Small Business Owners' Assessments of Their Abilities to Perform and Interpret Formal Market Studies

Recent research (for example, Brush 1992; Brush and Vanderwerf 1992), has noted a critical need for small business managers to obtain accurate and timely information about their markets, including the motivations, preferences, and behaviors of their customers and competitors. This need has been driven by intensifying levels of competition and contracting life-cycles of products and services (Schafer 1990). Recommendations for overcoming these changing conditions include developing a strategic awareness that includes immersing the employees of the firm in information about customers and market conditions (Redding and Catalanello 1995). This emphasis on strengthening the feedback loop from the customer has focused attention on the ways that small business managers gather market information. A number of studies have specifically looked at the types and sources of information that small business managers value and actively seek from the environment (Fann and Smeltzer 1989; McDaniel and Parasuraman 1985; McDaniel and Parasuraman 1986; Smeltzer, Fann, and Nikolaisen 1988). Findings from these studies have provided interesting and sometimes surprising facts about the information search behaviors of small business owners and managers. For example, informal sources of market information have been found to be the most favored method of gathering information. Some studies (McDaniel and Parasuraman 1985; McDaniel and Parasuraman 1986; Smeltzer, Fann, and Nikolaisen 1988) have shown that managers prefer such informal sources of information as discussions with customers and family members over materials published in trade journals or information obtained from business professionals such as economists or accountants. Furthermore, the use of information-seeking or data-gathering techniques which require formal planning or significant costs of time or money are not popular environmental scanning techniques for small business owners and managers. As evidence, McDaniel and Parasuraman (1986) report that 60 percent of the small business owners/managers in their study had not conducted nor hired external consultants to conduct a formal marketing study in the past three years. On the other hand, these authors report that the respondents who had recently conducted a market study were more likely to perceive marketing research as being worth the cost and were more likely to be confident in their ability to implement and conduct marketing studies. In addition, McDaniel and Parasuraman (1986) found a significant association between research experience and firm size, with managers from larger firms being more likely to have conducted formal marketing research. Other major reasons that formal market studies are not more common among small business managers are described by Andreasen (1983). According to this author, small business managers express the belief that because of its costs, marketing research is feasible only when facing a major decision. They also believe that only trained experts can conduct marketing research and that the resulting information is not applicable to real-world business decisions. The importance of formal market research as an information-seeking activity for small businesses becomes greater in light of a number of facts. First of all, formal market research has been shown to provide important competitive information that is not always available from other sources (Schafer 1990- Smeltzer, Fann, and Nikolaisen 1988). Second, managers who have performed market research recognize that the benefits of these studies are most often greater than the costs (McDaniel and Parasuraman 1985). Recently, Gorelick (1993) has discussed a number of less obvious benefits that accrue to managers who conduct research. For example, he argues that the quality of either a product or a service can only be accurately defined by the customer. Without reliable feedback from customers, the manager cannot have an accurate definition of quality. …