Know Your Customers

Published by MBA Skool Team, Published on September 13, 2012

Sitting in a marketing class, the importance of market research will be hammered into you. Sales is the first step to marketing, they say (read settle for those profiles for summer placements). So what comes to mind when I think market research- Surveying, sample space, dipstick study, questionnaires, marketing metrics and the usual. But we did come across one remarkable concept in Kotler, our bible!! And that is, (cue for drum roll) latent demand- a strong need that isn’t fulfilled by any existing product.

The marketplace is abundant with examples where inventors made millions out of a very simple idea that was bang-on with what consumers needed. Take the example of the coffee sleeve. Every day almost every American takes coffee at the nearest Starbucks on his way to work. And we all like our morning coffee hot. Interestingly, it took an unfortunate accident for one Jay Sorenson to invent a coffee sleeve- a cylindrical sleeve made of textured paperboard that fits tightly around the handle-less paper cups and protects the drinker’s hands from getting burnt.

What’s more, the coffee houses saved millions as they needn’t double-cup and they generated revenues from the advertisements that could be carried on these sleeves. The brilliant businessman got his invention patented in 1993 and what started out as $15,000 Company is now reaping revenues to the tune of $12-15 million (2003).

If you’re a Tom Cruise fan like me, you would recall his rocky ride to success in his critically acclaimed move, cocktail. What I picked up from the movie was his very interesting take on the cocktail umbrella- an essentially frivolous embellishment that is more or less a hygiene factor for every bar now. So if you are a budding booze entrepreneur, if that’s a term, you might want to loosen your purse strings for these cocktail umbrellas. Though the origin of the idea is a little mysterious, these fancy add-ons were first seen on mainland North America at Trader Vic's, San Francisco's notorious island-themed speakeasy. Soon they became such a rage that every bar worth going to had to have them. Frivolous? I think not!!

Moving onto the holiday season when countless Halloween, Christmas and New Year themed thingamajigs, each more futile than the previous take up the shelves. The craziest ideas become a fad, think the pet rock, the ‘Furby’, the crazy straws, the plastic wishbones and many more. I think if people would line outside stores to buy something as inanimate as a rock with googly eyes glued to it, then they’ll buy just about anything. At least ‘Furby’ was touted as the first toy with “artificial intelligence” who would learn the ‘human’ ways in time. People went crazy trying to get their hands on this adorable furball and as any amateur economist would predict, prices skyrocketed.

The point I am trying to make is the rationale behind market research. The industry is abuzz with the term but how effectively is it done? You got the bigshot syndicate research firms claiming they know all there is to know about the market. But when instances of variations between two biggies in the Indian playfield- IMRB and AC Nielsen (reference- HUL declining market share controversy in 2009**) emerge, one wonders. So on one hand common people manage to get it just right and make ridiculous amount of moolah and on the other hand marketers spend serious money on market research for nothing. So it all boils down to this, is market research all a ballgame of common sense?

** Reference:

FMCG giant Hindustan Unilever is not too happy with the data collected by market research firm AC Nielsen. The data suggests that in the hair and personal care space, competition may be catching up with Hindustan Unilever. The data shows that HUL has lost market share across categories soaps, skin cleansing, detergents and toothpaste between March 2008 and March 2009. HUL's market share in soaps fell from 53.4% to 47.5%. In detergents, it fell from 38.9% to 36.8%. In skin care, it has lost from 52.2% to 47.2%, and in shampoos from 46.3% to 44.7%. But HUL says this data is not consistent with an IMRB's independent household survey.

D Sundaram, Vice Chairman and CFO, Hindustan Unilever, said, “There are divergent trends in some categories. The trends indicated by AC Nielson and the trends indicated by IMRB, household panel, there have been variations. We will of course take it up with AC Nielson.”

This article has been authored by Bhavna Sharma from IIM Indore.


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