The Role of Market Research in the Decision-Making Process of an Organization - Essay Example

? Evaluate the role of market research in the decision making process of an organization Introduction Market research can be regarded as the function linking the marketer to the customer through information. The information collected during market research plays an essential role in evaluation of marketing options, monitoring performance in the market and defines opportunities and problems in the market. The three functional roles played by marketing research include predictive, diagnostic, and descriptive functions (McDaniel & Gates 1998, p. 5). Examples of market research strategies that organizations use include surveys, questionnaires, observation of consumer behavior, personal interviews, quantitative, as well as qualitative market research. Mostly, the firm undertakes a study of a small sector of the population and the data collected represents the entire population. For example, married women who work in Bristol and are between the ages of 30-45 can be used to represent all urban women who work in the United Kingdom. The Role of Market Research in the decision making process of an organization In order to reach and appeal to the target market, organizations utilize strategies that enhance the success of their activities in the market. For example, Arbitron conducted market research that indicates people who frequently attend movies say that commercials on television cannot be termed more acceptable than commercials aired before the start of the movie. 53% of people who frequent cinema halls find movie advertising more acceptable; only 46% contend that television advertising can be termed as acceptable. The research also indicated that 59% of people who attend movies remember the commercials they watched on the screens before the start of the movies (Wiley 2012, p. 4). The study also indicated that advertising using cinema can be regarded as the best way of connecting with the younger generation. Movie theaters’ adverts reach 124 million people or 45 percent of Americans from the age of 12 years. 67% percent of adults between the ages of 18 and 24 years frequent movie theaters in every 30 days. The collection of such data during market research plays an essential role in informing the decision making process of an organization (Wiley 2012, p. 4). In the decision making process of an organization, market research plays a number of roles. First, market research contributes significantly to the marketing system, especially in the marketing intelligence feedback process. It provides management with data regarding the effectiveness of the marketing mix that the organization relies on in the market. Based on this, an organization will be in a position to identify the necessary changes that ought to be made in the marketing mix. In addition, market research plays a crucial role when the organization wants to explore new opportunities available in the market. This is accomplished through new product research, which enables an organization to make decisions on how to structure the product to meet the demands of the customers. For example, an organization makes decisions on branding and packaging of the products (McDaniel & Gates 1998, p. 5). Another role of market research in decision making emanates from the crucial role that it plays in helping the management understand the needs of the customers. In the modern world, market research provides many organizations with the necessary knowledge on the customers' needs. As a result, the organization will be in a position to make decisions that will enhance the retention of customers and customer loyalty. Consequently, this will lead to job satisfaction and employee retention as employees becomes effective while serving loyal customers (McDaniel & Gates 1998, p. 7). Statistics in a study conducted by Bain and Company indicates that a reduction in the rate of customer defection can boost the profits by 25 percent up to 95 percent. Apart from assisting the organization to understand the needs of the customers, market research plays an essential role in decision making process as it reduces uncertainty. By conducting market research, the organization reduces reliance on assumptions; rather, the organization relies on facts while making decisions. As a result, the organization will make decisions based on in-depth assessment of the product and the prevailing market conditions. Small, medium and large enterprises find it easier to make decisions by relying on market research because there are available facts, which can be used to support the decisions that the organization makes. For example, well organized information from the market provides the necessary guidelines upon which decisions can be made (Birn 2004, p. 7). The other role of market research is that it can be regarded as essential in making decisions regarding communication between the organization and its potential customers, as well as the current customers. Market research entails strategies such as face-to-face oral interviews, observation, and focus groups. Through market research, an organization collects data on market size, sales, trends in the market, and the shares of the competitors (Hague 2004, p. 3). Additionally, the organization is able to track the satisfaction of customers with the products offered. For example, reports on consumer lifestyles assist business organizations in the United Kingdom to gain insights about unique behaviors, spending patterns and attitudes of their customers. As a result, the organization will use the information collected to make decisions on improvements of service provision to the customers. The next role of market research in the decision making process of an organization is that it helps in making decisions regarding competition. The organization gets to know the activities of the competitors in the market by conducting market research. This way, the organization what the competitor is doing better than them. As a result, the organization will make strategic decisions on how to withstand the competition in the market (Wenzel 2012, p. 98). Most organizations aim at outwitting their competitors in the market. This can be done through providing high quality goods and services that will enable the organization achieve high profits. For example, business organizations use market research as an essential tool to come up with decisions that will guarantee high profits and avoid losses (Wenzel 2012, p. 98). The other role of market research is that it enhances the collection of information on the number of competitors present in the industry that an organization operates, and the spread of the competition, the prices charged by competitors, as well as the strengths of the organization. Such information will be crucial as it enhances an organization to make decisions on how to improve strategies so that they can be better than those of the competitors (Wenzel 2012, p. 99). For example, industry reports are crucial for understanding of market size, drafting business plans, forecasting, benchmarking, and for valuation of business. The other role played by market research in decision making process is that it provides tactical decision support to the management. Through conducting market research, the management can share responsibility for decisions. This applies while dealing with new products with high risks, especially the fast-moving consumer goods. The organization develops strategies that enhance closer relationships between them and their customers. Consequently, the organization can make decisions that will enable it meet the demands of the customers. Market research enables organizations to make decisions on acquisition and mergers. For example, the United Kingdom witnessed growth acquisition during the 1980s as a result of market research (Stone 2007, p. 119-120). Another role played by market research is that it enhances the management of markets by organizations. Based on the response the organization gets from the market, an organization can determine what additions should be made on the products. For example, Direct TV, the television service that deals with direct broadcast, uses market research to evaluate the programs that it should add to its channel (Zikmund & Babin 2006, p. 13). Market research is an essential decision making tool as it helps an organization to evaluate its success. Information collected during market research enables the organization to know whether it has reached its goals. An organization can utilize the information gathered to make decisions on the improvements that should be made in some of the organization’s processes. In addition, such information can help the organization to formulate the best strategies that can overcome and reduce barriers to the success of the organization. Decisions such as pricing strategies rely heavily on the information that the organization collects during market research (Zikmund & Babin 2006, p. 19). Conducting market research can be regarded as essential in minimizing the risks that can be encountered while doing business. For example, data collected through marketing may tell the company that the market is already saturated with the product or service they want to introduce in the market. This may be useful as it may help the organization to alter the product they want to introduce to the market; it can also help the management make decisions on another location to introduce the product. Therefore, market research assists an organization to come up with information that may be useful in minimizing the market risks (Hague 2007, p. 8). Another crucial role played by market research in decision making encompasses the relevance of the information collected in providing information relating to both internal and external factors, which have an impact on the organization’s performance. The organization makes sound decisions relating to the internal operations; this helps in the overall progress of the organization. Through market research, the organization can also carry out decision making process such as planning, control, and budgeting with a lot of ease. Market research helps in coordinating the activities of the managers in the organization, thus promoting harmony and efficiency in the decision making process (Hague 2004, p. 7). Market research is also essential in the decision making process as it helps the organization to estimate the market size, which the organization can serve. Knowing the market size is also essential in decision making since it can be relied upon by investors. With knowledge about the market size, the organization can decide on where to market its products and avoid venturing in places where its products do not have a market. An organization also allocates resources to the marketing of products in areas where there is a large market than other areas. Through market research, an organization can make decisions of venturing in new markets where it has not ventured although there may be a market for its products (Zikmund & Babin 2006, p. 18). Another crucial role of market research in decision making is that it allows an organization to measure and monitor performance of the market. An organization gets to know whether the resources invested have achieved the goals they ought to have achieved. As such, the firm accesses the return on investment, and whether the operations carried out by the organization have any benefit. Through market research, an organization strives to make decisions that aim at correcting what has gone wrong in the market. Based on the information collected during market research, an organization can make decisions that will reduce the occurrence of such decisions in the future (Zikmund & Babin 2006, p. 19). Disadvantages of Market Research in Decision Making Process Apart from the benefits derived from using market research in the decision making process, there are disadvantages of using market research. First, data collected during market research may lack validity. There may be problems that can hinder systematic collection of data. This may affect the reliability of the data collected during market research. Therefore, the data collected during market research cannot be fully trusted and relied on to inform decisions that an organization makes (Nykiel 2007, p. 41). Another disadvantage of relying on such information in decision making emanates from the fact that it needs too much time to conduct comprehensive market research. For example, collecting adequate data on the prevailing market conditions requires the organization to dedicate a lot of time. Therefore, time constrains may affect the quality of information collected during market research. Conclusion In conclusion, market research plays an essential role in the decision making process of an organization. The role of market research and the disadvantages accrued from suing it in decision making outweighs the disadvantages. Through market research, the organization collects crucial information regarding the preferences and tastes of the customers. The management can also make decisions on the strategies that can be used to reduce risks in the organization. Another role of market research is that it enables an organization to know when to introduce a new product in the market and the best market segments to target. However, there are disadvantages of using market research in decision making, which may result from the unreliability and lack of validity in the information collected. References List Birn, R. (2004). The Effective Use of Market Research: How to Drive and Focus Better Business Decisions, London, Kogan Page Publishers. pp. 1-15. Hague, P. (2004). Market Research in Practice, London, Kogan Page Publishers. pp. 2-10. McDaniel, C. D. & Gates, R. H. (1998). Marketing Research Essentials, London, Taylor & Francis. pp. 5-7. Nykiel, R. (2007). Handbook of Marketing Research Methodologies for Hospitality and Tourism, London, Rouledge. p. 41. Stone, M. (2007). Fundamentals of Markets: A Critical Evaluation, London, Taylor & Francis. pp. 119-121. Wenzel, A. M. (2012). The Entrepreneur's Guide to Market Research, London, ABC-CLIO. pp. 98-100. Wiley (2012). The Role of Marketing Research in Management Decision Making, London, John Wiley & Sons. pp. 3-6. Zikmund, G. W. & Babin, B. J. (2006). Exploring Marketing Research, London, Cengage Learning. pp. 18-20. Read More