What Will Consumers Buy?

Product variation, or the introduction of new products, epitomizes the two-way relation between consumer preference and nonprice competition by sellers in the market. Both the historical and the empirical data in this work have supplied a major emphasis on variety: the goods and services that consumers buy, the shopping processes through which they buy, have been changing continuously, and constantly offering a wider range of choice. The theoretical analysis of consumer choice rests on consumer tastes and preferences and on the basic craving for variety -- the Law of Satiable Wants -- which is such an important part of human nature. The analysis of consumer markets discloses monopolistic competition and all the forms of nonprice competition that provide variety. Product differentiation is one of the most powerful forms of competition. But the force of consumer preference is such that mere random variation, any differentiation at all of the product, will not do. Over and over again the success of one product or marketing innovation, or the failure of another, has been traced to consumer acceptance in the one case, consumer rejection in the other. Firms that introduce new products, therefore, have developed ways and means of investigating consumer preference, of gauging what people will buy; such investigations shape both the process of market competition and consumer choice.

Consumer Research and Competition

The development of market research has paralleled the growth of mass production and the proliferation of distribution methods that separate the maker of a commodity from its ultimate purchaser. At the beginning of the century, these techniques of production and distribution were beginning to be typical of the economy. Prior to that time consumers, over half of whom lived on farms, obtained their goods from three possible sources. Many things were home-produced: foods grown on the farm, clothing made by wives and daughters. A second source was the factory that supplied the stock of a general store or a small city shop. Much of what these outlets sold was raw materials for home production: fabrics for making clothes, flour for making bread, lye for making soap. Only a minor part of factory production represented finished consumer goods: men's ready-to-wear clothing, shoes, household utensils, the earliest processed cheeses and canned soups. Typically, these were limited in quantity, quality, and variety, for local or regional manufacturers served small market areas. A third type of supplier, the local producer or craftsman, sold directly to the consumer. The dairyman delivering milk, the farmer (or his wife) with a weekly route for eggs and poultry, the local ice plant or coal yard, the milliner and the seamstress, the cobbler, the cabinetmaker, and the blacksmith -- these were small businessmen in direct contact with their customers. In many cases the consumer's order preceded production, and goods were frequently "made to order." The changeover to factory production of almost all final consumer goods brought a growing separation between maker and user.

Market research is the modern version of the craftsman's intimate knowledge of his customers. Originally confined to sales analysis and dependent on reports from distributors or sellers, market research has shifted more and more toward investigating consumers directly. Consumer survey data are arranged to estimate the sales potential of a given product; consumer shopping habits are studied to evaluate the sales potential of a given market. And, as differentiating the product has become central to nonprice competition, firms have sought suggestions from consumers themselves as to how their products should be differentiated. The study of consumer preferences has become central to the introduction of new products, or to variations in existing products. Surveys of the failures of new products reiterate that market research was insufficient (or that the public was fickle); the more accurate the prediction of consumer reaction, it is held, the more successful the innovation.

The extent of market research, and particularly of consumer research or premarket evaluation, in American industry cannot be documented by any data that cover the entire economy. Studies by the American Management Association and the American Marketing Association, by such trade publications as Printers' Ink andAdvertising Age, or by individual investigators, have all been confined to surveys of members, readers, or small groups of firms; no statements can yet be

made about "all manufacturers" or even "all consumer goods firms." But all these studies, as well as the current reporting of business activity in trade papers, agree that the investigation of consumer preference is a growing field, both in terms of the number of firms involved in it and the amount of resources they devote to it, as well as of the recognition accorded it by company policy.

One difficulty in measuring market research activity is the number of different functions involved. Manufacturers of consumer goods (or producers of consumer services) who have an established consumer research policy can organize responsibility in many different ways. The firm's own staff may devote its efforts to working out areas for investigation which are carried through by specialized organizations outside the firm. Their reports are then analyzed by the market research staff of the firm. Or the staff may itself be fully versed in all the techniques of consumer research, and draw its own samples of consumers for interviews, mail questionnaires, and product testing. A firm that specializes in market research may provide all these services, from diagnosing the manufacturer's needs for consumer investigations to providing detailed reports and analysis. Or such a firm may concentrate on a particular industry or line of consumer goods, or on a particular research technique, such as motivation research, store audits or mailed surveys, drawing samples or conducting field interviews. Among the other firms that include consumer research among their services to manufacturer-clients are advertising agencies, management consultants, and specialists in packaging or design.

Consumer research is of crucial importance to advertising media, which describe (and differentiate) their "product" in terms of the market they reach. Investigating the number in their "audience," whether these be subscribers, readers, listeners, or viewers, is only a first step: if the audience can be further defined by income, age, occupation, family composition, and other household characteristics, its potential for sellers' advertising appeals can be more specifically delineated. Some newspapers, radio stations, and magazines run extensive surveys of routine purchases; others make special studies of particular product or service lines. The Life Study of Comsumer Expenditures and the Look National Appliance Survey are among the most ambitious of such investigations, for they were both based on a national probability sample, which also provided precise figures on magazine readership. Finally, trade associations and trade publications engage in consumer research.

Not all of these activities, obviously, are concerned with investigating consumer preferences primarily as a guide to the production of more successful new products or product variations. Techniques of premarket evaluation are still being discovered and developed; as in any growing field, there is always a fad for one or another type of research. But the fact that consumer preference research is a vital function in market competition is evidenced in policy statements from more and more companies:

Management cannot afford to spend vast sums tooling up for a product that the consumer will not buy, and even more important, rebuy. On the other hand, management cannot afford to wait for wants and preferences to originate and spread through the market spontaneously or to be created by competition. The marketing research upon which management must increasingly depend must measure and forecast rather than describe.

This statement recognizes the crucial importance of consumer repeat purchases, and the fact that nonprice competition focuses on catering to consumer tastes and preferences. The forces of consumer choice are capable of wreaking havoc on nonprice competition.

For example, in discussing advertising as only one part of distribution -- that is, of the entire shopping process -- one consumer goods executive has noted:

Advertising can only create a new market for products which fill a genuine -- though often unexpressed or latent -- consumer want. ...The basic need or desire must be there to begin with.

An expert on styling has said much the same thing:

Change just for the sake of change is not a positive approach to any problem; rather styling or industrial design should be used as a plus factor in planning a manufactured product....Unless the product actually does something better for the consumer, or unless it costs less, it will not satisfy her in the long run.

Although the skeptic may find such remarks to be only pious rationalizations, they supplement statements of the belief that consumers themselves are the best judges of "wants" and "needs."

There are two ways to develop a product. One is either from the production or manufacturing end out to the consumer, which some companies do. The other is to begin with the market, and come back and have the production people develop the kind of product the consumer wants.

And, of course, the weightiest evidence that this is not just rationalization or wishful thinking lies in the money and resources devoted to market research by consumer goods firms, and by all the organizations they employ for that purpose. To quote another executive of an innovating consumer goods firm, "Today's consumers have more of a direct say about products than ever before -- certainly more than they realize."

The functions of consumer research are therefore to devise ways and means of letting consumers have more of a direct say about products. Precisely how research methods stimulate consumers into furnishing the desired information about their wants and needs can be learned only by exploring widely; in a sense, each project is unique. In general, however, the process that many firms use to "develop the kind of product the consumer wants" comprises several parts.

Source: Random House