Marketing Concepts Marketing Research & Market Segmentation

1. MarketingConceptsMarketing Research & Market Segmentation MKTG 3110 Spring 2015 Mrs. Tamara L. Cohen Class #8

2. Marketing Research

3. KEY TERMS Primary data Secondary data - internal & external BIG data Analytics

4. KEY CONCEPTS Marketing Research Questionnaire data Structured data Unstructured data

5. No-one’s too big to make mistakes April 23, 1985

6. Information Overload

7. 5-step marketing research approach leading to marketing actions This is the hardest & most critical step.

8. Step 1Define the Problem Set research objectives old or new phone design? • Exploratory research • helps define problem and suggest hypothesis • Descriptive research • describe market potential or demographics of consumers • Causal research • how change in one factor causes change in another factor, e.g. Would a 10% reduction in tuition at a private college boost enrollment enough to offset the reduced tuition?

9. Step 1Define the Problem Measure of success: PLAYTIME Possible marketing actions Continue old design; don’t introduce new design Introduce new design; drop old design Measures of success Children spent more time playing with OLD design Children spent more time playing with NEW design

10. Develop the Research Plan Step 2 Specify CONSTRAINTS • Time • Money Identify DATA needed e.g. It might be nice to know children’s favorite colors, if they prefer wood or plastic material, but rather focus on main problem, i.e. which design? Data collection METHOD • Sampling methods

11. Types of marketing information DATA Relevant facts & figures PRIMARY DATA Newly collected SECONDARY DATA Previously collected INTERNAL DATA inside the organization EXTERNAL DATA outside the organization • OBSERVATIONAL DATA watching people • QUESTIONNAIRE DATA asking people • OTHER SOURCES

12. Collect Relevant Information Step 3 SECONDARY data • facts & figures: already recorded inside or outside the company • advantages: already exists + low cost • disadvantages: out of date; categories can be ‘off’ for project PRIMARY data • facts & figures: specifically collected for this project • advantage: customized • disadvantages: expensive + time-consuming

13. Collect Relevant Information Step 3 Secondary data: INTERNALsources • Sales Reports • Customer Inquiries/Complaints

14. Collect Relevant Information Step 3 Secondary data: EXTERNAL sources • Census Bureau • U. S. 2010 Census • American Community Survey • Syndicated Panel Data • Scanner Data • Trade Associations • Business Periodicals

15. Collect Relevant Information Step 3 Primary data: WATCHING people (observational data) Mechanical methods • Nielsen’s TV Ratings • what about TiVo? • people skipping commercials? • Personal methods • Mystery shopper • Ethnographic research • Neuro-marketing methods • brain scanning

16. Nielsen Television Index Ranking Report for network primetime households: Week of May 18-24, 2009

17. Collect Relevant Information Step 3 Primary data: ASKING people (questionnaire data) • Interviews – individual; in-depth; focus group • Questionnaires – personal, mail, phone, on line • Open-ended questions – collect ideas, opinions • Closed questions – fixed choices • Dichotomous (binary) Questions – yes/no • Semantic Differential Questions – 5-point scale • Likert Scale Questions – extent agree/disagree

18. Different types of questions in a sample Wendy’s survey (Q1-Q5) Open-ended question Dichotomous question Closed question (multiple choice) Attitudinal question Semantic differential scale

19. Different types of questions in a sample Wendy’s survey (Q6-Q9) Likert scale question Media behavior question Usage behavior question Demographic questions

20. Common problems with wording of questions

21. Develop Findings Step 4 • Analyze the data • interpret results • draw conclusions • Present findings • keep it simple (K.I.S.S.) • keep it objective • offer different interpretations where relevant

22. Take Marketing Actions Step 5 Effective marketing research will be translated into marketing actions, which in turn will be implemented, and finally evaluated • analytical models for sensitivity analysis (what ifs) • evaluate decision • evaluate decision process

23. Sales Forecasting Forecasting is often a key goal of marketing research. 3 main techniques: • Decision-maker’s judgment - most common • Knowledgeable sources - prospective buyers, e.g. Boeing (limited number of buyers) - sales force • Statistical methods - trend extrapolation

24. BIG DATA & Analytics BIG DATA = collection of huge, complex data sets • difficult to capture, archive, manage & process using traditional tools & methods of analysis ANALYTICS = discovery and interpretation of meaningful patterns in data • helps organizations make better decisions using new insights from volume & variety of BIG DATA BIG DATA+ANALYTICSbusinesses make smarter decisions + improve productivity + make better predictions

25. BIG DATA example 10%

26. BIG DATA example Target’s pregnancy prediction model • revenues grew from $44 billion (2002) to $67 billion (2010) • Guest ID number is linked to demographic info. • predictive analytics department • major life event leads to flexible shopping habits • predictable • potential gold mine for retailers

27. BIG DATA Issues • Volume(increasing amount of data) • Velocity(speed of data in and out) • Variety(range of data types and sources) • Veracity(accuracy)

28. How BIG DATA Creates Value • BIG DATA can make information transparent & usable at much higher frequency. • As organizations create & store more data digitally, they can collect more accurate & detailed performance information, to boost performance. • BIG DATA enables finer segmentation of markets and better tailoring of products & services. • Sophisticated analytics can improve decision-making. • Development of next-generation products & services can be improved.

29. BIG DATA = Competitive Advantage Future challenges associated with BIG DATA: • shortage of talent with analytic skills • privacy, security, intellectual property, liability

30. Mars, a forecasting enigma

31. break

32. Market Segmentation

33. KEY TERMS Market segments Market segmentation Product differentiation Product positioning / repositioning

34. KEY CONCEPTS Perceptual map 80/20 rule Usage rate

35. Why segment? Companies divide large heterogeneous markets into smaller segments that can be reached more efficiently & effectively with products & services that match their unique needs. Different markets have different needs. One-size-fits-all mass markets are gone. Product differentiation is used for different markets.

36. How to segment? • ONE product & MULTIPLE segments

37. How to segment? • MULTIPLE products & MULTIPLE segments P&G sells 7 brands of laundry detergent in the US - these brands compete with each other on same supermarket shelves - customers want different mixes of benefits, e.g. economy, bleaching power, fabric softening, fresh smell, strength/mildness, lots of/few suds - different priorities for each benefit - 2-tier segmentation strategy vs & - “shotgun” (scattered) approach versus “rifle” (focused) approach

38. How to segment? • Segments of ONE: Mass Customization BMW uses Just-In-Time manufacturing to customize cars in 10 days • Dell uses Built-To-Order systems • computer manufacturing line restricted to a few basic models that can be assembled in 4 minutes • good (but limited) choice + quick delivery

39. Segmentation trade-off: Synergy versus Cannibalization

40. Ways to segment • Geographic • Demographic • Psychographic • Behavioral

41. Ways to segment • Geographic – nation, region, city, neighborhood e.g. Campbell’s sells gumbo soup in Louisiana & Mississippi – people living in the same geographic area often show similar buying patterns – reinforced by local weather, environment, culture

42. Ways to segment • Demographic – age, gender, family size, life cycle, race, income, occupation, religion, education, generation, nationality – most common basis of segmentation • e.g. most US households have 1-2 people, so Campbell’s packaged meals contain 1-2 servings

43. Ways to segment • Psychographic – social class, lifestyle, personality e.g. Pottery Barn customers want furniture that meshes with their lifestyles

44. Ways to segment • Behavioral – customer knowledge, attitudes, uses or responses to a product e.g. occasion (breakfast - orange juice) benefits sought (P&G detergent) loyalty (brands, stores, companies; completely or somewhat loyal) usage rate (light, medium, heavy - fast food)

45. Product Positioning = the way the product is defined by consumers on important attributes • the place the product occupies in consumers’ minds relative to competitive products • e.g. Tide is positioned as a powerful, all-purpose, family detergent; Ivory Snow is positioned as a gentle detergent for fine washables & baby clothes • product repositioning • position by differentiation or head-to-head

46. The strategy American dairies are using to reposition chocolate milk to reach adults

47. Mapping Segments Perceptual map = graphing the locations of products or brands in consumers’ minds Marketing managers can see how competing brands compare to their own products/brands. Areas where there is a cluster of ideal points indicates a market segment. A company considering the introduction of a new product/brand will look for an area on the map free from competitors.

48. Next class: Midterm Exam #2 Preparation: Study power points, your own notes, assignments & assigned readings for each class.

49. Next class: Product Marketing class #10 Preparation: Read ch.10 & 11(assigned pages) Homework #7:New Product/Service