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This chapter provides a brief history and definitions of ethnography and observational research. Marketing ethnography is a subfield of applied anthropology and sociology that uses the direct experience of consumers' everyday reality to stimulate the innovation process and the intensive understanding of purchase and usage dynamics. An in‐home observational study of consumers' interaction with major appliances demonstrated a wide array of marketing opportunities. Ethnography, consequently, provides a holistic way of studying people during the purchase and usage of goods and services and also provides the framework for analyses of evolving human ideals, culturally constructed needs and social trends. Ethnographic principles and methods are used nowadays when marketers wish to go beyond the conventional wisdom yielded through other knowledge‐generation approaches. The ethnographic approach will be increasingly challenged to sustain its creativity, authenticity and quality standards in a business context that sometimes devalues ideas through popularisation and commoditisation.