Consumer Surveys and Observational Research

Consumer Surveys involve questioning a sample of consumers about how they would respond to particular changes in the price of the commodity, incomes, the price of related commodities, advertising expenditures, credit incentives, and other determinants of demand. These surveys can be conducted by simply stopping and questioning people at a shopping center or by administering sophisticated questionnaires to a carefully constructed representative sample of consumers by trained interviewers.

In theory, consumer questionnaires can provide a great deal of useful information to the firm. In fact, they are often very biased because consumers are either unable or unwilling to provide accurate answers. For example, do you know how much your monthly beer consumption would change if the price of beer rose by 10 cents per 12-oz can or bottle? If the price of sodas fell by 5 cents? If your income rose by 20 percent? If a beer producer doubled its advertising expenditures? If the alcoholic content of beer were reduced by 1 percentage point? Even if you tried to answer these questions as accurately as possible, your reaction might be entirely different if actually faced with any of the above situations. Sometimes consumers provide a response that they deem more socially acceptable rather than disclose their true preferences. For example, no one would like to admit that he or she drinks 200 beers per month. Depending on the size of the sample and the elaborateness of the analysis, consumer surveys can also be expensive.

Because of the shortcomings of consumer surveys, many firms are supplementing or supplanting consumer surveys with observational research. This refers to the gathering of information on consumer preferences by watching them buying and using products. For example, observational research has led some automakers to conclude that many people think of their cars as art objects that are on display whenever they drive them. Observational research has also shown that consumer prefer to take several cold medicines, not just one. Observational research relies on product scanners which are increasingly found in stores and on people meters in homes. These make it possible for a company to learn overnight how a wide variety of products sell, the effectiveness of commercials, as well as television viewing patterns. Scanners and people meters, however, raise legal questions about privacy.

Observational research does not, however, render consumer surveys useless. Sometimes consumer surveys are the only way to obtain information about possible consumers’ responses. For example, If a firm is thinking of introducing a new product or changing the quality of an existing one, the only way that the firm can test consumer’s reactions is to directly ask them since no other data are available. From the survey, the researcher then typically tries to determine the demographic characteristics (age, sex, education, income, family size) of consumers who are most likely to purchase the product. The same may be true in detecting changes in consumer tastes and preferences and in determining consumers’ expectations about future prices and business conditions. Consumer surveys can also be useful in detecting consumers’ awareness of an advertising campaign by the firm. Furthermore, if the survey shows that consumers are unaware of price differences between the firm’s product and competitive products, this may be a good indication that the demand for the firm’s product is price inelastic.