Importance of study of the market

Market research policies which may be projected for any considerable period cannot be sound and successful if formulated on guesses or hunches. Marketing campaigns will inevitably be wasteful unless they are based definitely on precise methods of analysis of market data. The market is the objective of production and it must be defined, classified, evaluated, interpreted and measured before goods are manufactured. Product research is conducted in the light of the market. Competition, likewise, must be studied in connection with the possibilities of the general market.

Definition of the market

The term "market" often is defined as a collection of individual consumers who are able, willing, and ready to buy a given product. In this sense, the individual manufacturer, or distributor uses the word "market" possessively and with either a present or future significance. Such a definition, of course, is quite different from the more impersonal and economic meaning of "a place or area where the rights to goods are bought and sold, and toward which and from which the actual goods tend to travel." In our discussion we shall adhere to the business meaning.

Manifestly, the producer's or manufacturer's market is usually divided into two parts :

1. Immediate customers—the wholesalers and retailers to whom he sells.
2. The ultimate market—the individual consumers for whom his products are produced or manufactured.

Because the ultimate market is the essential guide to business activity, and the immediate market unquestionably depends upon the ultimate market, the ultimate market will be chiefly considered.

The two types of market data

The market, in the sense of collective consumers, must not be considered exclusively as an abstract, inanimate, and impersonal consuming force. Although the "market" may connote economic tendencies, the distribution of population, and other factors, it concerns mainly the highly personal and animate individual consumer and his buying motives and habits.

The study of the "market" may be statistical, but the stimulation of the individual consumer's willingness to buy is fundamental to sales. And the approach to the individual consumer is largely psychological. Thus, any survey of market facts quite definitely involves two kinds of data, (a) quantitative and (b) qualitative. Each type has a definite significance and when classified and interpreted correctly will suggest essential marketing policies and effective and economical methods for market campaigns.

Principal market factors

The most important "market" factors that should be surveyed are:

• The territorial extent of the market
• The character of the market
• The potentialities of the market
• The limitations on the market
• The status of competition
• Qualitative market factors such as age, sex, race, religion, occupation, class, operating knowledge, amusements and recreations, prejudices, buying habits, buying motives and buying capacity.
  While these factors apply chiefly to the problems of the manufacturer, many of them are equally applicable to the wholesaler, and some, at least, are of value to the retailer.

Extent of the market

It is important first to classify the market on the basis of its territorial extent. Markets may be local. They may be limited to the community in which the producer or dealer is located. Such a market is reached quickly and at low cost. Sometimes the market is local because of a factor such as transportation which definitely marks out a natural area. Markets may also be state-wide, sectional, national, or international.

Whatever the extent may be, one question must be considered fully and careful market analysis will disclose its answer: Is the market to be covered a natural market? Political boundary lines in most cases do not define a market. When the manufacturer of sewing machines, or typewriters, or automobiles, considers this question, because of the nature of these products, he can probably answer with the statement that his is a national or world market.

When the manufacturer of cement considers his market, he must also ask: Where does the matter of freight rates begin to operate in favour of my competitors? The answer to this question sets up the limit of his market. If the manufacturer has some monopoly control over the supply of his product as the result of a patent or copyright, or controls the source of supply, his market comprises every one who is likely 'to consume his product.

If the product is one that can be produced just as advantageously in several regions, or in foreign countries, there are then definite territorial limitations to the market of the individual manufacturer. The extent of these limitations depends on the degree of efficiency the manufacturer can attain relative to competitors producing in other regions.

Character of the market

The character of the market is also an important factor in deciding upon the extent of the market and what to do to reach it. In a country like the United States there are three types of markets from the standpoint of location, each with its special needs and wants. These types are the urban, suburban and rural markets. An urban market because of social pressure, may be a good field for the sale of dinner clothes and evening dresses.

A rural market because of special need will offer outlets for heavy and strong shoes and work clothes. The suburban market will evidence a demand for lawn seed, flower seed, automobiles and porch furniture. For a convenience article like cigarettes the market area will include all three location types. If there is need for special effort in any one of these markets, that fact should certainly be discovered and carefully considered. However, the boundary lines between metropolitan or urban, suburban and rural markets are becoming less hard and fast. The motor truck, the automobile and good roads have done much to break down distinctions formerly existing.

The potentialities of the market

In attempting to measure the possibilities of a market for a product it is essential to know the total annual volume of consumption of the product, the per capita consumption, and the particular company's actual share of the total business. The ratio of actual users to logical or potential users can then be determined and means adopted to convert as many as possible of the logical users into actual users. The replacement factor enters into this calculation.

Some products because of their obsolescence are discarded before their usefulness is actually at an end. New ones are purchased because of a change in colour or style, or the introduction of an improvement, which makes the old product completely out of vogue. Radios, automobiles, and furniture are typical products in which an estimate of the replacement market is necessary to discover the true market potentialities. On the other hand, a product like an electric range may have practically no possibility of a repeat or replacement sale. In the latter case, the market potentialities lie almost entirely in turning logical users into actual users. The problem is one of inducing the consumer to recognize the need for the article and to stimulate a desire to purchase it.

The tendency of the market for a product to increase or decrease must be considered from the standpoint of its bearing upon market potentialities. When a product that fills a fundamental need, like the automobile, comes on the market, there is a reasonable assurance that the tendency will be toward an" increasing use. But what is going to be the effect on other products? Wagon and carriage industries were not aware until forty years ago that the tendency in their markets was a decreasing one.

Silk and furs for women's attire came very rapidly to the fore because of improved methods of manufacture and the increased general prosperity of the population. As a result, the cotton and woollen industries had to face a strong competition from these sources. Market research and analysis must give continuous attention to such possibilities.

Market limitations

Market potentialities must also be considered in the light of particular factors which exert a limiting influence upon the market for a given product. Some of these factors. are:

• Purchasing power
• Price
• Fashion
• Cost of product operation
• Seasonal and climatic conditions
• The second-hand market.

Purchasing power and price

Purchasing power is an important limiting factor in the percapita consumption of a particular product. Studies of income ranges and typical family budgets will be helpful in any analysis of present and potential per capita consumption. If the price of the product is high these factors assume general market significance because the relationship of the high price to the amount which is available in the typical budget in a specific income range will certainly limit the market.

The economist states that the price of a product must be fixed at that point which appeals to the marginal buyer. The price may be so high that only a few can buy. Every lowering of the price will reach a new buying strata and create added market opportunities. On the other hand, if the product is intended for the "classes" and not the "masses" a high price is an effective way of limiting market potentialities.

Fashion

The influence of fashion is another factor which may seriously limit market potentialities. At one time quality was the prime factor considered in making a purchase. To-day, quality is taken for granted, but style is not. Unless a product possesses the style that has been accepted as fashion, its market will be limited to the few who do not care about the vogue. Moreover, the tempo of fashion change is far more rapid to-day than in the past. In most cases a refusal to keep in step with fashion changes will mean a serious market limitation, even though the product concerned possesses valuable quality and performance characteristics and is sold at a low price.

The fourth factor, cost of product operation, is a limiting market factor that is not always given the consideration that it deserves. When automobiles first came into the market the cost of operation was exceedingly high. Chauffeurs were almost a necessity. The cost of repairs and of gasoline and lubricating oils was considerable. Sales were limited largely to the wealthy until the Ford Motor Company set up its mass-production program.

The advent of the low-cost, highly standardized car making possible owner driving and cheap repairs coupled with the decreased cost of gasoline and oil, has developed the use of the automobile in America to an extent that has astounded the rest of the world. All along, American automobile manufacturers were able to widen their markets because the costs of running cars were gradually decreased and middle-class families and lower-income groups came rapidly into the purchasing market.

Climatic and seasonal factors

Climatic and seasonal influences are also obvious factors limiting market potentialities. Climate, in particular, determines the extent of almost every market. Woollen caps are not a fast-moving commodity in Brazil. Heavy rubber galoshes are not greatly in demand in Florida. Coal stoves for heating purposes are not necessities in southern California. Seasonal factors are likewise essentially limiting factors. Moreover, they complicate the whole task of manufacturing and marketing.

Compare, for example, the opportunities and the marketing problems facing the manufacturers, respectively, of lead pencils and men's straw hats. There is no seasonal demand for lead pencils, except' perhaps, a slight increase at the opening of the school year. Goods can be moved in a relatively steady stream from the factory through the channels of trade to the points of final consumption.

The manufacturer of men's straw hats, however, has but one season and a very short one. He must estimate seasonal demand twelve months or more in advance and then attempt to schedule production throughout the year. He must arrange to have his wholesale and retail customers ( his immediate market) accept a considerable part of his goods long before the consumer wants them, so that he can get money with which to carry on his operations and so that the goods will surely be on hand in his ultimate market when the season opens.

He must hazard guesses on the popularity of new styles and risk large losses on them because he has little or no opportunity to try out these styles even in a tentative way. Moreover, he can sell the stock which he has manufactured to meet maximum requirements only if the season brings the normal amount of hot weather.

The second-hand market

In a number of cases, the second-hand market operates to limit the market for first-quality goods. For several years, the used-car automobile market has been an important limiting factor in the sale of new cars. It is a factor which is likely to increase in seriousness. Whether it will offset the potentialities of promotion and of changes in design that increase the rate of obsolescence is an important question.

The second-hand market limitation has a direct bearing on price and profits. Generally, the used product will have to be taken in exchange in every replacement purchase and a price allowance made for the old product. The situation is not without its favourable aspects, however. A wide second-hand market may serve as an educating medium. Users may come into the replacement market for new products solely because of experience with used products of similar types.

Status of competition

Obviously, no survey of market possibilities will be complete without an inquiry into the factor of competition. To ignore competition is to distort the facts regarding the true quantitative market potentialities of a product. A number of questions are important. How many competitors are in the market? How many are in each section of the market?

What indirect competition comes from products of a different but related kind? Coffee substitutes compete with coffee. Hot water heaters compete with steam heaters, mechanical refrigerators with ice refrigerators, vacuum cleaners with carpet sweepers. 'What is the relative marketing strength of each competitor?

How much business is each competitor getting? Suppose, for example, a manufacturer discovers that fourteen competitors have preceded him into a territory that naturally should be his. One gets 75 per cent of the business, one gets 10 per cent, and the other twelve divide the remaining minute portion.

If the new manufacturer needs 10 per cent of the business in order to keep his plant running, he may decide that it will be cheaper and easier to go after the business of the trailers rather than to try to make a dent in the trade of the overshadowing leader. It is normally less difficult to enter a market in which there are a few dominant figures and many less important ones than one in which a large number are striving evenly for business. If the leading manufacturer gets only 15 per cent of the total business and if he is closely followed by many others, the new manufacturer who plans for a large output must rank from the outset well up among the leaders if he is to keep his plant busy.

This is not an easy task to undertake and the manufacturer attempting it must be well backed by capital and selling strategy. 'Whatever may be the situation, the market research department should set up some quantitative percentage evaluation of the company's position in the market as compared with competing companies. It should discover and analyse also the reasons back of the effective competition on the part of other manufacturers. These reasons should be pinned down to the definite factors of price, quality, performance, service, transportation, recognition, executive management, patents, and other important items.

Choosing a market objective

Every manufacturer, of course, does not attempt to cultivate his entire market. Although in some cases the neglect of a portion of the market is the result of ignorance of its true extent, more often the restriction of activities to only a few of the possible outlets is the result of a conscious marketing policy.

Relatively few manufacturers are actually in a position to attempt national marketing. Many who are carrying on extensive programs are spreading themselves too thinly over the whole territory. They could probably reduce their marketing costs and secure greater returns by concentrating their efforts in more restricted areas. In the case of a new product, prudence usually dictates a modest start in a single community, and the gradual extension of coverage as rapidly as marketing campaigns can be brought to bear effectively on wider areas.

The quantitative factors which have been mentioned are important in defining possible markets, but an examination of the qualitative factors is necessary to decide upon the particular markets which can be served most profitably. Moreover, these qualitative factors will be the most important indicators of the specific sales methods that should be employed. One of the most interesting phases of market analysis is concerned with the attempt to discover the qualitative factors which affect the purchase of a given product by an individual consumer. Marketing is very largely a matter of people and not of stereotyped sales talks, conventional advertising copy and widespread circulation coverage. It is a matter not only of ability to buy but also of readiness and willingness to buy.

Principal qualitative market factors

The principal qualitative buying factors which affect the purchases of an individual consumer are :

• Age
• Sex
• Race
• Religion
• Occupation
• Social standing or class
• Knowledge of operating methods
• Amusements and hobbies
• Prejudices
• Buying habits
• Buying motives.

An individual, in making purchases, is inevitably influenced by these factors which represent the effects of heredity, environment and education. Moreover, taken collectively, individual consumers react alike to any given stimulus.

Age

The influence of age as a qualitative factor in marketing is apparent. Products that are necessary and desirable for a child in most cases are not necessary or desirable for grown-ups. Maturity and old age have their special purchasing demands. Moreover, the consumers' freedom of choice varies somewhat with the different age periods. Children up to ten or twelve years of age generally have their decisions made for them by older people.

After that they may decide largely for themselves and may begin to influence the decisions of the older members of the family. As old age creeps on, most people who are in a family circle are influenced even in their own purchases by the decisions and choices of the mature but younger members of the family. However, generalizations are hazardous and each product situation must be examined for itself.

Sex

In the case of sex as a qualitative marketing factor there is first, of course, the difference in the fundamental requirements of men and women. Then there is the relative influence that each have on purchases. It has been estimated that the women in the United States make between 80 and 90 per cent of all the ultimate-consumer purchases. One investigator claims to have discovered that the only thing men purchase without the aid of women is collars. There is probably considerable exaggeration in this statement. In any household it will be found usually that the men are consulted on most purchases involving an outlay of money greater than the day-to-day requirements and that men exercise more purchasing influence than is usually recognized. Nevertheless, this point needs careful investigation.

Racial factors

Although the United States has been called the melting-pot of nationalities, the fusing fire burns slowly. There are still almost 1,000 foreign language publications printed regularly in the United States. It is estimated that the population of New York City is about 70 per cent foreign born or of foreign parentage. Other cities are also compositely populated although the quantitative figures vary. Moreover, many cities are peopled quite largely by some particular race. Any approach to a specific market must take into account this racial factor. The racial peculiarities of our foreign-born population persist often for several generations. These peculiarities are particularly important in influencing the marketing of foodstuffs. Some have stamped themselves upon our national life. For example, noodles, spaghetti, macaroni, sauerkraut, and goulash are foreign dishes that have become standard additions to the nation's diet.

Religion

Religion is diminishing in importance as a qualitative purchasing factor. Unleavened bread, prepared fish, rosaries, homiletic commentaries, Sunday-School supplies, candles, church insignia, communion sets, and similar products find primary markets among people of specific religious faiths. However, they form only a fraction of the total volume of purchases, and the gradual disappearance of strict religious distinctions is lessening the influence of religious differences in marketing.

Occupation

The occupation of the consumer is of considerable importance in any analysis of buying factors. A shoe that is to be sold through general stores and that is made for daily wear by the farmer will differ from the shoe made for the clerk in a city office and sold to him through a chain store. In one occupation, overalls may be in demand, in another, smocks, and in still another, leather aprons. Moreover, the painter may demand overalls of cotton cloth in the grey, the locomotive engineer hickory stripes and the subway labourer brown duck. Special products and special materials and colours are in demand for particular industrial occupations. A little investigation will soon discover these occupational preferences.

Class or social position

For the manufacturer and distributor of books, pictures and works of art, the factor of social standing or class may be important. In any consideration of this factor it should be remembered that culture has very much more to do with a determination of the class to which purchasers belong than does wealth. Frequently, errors are made in giving too much importance to this particular qualitative factor. Many manufacturers and distributors are sacrificing profitable sales opportunities by complacently accepting narrow class markets instead of making actual studies of the problem of possible consumption in wider fields.

Knowledge of operating methods

The knowledge of operating methods which ultimate consumers need in order to use a given product effectively may also be a matter for consideration and evaluation. If an electric ironing machine or some similar device is being marketed to housewives, this operating factor must be investigated and means must be arrived at for reducing any limiting influence it may have in the marketing of the product.

Hobbies and recreations

Hobbies, recreations, and leisure interests may also affect the problem of marketing. Whenever it is discovered that these factors affect the decision to purchase, plans should be formulated to capitalize on the situation. Sales talks and advertising copy which can be directed along such lines sell from the consumer's point of view.

Because of the growing influence of golf the two-trouser suit for men, one long, one knicker, has now extended to conservative models beyond the mere sport style. Under the influence of widespread recreational activities, many kinds of sports clothes, such as outing shirts, shorts, slacks, sport jackets, and combinations of these units, have been put on the market in answer to demands.

Market prejudices

Market prejudices should also be given consideration. Many of these prejudices are results of custom and grow out of inherited traditions, and some are the result of unsatisfactory experiences of one type or another. Because of a persistent market prejudice, oleomargarines have only recently come into general use. In the early days, these products were regarded as greasy cooking compounds and did not receive widespread consumer acceptance for table use.

In the days when fruits and vegetables were put up in large quantities in the home there was a prejudice against manufacturers' canned goods because of mistaken ideas on quality, cleanliness and dangers of metallic poisoning. Machine-made garments made slow progress at first against hand-sewed clothing because of the belief, unfounded in fact, that machine work was inferior because it cost less to perform.

Buying habits

Habit—man's constant and almost universal urge to repeat the same act—is one of the most vital of the qualitative market considerations. Purchases may be impulsive, reasoned or habitual, but in the majority of cases they are the latter. Deeply-rooted buying habits are difficult to modify or change. What is customary and usual must be discovered in any market survey. As Percival White has pointed out :

For years, New England considered white rubber goods superior in quality to red, while the rest of the country considered red rubber superior to white. Instances of sectional buying habits are many. Green asparagus in Boston, white in Chicago ; rubber-stemmed pipes in New England, celluloid in the South, dark cheese in the South, light cheese in the North ; cream of tartar in Maine, baking powder in the rest of the country. These are only a few cases.

But buying habits do not concern only the type of product that is customarily purchased. They involve also the amount or unit of product bought, when the purchase will be made, and where it will be made. They form the basis of an attitude of acceptance, and insistence.

When fully developed and established in relation to a particular product they result in consumer insistence which in its negative aspect means consumer hostility toward directly and indirectly competing products. It is frequently said that if an article contributes to the personal appearance, comfort or health of the person for whom it is purchased, his attachment for it is much stronger than for some other possession of more utility. It is difficult to switch a man from a make and shape of collar that satisfies him. It is much easier to win him over to a new brand of writing ink. Unquestionably, every detail of buying habits that affect the product line or its uses is important to market research.

Buying motives

A step beyond buying habits is the factor of buying motives, the "whys" of human behaviour. When it is desired to induce people to break away from habitual purchases in order to buy impulsively or through reasoning, the use of appeals to buying motives is fundamental. Unfortunately, very little thoroughly scientific work has been done on the subject of buying motives so that it is hardly possible to set up a standardized list of motives.

The existence of several different schools of thought on the subject of psychology, each school at odds with the others, is retarding progress in discovering and standardizing fundamental buying motives. On the other hand these various groups are stimulating progress by specializing and experimenting in different phases of the problem of influencing human behaviour. One set of consumers' buying motives has been set up by Copeland after a study of a large number of advertisements. He lists these motives in two groups as follows in his book on "Principles of Merchandising" :

Rational

1. Handiness
2. Efficiency in operation or use
3. Dependability in use
4. Dependability in quality
5. Reliability in auxiliary service
6. Durability
7. Enhancement of earnings
8. Enhancing productivity of property
9. Economy in use
10. Economy in purchase.

Emotional

1. Distinctiveness
2. Emulation
3. Economical emulation
4. Pride of personal appearance
5. Pride in appearance of property
6. Social achievement
7. Proficiency
8. Expression of artistic taste
9. Happy selection of gifts
10. Ambition
11. Romantic instinct
12. Maintaining and preserving health
13. Cleanliness
14. Proper care of children
15. Satisfaction of the appetite
16. Pleasing the sense of taste
17. Securing personal comfort
18. Alleviation of laborious tasks
19. Security from danger
20. Pleasure of recreation
21. Entertainment
22. Obtaining opportunity for greater leisure
23. Securing home comfort

This list is extensive but not all-inclusive. It is suggestive, and should be used in that sense. Carefully-conducted surveys applied to particular products should determine the important buying motives for purchases under established conditions and should be used to discover the proper shade of phrasing to express an appeal that has proved to be effective.

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