Understanding the needs of the customer is a fundamental
activity that coincides with the development of the business. As customers and
their patronage are the lifeblood of an organizations existence it is extremely
important for organizations understand their needs and wants. One way to do
this is to determine the market trends and attempt to find products and
solutions that will appeal to customers. To do this well would require a level
of market research and market forecasting.
The American Marketing Association defines market
research as, “the systematic gathering,
recording, and analyzing of data with respect to a particular market, where
market refers to a specific customer group in a specific geographic area”
(2011). Market research collects
specific information to study market characteristics while a marketing analysis
puts the information into a framework that is understood for prediction
purposes.
Some assessment tools, such as Ansoff’s Matrix Analysis,
provides for a systematic analysis of four general classes product/market
growth strategies which include 1.) market penetration; 2) market development;
3) product development; 4) and diversification (Finch, 2012). Even though the
analysis is beneficial one must go into greater detail and research to
understand these concepts to make them useful.
Market Penetration:
Increasing current sales to existing markets.
Market Development:
Increasing sales by selling existing products in new markets.
Product
Development: Selling additional products to current
customers.
Diversification
Growth: Selling new products in new markets to
create diversification.
Each strategy has its own particular benefits and
detractors. For example, if a market is currently saturated it may not be
beneficial to create additional market penetration. Likewise, sometimes it can
be beneficial to diversify products and markets when traditional products and
services are on the decline. To know when each strategy is likely to be
successful requires the ability to forecast the market properly. Inaccurate or misaligned strategies can cost
companies their competitive abilities and possibly their future sustainability.
When one has useful information and has analyzed trends
it is possible to forecast the market. In general, forecasting the environment
should be completed in the context of competitive market demand of both
internal and external factors within the market (Pilinkiene,
2009). This means that one should understand the trends, available products,
and even the company’s internal abilities to determine whether or not its
offerings are competitive.
The constantly
changing market requires a new way of thinking about forecasting. As most
forecasting models use mathematical models they often ignore the qualitative
aspects of the market and therefore become stale (Pilinkienu, 2008). It is necessary to understand that older
models may be limiting in terms of their accuracy. Relying too heavily on one
strategy, means that one is not getting the full market picture.
When organizations
do not take into account the full spectrum of relevant information the market
has to offer or take in multiple methods of evaluating that market there is a
high potential of poor judgment. Executives cannot make proper decisions unless
proper information and analysis is conducted. Ensuring that analysis are
thorough take into account varying circumstances and offer contingency plans
can be helpful in the decision making process.
Companies should seek to reevaluate their
marketing strategies at least once every five years with yearly adjustments.
Adjustment periods depend on the type of industry one is in. For example,
traditional services have a longer projection time than fast paced technology
bubbles. In fast paced markets it may be necessary to develop a marketing plan
for each product or service and continue to adjust it as needed or new
information arises.
American Marketing
Association. (2011). Retrieved from http://www.marketingpower
.com/_layouts/Dictionary.aspx
Finch, J. (2012). Managerial
marketing. San Diego, CA: Bridgepoint Education, Inc.
Pilinkiene, V.
(2009). Forecasting environment and its factors when assessing the competitive
market demand. Economics & Management, p. 878-883.
Pilinkienu, V.
(2008). Market demand forecasting models and their elements in the context of
competitive market. Engineering Economics, 60 (2).
