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).