Market research is critical to guide your business decisions by giving you actionable insight into your market, your customers, your products, your competitors and your strategies.
There are many factors that can influence the effectiveness of good market research. Here are 10 factors that you should be aware of when planning your market research:
Anchoring is a form of cognitive priming effect that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making subsequent judgements about value. The process usually occurs without our awareness.
For example, the price of the first car shown to us by salesman may serve as an anchor and influence perceptions of cars subsequently presented to us (as relatively cheap or expensive).
Confirmation bias occurs when people tend to search for, interpret, favor, and recall information in a way that confirms their pre-existing perceptions, beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities. Marketers are particularly vulnerable to this. For example, a marketer who likes a particular strategic approach may be motivated to seek out customer research that supports that approach.
Choices can be worded in a way that highlights the positive or negative aspects of the same decision, leading to changes in their relative attractiveness. Different types of framing approaches exist, including risky choice framing (e.g. the risk of losing 10 out of 100 patients vs. the opportunity to save 90 out of 100 cancer patients), attribute framing (e.g. beef that is described as 95% lean vs. 5% fat), and goal framing (e.g. motivating people by offering a $5 reward vs. imposing a $5 penalty).
The term ‘gambler’s fallacy’ refers to the mistaken belief held by some people that that, if something happens more frequently than normal during some period, it will happen less frequently in the future. For example, a roulette or lottery player may choose not to bet on a number that came up in the previous round. Even though people are usually aware that successive draws of numbers are unrelated, their gut feeling may tell them otherwise.
This bias, also referred to as the ‘knew-it-all-along effect’, is a frequently encountered judgment bias that is partly rooted in availability and representativeness heuristics. It happens when being given new information changes our recollection from an original thought to something different. For example, after viewing the outcome of a potentially unforeseeable event, a person believes he or she “knew it all along”. Such examples are present in the writings of historians describing outcomes of battles and physicians recalling clinical trials.
Loss aversion refers to people’s tendency to prefer avoiding losses to acquiring equivalent gains. It suggests that that one who loses $100 will lose more satisfaction than another person will gain satisfaction from gaining $100. The pain of losing is suggested psychologically to be about twice as powerful as the pleasure of gaining, and since people are more willing to take risks to avoid a loss, loss aversion can explain differences in risk-seeking versus aversion. The basic principle of loss aversion is sometimes applied in behavior change strategies, and it can explain why penalty-based approaches are sometimes more effective than reward-based approaches in motivating people.
People tend to overestimate the probability of positive events and underestimate the probability of negative events. For example, people believing that they are less at risk of being a crime victim, smokers believing that they are less likely to contract lung cancer or disease than other smokers and first-time bungee jumpers believing that they are less at risk of an injury than other jumpers.
Pain of paying
Consumers do not generally like to spend money. We all experience pain of paying, because we are loss averse. This pain is thought to be reduced in credit card purchases, because plastic is less tangible than cash, the depletion of resources (money) is less visible, and actual payment is deferred. Because different personality types experience different levels of pain of paying, this can affect spending decisions. Tightwads, for instance, experience more of this pain than spendthrifts, which leads to different outcomes for these groups when payments are made by cash versus card.
Conceptual priming is an implicit effect where exposure to a stimulus influences the response to other stimuli. The prime consists of meanings (e.g. words) that activate associated memories (schema, stereotypes, attitudes, etc.). This process may then influence people’s performance on a subsequent task. For example, one study primed consumers with words representing either ‘prestige’ US retail brands (Tiffany, Neiman Marcus, and Nordstrom) or ‘thrift’ brands (Wal-Mart, Kmart, and Dollar Store). In an ostensibly unrelated task, participants primed with prestige names then gave higher preference ratings to prestige as opposed to thrift product options.
Social proof is a psychological phenomenon where people assume the actions of others in an attempt to reflect correct behavior in ambiguous situations where we are uncertain about how to behave and look to others for information or cues. Social proof is an informational influence (or descriptive norm) and can lead to herd behavior. Research suggests that receiving information about how others behave (social proof) leads to greater compliance among people from collectivist cultures, whereas information on the individual’s past behavior (consistency/commitment) is associated with greater compliance for people from individualist cultures.
Market research is one of the key factors used in understanding the market need, market size and competition. There are many factors that influence the outputs of market research; paying attention to these 10 could improve the effectiveness of your Market Research activities and prevent you wasting $millions.
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