Chapter 7

1. Chapter 7 Marketing Research Decision-Support Systems, and Sales Forecasting

2. Chapter Objectives • Describe the development of the marketing research function and its major activities. • List and explain the steps in the marketing research process • Differentiate between the types and sources of primary and secondary data. • Explain the different sampling techniques used by marketing researchers. • Identify the methods by which marketing researchers collect primary data. • Discuss the challenges of conducting marketing research in global markets. • Outline important uses of computer technology and marketing research. • Identify the major types of forecasting methods and explain the steps in the forecasting process.

3. In this advertisement H&R Block uses one numerical statistic, generated by Marketing Research, to make a point.

4. The Marketing Research Function • Marketing research: the process of collecting and using information for marketing decision-making • Development of the Marketing Research Function • First organized marketing research project done by N.W. Ayer in 1879 • First commercial research department in the U.S. established by Charles C. Parlin for the Curtis Publishing Co. in 1911 • Parlin counted soup cans in garbage to convince the Campbell soup Company that working-class families would buy canned soup

5. L'Oreal Kids • Using Marketing Research to Match New Products to Potential Customers. • The Tangle Free Shampoo and the Bottle Design Resulted From Research Among Mothers and Children.

6. Who Conducts Marketing Research • The size and organizational form of the marketing research function is typically tied to a given company’s structure • Many firms depend on independent marketing research firms

7. Types of questions Marketing Research can help answer.

8. “Mediamark Research offers comprehensive demographic, lifestyle, product usage and exposure to all forms of advertising media collected from a single sample.” • Source Mediamark Web Site.

9. Age Influences on Consumption 4-1 18-24 25-34 35-44 45-54 55-64 65+ Products Tequila 156 174 115 57 64 5 Scotch 44 66 98 143 119 137 Laptop/notebook 94 115 124 139 98 15 Doctor visits 74 88 91 107 110 135 Activities Barbecuing 69 116 139 130 82 32 Aerobics 171 140 118 99 28 18 Cruise ship 60 80 95 114 144 121 Volunteer work 75 96 117 121 97 82 100 = Average level of use, purchase, or consumption Source: Mediamark Spring 1997 (New York: Mediamark Research, Inc., 1997).

10. Age Influences on Consumption 4-1 (II) 18-24 25-34 35-44 45-54 55-64 65+ Shopping Montgomery Ward 91 87 106 94 117 110 The Gap 217 140 85 82 52 26 Dominos Pizza 161 132 124 80 52 30 Marie Callenders 77 80 105 135 110 96 Media Reader’s Digest 64 75 96 109 119 144 Rolling Stone 290 158 93 46 14 2 MTV 286 153 81 42 22 16 CNN 73 93 99 114 117 107 100 = Average level of use, purchase, or consumption Source: Mediamark Spring 1997 (New York: Mediamark Research, Inc., 1997).

11. Full-Service Research Suppliers • Organizations that contract with clients to conduct complete marketing research projects

12. Limited-Service Research Suppliers • A marketing research firm that specializes in selected activities like: • Field or telephone interviews • Data-processing • Focus groups • Customer Satisfaction Measurement Programs • Procedure for measuring customer feedback against customer satisfaction goals and developing a plan of action for improvement

13. The Marketing Research Process

14. Shell • Shell Followed the Marketing Research Process to develop its “Count on Shell” Campaign

15. Did eTrade conduct research to establish that there may be a need for their type of service? Based on their success it is safe to assume they did.

16. Step 1: Define the Problem • Avoid confusing symptoms of a problem with the problem itself • The problem(s) should be agreed upon by all concerned parties • Doing so helps to keep everyone concerned in agreement and to keep the project focused on solving the problem(s) • Doing so also helps to prevent the all-too-common tendency to spend resources attempting to answer “interesting, but not necessary” questions

17. Step 2: Conduct exploratory research • An Informal investigation seeking to discover the cause of a problem by discussing it with informed internal and external sources • Can include evaluation of company records such as sales and profit analyses • Can also include sales and profit analyses of competitors’ products • Using Internal Data • Three commonly available sources of valuable internal data are sales records, financial statements, and marketing cost analyses.

18. Step 3: Formulate a Hypothesis • Hypothesis: a tentative explanation for some specific event – a statement about the relationship among variables that carries a clear implication for testing this relationship • Sets the stage for more in-depth research by further clarifying what researchers need to test • Not all marketing research tests specific hypotheses

19. Step 4: Create a Research Design • Research design: a series of decisions that, taken together, comprise a master plan or model for conducting marketing research • Must ensure that the study will measure what the marketer intends to measure • Must also ensure an appropriate selection of respondents

20. Step 5: Collect Data • Secondary data is data from previously published or compiled sources (e.g. Census data) • Two important advantages of secondary data: • Almost always less expensive to gather • Less time is usually necessary to locate and use it • Primary data refers to data collected for the first time specifically for a marketing research study • Primary data can provide richer, more detailed information than secondary data

21. Primary Research Methods Slide 1 of 2 • Observation Method. Researchers view the overt actions of the subjects. • Survey Method. Ask questions to get information on attitudes, motives, and opinions. Researchers can use either interviews or questionnaires. • Telephone Interviews. • A quick and inexpensive method for obtaining a small quantity of relatively impersonal information. • Personal Interviews. • The Best means for obtaining detailed information about consumers • Focus Groups. • Brings together 8 to 12 individuals in one location to discuss a subject of interest. • Usually encourages a general discussion of a predetermined topic. • Mail Surveys. • Cost-effective alternative and also provide anonymity. • Help markets track consumer attitudes through ongoing research. • Response rates are typically much lower than for personal interviews. • Usually takes a long time to conduct. • Questionnaire cannot answer unanticipated questions that occur. • Researchers must worry about bias.

22. Primary Research Methods Slide 2 of 2 • Experimental Method. Least-used method for collecting primary data. Most common use of this method by marketers is test-marketing. • Three Problems with test-marketing: • Test-marketing is expensive. • Competitors quickly learn about the new product. • Some products are not well-suited to test-marketing.

23. Levels of Measurement • Nominal coded data: Ability to distinctly categorize, or conversely, allows the determination of equality. • Ordinal coded data: Allows determination of magnitude, rank, greater or less than. • Interval coded data: Captures the distance apart two or more respondents are with respect to an attribute. • Ratio data possess a natural or absolute zero, indicating a true absence of a characteristic. Permits statements concerning the equality of ratios.

24. Objectives • Characteristics of questionnaire items • Distinguish between single-item measures versus composite scales, “batteries of items.” • Qualities of measurements • Validity • Sensitivity • Reliability and error • Examples of scales used in marketing research

25. BASIC QUESTION-RESPONSE FORMATS • Open-Ended Response Format Questions • Unprobed • Probed Format • Closed-Ended Response Format Questions • Dichotomous • Multiple Category • Scaled-Response Format Questions • Labeled • Unlabeled

26. Open-Ended Response Format • Unprobed: • Unaided awareness: “List some competing brands of toothpaste. • Store choice: “What grocery store receives the majority of your household’s purchases? • Probed: • “Can you think of anymore brands? • “Are there anymore stores where you shop?

27. Closed-Ended Response Format • Dichotomous: Only two choices • Good for qualifying items, screening questions • Multiple category: More than two choices

28. Who is your major wholesaler? Closed-ended item that is nominally coded. Affiliated Foods  (1) Topco  (2) Fleming Foods  (3) Other  (4)

29. Scaled-Response Format Questions • Labeled: All positions, especially mid-point and intermediate positions for the respondent are marked, or bear “labels” • Unlabeled: No intermediate points are labeled, sometimes positions bear only numbers.

30. Likert item:LabeledPeople should shop at local merchants even though the prices may be significantly higher. 1 . . . . . . 2 . . . . . . 3 . . . . . . 4 . . . . . . 5 Strongly agree Strongly disagree Disagree Neutral Agree Numeric differential item: Unlabeled Paying higher prices at local merchants... Shows intelligence Shows ignorance 1 . . . . 2 . . . . 3 . . . . 4 . . . . 5

31. Single-items adequate for measurement? • Suppose an instructor had single-question exams? • Suppose the ACT (or GMAT) had only 5 possible scores (similar to A,B,C,D,F grades)? • Suppose the ACT had only 4 questions, 1 each for mathematics, English, reading comprehension, and science? These are the issues behind marketing research use of multiple-item scales.

32. Composite, or Multiple-Item Scales • Capture the sensitivity to the continuous nature of many subtle differences in between consumers. • Simultaneously address concerns of: • Accuracy: Just as a 25-question exam can ask questions evaluating the many topics covered in a course, multiple-item scale can ask the many subtle aspects that underlie a consumer attitude or behavior. • Consistency: Though we do not administer the same surveys repeatedly to the same consumers, we strive to develop scales that consumers would provide consistent responses to over time. • All relate to larger issue of measurement error.

33. Semantic Differential Scale Indicate your impression of shopping at Dillard’s by checking the box corresponding to your opinion for each pair of descriptions. Good value Unfamiliar brands Distinctive fashion Low quality Helpful staff Poor value Best brands No fashion High quality No staff

34. VALIDITY AND RELIABILITY OF MEASUREMENTS • Validity: Accuracy • Conceptual Issue • Face Validity • Predictive Validity • Reliability: Consistency • Proportion of statistical error • Test-Retest • Inter-Item Correlation • Increasing the number of questions (items) can increase both the validity and reliability of a scale.

35. Step 6: Interpret and Present Research Information • Findings must be presented to decision-makers in a format that allows them to make effective judgments • Cardinal rule of presenting marketing research requires that it assists decision-making rather than being an end in itself

36. The Research Report and Presentation: Linking the Study and the Research User

37. The film industry is extremely competitive and blunders are costly. In order to enhance the success rate of a film producers can turn to marketing research.

38. Class Discussion How and why can marketing research help to prevent failures of new businesses and new products?

39. Marketing Research Methods

40. Secondary Data Collection • Government Data • Nation’s most important source of marketing data • Most frequently used government statistics • Census information available at no charge • TIGER System: Topographically Integrated Geographic Encoding and Referencing System • The system combines topographic features like railroads, highways, and rivers with census data such as household income figures

41. Persuading People to Participate in Census 2000

42. Secondary Data Collection • Online Sources of Secondary Data • Cyberspace sometimes simplifies the search for secondary data • A Web-based research project can cost less, and can yield significantly faster results than offline research • Caveat Emptor should guide Internet searches for secondary data

43. Bureau of Labor Statistics

44. Sampling Techniques • Sampling:the process of selecting survey respondents or other research participants • Population (universe): total group that researchers want to study • Census: a collection of data on all possible members of a population or universe

45. Probability sample: sample that gives every member of the population a known chance of being selected • Simple random sample: basic type of probability sample in which every individual in the relevant universe has an equal opportunity of selection • Stratified sample: probability sample constructed to represent randomly selected sub-samples of different groups within the total sample • Cluster sample: probability sample in which researchers select geographic areas or clusters, and all of the chosen individuals within this area become respondents

46. Non-probability sample: arbitrary grouping that produces data unsuited for most standard statistical tests • Convenience sample: nonprobability sample selected from among readily available respondents • Quota sample: nonprobability sample divided to insure representation of different segments or groups in the total sample

47. Primary Research Techniques • Observation Method • Researchers actually view, or watch, the overt actions of the research subjects • Useful in helping to understand how consumers actually behave in certain situations • Can be as simple as counting passing cars or as sophisticated as people meters recording household TV-viewing habits

48. Observation research results in new products

49. Survey Method • Telephone Interviews • An inexpensive and quick method for obtaining a small quantity of relatively impersonal information • Relatively high response rates • Limitations include: • Only simple, clearly worded questions draw appropriate responses • Personal information difficult to obtain • Respondents can’t view pictures

50. Survey Method • Personal Interviews • Best means for obtaining detailed information about consumers • Interviewer can explain confusing or vague questions • Offer Good Flexibility • Limitations: • Slow • Expensive