It is widely recognised in today's business environment that information is a commodity more valuable than time or even money. Businesses that fully understand the benefits of intelligence gathering will be the ones that thrive as they create and sustain a vital competitive edge.

Information comes from the data a business generates, collects through its normal transactions or has access to from external sources. But data becomes information, and ultimately knowledge, but only when it is properly interpreted and understood.

Businesses that conduct market research improve their competitive position through more informed decision-making. Strategies may be fine-tuned, ensuring the deployment of appropriate tactics to achieve objectives. For example, Toyota became one of the world's most successful motor manufacturers by concentrating its research solely on its customers on the basis that, firstly, they are more likely to buy a new Toyota; and second, they are uniquely placed to know the good and the bad features of the cars they are driving.

Any business that has not considered research or has no plans for an information process strategy risks finding future trading conditions difficult. Marketing research in its widest sense informs planning and decision-making at every level of an organisation. It's the key to discovering why people buy things and provides the ability to probe deeply into people's beliefs, awareness, intentions, needs, attitudes, ideas, aspirations, motivations and self-image.

A better understanding of customers facilitates:

  • product and concept testing
  • marketplace evaluations like trends and competitor activity
  • recognition of customers' usage of and preference for different distribution channels
  • quantification, profiling and segmentation of target prospects and existing customers
  • competitor analysis and identifying customer usage of competitors
  • development and maintenance of loyalty programmes.

    Information you acquire from the marketing research process contributes to your marketing in four vital ways by:

  • identifying and locating potential customers to grow your base
  • learning more about your existing customers to have a better understanding of their needs
  • identifying market opportunities for current and new products and services
  • developing the right products to meet the needs of your current and potential customers.

    There are two main methods of gathering business information – secondary and primary research – and two fundamentally different types of business information – qualitative and quantitative research. Secondary research should always be instigated before primary research. We use secondary research to glean information from a company's own records and published sources. Primary research – usually interviews, surveys, focus groups, questionnaires and on-going panels – is designed to answer specific questions and tackle particular problems or opportunities.

    Which methodology to employ must be given serious consideration. The effect of the research medium on the possible outcome needs to be taken into account alongside likely response rates and the costs involved. Options include:

  • Postal surveys. Allow respondents the opportunity to provide carefully considered replies.
  • Telephone interviews. Facilitate one-to-one interaction without the cost or time overheads of face-to-face meetings.
  • Face-to-face interviews. Allow an interviewer to really concentrate on finding out what an individual thinks, read body language and assess hidden agendas.
  • Group discussions. These provide interaction between participants, which can produce more structured and considered results as the comments of individual members stimulate the entire group.

    Qualitative research answers "why" and "how" questions and uses methods such as group discussions and in-depth interviews and investigates attitudes, beliefs and motivations. Quantitative research answers the "how many" questions, and is more likely to use postal surveys, panels, and telephone and face-to-face interviews.

    Perhaps the most common mistake businesses make with market research is simply not bothering to do any at all. For those convinced of its value, here are some of the most common pitfalls:

  • have a clearly defined research goal – without it, questions will be badly phrased or, worse still, irrelevant
  • use a proper sample size – do not take short cuts to save money. Sample sizes need to be truly representative of your customers or prospects as a whole to be statistically significant
  • make research continuous – without any follow-up activity, it is impossible to track changes over a period of time
  • interpretation of data is critical – try to ensure the analysis is not positioned to derive the results that you want, rather than what the results really are. Aim always to be as objective as possible.

    Above all, remember, all marketing decisions (if not all decisions) should be based upon experience, instinct and facts. With the insurance sector making increasing use of customer relationship management programmes and loyalty schemes, understanding of customer and prospect behaviour is at a premium. That's why research plays such a vital role in today's marketing mix.

  • Steve Manton is managing director of M Consulting.

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