Chapter 4 Managing Marketing Information

1. Chapter 4Managing Marketing Information Professor Marshall Queens College

2. Coca-Cola’s Marketing Blunder • In 1985, marketers thought they were listening to their target market. They noticed that they were losing market share to Pepsi and they conducted taste tests to develop their new formula. • On April 23, 1985, Coca-Cola stopped producing old Coke and created a new Coke with a sweeter taste. • Angry customers panicked, filling their basements with old Coke and threatening lawsuits. • 3 months later, Coca-Cola brought back the old formula calling it Coca-Cola Clasic. What went wrong? Coca-Cola fouled up their research. They focused only on Taste. The company ignored consumers’ feeling about the old Coke. Luckily, Coca-Cola had quick reaction time.

3. The Importance of Marketing Information • Companies need information about their: • Customer needs • Marketing environment • Competition • Marketing managers do not need more information, they need better information.

4. Marketing Information System • An MIS consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers. • The MIS helps managers to: • Assess Information Needs • Develop Needed Information • Distribute Information

5. Assessing Information Needs • A good MIS balances the information users would like against what they really need and what is feasible to offer. • Sometimes the company cannot provide the needed information because it is not available or due to MIS limitations. • Have to decide whether the benefits of more information are worth the costs.

6. Developing Marketing Information • Internal Databases: Electronic collections of information obtained from data sources within the company. • Information in a database can come from many sources. Operations tracks shipments and inventory, sales tracks competitor activities, marketing has customer demographics and buying behavior, customer service contains information on customer satisfaction. • Marketing Intelligence: Systematic collection and analysis of publicly available information about competitors and developments in the marketing environment. • Used to improve strategic decision making • Marketing Research: Systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization. • Used to help understand customer purchase behavior

7. Customer Relationship Management • Many companies utilize CRM • Capture customer information from all sources • Analyze it in depth • Apply the results to build stronger relationships. • Companies look for customer touch points (every contact between company and customer). • CRM analysts develop data warehouses (centralized database) and use data mining (algorithms designed to detect patterns in the data) techniques to find information out about customers.

8. Marketing Research Process Implementing the research plan – collecting & analyzing the data Defining the problem & research objectives Developing the research plan for collecting information Interpreting & reporting the findings Problem: Losing market share to Pepsi. We must research the taste preferences of consumers. Problem defined too narrowly We should collect taste preference information through blind taste tests. Conduct blind taste tests in various settings aimed at various consumers Data finds that consumers prefer the sweeter taste of Pepsi. Based on the findings, Coca-Cola decides to produce a sweeter New Coke, and remove the old Coke from its product line.

9. Defining Problem & Objectives If Coca-Cola had dug deeper, they would have realized that people buy coke for reasons other than taste - intangibles - Coke's history, packaging, cultural heritage, and image. • Exploratory Research: • Gather preliminary information that will help define the problem and suggest hypotheses. • Descriptive Research: • Describes things (e.g., market potential for a product, demographics, and attitudes). • Causal Research: • Tests hypotheses about cause-and-effect relationships. Example: Would a 10% decrease in tuition at a private college increase enrollment enough to offset the decrease in tuition?

10. Developing the Research Plan • Includes: • Determining the exact information needed • Developing a plan for gathering it efficiently • Presenting the written plan to management • Outlines: • Sources of existing data • Specific research approaches • Contact methods • Sampling plans • Instruments for data collection

11. Developing the Research Plan: Campbell Soup Campbell wants to conduct research on how soup consumers would react to the introduction of new bowl-shaped plastic containers which would allow consumer to heat soup in the microwave without adding anything and without a need for dishes. They need to research the following information: • Demographic, economic and lifestyles of current soup consumers • Consumer usage patterns for soup (where, when, how much) • Retailer reactions to new packaging • Consumer attitudes toward new packaging • Forecasts of sales for new and old packages Next Step: determine where/how to gather this information and all associated costs. Present this in a written proposal.

12. Gathering Secondary Data • Information that already exists somewhere • Internal databases • Commercial data services: www.acneilson.com (data on household purchasing), www.dnb.com (information on companies) • Government sources: www.sec.gov (financial data on US corporations), www.census.gov • Available more quickly and at a lower cost than primary data. • Must be relevant, accurate, current, and impartial. See page 116 for more external information sources.

13. Primary Data Collection • Information collected for the specific purpose at hand. • Must be relevant, accurate, current, and unbiased. • Plan for Primary Data Collection Must determine: • Research approach • Contact methods • Sampling plan • Research instruments

14. Developing the Research Plan: Campbell Soup They need to research the following information: • Demographic, economic and lifestyles of current soup consumers • Consumer usage patterns for soup (where, when, how much) • Retailer reactions to new packaging • Consumer attitudes toward new packaging • Forecasts of sales for new and old packages Secondary Data Secondary Data Primary Data Primary Data Secondary Data

15. Observational Research • The gathering of primary data by observing relevant people, actions, and situations. • Ethnographic research: • Observation in “natural environment” • Mechanical observation: • People meters – records tv shows watched • Checkout scanners – record shoppers’ purchases • Galvanometer – detects sweating • Eye Cameras – study respondents’ eye movements

16. Survey Research • Most widely used method for primary data collection. • Approach best suited for gathering descriptive information. • Can gather information about people’s knowledge, attitudes, preferences, or buying behavior.

17. Personal can mean individual interviewing or focus groups (6-10 people who talk about product) Survey Contact Methods

18. Choosing the Sample • Sample – segment of the population selected to represent the population as a whole. • Requires 3 Decisions: • Who is to be surveyed? • Sampling unit • How many people should be surveyed? • Sample size • How should the people in the sample be chosen? • Sampling procedure

19. Types of Samples

20. Primary Data Collection • Questionnaires: • What questions to ask? • Form of each question? • Closed-ended – include all possible answers (multiple choice) • Open-ended – allow respondents to answer in own words • Wording? • Ordering?

21. Likert Scale One of the most popular closed-ended formats, widely used in survey research, particularly in measuring attitudes, beliefs and opinions.  The basic idea here is to: • write the item as a declarative sentence and;  • then provide a number of response options, or choices, that would indicate varying degrees of agreement with, or endorsement of, that sentence.  • Example: Three meals a day is essential to a healthy lifestyle. 1 2 3 4 5 6 Strongly Moderately Mildly Mildly Moderately Strongly Disagree Disagree Disagree Agree Agree Agree Please note, in the above example, that the "item" to be evaluated consists of a declarative sentence. Thus, it already states a 'position' and 'direction' of attitude. The respondent is then asked to circle the direction and extent (intensity) of his/her agreement (or disagreement) with that "position" sentence. 

22. Implementing the Research Plan • Collecting the data • Most expensive and subject to error • Processing the data • Analyzing the data

23. Analyzing the Data • Simple Tabulation – count the occurances of each variable independently of other variables • Cross Tabulation – divide the sample into sub-groups to show how the variable varies from one subgroup to another

24. Simple Tabulation 1 = Strongly Disagree, 2 = Moderately Disagree, 3 = Mildly Disagree, 4 = Mildly Agree, 5 = Moderately Agree, 6 = Strongly Agree

25. Cross Tabulation 1 = Strongly Disagree, 2 = Moderately Disagree, 3 = Mildly Disagree, 4 = Mildly Agree, 5 = Moderately Agree, 6 = Strongly Agree

26. Interpreting and Reporting Findings • Interpret the findings • Draw conclusions • Report to management

27. Experimental Research • Tries to explain cause-and-effect relationships. • Involves: • selecting matched groups of subjects, • giving different treatments, • controlling unrelated factors, and • checking differences in group responses. Example: before adding a new product, to its menu, Taco Bell might use experiments to test the effect of sales on two different prices it might charge.

28. Analyzing the Data • Hypothesis Testing • Uses Regression Analysis to Interpret the results Exmaple: Taco Bell might take the data from the experiments designed to test the effect of sales on two different prices. The company would run a regression on the data to determine if the new price had a significant effect on sales.

30. Regression Output Interpretation: we are 98% confident (1-p value) that there is a relationship between old sales (x) and new sales (y) data. To estimate new sales, we would formulate the following equation: -38.23 + (1.17 * Sales at the Old Price) If sales at the old price averaged 200, we would estimate new sales by: -38.23 + (1.17 * 200) = 195.24

31. Making the Decision • Given Estimated Sales at the New Price, is the price hike worth it? • Judging by our research estimates, we would reduce sales by 5 if we implement the new price. • We sold 200 at $4.98 = $996.00 • The new price adds $0.50 per sale, so we would sell: 195 at $5.48 = $1,069.90

32. Making the Decision • Assuming there are no other costs (or that the other costs don’t outweight the profits)… • We would increase revenue by: $73.90 if we increase the price. • So – YES we should make Taco Supreme Meals $5.48.

33. Video Case Applying Knowledge - Improving DecisionsBurke is one of the premier international research and consulting firms in the world. For nearly seven decades, Burke has helped manufacturing and service companies understand and accurately predict marketplace behavior. Burke's employee owners add value to research and consulting assignments by applying superior thinking to help clients solve business problems. Burke, Inc. (9 minutes) http://www.burke.com/about/

34. Thoughts • Can you name some new growing trends? • What products or services might be in high demand to fit those trends? • What jobs will grow to suit those trends?

35. Video Case Intel (15 minutes) http://www.capstonevideo.com/rpm_wvx/capstone_intel.wvx

36. Thoughts • Marketing Research was used at every stage in developing the Intel brand. • Deciding on an advertising theme and jingle • Developing a product name • Developing products geared toward the uses of customers all over the globe