This chapter contains theoretical and empirical studies. Literature review reveals the gaps and the existing knowledge regarding product research, market trend analysis, customer survey and competitor analysis. This reveals all the needs for market research to enhance the performance of SME's.
2.1 Market Research
The importance of market research has often be overlooked and underestimated by various businesses. Some of the main reasons include lack of business acumen, the belief that market research is a very expensive exercise that requires too much time, that it is hard and that it can only be conducted if one is starting up a big business entity or corporation (Eng, 2009). The big corporations do not obviously share out how they conduct their market research; they cannot just expand so large and big by sheer luck. There must have been an input of market research.
If a firm does not undertake market research, it places the business in a situation where the majority of its success shall be dependent on sheer luck rather than market strategy (Sen, 2010). If market research is not embraced the following dangers are envisaged: Potential investors will not invest in the venture where the entrepreneur has failed to provide adequate research coupled with facts about their business industry; the cost of acquiring a new client of the company will be high; the failure to deliver according to the taste and preference of the customers; there will be the risk of lack of knowledge as to the market needs and wants in the products or service.
When conducting market research an organization wants to find out among other factors the profitability of the organization's products or services and where the organization will have to place its business enterprise, the demographic history of the targeted market and the prices of similar or substitute products; the age brackets and culture of the potential and targeted consumers and also customers expectations in the business industry (Minlan, 2009). It is therefore wise that before investing in business and spending money on a new venture, the business should consider conducting market research first. This shall be an opportunity the business has to discover feasibility of business and also how marketable the products or services shall be and the size, age, wants, cultures and preference of the targeted market and the correct positioning of the business. The resources that will be important to competitively ensure a fair play in the market and also the likely obstacle that shall be encountered when the business is launched (Sen, 2010).
2.2 Rogers' Diffusion Theory
This process of adopting new innovations has been studied for a period of over 30 years. The most popular adoption model is described by Rogers (1995). Most researches from broad variety of disciplines have used this model as a framework. These disciplines include political science, public health, communications, history, economics, technology and education and defined Rogers' theory as a widely used theoretical framework.
Rogers defines diffusion as “the process in which an innovation is communicated thorough certain channels over time among the members of a social system”. As expressed in this definition, innovation, communication channels, time and social system are the four key components of the diffusion theory.
Rogers(1995) offered the following description of an innovation: “An innovation is an idea, practice, or project that is perceived as new by an individual or other unit of adoption” An innovation may have been invented a long time ago, but if individuals perceive it as new, then it may still be an innovation for them (Mankin, 2007). The most recent characteristic of adoption is related to three steps; knowledge, persuasion and decision of the innovation-decision process (Mohannak, 2007).This would go well with the objective of product research in this study. Uncertainty is an obstacle to the adoption of innovations. An innovation's consequences may create uncertainty: (Gohary, 2007) “Consequences are the changes that occur in an individual or a social system as a result of the adoption or rejection of an innovation”. For the purpose of reducing the uncertainty to adopt the innovation, individuals should be informed about the advantages and disadvantages to ensure they are aware of its all consequences (McAdam, & Keogh, 2007). Moreover, Rogers claimed that consequences can be classified as desirable versus undesirable (functional or dysfunctional) or direct versus indirect
2.2.2 Communication Channels
The second element of the diffusion of innovations process is communication channels. For Rogers communication is “a process in which participants create and share information with one another in order to reach a mutual understanding”. This communication occurs through channels between sources (Pansiri & Temtime, 2008). Rogers states that “a source is an individual or an institution that originates a message. A channel is the means by which a message gets from the source to the receiver” Rogers states that diffusion is a specific kind of communication and includes these communication elements: an innovation, two individuals or other units of adoption, and a communication channel. It is worth noting that diffusion on the other hand is a very social process that involves interpersonal communication relationships. (Murphy &Ledwith, 2007). Thus the interpersonal channels are more important and powerful to create or even change strong attitudes that are held by an individual. This study would benefit from this by considering the customer survey and understand the customers
According to Rogers the time aspect is ignored in most research and hence argues that inclusion of time dimension in diffusion research illustrates one of its strengths. The diffusion process, adopter categorization, and rate of adoptions all include a time dimension (Pinho, 2008). This aspect of Rogers' theory shall be beneficial in considering the market trend analysis which uses time to arrive at a conclusion.
2.2.4 Social System
The social system is the last element in the diffusion process. Rogers defined the social system as “a set of interrelated units engaged in joint problem solving to accomplish a common goal”. Diffusion takes place in the social systems, due to this it is influenced by the social structures of the social systems (Parmenter, 2007). For Rogers structure is “the patterned arrangements of the units in a system this would be embraced in the objective of the Competitor analysis. The Rogers Diffusion theory would be used to clearly elaborate on the objectives of the study as illustrated above
2.3 Empirical review
In this section the researcher shall consider the existing knowledge and information by other researchers relevant and in support of the study that the researcher is undertaking. It shows the gap that the researcher intends to fill up.
2.3.1 Product Survey and Performance of SMEs
The research and development (R&D) a function of any companies are mostly related to the invention of new products. While this may be very important, the development of existing products is equally significant because consumer preferences are continuously changing. The task of product research and development will be to come up with the products in terms of goods and services that meet and satisfy the needs of tomorrow\'s clients (Hinson et al, 2011). In all professionally run companies, research and development will always have strictly commercial functions so that they can further the company\'s business objectives by improving on the products' quality, this will improve operational processes and provide expert advice to the rest of the company and to customers (Lamberti &Noci, 2010). Research will not be expected to pay back for itself within a foreseeable time span. Large companies may allocate as much as one-tenth of their resources on the budget to research (Barnabas, et.al, 2010). Product researchers use marketing information to help them to develop products or services and choose suitable designs. Design is explained simply as the art of making things that are of the expected quality and or packaging them or presenting the products in an attractive way. The supermarkets or a bookshops layouts are designed in a way that customers shall quickly find and identify what they want. In this case the right use and allocation of space is vital to ensure profitability (Jiménez-Zarco et al., 2011).
A company might be reluctant to change an earlier design, particularly if it provides status (e.g. a designer label on a tracksuit). Conversely, small or slight changes may be made to products to bring them up-to-date e.g. if we take the logos of leading companies to give them a more modern and current feel (Jiménez-Zarco et al., 2011). Once a design has been completed the product researchers will build a prototype which could then be tested. Some prototypes will be discarded while others will be modified and improved.
Suliyanto and Rahab (2012), opine the research conducted recently have concluded that most internet shoppers are increasingly depending on product research before they decide what to buy. Majority of customers cannot make any purchase of product and services before first consulting product research. Many respondents it was found engaged more directly with the providers through their social media outlets.
2.3.2 Market Trend Analysis and Performance of the SMEs
Market trend analysis this is the function linking the customers and the public to the marketers through the information used to identify and define marketing opportunities and problems. This involves the process of generating, refining and evaluating the marketing actions, also monitoring marketing performance thus improving the understanding of marketing as a process (Hinson et al, 2011). Market survey specifies information required in addressing issues, design the methods for collecting information, management and implementation of data collection process, analyzing the results and communicating the findings and their implications. Market survey is the systematic gathering, recording and analysis of data about issues relating to marketing products and services (Kumar, et al., 2013). The goal of market survey will be to identify and assess how changing elements of the marketing mix will affect customer behavior. The term is commonly interchanged with market research; however, expert practitioners explain the distinction that market research is concerned specifically with markets, while market survey shall be concerned with the marketing processes. Market survey is often partitioned into two sets of categorical pairs, either by target market which includes consumer market survey and Business-to-business (B2B) market survey or, alternatively, by methodological approach which includes Qualitative market survey and Quantitative market survey, (Hanna, 2010).
Market survey provides the management with relevant and accurate, reliable and up-to-date information. Sound decisions are not based on intuition or even pure judgment. Marketing managers must be ready to make numerous strategic and tactical decisions in the process of identifying and satisfying client needs. They have potential opportunities, target market selection, market segmentation, planning and implementing marketing programs, marketing performance and control (Lashgara, F.S & Najafadi, M. 2011). Another factor in this mix is the complexity of consumers. Market survey is very crucial in that it allows the marketing manager to link the marketing variables with the environment and the consumers. Marketing survey helps remove some of the uncertainty by providing relevant information about the marketing variables, environment, and consumers (Kumar, et al., 2013).
Traditionally, market surveys are responsible for providing relevant information and marketing decisions made by the managers. However, due to the fact that the roles are changing and also market surveyors becoming more involved in decision making, whereas marketing managers are becoming more involved with research (Suliyanto & Rahab, 2012). The role of market survey in managerial decision making is explained further using the framework of the \"DECIDE\" model (Rausch, 2007). The DECIDE model describes decision making in managerial as a series of six steps. Decision processes always begin precisely by defining the problem or opportunity, along the objectives and constraints. Then, possible decision factors making up alternative course or courses of action (controllable factors) and uncertainties (uncontrollable factors) are well enumerated (Amaratunga and Baldry, 2009). Then, relevant information on the alternatives and possible outcomes is collected. The following steps are identified and select the best alternatives based on chosen criterion or measures of success (Young, 2009). A detailed plan for developing and implementing the alternatives selected is developed and implemented. Lastly, outcome of the decision including the decision process is evaluated.
Market survey is systematic and thus systematic planning is required at all the stages of the market survey process. The procedures are methodologically sound, documented and planned in advance. Market survey uses the scientific method in that data is collected and analyzed to test prior notions or hypotheses (Jovanov & Conevska, 2011). Market survey as an objective process attempts to provide reliable information that reflects the true state of affairs, should be impartially conducted. Research is influenced by the philosophy of researcher\'s research, but should not be biased towards personal or political biases of the researcher or the management (Wanjohi & Mugure, 2008). Research motivated by either personal or political benefits is a breach of professional standards. Such research may result into predetermined findings. The motto of every researcher should be, \"Find it and tell it like it is.\"
Mostly institutions are engaged in market survey mainly for two reasons, including identifying and solving marketing problems (Young, 2009). This distinction forms the base in classifying market survey to problem identifying research and problem solving research. Problem identification research is undertaken to help identify problems which are, perhaps, not apparent on the surface and yet exist or are likely to a company or business image, market characteristics, sales analysis, short-range forecasting, long range forecasting and business trends research (Hinson, 2011). Standardized research services are research studies conducted for different client firms but in a standard way (Kraus et al., 2008). For instance, procedures for measuring advertising effectiveness have been standardized so that the results can be compared across studies and evaluative norms can be established. The Starch Readership Survey is the most widely used service for evaluating print advertisements (Hanna, 2010). Another well-known service is the Gallup and Robinson Magazine Impact Studies. These services are also sold on a syndicated basis. Market survey can be classified in the forms of either problem-identification or as problem-solving research (Kumar, et al., 2013).
There are two main sources of data - primary and secondary. Primary research is conducted from scratch. It is original and collected to solve the problem in hand. Secondary research has been collected for other purposes thus it already exists. It is conducted on data published previously and usually by someone else (Kumar, et al., 2013). Although secondary research is far much cheaper than primary research, but the form that meet the need of the researcher matters.
Methodologically, market survey uses the following types of research designs, Qualitative market survey; generally used for exploratory purposes - small number of respondents – cannot be generalized to the whole population - statistical significance and confidence not calculated - examples include focus groups, in-depth interviews, and projective techniques (Gohary, 2007). Techniques include choice modeling, maximum difference preference scaling, and covariance analysis (Craig F., and Babette B, 2007) Ethnographic studies - by nature qualitative, the researcher observes social phenomena in their natural setting - observations can occur in cross-sectional, observations made at one time or longitudinally, observations occur over several time-periods - examples include product-use analysis and computer cookie traces.
Researchers often use more than one research design. it advisable to start with secondary research since it easier to get background information, later conduct a focus group, qualitative research design, in exploring the issues (Kumar, et al., 2013). A full nation-wide survey finally could be performed, to devise specific recommendations for the client.
Business to business (B2B) research is unavoidable although complicated than consumer research. The researchers should know the multi-faceted approach that shall answer the objectives, since possibly he/she can get the answer by using one method. Finding the right respondents is crucial in B2B research since they are often busy, and may not want to participate (Dhurup & Mahomane, 2007). Encouraging them to “open up” is yet another skill required of the B2B researcher.
Lastly business research lead to strategic decision hence the researcher needs to have expertise in development of strategies that are strongly rooted in the research finding and acceptable to the client. There exist four key factors that make Business to Business market research special and different to consumer markets (Dhurup & Mahomane, 2007). Market survey occurs in all organisation not only the huge corporations which have many employees and a large budget. Marketing information can be derived by observing the environment of their location and the competitor's location (Rudolf, 2007). Most secondary date, statistics, demographics among others, is available to the public in libraries or on the internet and can be easily accessed by a small business owner. Customers internationally have different customs, cultures, and expectations from the same company. In this case, Market survey relies more on primary data rather than secondary information. Gathering the primary data can be hindered by language, literacy and access to technology.
2.3.3 Customer survey and Performance of the SMEs
Customer surveys are a common mechanism for gathering the voice of the customer. Customer surveys are usually face to face with the individual customer or either with smaller numbers of people from same business or family unit. They give an opportunity to get more inclusive information from a particular customer (Lustern, 2009).
First step in the process you identify the customers to be interviewed. Based on market segment characteristics/dimensions, work with marketing and sales to identify potential customers by considering current customers, competitor's customers, and potential customers. Use different company contacts, channels and mechanisms for pursuing customer visits and interviews. There are two types of customer survey: planned and ad-hoc. Planned interviews are scheduled ahead of time and typically longer in duration for example, one-half to two hours. Ad-hoc interviews are requested on the spot for instance in a shopping mall or store and are shorter in duration for instance five to fifteen minutes.
It is important to prepare for the interview in advance the interviewee should be prepared some time before interview date to be able to give accurate information (Paul, 2007). Often it is necessary to schedule planned interviews at least one to three weeks in advance, so one should plan adequate lead-time. One should develop a script or list of questions to guide the interview and ensure that the necessary information is obtained. When conducting the interviews one person should ask the questions and another one should take notes. Consider audio or video recording the interview, but obtain permission first. During the interview, only cover the script discussion areas in the interview; also encourage open-ended discussion (Gohary, 2007). It is important to have a follow-up interview for reviewing the needs that were determined, the priorities and obtain a further competitive evaluation. After the interview, the interview notes are recorded and a summary is and distilled into sets of distinct customers' needs.
Customer interview is involving interactive discussions which take place in the where the customer use your products or solutions. This may be explained in different names as: contextual inquiry, work study, ethnographic research, they all have the same core characteristic to understand the customer and their context of use (Kraus & Fink, 2009). Customer's profiles are used come up with the marketing plan, that helps determine the features set which will be used to the targeted profile. In some cases, we validate and correct existing customer profiles during customer survey. In others, usually for new products, we use the customer survey to actually create the customer profiles.
From the results of the interviews, the interviewer develops a set of user profiles (Gohary, 2007). He combines these results with feedbacks from in-house sales, marketing, development, and management teams. He holds both a pre-interview and post-interview meeting with stakeholder together with the internal staff for integrating the feedbacks and take advantage of the existing markets and or use the research that might have been done.
Many organizations have implemented feedback loops that allow them to capture feedback at the point of experience (Gohary, 2007). Through Technology companies can get feedback easily . The challenge of working with customer service is to ensure that you focus its attention on the correct key areas which are measured by the right key performance indicator (Murphy, A. and A. Ledwith, 2007). There is no challenge to come up with a lot of meaningful KPIs, but the challenge is to select a few which reflects its overall strategy. Additionally to reflect its strategies it also enables employees to limit the focus to the areas that actually matters (Mohannak, K, 2007). The focus should be on KPIs that delivers most value to the overall objective, such as. cost saving, service improving etc. It must also be done in a way an employee believes they make some difference with their effort.
The feel good factor is one of the important aspects of a customer survey. The basic objective here is not only to help the customer have a good experience, but more so ensure they get an experience that is beyond their expectations (George, 2009). There are many key points like the following: Know the organization's products – ensure you know what products or the service you shall be offering. This means that you should be an information expert. At times it may be accepted to say \"I don\'t know,\" but this should as a matter of importance always be followed by \"but let me find out\" or else \"but my friend knows\" Whatever the case might be, ensure that all your customers questions are answered; body, language or communication – It is important to note that most of the communication that we do to others it is through body language. If it is negative it shows how we don't care. It should be noted that smiling and eye contact are two important positive body languages. Ensure you have eye contacts with your customers. It is an indication that one is listening to them, not at them. Remember smiling is more inviting than people who just have blank looks on their faces.
The customer will be more excited by an employee who goes beyond for an extra mile to serve them than they expect (Lovelock & Wirtz, 2011). This helps them to know and feel that you care and it leaves them with the \"Feel Good Factor\" that people always search for. Generally a large number of business owners would like to improve on the market trend analysis and also would like to continue with more business with their current customers. For this to happen they need to know who their customers are, what they want and if they are satisfied or not with the current products and services being availed to them
Majority of new business owners and directors of limited companies are very much scared of feedback. The reason being quite simple that people don't in general go out of their way to compliment, but rather they are happy in complaining, grumbling or even negative thinking when it comes to their mind that have been wronged. Whether positive or negative the truth is that both sorts of feedback are useful in one way or another (Malhotra, 2007). Negative feedback may at times be more useful than positive one. But due to the nature of human beings the negative comments might outweigh the positive ones, but this might necessarily not be a bad thing, or be interpreted as a sign that your business is doing a terrible job. It should be taken as a challenge to create room for improvement.
In the case of a good business, it will embrace the complaints, put them on board and adapt them in its operation. This will go hand in hand with pleasing the few people who are unhappy and this will help improve on the overall quality of customer care within the business (Scheepers, 2008). You also need to be wise not to introduce drastic changes not to again displease the customers who were happy. This explains why continuously seeking customer survey is a good plan. People posses the character of remembering the bad things about the business and tend to forget the good, this is unfortunate. The expansion of the internet dictates that you trend carefully while dealing with customer , If not that one might find that the business is a subject of negative comments in the World Wide Web where one cannot have any control (Aaker & McLoughlin, 2010). With actively seeking customer survey it shows that one cares.
People will always in general have a higher positive opinion to any business entity that shows that it cares about its customers than the one that by the look of things seems to only be interested in getting their money (Sarkees, 2011). You may gather feedback by having a list of questions although this might end up being too specific and one need to be careful in writing closed questions. The customers should be given a chance to say what and how they perceive you in their own words, with of course little suggestion they end up opening up and provide some business gems.
2.3.4 Competitor Analysis and Performance of the SMEs
Competitor analysis is the assessment of strength and weakness in business of either the current or future potential competitor (Sen, 2010). This analysis provides offensive and defensive strategically placed context to identify opportunities and threats. Competitor profiling will combine the relevant source of competitor's analysis to one framework in order to support the effective and also efficient strategies in formulation, implementation, monitoring and adjustment.
This Competitor analysis is important component of corporate strategy. Unfortunately most firms do not carry out this analysis systematically enough. On the contrary they operate on what is called “informal impressions, conjectures, and also intuitions gained through the tidbits of information about competitors every manager continually receives.” As a result of lack of competitor analysis, many businesses are placed by traditional environmental scanning at risk of dangerous competitive blind spots (Aaker & McLoughlin, 2010).
The strategic rationale of competitor profiling is simple. With the prior knowledge of the competitors, it offers an advantageous source of competitive advantage (Sen, 2010). Here the raw materials of competitive advantage will ensure that the goods produced are of superior quality, hence giving the customer value in the enterprises market. The Customer value will be defined relative to rival offerings that make competitor knowledge a very important component of corporate strategy. For one to exploit the opportunity it could be wise to employ the offensive strategy. On the other hand defensive strategy could be used to counter the threat of rival enterprise from taking advantage of your weaknesses (Aaker & McLoughlin, 2010). The businesses that have embraced competitor profiling have a big advantage and as a result the comprehensive profiling capability has allover sudden become a core competence required for any successful competition.
The common technique is to create detailed profiles on the major competitors. The created profiles enable competitor to access in-depth description of the competitor\'s information be it background, finances, products, markets or personnel (Uzoka, 2007). The strategies includes such as Scanning competitor\'s advertisements which tells more about competitor's believes on marketing and also show their target market. When competitor changes advertising message it can be a sign that there is new product offerings and may be new production processes, branding strategies, positioning strategies. This could also show that there is a new pricing strategy such as penetration, price discrimination, price skimming, product bundling, discounts (Lovelock & Wirtz, 2011). This could also be a sign of new distribution strategy, new distribution partners, more extensive distribution, more intensive distribution, a change in geographical focus, or exclusive distribution. It is worth noting that very little of this information is definitive and as such a lot of additional information is required before any logical conclusions can be drawn.
It is more so revealed that a competitor\'s media strategy reveals budget allocation, the segmentation and also the target strategy (Aaker & McLoughlin, 2010). This can be used by a rival enterprise manager to come up and implement his own media plan. You could also get the corporate intelligence from, trade shows, patent filings, mutual customers, annual reports, and trade associations. There are enterprises that go a notch higher and hire competitor intelligence professionals to ensure they obtain this information for them. When analyzing current competitors it is recommended to also estimate the future competitors threats.
2.4 Critical Issues
The market points out that customer support is a range of market research to assist customers to make cost effective and appropriately using a product (Vuuren Van & Groenewald, 2007). This could include the assistance in the planning, the installation, the training, also trouble shooting, the maintenance and upgrading, and lastly the disposal of the product. With Regard to the technology products or the mechanical goods, it shall be termed as technical support. However he failed to show the existence of the relationship between product survey, market trend analysis, customer survey and competitor analysis and how they affect Performance of the Enterprises.
The failure of doing market research will place businesses in a space where the majority of their success will be dependent on luck rather than market strategy (Berghoff et al., 2012). One of the main dangers of not doing market research is that potential investors will not invest in the venture if the entrepreneur is unable to provide adequate research and facts about their industry. However he failed to show the existence of the relationship between product research, market trend analysis, customer survey and competitor analysis and how they affect performance of business enterprises. Thus the poor performance in SME's could be associated with lack of adequate information and hence need to undertake the study.
2.5 Conceptual Framework
This is a hypothesized model identifying the concepts or variables under study and their relationships. The conceptual framework identifies what is to be measured (Josephine, 2009). The performance of the business depends with the product research to e come up with the needs and wants of the market. It will depend on the market trend analysis as this shows the upward and downwards movement of markets. Customer survey which will help understand the customer either through the available information or through one on one interview. Lastly, the competitor analysis, this basically involves understanding your competitors, so that you can know what market strategies they have and you adjust yours to remain in market.
Fig: 2.5 Conceptual Frameworks
The study is conceptualized as presented in fig.2.5.
Independent Intervening Dependent
Variable Variable Variable
The performance of the enterprises makes up the dependent variable which will be reflected in the increased customer satisfaction, quality products and turnovers resulting to increased profits. The product research, market trend analysis, customer survey and competitor analysis compose the independent variables. The conceptual framework plays a big role in the study as it is used as the guide in the analyzes of the variables that include the intervening variables that also have influence in the performance of the enterprises. They includes the enterprise size which controls the capability to deal with different types of goods, the Capital that is invested dictating the type of business to run since some require huge amount capital and the location also determines the type of business to start since different locations people have diverse tastes and preferences. Hence this framework helped conceptualize the whole study with its objectives to achieve the Market research.
2.6 Summary and Research Gaps
The market research as earlier explained deals with the markets and as such, it was deliberated upon in this study under the variables identified. The product research helped identify the taste and preferences and get the information to utilize it to better the performance of businesses. Market trend analysis specified the information required to address the issues, designs the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications (Johnson & Onwuegbuzie, 2008). Customer survey opened up an opportunity to get the in-depth information from a single customer. Competitor analysis provided an offensive and also defensive strategically placed context of identifying the opportunities and threats.
The factors that affect enterprise performance includes education, experience, parent's occupation, gender, race, age, and entrepreneurial goals. While other factors that affect the performance can be categorised into five perspectives, that is, motivations and goals, social learning theory, network affiliation , human capital level of education, skills and environmental influences (Josephine, 2009) suggested that factors influencing business performance could be attributed to personal factors such as demographic variable and business factors such as amount of financing, use of technology, age of business, operating location, business structure and number of full-time employees as important factors in examining the performance as small and medium businesses.
We can conclude that the most comprehensive summary of factors influencing performance includes individual characteristics, parental influence, business motivation and goals, business strategies, goals and motives, networking and entrepreneurial orientation
However, it is very important and worth to note that in number there are limited studies which attempted to show the existence of the relationship between product survey, market trend analysis, customer survey and competitor analysis and how they affect Performance of the enterprises. This gap of lack of adequate information on performance of SME's in the theory and also in practice forms the basis of this study.
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