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C H A P T E R N I N E TURNING MARKETING INFORMATION INTO ACTION Irwin/McGraw-Hill

AFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO: • Identify a five-step marketing research approach leading to marketing actions. • Describe how secondary and primary data are used in marketing, including the uses of questionnaires, observations, experiments, and panels. • Understand how information technology enables information systems to be used that link massive amounts of marketing information to meaningful marketing actions. • Recognize alternative methods to forecast sales and use the lost-horse and linear trend extrapolation methods to make a simple forecast.

PP9-AA What’s in a Movie’s Name? Three movies’ initial and ultimate titles: •Shoeless Joe became Field of Dreams •Teenie Weenies became Honey, I Shrunk the Kids •3000 became Pretty Woman Is research on movie titles expensive? YES IT IS!! But, what is more expensive? A bad title that can kill a movie and cost a studio millions of dollars. Big budget films can cost as much as $70 million. Market research has resulted in other types of changes to movies as well.

PP9-1a Marketing Research Questions Asked in Test Screenings of Movies and How They are Used POINT WHEN ASKED KEY QUESTIONS USE OF QUESTION(S) Before the test screening • How old are you? • How frequently do you pay to see movies? • What movies have you seen in the last 3 months? Decide if person fits profile of target audience for movie. If yes, invite to test screening. If not, don’t invite. After the test screening • What do you think of the title? What title would you suggest? • Were any characters too distasteful? Who? How? Change movie title. Change aspects of some characters. (continued)

PP9-1b Marketing Research Questions Asked in Test Screenings of Movies and How They are Used (continued) POINT WHEN ASKED KEY QUESTIONS USE OF QUESTION(S) • Did any scenes offend you? Which ones? How? • How did you like the ending? If you didn’t like it, how would you change it? • Would you recommend the movie to a friend? Change scenes. Change or clarify ending. Overall indicator of liking and/or satisfaction with movie. After the test screening

PP9-BB Definition of Marketing Research Marketing Researchis . . . . the process of defining a marketing problem or opportunity, systematically collecting and analyzing information, and recommending actions to improve an organization’s marketing activities.

Step 1 Step 2 Step 3 Step 4 Step 5 • Develop the research plan • Specify constraints • Identify data needed for marketing actions • Determine how to collect data • Collect • relevant • information by specifying • Secondary data • Primary data • Develop • findings and recom-mendations • Analyze data • Present findings • Make recom-mendations • Take marketing actions • Implement recommen-dations • Evaluate results • Define the • problem • Set Research Objectives • Identify possible marketing actions PP9-2 Five-Step Marketing Research Approach Leading to Marketing Actions

PP9-CC The Goal of Marketing Research Management is faced with many choices involving possible marketing actions. The goal of marketing research is to provide management with actionable information that will allow managers to make better decisions and ultimately reduce risk.

PP9-DD Should Marketing Research be Undertaken? As indicated earlier, marketing research can be expensive. Management must balance the cost of doing or contracting for marketing research against the value of the information, the value of a better decision. A marketing research project might cost $50,000, but suppose its purpose is to evaluate the feasibility of a $20 million exhibition and convention center? In this case the involved parties cannot afford “not to do marketing research.”

PP9-EE Concept Check 1. What is marketing research? 2. What are the five steps marketing research uses to help lead to marketing actions?

PP9-FF Step 1: Defining the Problem -- Key Points Objectives are the goals the decision maker seeks to achieve in solving a problem. Measures of success are criteria or standards used in evaluating proposed solutions to a problem. One test of whether marketing research should be undertaken is if different outcomes will lead to different marketing actions.

PP9-GG Step 2: Develop the Research Plan The second step in the marketing research process involves: 1. Specifying the constraints on the research activity, 2. Identifying the data needed for marketing actions, and 3. Determining how to collect the data.

PP9-HH Constraints The constraints in a decision are restrictions placed on potential solutions by the nature and importance of the problem. Common constraints in marketing problems are limitations on time and money available to solve the problem.

PP9-IIa Data Collection Methods are approaches that can be used to collect data to solve all or part of a problem. One method of collecting data in by sampling. There are two basic ways of sampling from a population: 1. Probability sampling involves using precise rules to select the sample such that each element of the population has a specific known chance of being selected. Probability samples can be very representative of a particular population. (continued)

PP9-IIb Data Collection 2. Nonprobability samples may be used when time and budget are limited. They use arbitrary judgments to select the sample. With this method it is not known “how” representative a population might be.

Simple random samples Probability Samples Stratified randomsamples Cluster samples All Samples Convenience samples Nonprobability Samples Judgment samples Quota samples PP9-A Kinds of Samples Used in Marketing Research

PP9-JJ Concept Check 1. How do research objectives relate to marketing actions? 2. What does constraints mean? 3. What is the difference between concepts and methods?

PP9–3 Types of marketing information • Internal data (inside the firm) • Financial statements, researchreports files, customer letters,sales call reports, andcustomer lists • Secondary data • Facts and Figures • Already recordedprior to the project • External data (outside the firm) • U.S. Census reports, tradeassociation studies, and magazines, business periodicals,and commercial reports • Data • Facts and figurespertinent to theproblem • Observational data • (watching people) • Mechanical and electronicapproaches • Personal approaches • Primary data • Facts and Figures • Newly collected forthe project • Questionnaire data • (asking people) • Idea generation through in-depthinterviews and focus groups • Idea evaluation through mail,telephone, and personal surveys

PP9-KK Concept Check 1. What are methods? 2. What is the difference between secondary and primary data? 3. What are some advantages and disadvantages of U.S. Census of Population data?

PP9–4 Nielsen Ratings of the Top 10 National Television Programs from February 2, 1999 through February 7, 1999 NIELSEN RATING RANK PROGRAM NETWORK 1 2 3 4 5 6 7 8 9 10 ER Frasier Friends NBC Sunday Night Movie (The ‘60s Pt. 1) 60 Minutes Touched by an Angel Veronica’s Closet Jesse Dateline NBC-MON CBS Sunday Night Movie (Night Ride Home) NBC NBC NBC NBC CBS CBS NBC NBC NBC CBS 20.3 17.0 16.9 15.1 14.8 14.7 14.1 13.5 13.0 12.3

PP9-LL Questionnaire Data Questionnaire data are facts and figures obtained by asking people about their attitudes, awareness, intentions and behaviors. Because so many questions might be asked in questionnaires, it is essential that the researcher concentrate on those directly related to the marketing problem at hand.

PP9–B The two stages in a marketing research study Hypothesis evaluation stage Purpose: test ideas discovered in hypothesis generation stage to recommend marketing actions Typical methods:mail, telephone, and personal interviews using large samples Kind of questions used: fixed alternative How results are analyzed:qualitative analysis Hypothesis generation stage Purpose:uncover ideas to test in idea evaluation stage Typical methods:one-on-one conversations, focus groups, brainstorming sessions using small samples Kind of questions used:open-end How results are analyzed:qualitative analysis

PP9-MM Hypothesis Generation Studies Marketing studies for hypothesis generation involve a search for ideas that can be evaluated in later research. Two methods of collecting data for such studies are: 1. Individual interviews 2. Focus groups

PP9-C Comparison of mail, telephone, and personal interview surveys Basis of Comparison Cost per completed survey Ability to probe and ask complex questions Opportunity for interviewer to bias results Anonymity given respondent Mail, Internet, andFaxSurveys Usually the least expensive, assuming adequate return rate Little, since self-administered format must be short and simple None, since form is completed without interviewer Complete, since no signature is needed Telephone Surveys Moderately expensive, assuming reasonable completion rate Some, since interviewer can probe and elaborate on questions Some, because of voice inflection of interviewer Some, because of telephone contact Personal Interview Surveys Most expensive because of interviewer’s time and travel expenses Much, since interviewer can show visuals, probe, establish rapport Significant, because of voice and facial expressions of interviewer Little, because of face-to-face contact

PP9-D How Ethical is This Claim in an Ad That Is Based on a Survey of Doctors?

PP9–5a Typical Problems in Wording Questions PROBLEM SAMPLE QUESTION EXPLANATION Leading question Ambiguous question Unanswerable question Two questions in one Consumer is led to make statement favoring Wendy’s hamburgers What is meant by word regularly-once a day, once a month, or what? Who can remember the answer? Does it matter? How do you answer if you eat Wendy’s hamburgers but not chili? Why do you like Wendy’s fresh meat hamburgers better than those of competitors made with frozen meat? Do you eat at fast-food restaurants regularly? Yes No What was the occasion for your eating your first hamburger? Do you eat Wendy’s hamburgers and chili? Yes No (continued)

PP9–5b Typical Problems in Wording Questions (continued) PROBLEM SAMPLE QUESTION EXPLANATION Nonexhaustive question Nonmutually exclusive answers Where do you live? At home In dormitory What is your age? Under 20 20-40 40 and over What do you check if you live in an apartment? What answer does a 40-year old check?

PP9–6a Sample Questions from Wendy’s Survey 1. What things are most important to you when you decide to eat out and go to a restaurant? 2. Have you eaten fast-food restaurant food in the past three months? Yes No 3. If you answered “yes” to Question 2, how often do you eat fast food? Once a week or more Two or three times a month Once a month or less (continued)

PP9–6b Sample Questions from Wendy’s Survey (continued) 4. How important is it to you that a fast-food restaurant satisfy you on the following characteristics? Check the box that describes your feelings. SOME- WHAT IMPOR- TANT SOME- WHAT UNIMPOR - TANT UN- IMPOR- TANT VERY UNIMPOR- TANT VERY IMPOR- TANT CHARAC- TERISTIC IMPOR- TANT Taste of food Cleanliness Price Variety on menu 5. Check the space on the scale below that describes how you feel about Wendy’s on the characteristics shown. CHARACTERISTIC CHECK THE SPACE DESCRIBING HOW WENDY’S IS Not Tasty Dirty Expensive Narrow Taste of food Cleanliness Price Variety on menu Tasty Clean Inexpensive Wide -------------------- -------------------- -------------------- -------------------- (continued)

PP9–6c Sample Questions from Wendy’s Survey (continued) 6. Check the box that describes your agreement with the statement. STRONGLY AGREE DON’T KNOW STRONGLY DISAGREE STATEMENT AGREE DISAGREE Adults like to take their families to fast- food restaurants. Our children have a say in where the family eats. 7. How important is this information about fast-food restaurants? VERY IMPORTANT SOURCE SOMEWHAT IMPORTANT SOURCE NOT AN IMPORTANT SOURCE SOURCE OF INFORMATION Television Newspapers Billboards Mail (continued)

PP9–6d Sample Questions from Wendy’s Survey (continued) 8. In the past three months, how often have you eaten at each of these three fast-food restaurants? ONCE A WEEK OR MORE TWO OR THREE TIMES A MONTH ONCE A MONTH OR LESS RESTAURANT Burger King McDonald’s Wendy’s 9. Please answer the following questions about you and your household. a Are you Male Female b Are you Single Married Other (widowed, divorced) c How many children under the age of 18 live in your home? 0 1 2 3 4 5 or more d What is your age? 24 or under 25-39 40 or over e What is your approximate total annual household income? Less than $15,000 $15,000-$30,000 More than $30,000

PP9-NN Concept Check 1. A mail questionnaire asks you, “Do you eat pizza?” What kind of question is this? 2. Does a mail, telephone, or personal interview survey provide the greatest flexibility for asking probing questions? 3. What is the difference between a panel and an experiment?

PP9-OO Information Technology Information technology involves designing and managing computer and communication networks to provide an information system to satisfy an organization’s needs for data storage, processing, and access.

PP9-7 How Marketing Researchers & Managers Use Information Technology to Turn Information into Action Customer orders customer characteristics inventory sales calls promotions Computer and communication network Databases internal external Trade associations U.S. Census Internet Single source services Models to analyze, organize interpret, and present data Queries - who buys? - how much? - why? Results Marketing researcher or manager at desktop computer

PP9-PP Step 4: Develop Findings and Recommendations Analyze Findings Present Findings Make Recommendations

PP9-QQ Step 5: Take Marketing Actions Implement the Recommendations: Putting the research results into action is critical, or the research was a waste of time. Evaluate the Results: - Evaluate the Decision Itself - Evaluate the Decision Process Used

PP9-RR Concept Check 1. In querying an information system, give an example of a question that might be answered directly from the data in the system versus a question that would need some kind of a model to obtain an answer. 2. In marketing research, what is the difference between developing findings and recommendations and taking marketing actions?

PP9-SS Market & Sales Forecasting Market or Industry Potential Sales or Company Forecast

PP9-TT Two Basic Approaches to Forecasting Top-Down Forecast Buildup Forecast TOP-DOWN BUILDUP

PP9-8 U.S. Population, Effective Buying Income, and Retail Sales for Selected States, 1998 1998 Regional State Summaries of….. POPULATION EFFECTIVE BUYING RETAIL SALES INCOME 1997 1998 Total Total 1997 Retail Region/ Pop. % of Total EBI % of Sales % of State (000) U.S. (000) U.S. (000) U.S. Middle Atlantic38,320.0 14.1793 684,011,632 15.5457 337,080,731 31.2381 New Jersey 8,078.3 2.9892 160,134,925 3.6394 78,290,968 3.0747 New York 18,197.6 6.7335 315,102,328 7.1614 142,486,171 5.5958 Pennsylvania 12,044.2 4.4566 208,774,378 4.7449 116,303,502 4.5676

PP9-9 Buildup Approach to a Two-Year Sales Forecast for Boeing’s Aerospace Department Forecast of total sales $6 5 Estimated sales from 4 new business proposals Estimated sales from 3 follow-up work 2 Estimated sales from 1 work under contract 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Year 1 Year 2

PP9-UU Specific Sales Forecasting Techniques Judgments of the Decision Maker direct forecast lost-horse forecast Survey of Knowledgeable Groups survey of buyers’ intentions forecast salesforce survey forecast jury of executive opinion forecast survey of experts forecast Statistical Methods Trend Extrapolation

PP9-10 Linear Trend Extrapolation of Sales Revenues of Xerox, Made at the Start of 1995 26 24 Actual values 22 available before forecast is made 20 Linear trend 18 extrapolation 16 forecast 14 Sales revenue ($ billions) Actual values 12 after forecast is made 10 8 Forecast 6 4 Actual 2 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

PP9-VV Concept Check 1. What is the difference between the top-down and buildup approaches to forecasting sales? 2. How do you make a lost-horse forecast? 3. What is linear trend extrapolation?

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