Defining the Marketing Research Problem and Approach

1. Chapter Two Defining the Marketing Research Problem and Developing an Approach

2. Chapter Outline 1) Marketing Research process 2) Step 1: Defining the Problem 3) Step 2: Developing an Approach 4) An Example of steps 1 and 2: a case of United Airlines

3. Marketing Research Process Step 1: Defining the Problem Step 2: Developing an Approach to the Problem Step 3: Formulating a Research Design Step 4: Doing Field Work or Collecting Data Step 5: Preparing and Analyzing Data Step 6: Preparing and Presenting the Report Chapter 2 covers the first two steps of the marketing research process.

4. Step 1: Defining the Problem

5. One day I received a phone call from a research analyst who introduced himself as one of our alumni. He was working for a restaurant chain in town and wanted help analyzing the data he had collected while conducting a marketing research study. Chain Restaurant Study

6. When we met, he presented me with a copy of the questionnaire and asked how he should analyze the data. My first question to him was, What is the problem being addressed? Chain Restaurant Study

7. When he looked perplexed, I explained that data analysis is not an independent exercise. Rather, the goal of data analysis is to PROVIDE INFORMATION RELATED TO THE PROBLEM COMPONENTS. Chain Restaurant Study

8. I was surprised to learn that he did not have a clear understanding of the marketing research problem and that a written definition did not exist. So before going any further, I had to define the marketing research problem. Once that was done, I found that much of the data collected was not relevant to the problem. In this sense, the whole study was a waste of resources. A new study had to be designed and implemented to address the problem defined. Chain Restaurant Study

9. The Problem Definition The Problem Definition is the most important step, because only when a problem has been clearly and accurately identified, a research project can be conducted properly. Defining the marketing research problem sets the course of the entire project. All effort, time and money spent on the research will be wasted if the problem is misunderstood or ill defined

10. Tasks Involved Interviews Secondary Discussion Qualitative with with Data Research Decision Maker(s) Experts Analysis Environmental Context of the Problem Step 1: Problem Definition Management Decision Problem Marketing Research Problem Step 2: Approach to the Problem Specification of Information Needed Analytical Model: Verbal, Graphical, Mathematical Objective/ Research Hypotheses Theoretical Questions Foundations Step 3: Research Design The Problem Definition Process

11. The Problem Definition Process • Tasks involved: To define the problem the researcher should do some important task: 1-Discussion with key decision makersin the company. those meetings help the researcher determines the management decision problem. In discussions, the researcher makes what is called “problem Audit” which is a comprehensive examination of the marketing problem to understand its origin and nature. 2-Interviews with industry experts either inside or outside the company. The purpose is to help the researcher define the marketing research problem rather than to develop a conclusive solution. 3-secondary data analysis is very important in defining the problem. Those data include: information made by business and government sources, commercial marketing research firms, and computerized databases. 4-qualitative research is an unstructured, exploratory research methodology based on small samples. The intended purpose of it is to provide insights and understandings of the problem and its underlying factors (e.g. focus groups and depth interviews).

12. The Problem Definition Process • Environmental context of the problem: Environmental context analysis is done so that the researcher could understand the internal or external factors that impact on the definition of the marketing research problem. Those factors include: • Past information pertaining to the firm and industry (e.g. sales, market shares, profitability, population, and demographics). • Resources and constraints of the firm (e.g. money and time – the scope of the research is affected by such factors). • Objectivesof the decision makers of the organization should be considered; simply because the research is done to help decision makers’ decisions in attaining their objectives. • Buyer behavior study to understand and predict consumers’ actions and the factors (e.g. buying habit, preferences, and demographics) that affect these actions. • Legal environment that influence the performance of firms (e.g. taxes tariffs, trade regulations). • Economic environment influences the performance of the company, for example, the state of rapid growth is different than the state of recession. • Marketing and technological skills in the firm affects its performance and may be causes of some marketing problems.

13. The Problem Definition Process • Problem Definition: After gaining an adequate understanding of the environmental context of the problem, the researcher can define both the management research problem and the marketing research problem.

14. The Problem Definition Process • Iceberg principle: Symptoms and Causes

15. The Link between Management Decision Problem and Marketing Research Problem While distinct, the marketing research problem has to be closely linked to the management decision problem. A good way to link is the use of Conceptual Map of three components: action, topic, and question.

16. Marketing Research Problem Broad Statement Specific Components Proper Definition of the Research Problem Component 1 Component 2 Component 3

17. Example: Department Store Project Problem Definition In the department store project, the marketing research problem (broad statement) is to determine the relative strengths and weaknesses of Sears, vis-à-vis other major competitors, with respect to factors that influence the customer store patronage. Specifically, research should provide information on the following questions (specific components): Component 1:criteria for selecting the store. Component 2: customer actual evaluation of different stores. Component 3: customer patronage to stores. Component 4: the market share of the store’s product categories. Component 5: demographic and psychographic characteristics of consumers in different stores.

18. Step 2: Developing an Approach to the Problem

19. Components of an Approach • Objective/Theoretical Foundations (Framework): Research should be based on objective evidence and supported by theoretical and empirical findings (literature review) • Analytical Model: a set of variables and their interrelationship. It could be verbal, graphical, or mathematical. • Research Questions: refined statements of specific components of the problem. • Hypotheses: A hypothesis is an unproven statement or proposition about the studied phenomenon. • Specification of the Information Needed: information that should be obtained to test the hypotheses of the research.

20. Components of the Marketing Research Problem Objective/ Theoretical Framework Research Questions Analytical Model Hypotheses Steps of Research approach Specification of the Information Needed

21. Components of an Approach • Objective/Theoretical Foundations (Framework): Research should be based on objective evidence and supported by theoretical and empirical findings (literature review) to: • Determine which variables should be investigated and how to measure them. • Know how the research could be design and how a sample is selected. • Guide in selecting data analysis methods. • Help in organizing and interpreting the research findings in light of the previous research findings.

22. Awareness Evaluation Preference Patronage Components of an Approach • Analytical Model: a set of variables and their interrelationship. It could be verbal, graphical, or mathematical. n å a a x = + y 0 i i = 1 i

23. Components of an Approach • Research Questions: (RQs) are refined statements of the specific components of the problem. • Hypotheses: (H) is an unproven statement or proposition about a factor or phenomenon that is of interest to the researcher. Often, a hypothesis is a possible answer to the research question. Example: • RQ: Do the customers of Sears exhibit store loyalty? • H1: Customers who are store-loyal are less knowledgeable about the shopping environment. • H2: Store-loyal customers are more risk-averse than are non-loyal customers.

24. Components of an Approach Department Store Project • Specification of the Information Needed: information that should be obtained to test the hypotheses of the research. Specification of the information needed could be determined focusing on each component of the problem, analytical framework and models, research questions, and hypotheses. Component 1 (choice criteria) The researcher identified the following factors as part of the choice criteria: quality of merchandise, variety and assortment of merchandise, returns and adjustment policy, service of store personnel, prices, convenience of location, layout of store, credit and billing policies. The respondents should be asked to rate the importance of each factor as it influences their store selection. Component 2 (consumer evaluation of the stores) The researcher identified nine department stores as competitors to Sears based on discussions with management. The respondents should be asked to evaluate Sears and its nine competitors on the eight choice criteria factors. 

25. Components of an Approach Department Store Project Component 3 (consumer patronage of stores) 16 different product categories were selected, including women's dresses, women's sportswear, lingerie and body fashion, junior merchandise, men's apparel, cosmetics, jewelry, shoes, sheets and towels, furniture and bedding, and draperies. The respondents should be asked whether they shop at each of the 10 stores for each of the 16 product categories. Component 4 (market shares of the stores) No additional information needs to be obtained from the respondents. Component 5 (consumer characteristics) Information should be obtained on the standard demographic characteristics and the psychographic characteristics of store loyalty, credit use, appearance consciousness, and combining shopping with eating.

28. Example: Defining the problem and Developing an Approach to the Problem The case of United Airline

29. At United, Food Is Uniting the Airline with Travelers United Airlines, as other major airlines, had to deal withpassenger loyalty management decision problem: how to attract more and more loyal passengers. The broadmarketing research problem:to identify the factors that influence loyalty of airline travelers.

30. The basic answer is toimprove service.Exploratory research, theoretical framework, and empirical evidence revealed that the consumers’ choice of an airline is influenced by:safety, price of the ticket, frequent-flyer program, convenience of scheduling, and brand name. At United, Food Is Uniting the Airline with Travelers

31. A graphical model stipulated that consumers evaluate competing airlines based on factors of the choice criteria to select a preferred airline. The problem was that major airlines were quite similar on these factors. Indeed, "airlines offer the same schedules, the same service, and the same fares.” Consequently, United Airlines had to find a way to differentiate itself. Food turned out to be the solution. At United, Food Is Uniting the Airline with Travelers

32. Secondary data, like the J. D Power & Associates' survey on "current and future trends in the airline food industry," indicated that"food service is a major contributor to customers’ loyalty."This survey also emphasized the importance of food brands. At United, Food Is Uniting the Airline with Travelers

33. At United, Food Is Uniting the Airline with Travelers The airline's Marketing survey told United Airlines that "customers wanted more varied and up-to-date food.” The following research questions and hypotheses may be posed. RQ1 How important is food for airline customers? H1: Food is an important factor for airline travelers. H2: Travelers value branded food. H3: Travelers prefer larger food portions, but with consistent quality. H4: Travelers prefer exotic food (unusual food).

34. Characteristics that influence the research design included the identification of competing airlines (Delta, American, etc.), factors of the choice criteria (already identified), measurement of airline travel, and loyalty. At United, Food Is Uniting the Airline with Travelers

35. This kind of research helped United Airlines define their marketing research problem and develop the approach. Focus groups and surveys were conducted to check customers' perceptions of food in United Airlines' aircraft. The results provided support for all the hypotheses (H1 to H4). United Airlines then made a few changes: new "culinary menus," larger portions of food, new coffee, and branded products (e.g., Godiva chocolates). This resulted in better service, increasing customer satisfaction and fostering loyalty. At United, Food Is Uniting the Airline with Travelers

36. Questions for Revision • Why is it important, as a first step in undertaking marketing research, to define the marketing research problem appropriately? (slide 9) • Mention , with an example, 2 differences between management decision problem and marketing research problem. (slide 13) • Explain, with an example, the relationship between management decision problem and marketing research problem. (slide 14) • What are the most common forms of the analytical models that are used when conducting research. (slide 21)