available data. The government census is a valuable source of secondary data.
Secondary data has the advantage of saving time and reducing data gathering costs. The
disadvantages are that the data may not fit the problem perfectly and that the accuracy may be
more difficult to verify for secondary data than for primary data.
Some secondary data is republished by organizations other than the original source. Because
errors can occur and important explanations may be missing in republished data, one should
obtain secondary data directly from its source. One also should consider who the source is and
whether the results may be biased.
There are several criteria that one should use to evaluate secondary data.
Whether the data is useful in the research study.
How current the data is and whether it applies to time period of interest.
Errors and accuracy - whether the data is dependable and can be verified.
Presence of bias in the data.
Specifications and methodologies used, including data collection method, response rate,
quality and analysis of the data, sample size and sampling technique, and questionnaire
Objective of the original data collection.
Nature of the data, including definition of variables, units of measure, categories used,
and relationships examined.
Often, secondary data must be supplemented by primary data originated specifically for the
study at hand. Some common types of primary data are:
Demographic and socioeconomic characteristics
Psychological and lifestyle characteristics
Attitudes and opinions
Awareness and knowledge - for example, brand awareness
Intentions - for example, purchase intentions. While useful, intentions are not a reliable
indication of actual future behavior.
Motivation - a person's motives are more stable than his/her behavior, so motive is a
better predictor of future behavior than is past behavior.
Primary data can be obtained by communication or by observation. Communication involves
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questioning respondents either verbally or in writing. This method is versatile, since one need
only to ask for the information; however, the response may not be accurate. Communication
usually is quicker and cheaper than observation. Observation involves the recording of actions
and is performed by either a person or some mechanical or electronic device. Observation is
less versatile than communication since some attributes of a person may not be readily
observable, such as attitudes, awareness, knowledge, intentions, and motivation. Observation
also might take longer since observers may have to wait for appropriate events to occur, though
observation using scanner data might be quicker and more cost effective. Observation typically
is more accurate than communication.
Personal interviews have an interviewer bias that mail-in questionnaires do not have. For
example, in a personal interview the respondent's perception of the interviewer may affect the
The questionnaire is an important tool for gathering primary data. Poorly constructed questions
can result in large errors and invalidate the research data, so significant effort should be put into
the questionnaire design. The questionnaire should be tested thoroughly prior to conducting the
Attributes can be measured on nominal, ordinal, interval, and ratio scales:
Nominal numbers are simply identifiers, with the only permissible mathematical use
being for counting. Example: social security numbers.
Ordinal scales are used for ranking. The interval between the numbers conveys no
meaning. Median and mode calculations can be performed on ordinal numbers.
Example: class ranking
Interval scales maintain an equal interval between numbers. These scales can be used
for ranking and for measuring the interval between two numbers. Since the zero point is
arbitrary, ratios cannot be taken between numbers on an interval scale; however, mean,
median, and mode are all valid. Example: temperature scale
Ratio scales are referenced to an absolute zero values, so ratios between numbers on
the scale are meaningful. In addition to mean, median, and mode, geometric averages
also are valid. Example: weight
Validity and Reliability
The validity of a test is the extent to which differences in scores reflect differences in the
measured characteristic. Predictive validity is a measure of the usefulness of a measuring
instrument as a predictor. Proof of predictive validity is determined by the correlation between
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results and actual behavior. Construct validity is the extent to which a measuring instrument
measures what it intends to measure.
Reliability is the extent to which a measurement is repeatable with the same results. A
measurement may be reliable and not valid. However, if a measurement is valid, then it also is
reliable and if it is not reliable, then it cannot be valid. One way to show reliability is to show
stability by repeating the test with the same results.
Many of the questions in a marketing research survey are designed to measure attitudes.
Attitudes are a person's general evaluation of something. Customer attitude is an important
factor for the following reasons:
Attitude helps to explain how ready one is to do something.
Attitudes do not change much over time.
Attitudes produce consistency in behavior.
Attitudes can be related to preferences.
Attitudes can be measured using the following procedures:
Self-reporting - subjects are asked directly about their attitudes. Self-reporting is the
most common technique used to measure attitude.
Observation of behavior - assuming that one's behavior is a result of one's attitudes,
attitudes can be inferred by observing behavior. For example, one's attitude about an
issue can be inferred by whether he/she signs a petition related to it.
Indirect techniques - use unstructured stimuli such as word association tests.
Performance of objective tasks - assumes that one's performance depends on attitude.
For example, the subject can be asked to memorize the arguments of both sides of an
issue. He/she is more likely to do a better job on the arguments that favor his/her stance.
Physiological reactions - subject's response to a stimuli is measured using electronic or
mechanical means. While the intensity can be measured, it is difficult to know if the
attitude is positive or negative.
Multiple measures - a mixture of techniques can be used to validate the findings,
especially worthwhile when self-reporting is used.
There are several types of attitude rating scales:
Equal-appearing interval scaling - a set of statements are assembled. These statements
are selected according to their position on an interval scale of favorableness. Statements
are chosen that has a small degree of dispersion. Respondents then are asked to
indicate with which statements they agree.
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Likert method of summated ratings - a statement is made and the respondents indicate
their degree of agreement or disagreement on a five point scale (Strongly Disagree,
Disagree, Neither Agree nor Disagree, Agree, Strongly Agree).
Semantic differential scale - a scale is constructed using phrases describing attributes of
the product to anchor each end. For example, the left end may state, "Hours are
inconvenient" and the right end may state, "Hours are convenient". The respondent then
marks one of the seven blanks between the statements to indicate his/her opinion about
Stapel Scale - similar to the semantic differential scale except that 1) points on the scale
are identified by numbers, 2) only one statement is used and if the respondent disagrees
a negative number should marked, and 3) there are 10 positions instead of seven. This
scale does not require that bipolar adjectives be developed and it can be administered
Q-sort technique - the respondent if forced to construct a normal distribution by placing a
specified number of cards in one of 11 stacks according to how desirable he/she finds
the characteristics written on the cards.
The sampling frame is the pool from which the interviewees are chosen. The telephone book
often is used as a sampling frame, but has some shortcomings. Telephone books exclude those
households that do not have telephones and those households with unlisted numbers. Since a
certain percentage of the numbers listed in a phone book are out of service, there are many
people who have just moved who are not sampled. Such sampling biases can be overcome by
using random digit dialing. Mall intercepts represent another sampling frame, though there are
many people who do not shop at malls and those who shop more often will be over-represented
unless their answers are weighted in inverse proportion to their frequency of mall shopping.
In designing the research study, one should consider the potential errors. Two sources of errors
are random sampling error and non-sampling error. Sampling errors are those due to the fact
that there is a non-zero confidence interval of the results because of the sample size being less
than the population being studied. Non-sampling errors are those caused by faulty coding,
untruthful responses, respondent fatigue, etc.
There is a tradeoff between sample size and cost. The larger the sample size, the smaller the
sampling error but the higher the cost. After a certain point the smaller sampling error cannot be
justified by the additional cost.
While a larger sample size may reduce sampling error, it actually may increase the total error.
There are two reasons for this effect. First, a larger sample size may reduce the ability to follow
up on non-responses. Second, even if there is a sufficient number of an interviewer for follow-
ups, a larger number of interviewers may result in a less uniform interview process.
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In addition to the intrinsic sampling error, the actual data collection process will introduce
additional errors. These errors are called non-sampling errors. Some non-sampling errors may
be intentional on the part of the interviewer, who may introduce a bias by leading the
respondent to provide a certain response. The interviewer also may introduce unintentional
errors, for example, due to not having a clear understanding of the interview process or due to
Respondents also may introduce errors. A respondent may introduce intentional errors by lying
or simply by not responding to a question. A respondent may introduce unintentional errors by
not understanding the question, guessing, not paying close attention, and being fatigued or
Such non-sampling errors can be reduced through quality control techniques.
Data Analysis - Preliminary Steps
Before analysis can be performed, raw data must be transformed into the right format. First, it
must be edited so that errors can be corrected or omitted. The data must then be coded; this
procedure converts the edited raw data into numbers or symbols. A codebook is created to
document how the data was coded. Finally, the data is tabulated to count the number of
samples falling into various categories. Simple tabulations count the occurrences of each
variable independently of the other variables. Cross tabulations, also known as contingency
tables or cross tabs, treats two or more variables simultaneously. However, since the variables
are in a two-dimensional table, cross tabbing more than two variables is difficult to visualize
since more than two dimensions would be required. Cross tabulation can be performed for
nominal and ordinal variables.
Cross tabulation is the most commonly utilized data analysis method in marketing research.
Many studies take the analysis no further than cross tabulation. This technique divides the
sample into sub-groups to show how the dependent variable varies from one subgroup to
another. A third variable can be introduced to uncover a relationship that initially was not
The conjoint analysis is a powerful technique for determining consumer preferences for product
A basic fact about testing hypotheses is that a hypothesis may be rejected but that the
hypothesis never can be unconditionally accepted until all possible evidence is evaluated. In the
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case of sampled data, the information set cannot be complete. So if a test using such data does
not reject a hypothesis, the conclusion is not necessarily that the hypothesis should be
The null hypothesis in an experiment is the hypothesis that the independent variable has no
effect on the dependent variable. The null hypothesis is expressed as H0. This hypothesis is
assumed to be true unless proven otherwise. The alternative to the null hypothesis is the
hypothesis that the independent variable does have an effect on the dependent variable. This
hypothesis is known as the alternative, research, or experimental hypothesis and is expressed
as H1. This alternative hypothesis states that the relationship observed between the variables
cannot be explained by chance alone.
There are two types of errors in evaluating a hypothesis:
Type I error: occurs when one rejects the null hypothesis and accepts the alternative,
when in fact the null hypothesis is true.
Type II error: occurs when one accepts the null hypothesis when in fact the null
hypothesis is false.
Because their names are not very descriptive, these types of errors sometimes are confused.
Some people jokingly define a Type III error to occur when one confuses Type I and Type II. To
illustrate the difference, it is useful to consider a trial by jury in which the null hypothesis is that
the defendant is innocent. If the jury convicts a truly innocent defendant, a Type I error has
occurred. If, on the other hand, the jury declares a truly guilty defendant to be innocent, a Type
II error has occurred.
Hypothesis testing involves the following steps:
Formulate the null and alternative hypotheses.
Choose the appropriate test.
Choose a level of significance (alpha) - determine the rejection region.
Gather the data and calculate the test statistic.
Determine the probability of the observed value of the test statistic under the null
hypothesis given the sampling distribution that applies to the chosen test.
Compare the value of the test statistic to the rejection threshold.
Based on the comparison, reject or do not reject the null hypothesis.
Make the marketing research conclusion.
In order to analyze whether research results are statistically significant or simply by chance, a
test of statistical significance can be run.
Tests of Statistical Significance
The chi-square ( c2
) goodness-of-fit test is used to determine whether a set of proportions have
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specified numerical values. It often is used to analyze bivariate cross-tabulated data. Some
examples of situations that are well-suited for this test are:
A manufacturer of packaged products test markets a new product and wants to know if
sales of the new product will be in the same relative proportion of package sizes as
sales of existing products.
A company's sales revenue comes from Product A (50%), Product B (30%), and Product
C (20%). The firm wants to know whether recent fluctuations in these proportions are
random or whether they represent a real shift in sales.
The chi-square test is performed by defining k categories and observing the number of cases
falling into each category. Knowing the expected number of cases falling in each category, one
can define chi-squared as:
= å ( Oi - Ei )2
Oi = the number of observed cases in category i,
Ei = the number of expected cases in category i,
k = thenumber of categories,
thesummation runs from i = 1 to i = k.
Before calculating the chi-square value, one needs to determine the expected frequency for
each cell. This is done by dividing the number of samples by the number of cells in the table.
To use the output of the chi-square function, one uses a chi-square table. To do so, one needs
to know the number of degrees of freedom (df). For chi-square applied to cross-tabulated data,
the number of degrees of freedom is equal to
(Number of columns - 1) (Number of rows - 1)
This is equal to the number of categories minus one. The conventional critical level of 0.05
normally is used. If the calculated output value from the function is greater than the chi-square
look-up table value, the null hypothesis is rejected.
Another test of significance is the Analysis of Variance (ANOVA) test. The primary purpose of
ANOVA is to test for differences between multiple means. Whereas the t-test can be used to
compare two means, ANOVA is needed to compare three or more means. If multiple t-tests
were applied, the probability of a TYPE I error (rejecting a true null hypothesis) increases as the
number of comparisons increases.
One-way ANOVA examines whether multiple means differ. The test is called an F-test. ANOVA
calculates the ratio of the variation between groups to the variation within groups (the F ratio).
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While ANOVA was designed for comparing several means, it also can be used to compare two
means. Two-way ANOVA allows for a second independent variable and addresses interaction.
To run a one-way ANOVA, use the following steps:
1. Identify the independent and dependent variables.
2. Describe the variation by breaking it into three parts - the total variation, the portion that
is within groups, and the portion that is between groups (or among groups for more than
two groups). The total variation (SStotal) is the sum of the squares of the differences
between each value and the grand mean of all the values in all the groups. The in-group
variation (SSwithin) is the sum of the squares of the differences in each element's value
and the group mean. The variation between group means (SSbetween) is the total variation
minus the in-group variation (SStotal - SSwithin).
3. Measure the difference between each group's mean and the grand mean.
4. Perform a significance test on the differences.
5. Interpret the results.
This F-test assumes that the group variances are approximately equal and that the observations
are independent. It also assumes normally distributed data; however, since this is a test on
means the Central Limit Theorem holds as long as the sample size is not too small.
ANOVA is efficient for analyzing data using relatively few observations and can be used with
categorical variables. Note that regression can perform a similar analysis to that of ANOVA.
Analysis of the difference in means between groups provides information about individual
variables, it is not useful for determine their individual impacts when the variables are used in
combination. Since some variables will not be independent from one another, one needs a test
that can consider them simultaneously in order to take into account their interrelationship. One
such test is to construct a linear combination, essentially a weighted sum of the variables. To
determine which variables discriminate between two or more naturally occurring groups,
discriminant analysis is used. Discriminant analysis can determine which variables are the best
predictors of group membership. It determines which groups differ with respect to the mean of a
variable, and then uses that variable to predict new cases of group membership. Essentially, the
discriminant function problem is a one-way ANOVA problem in that one can determine whether
multiple groups are significantly different from one another with respect to the mean of a
A discriminant analysis consists of the following steps:
1. Formulate the problem.
2. Determine the discriminant function coefficients that result in the highest ratio of
between-group variation to within-group variation.
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3. Test the significance of the discriminant function.
4. Interpret the results.
5. Determine the validity of the analysis.
Discriminant analysis analyzes the dependency relationship, whereas factor analysis and
cluster analysis address the interdependency among variables.
Factor analysis is a very popular technique to analyze interdependence. Factor analysis studies
the entire set of interrelationships without defining variables to be dependent or independent.
Factor analysis combines variables to create a smaller set of factors. Mathematically, a factor is
a linear combination of variables. A factor is not directly observable; it is inferred from the
variables. The technique identifies underlying structure among the variables, reducing the
number of variables to a more manageable set. Factor analysis groups variables according to
The factor loading can be defined as the correlations between the factors and their underlying
variables. A factor loading matrix is a key output of the factor analysis. An example matrix is
Factor 1 Factor 2 Factor 3
Column's Sum of Squares:
Each cell in the matrix represents correlation between the variable and the factor associated
with that cell. The square of this correlation represents the proportion of the variation in the
variable explained by the factor. The sum of the squares of the factor loadings in each column is
called an eigenvalue. An eigenvalue represents the amount of variance in the original variables
that is associated with that factor. The communality is the amount of the variable variance
explained by common factors.
A rule of thumb for deciding on the number of factors is that each included factor must explain at
least as much variance as does an average variable. In other words, only factors for which the
eigenvalue is greater than one are used. Other criteria for determining the number of factors
include the Scree plot criteria and the percentage of variance criteria.
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To facilitate interpretation, the axis can be rotated. Rotation of the axis is equivalent to forming
linear combinations of the factors. A commonly used rotation strategy is the varimax rotation.
Varimax attempts to force the column entries to be either close to zero or one.
Market segmentation usually is based not on one factor but on multiple factors. Initially, each
variable represents its own cluster. The challenge is to find a way to combine variables so that
relatively homogenous clusters can be formed. Such clusters should be internally homogenous
and externally heterogeneous. Cluster analysis is one way to accomplish this goal. Rather than
being a statistical test, it is more of a collection of algorithms for grouping objects, or in the case
of marketing research, grouping people. Cluster analysis is useful in the exploratory phase of
research when there are no a-priori hypotheses.
Cluster analysis steps:
1. Formulate the problem, collecting data and choosing the variables to analyze.
2. Choose a distance measure. The most common is the Euclidean distance. Other
possibilities include the squared Euclidean distance, city-block (Manhattan) distance,
Chebychev distance, power distance, and percent disagreement.
3. Choose a clustering procedure (linkage, nodal, or factor procedures).
4. Determine the number of clusters. They should be well separated and ideally they
should be distinct enough to give them descriptive names such as professionals, buffs,
5. Profile the clusters.
6. Assess the validity of the clustering.
Marketing Research Report
The format of the marketing research report varies with the needs of the organization. The
report often contains the following sections:
Authorization letter for the research
Table of Contents
List of illustrations
Conclusions and recommendations
Appendices containing copies of the questionnaires, etc.
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Marketing research by itself does not arrive at marketing decisions, nor does it guarantee that
the organization will be successful in marketing its products. However, when conducted in a
systematic, analytical, and objective manner, marketing research can reduce the uncertainty in
the decision-making process and increase the probability and magnitude of success.
There are many ways to develop and format a marketing plan. The approach taken here is to
present a 6-Part plan that includes:
1. Purpose and Mission
2. Situational Analysis
3. Marketing Strategy and Objectives
4. Tactical Programs
5. Budgets, Performance Analysis and Implementation
6. Additional Consideration
This plan is aimed at individual products and product lines; however, it can be adapted fairly
easily for use in planning one or more strategic business units (SBU).
Growing your business
o Plan for growth
Once your business is established and you’re making a profit on the products and services you
sell to customers, you may want to start thinking about how to grow. Many businesses think of
growth in terms of increased sales, but it’s also important to focus on how to maintain or
improve your profitability.
Things you can do to help grow your business include:
Looking into ways of increasing your sales, both to existing customers and new customers
Improving your products and services by researching and testing changes with your
Developing new products and services, and selling them to new or existing markets
Taking on staff or training your current staff, including working with apprentices and
Looking for additional sources of funding, such as bringing in new investors
Contact the Business Link Helpline for help and advice on starting or growing your
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o Increase sales to existing customers
How you go about increasing sales depends on your circumstances and how your business is
performing. You might choose to focus on customers who’ve already bought from you, or you
could try to win new customers in your local area, nationally or overseas.
The simplest way to increase your sales is to sell more of the products or services you’re selling
at the moment to the customers who are already buying them. For most businesses this
persuading one-off customers to become repeat customers
finding customers who’ve stopped buying from you and trying to win them back
selling more of the same products or services to your regular customers
By keeping a record of who your customers are and what you sold to them, you can work out
who’s stopped buying from you, and who might consider buying more. Targeting these
customers is often a cheaper and more effective way to increase sales than trying to find new
o Review your prices
Regularly reviewing your prices and checking them against your competitors can be an effective
way of increasing your sales, profits or both.
You should try to estimate the likely effect of different price changes on the sales, cash flow and
profitability of your business before making any changes. To do this successfully, you need to
the ‘cost structure’ of your business (including regular ‘fixed’ costs, and ‘variable’ costs
that change according to your business’ activity)
the value your customers place on your products and services
Watch a video on dealing with cash flow problems, including handling late payments.
It’s worth bearing in mind that offering a discount can sometimes reduce your overall
profitability, even if your sales go up. Equally, you might be able to make more profit overall by
increasing prices, even if you’re selling fewer items.
Small changes to pricing like providing loyalty schemes or bulk discounts can increase sales to
both existing and former customers.
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A car wash offers free cleaning every tenth visit if customers opt for the deluxe service. Even
though they’re giving something away for free, the value of repeat business from loyal
customers means that profits go up.
It’s likely that it would’ve cost significantly more to generate the same amount of sales with new
customers, resulting in less profit.
You should also regularly check the price you’re selling products and services at against
competitors. This will help you find out if you’re:
losing customers who get the same product or service elsewhere for less money
sacrificing profitability, because customers are willing to pay more than you’re charging
o Attract new customers
One way of finding new customers for your products and services is by increasing awareness in
your local area. You can do this by:
asking your customers to recommend you to their friends and colleagues
advertising in local media
using other forms of marketing, including online
You could also talk to potential customers who don’t use your business at the moment and find
out what it would take for them to switch from your competition.
o Expanding outside your local area
If you want to sell your product or service through new sales channels or markets elsewhere in
the UK, there are different organizations you’ll need to work with, including:
retailers, including online retailers
o Improve your products and services
If you’re looking to grow your business by improving your products and services, start by
focusing your existing customers and their needs.
Talk to them, and find out their views on:
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what they’re buying from you, and what they value most about it
what you could do to make it more useful and valuable to them
what would encourage them to buy more
Watch a video on researching your market to understand your customers’ needs.
o Make changes based on feedback
Getting customer feedback should help you to identify ways to improve what you’re offering to
your current customers. It may also allow you to:
increase the price you charge to your existing customers
attract new customers whose needs you weren’t meeting before
Try to ensure that any changes you make will increase your sales and profitability enough make
the time and money you’ll need to invest worthwhile.
If possible, you should test out prototypes of improved products or services with a few existing
customers. By doing this, you can get their feedback and avoid making unpopular changes that
could harm your business.
Doing this is equally important for all businesses, whether you’re starting up or established,
improving an existing product or service, or bringing something new to market.
o Develop new products and services
If you’re planning to develop new products and services, you should test them with your
customers with just as much care and attention as a new business going to market for the first
By making sure there’s real demand for what you’re planning to sell, you can find out about any
problems and fix them before you’ve wasted too much time, effort and money.
1. Talk to existing and potential customers and find out about their needs.
2. If you can, develop a prototype as quickly and cheaply as possible. Work out the minimum
investment that lets you find out if you’re meeting a real need.
3. Test it with customers and get feedback. Find out what they’d be willing to pay for it. Try out
different prices with different customers in a consistent, realistic way to see what people will
really pay. Can you make enough money for a return on the investment you’d need to develop
your new product or service?
4. If there are other businesses competing for your market, think about what will make you
different. Can you provide something better than what’s already available? And is it significantly
different or better to what you’re already offering?
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o Benefits of development
By developing new products and services, you can:
sell more to existing customers (making the most of existing relationships is cheaper than
finding new customers)
spread fixed costs like premises or machinery across a range of products
diversify the products you offer so you’re less reliant on certain customers or markets
Another way of expanding your product range is by importing goods from overseas to sell in the
UK. Make sure you know the rules on things like tax and commodity codes if you’re planning to
o Business ideas and intellectual property
If you’ve invented something or come up with an original idea that you want to turn into a
product or service, you should register it to make sure nobody copies it without your permission.
Find out about trademarks, copyright and intellectual property.
o Hire and train staff
As your business expands, you’ll need more capacity to produce or provide your product or
service, and a wider range of skills. The easiest ways of achieving this are usually by taking on
new staff, or training your existing workforce.
o Employing people
By taking on new people you can spread your workload, expand production and take advantage
of new and different skills and expertise.
This applies whether you already have employees, or you started your business on your own as
a sole trader and are thinking about taking on staff for the first time. Find out about your
responsibilities when employing someone.
Taking on an apprentice allows you to grow your capacity by investing in people who want to
learn. Your business benefits from the skills they develop as they train both on and off the job.
Find out about the practical steps involved in taking on an apprentice.
o Training your staff
You can improve the range and level of skills in your business by training up existing staff.
Giving staff training opportunities can increase their loyalty to your company and their
productivity - as well as your profits.
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Schemes and organizations that can help you to grow your business through training include:
finding training courses specific to your business area through the Sector Skills Councils
using a business improvement framework, like Investors in People
o Working with a mentor
Business mentors can help you develop your ideas for growth by sharing their skills, expertise,
experience and contacts.
o Get extra funding
Growing your business, whether through increased sales or improved profitability, often means
you need to invest more. You can do this by:
investing previous profits back into your business
taking out a loan
selling shares to outside investors
looking for other sources of finance, including government-backed schemes
Professional advisers such as accountants can help you to work out whether it makes financial
sense to take on loans or investment. You should take legal advice before taking on new
investment in your business.
o Taking out a loan
You should make sure that your business will be able to pay back the debt before you take out a
loan. Repayments are often made in instalments over a number of years, and you’ll need to pay
off any interest on outstanding debts.
If you’re a sole trader looking for a loan, a lender might ask you to provide a personal guarantee
or promise to hand over assets like your house or car if you can’t repay the loan.
o Selling shares
If you’re thinking of bringing in new investors, they’ll want to know how much your business
could increase in value if they buy shares. To work this out, they’ll need to know how much their
investment will increase your sales and profitability.
You’ll need to provide potential lenders and investors with a financial model showing:
how your business will spend the extra money to increase sales and profitability
how initial costs and increased ongoing costs will affect your cash flow
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Increases in sales usually only happen after taking on additional costs like employing more staff,
moving to larger premises or putting in bigger orders for raw materials. You’ll need to take all of
these into account in your financial planning.
Role of Marketing Manager
For the small business, there are several different organizational approaches to marketing. The
duty may lie with a single member of the team, or it could be a group responsibility. The great
thing about a small team is the ability to quickly instill a marketing led ethos which can become
the operational soul of your business.
Depending on budget availability and the skills of the team, you may choose to outsource
certain elements of the marketing process (such as market research) or decide to do these jobs
in-house. Key responsibilities of the marketing manager / director vary according to the
business but can include:
Instilling a marketing led ethos throughout the business
Researching and reporting on external opportunities
Understanding current and potential customers
Managing the customer journey (customer relationship management)
Developing the marketing strategy and plan
Management of the marketing mix
Ensuring timely delivery
Making customer focused decisions
The marketing role can be diverse or focused but now we'll elaborate further on some key
aspects which should be at the heart of the job.
Development of marketing strategy and plan.
Management of the marketing mix.
Customer relationship management (CRM)
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Marketing plan - How to write
The plan is a detailed written document which can be used to promote a single product, of form
the annual business strategy.
Stage 1: Research and planning: Understand your customer and the marketing environment,
look for opportunities for growth.
Stage 2: Developing your marketing strategy: Identify objectives and choose the right path to
exploit opportunities highlighted in the research stage.
Stage 3: Determining actions and controls : Implement your strategy and track success.
The marketing plan should provide direction for all relevant members of the organization and
should be referred to and updated throughout the year. The main purpose of the marketing plan
is to provide a structured approach to help marketing managers consider all the relevant
elements of the planning process.
Statement of your current situation and scope of the plan
Research into potential / current customers
Examining the marketing environment
Identifying opportunities for growth
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Current business situation
Summarize your current position, possible items include:
Sale figures and trends
Level of repeat business
The marketing environment
Examining both the internal and external marketing environments can identify both opportunities
and threats to the business and is a core component of the plan. The whole area is usually
broken down into the macro, micro and internal environments as summarized in the diagram
A commonly used method of quantifying the macro external environment is with a PEST
analysis. PEST is an acronym which divides the macro-environment into four areas – Political,
Economic, Social, and Technological, examples of which are explained below:
1. Political environmental factors
2. Economic environmental factors
Rate of inflation
Growth of the housing market
3. Social environmental factors
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Shifts in attitude
Attitudes to career
4. Technological environmental factors
Emergence of new communications channels
Improved production processes
Advances in computing and the internet
New technologies such as electric vehicles
Reduced cost of materials
The micro-environment includes factors which are still not directly under the control of the
company, but more directly relevant to strategy such as consumer trends, stakeholders,
suppliers and competitors. Some example items are listed below.
Summary of your market segment
Market growth, trends and competition
Potential new markets
Direction from shareholders
Supplier costs and service quality
Changes in consumer behavior
Understanding your customers and market
Ensuring a thorough knowledge of the consumer is vital for successful marketing planning. Use
the primary and secondary (first and second hand) market research information at your disposal
to describe your customer. As your understanding of the audience improves, you'll be able to
design products which cater for their needs better, and you will be able to communicate with
them more directly. If you have a broad customer base, you might need to split your customers
into groups (segmentation). Some examples are shown below.
Typical customer demographics
Understanding your competitors
Who are your competitors?
What are they likely to be doing?
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Reputation and brand equity
How are they using the marketing mix?
Infrastructure and supply chain
The internal marketing environment includes factors that the business can directly influence.
This can include:
The organizational structure
The strengths and weaknesses of a department
Financial stability and resources
Spare production capacity
Identifying opportunities in the marketing environment
Once you have completed the internal and external environmental audit, you can summaries
your findings using a SWOT analysis which can be used to make key decisions.
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A 'SWOT analysis' is a useful way of summarizing the results of the environmental audit and
presenting the current status of a business. SWOT simply stands for the Strengths,
Weaknesses, Opportunities and Threats which have emerged from examining the macro, micro
and internal marketing environments.
Our electric motors are cheap to
produce and maintenance free
Charge time is class leading
Production capacity can be increased
R&D department is class leading
Batteries are heavy, slow to charge and
provide limited mileage
Dealer network is small
Customer trust in the segment is low
Market is highly competitive
Government grants are available
Road tax breaks for electric cars
Market is growing rapidly
Battery technology is evolving
Tesla has secured a large government
The big players are investing heavily
Hybrid and diesel technology is evolving
This section includes the following elements:
Development of a mission statement
Statement of objectives
Strategy and tactics to accomplish the objectives
Your mission statement is a formal commitment and focus for the business. It should explain to
customers concisely what the nature of your business is and where you are going, and also
provide a motivational tool for employees. It should be aspirational, something to strive for, yet
obtainable and relevant. Once this has been defined it should form the focus for your business
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A vision statement is a more long term, ideal-world statement which outlines where you would
like to take the business in the long run.
Combined with the mission statement, your objectives should be the key statements that drive
your business. The most successful goals follow the SMART acronym. Specific, measurable,
achievable, realistic and time bound.
What do you want to achieve by the end of this year?
Where do you want to be in one, five, ten years?
Objectives must be quantitative in order to measure success accurately. For example, 'sell 600
units in the next year' or 'increase customer retention by 20%'.
Selecting a suitable strategy
Developing a strategy for growth - the Ansoff Matrix
Most businesses need to grow, and the Ansoff Matrix (below) is a method of determining the
best course of action if growth is your priority.
The Ansoff matrix
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Increasing market share in a current market with a current product.
Aggressive pricing policy (see 'cost leadership' in Porter's model)
Increasing marketing spend
Taking existing products into new markets
Finding a new use for an existing product
Expanding the distribution network
Strategic partnerships in international markets
Developing a new product for a market that you have already entered.
Creating a range of similar products, for example, shaving foam if you are already
Developing a new product for a completely new market.
Product research and development
Developing a pricing strategy
Once you have determined the product and market you want to be in, the next problem will be
setting a price. Porter's model discusses three strategies for competitive advantage based on
Three generic strategies for competitive advantage - Porter's model
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Cost leadership: A good quality product at a lower price than the competitors.
Differential strategy: A product or service which is perceived as unique within a particular
Focus strategy: Delivering focused attention to a particular segment to deliver service
which competitors cannot compete.
Determining which products to invest in
If you have a range of products, it is likely that some will do better than others. The Boston
Consultancy Group matrix is a method of determining which to invest in, and which to drop,
The Boston Consultancy Group matrix
High growth products with a strong market presence. Probably need high investment to
Low growth products with a high market share. Probably don't need much investment, but
require management to maintain profitability.
Products which have potential, but may require investment to yield decent profits.
There are rarely worth investing in. Dogs should at least break even to be retained.
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Tactics - the marketing mix
The marketing mix is a selection of customer focused business elements which work together
as a toolkit to market your product or service. The tactical section of a marketing plan
summarizes how you intend to use each element of the marketing mix, which can be
summarized in seven 'Ps' as shown in the illustration below.
The marketing mix (7 P model)
Product refers to the items you are selling or service you are providing. Your product based
tactics link back to your overall strategy - if your strategy is market penetration (see the Ansoff
matrix), then there may be little need to do anything to the product. However, if you have
chosen product development or diversification then a certain amount of research and
development, and product design will be needed.
Should the product be premium, or good value? Disposable or last a lifetime? Fast or slow?
How will it be packaged? Where will it be made? Is it environmentally sound?
Pricing is one of the most important factors when deciding your marketing tactics, which
could involve the following:
Skimming – low market penetration, high pricing strategy for premium products
Comparable pricing – if you are not the market leader, competitors will have set a price
expectation which can be followed
Market penetration strategy – deliberately low pricing in order to enter or control a
Place refers to the method of getting your product to the consumer - this could be a dealership
or an online shop.
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How will you attract more retailers to sell your product? How will you maintain a premium
appearance? How will your distribution network function? How many countries should you
Promotion is much more than just advertising - this is the discipline of marketing
What is your branding strategy? Which promotional channels will you use? How will you divide
up the budget? Will billboards work better than TV ads? What should be the discount for special
offers? How will you generate positive PR? Should you out-source the creative work?
People refer to the entire customer facing staff in your organization, not just the sales staff.
What training do they require? Do they know the products well? How much commission should
they get? Should you out-source? Do they need a uniform? What incentives can you give?
Process refers to the procedures which are followed when delivering a service to a customer.
For example, for a hotel - how are customers greeted? Who takes the baggage to the room?
When are the rooms cleaned? What time is breakfast?
This element of the marketing mix should also include your customer relationship management
(CRM) process, or in other words, how you manage customers through the purchasing funnel.
This element of the marketing mix is mostly used to promote services. If you're not selling
anything tangible, how will people know what they're getting?
This is where physical evidence becomes important. Examples of physical evidence include a
brochure for a holiday tour, customer testimonials for a dentist, or a portfolio for a website
Segmentation, targeting & positioning
When using the marketing mix, it is important to keep in mind the three generic stages of
marketing - segmentation, targeting and positioning. Segmentation is the detailed breakdown of
your customers into as much detail as practical, targeting then ensures all elements of the mix
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are tailored to your identified consumer group. Positioning is the process of ensuring potential
and current customers perceive your company in the intended way.
How will you monitor progress? Who will do which jobs? When will each element be completed?
How will you adjust the plan? What will be the budget? This section discusses action plans,
controls, measurements and reporting.
Developing an action plan
An action plan is core to the marketing process – a constantly evolving document which is
cascaded to the relevant people and monitored regularly. Most action plans are relatively short
term documents which focus on the coming year, but longer term implications should also be
Action planning is a stages approach:
Clarify goals, and ensure they are SMART
Link back to your objectives and tactics
Set criteria for success
Determine who will complete each action point
Monitor the progress of the plan and review regularly
An example action plan is shown below
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Measurements, controls and reporting
The final stage of the action plan is the implementation of measurements and controls and
reporting results. Many models for monitoring the performance of businesses have emerged,
many of which address the needs of key stakeholders and allow them to evaluate the overall
success of a company.
Traditionally, businesses have tracked success based on just one measure – financial results.
However, the scorecard system views the business from four external perspectives to gain a
more relevant approach to performance metrics.
Learning & growth – how you are innovating and improving to meet your goals
Business process – how critical processes are measuring up
Customer perspective – usually measured in terms of time, quality, performance and
Financial perspective – financial performance from the stakeholder point of view
Each element is tracked using four items, which are listed individually:
Objectives - as identified in stage 2 of the marketing planning process
Measures - how will success be measured?
Targets - specific quantifiable targets
Initiatives - how to make the targets more readily achievable
Key performance indicators (KPIs)
Depending on your industry, you may also have certain specific metrics which determine
success, these could include:
Market share analysis
Marketing information systems
CRM - New customers acquired, retention
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Gap analysis is another useful tool which answers two questions: Where are you? Where do
you want to be? It can be useful to identify where you are with the following facets of the
Business direction and marketing mix
Requirements vs capability
Market potential vs existing usage
Your business vs competition
Now that you have an accurate picture your plan's success it is important to feedback this
information in order to fine tunes the strategy and updates your actions accordingly.
The marketing planning process is a comprehensive method for examining your business, your
market and the environment in order to develop a strategy to exploit opportunities. This is a vital
process which should be used by almost every company to ensure a profitable and sustainable