Download Chapter 1 (Case Solution Manual) 11e

Case 1-1
PRE-TEEN MARKET – THE RIGHT PLACE TO BE IN FOR CELL PHONE PROVIDERS?
This case presents a chance to discuss marketing opportunities and ethical dilemmas in marketing.
Teaching objectives:
1. Allow students to see the need for marketing research, analyze marketing opportunities that
arise, and make relevant business decisions.
2. Provide students the chance to consider ethical issues in marketing and incorporate ethical
considerations into the decision making process.
3. Offer the instructor a springboard for a general discussion about marketing intelligence and
ethics.
Study questions:
1.
Do you think pre-teens offer good market potential for cell phone companies?
Answering this question actually addresses the situation analysis mentioned in the chapter. Generally,
three major issues should be analyzed during situation analysis, which include market environment,
market characteristics, and consumer behavior. Some suggestions particularly relevant to this case are:
Market environment:
a. Technologies: Firefly’s product offers relatively simple features for use and safety, such as no
numerical keypad, and incoming calls screening. Are these in sync with consumer demand and
needs?
b. Disposable income: It is important to determine whether the current offering package price of
$199 is economically relevant to the target market.
c. Social trends: Firefly should determine whether there is a growing need in the market for
communication between parents and their pre-teen kids and among kids, and what drives this
trend.
d. Political and regulatory: It is necessary to identify regulations, if any, that govern the sale and
use of cell phones by pre-teens as well as understand and appreciate the concern of stakeholders,
such as schools and parents, about kids’ use of cell phones in order to incorporate relevant
features into the product design.
Market characteristics:
a. Market size, potential and growth rate: These are very important issues that any company must
consider before launching a new product. Details pertaining to these issues are not provided in
this case, but the fact that food companies and retailers have targeted pre-teen market proves that
this market is a potential one.
b. Competition: Several companies were mentioned as Firefly’s competitors. Among them were
wireless carriers who offer family plans, pre-teen phone specialist (Wherify), and well
recognized names in the pre-teen market such as Mattel Inc. with Barbie products.
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c. Competitive products: Some products were believed to be offered at lower price, such as family
plans offered at steep discounts, others were offered with special features, such as GPS locator
which enables parents to track their kids.
Consumer behavior:
a. What and why customers buy a product: Obviously parents buy cell phones for their kids mostly
to maintain regular communication with them.
b. Who buys: Although ultimate customers are pre-teens, most often parents are the buyers. So the
product should satisfy the different needs of both the pre-teens and their parents.
2. While designing products for this market, what are the issues faced by the service providers?
The product in this case, cell phone, requires special attention in terms of ethics because it targets preteens who are usually not in a position to make their own decisions and also prone to misuse the service
if not monitored in some way. The product thus comes under scrutiny by three different bodies: parents,
schools and the government. During product design, the manufacturer has to consider concerns raised by
all these three bodies including possible product misuse, unnecessary investment, kids’ tendency to lose
their belongings, and even cell phone ban in classrooms. Manufacturers and service providers can
familiarize themselves with all these issues through appropriate market research techniques like focus
groups and surveys in order to address them adequately.
Case 1-2
BEST BUY ON A SEGMENTATION SPREE
This case illustrates the importance of marketing intelligence in making business decisions particularly
with regard to market segmentation and marketing program development. The focus of this case is on
Best Buy’s segmentation of customers into high value (“angels”) and low value customers (“devils”) in
order to apply the best marketing strategy for each category. By treating customers differently based on
their value and behavior, Best Buy could maximize high value customers’ contribution, avoid
unprofitable ones, lower cost and improve profits.
Teaching objectives
1. Allow the students to appreciate the business decisions behind optimal allocation of marketing
resources among a company’s vast array of customers
2. Provide an insight into how companies make use of customer data for segmentation and profiling
of customers, determining potential
value of each segment, and how the companies tailor their marketing strategy based on
marketing intelligence.
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Study Questions:
1
What benefits can Best Buy hope to gain from its customer segmentation tactics?
Out of the million visitors each year to Best Buy Co.’s stores, nearly 20 percent are considered
undesirable and therefore Best Buy wants to avoid these customers. Customer segmentation based on
purchase behavior and thereby value to the company enables Best Buy Co. to work out appropriate
marketing strategies to deal with each segment. Specifically, each store maintains stocks that fit with
local demographics. It lures high spenders by stocking more merchandise, offers right products to the
relevant segments (e.g. pricey home-theatre systems to upper income people), and offers more service
options. To keep the undesirables away, the company cuts back on promotions, enforces re-stocking fee
of 15 percent of the purchase price, resells returned items over the Internet, etc. These strategies help
improve revenue, and thereby profit, while reducing costs. Early results indicate that pilot stores [those
applying the stated segmentation scheme] performed far better than conventional ones, therefore Best
Buy Co. intends to introduce the model in other stores.
Question 2: Do you think Best Buy is making adequate use of marketing intelligence practices for
its business decisions?
Marketing intelligence is applied to various areas including product decisions, customer segmentation
decisions, branding and pricing decisions, keeping shareholders happy, market estimation, competitive
benchmarking, and distribution. The case mentions Best Buy Co.’s use of marketing intelligence for
product decisions and customer segmentation purposes, with remarkable success. Best Buy Co. can
further extend its use of marketing intelligence for optimizing marketing resource allocation through
customer lifetime value calculations and marketing mix modeling.
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Case 1-3
ETHICAL DILEMMAS IN MARKETING RESEARCH
Six brief descriptions of ethical dilemmas that can arise in a marketing research setting are
presented. In all the descriptions the student is to look at the situation from the viewpoint of the market
researcher. Most of the problems deal either with the interaction between the researcher and subject or
between the researcher and client. These dilemmas usually generate a spirited, open discussion of ethical
issues.
Teaching Objectives
1. Allow students to see the need for ethical judgments in marketing research and for the
development of ethical criteria.
2. Provide a means for students to see that there are different interpretations of "ethics".
3. Offer the instructor a springboard for a general discussion of ethics in marketing in general and
in marketing research in particular.
Study Question
Assume you are the executive mentioned in each of these dilemmas. What action would you take?
(Write out your answer beforehand and be prepared to justify your course of action in class.)
Analysis
1. Fictitious Market Research Agent. This problem raises issues about the researcher-subject
interaction. In such cases, a useful question is how would the subject react if he or she knew the
truth? Some students approve this action because the deception appears harmless. These students
argue that most people know that organizations can and do hire market research organizations to
hide the source and ask why should a company have to spend extra money to hire an outside firm to
achieve this goal. On the other hand, more students usually will not use a fictitious name, noting that
the executive director only suggests the practice. Would this compromise the data? One possible
solution would have interviewers not mention the name of any organization to a respondent unless
asked.
___________
The note was prepared and is Copyright 1987 by C. Weinberg.
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If asked, the interviewers could be instructed to respond that they cannot provide an answer until the
end of the interview, to prevent this knowledge from influencing responses. (This solution implies
that competing products appear too on the form, to avoid unintentional indications of the study's
sponsor.) In this case, would the interviewer allow the respondent to withdraw his or her answers
from the study at the end?
2. Omit Data. This problem focuses on the researcher-client interaction. In these types of dilemmas,
some classifying variables are (a) whether the person is employed by the user or supplier of
information, (b) who asks for the deception, and (c) whether the deception asked for is passive or
active. Of course, the issue often turns on whether the researcher perceives a deception to have
occurred. Another issue, if the researcher refuses to comply, is how vigorously should he or she act
to make the request for deception known.
Students frequently raise questions pertaining to circumstances surrounding the request to omit
relevant data:
•
How seriously mis-marketed is the product?
•
Does the product management team know or suspect that the product was mismarketed
before the research was conducted?
•
Do others in the organization know or suspect?
•
What action will the product management team take with respect to the research firm if the
finding is included in the final report?
Can the research firm tolerate the loss of this account? Many conclude that answers to these
questions are largely irrelevant because to omit the data violates their own ethics, and, in the long
run, is a disservice to the client.
Those who argue for excluding the data suggest that the purpose of the market research was not to
evaluate the program but to help the product management team. Because release of the data will not
aid the team members who are aware of the results, not complying will serve only to undermine
those for whom the researcher is working. How likely is the research firm to obtain another contract
with this company if the request is not complied with?
3. Biased Questionnaire. Students may propose several actions:
a. Accede to the client’s request.
b. Explain to the client that biased data will result but proceed as
requested.
c. Accede to the request but strongly qualify results in the final report.
d. Refuse to proceed with the study.
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e. Take some other action.
The instructor might develop this list of potential actions and take a vote before directly discussing
this dilemma. Few students elect to run the study as directed. The class discussion can get exciting
when students commit themselves on various choices of b, c, and d as the "to get along you have to
go along" group voting for b does battle with the "pride before price" group voting for d. It is useful
to ask students how they can retain ethical values espoused in class when they enter the "real world"
and must face financial and other pressures.
4. Jury Research. Most students would conduct the research, reasoning that any defendant is, the end
result is a presumed innocent until proven guilty. Often they rationalize that "If I don't perform the
research, someone else will" and that "The prosecution has the same option open to it as does the
defense." Still, the end result is a jury biased on socioeconomic characteristics and other attitudes.
The instructor can use the class discussion about this dilemma to point out that ethical issues are
often not about marketing per se but about how marketing is used.
5. Misleading Advertising. Students quite easily conclude that the problem describes an ethical issue
not in marketing research but in advertising, if the advertising agent knows of the misuse. Thus, the
research director has a responsibility to see that both the advertising agency and marketing
management of the chemical company are formally informed of the misuse. Most students stop here,
feeling that their ethical responsibilities are discharged. However, some would hold for disclosure to
the press or a regulatory agency if these first efforts fail, an action somewhat akin to the plot of "The
China Syndrome". An interesting discussion can result
6. First day in Summer Internship. While this dilemma can raise a number of issues (e.g., what does
information disclosure mean, what information is disclosed and what information is withheld) the
main function is to reveal student research practices about corporations. One approach is to ask
whether students think such practices are common and engage in a discussion on whether this
practice is ethical or not. Then, ask the students what they think are other ethically questionable
practices corporations might do.
With regard to the dilemma itself, a first issue is how do the students verify what information have to
be disclosed when collecting information? Can the information be collected without raising the
identity of the caller? What are the legal repercussions for the caller, the supervisor and the
company?
Commentary
Ethical concerns may shift over time as a result of societal and industry changes. A recent study of
marketing researchers and executives asked them for their reactions to several ethical scenarios in a
replication of an earlier study done in 19701. The three scenarios listed in Figure 2-1 (below), although
worded differently, revolve around the same ethical issues as those mentioned in Questions #1, and 2
(and to a lesser extent #5). The instructor can use these excerpts from the study to indicate shifting
ethical concerns in industry and compare them to the class opinions about the same ethical issues.
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The instructor may wish to make the following comments when discussing the results of the ethical
judgments made by marketing professionals shown in Figure 2-1.
Items 1 and 3 above show a shift in ethical concerns over the past twenty years, though in different
directions. The shift in Item 1 may reflect that marketing professionals have got more sensitized to
ethical issues and are less likely to condone research practices such as use of a fictitious company name
as the study sponsor. The shift in item 3 may reflect that societal concerns with minority-related issues
have been superseded by other social problems such as AIDS and the drug epidemic. Misrepresentation
of facts in item 2 seems to be an ethical issue overwhelmingly disapproved of by respondents in other
studies. The numbers in the table also indicate good agreement between the opinions of marketing
researchers and educators.
__________________________
1
. Ishmael P. Akaah and Edward A. Riordan, judgments of Marketing Professionals About Ethical Issues
in Marketing Research: A Replication and Extension", Journal of Marketing Research, 26 (February
1989), 112-120.
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Figure 2-1
Judgments of Marketing Professionals About Ethical Issues in Marketing Research
PERCENTAGE OF DISAPPROVALS
Marketing
Researchers
1970
1989
Shady
Study
(n=259) (n=205)
Marketing
Executives
1970
1989
Shady
Study
(n=142) (n=215)
1. "In another study concerning
consumers' magazine reading habits, the
Marketing Director decided to contact
a sample of consumers using the fictitious
company name, Media Research Institute.
This successfully camouflaged the identity
of X company as the sponsor of the study."
13
30b
16
30c
2. "In the trial run of a major
presentation to the Board of Directors,
the marketing vice president deliberately
distorted some recent research findings.
After some thought the Marketing
Research Director decided to ignore the
matter since the vice president obviously
knew what he was doing."
87
88
86
89
51
26b
3. 'The National Marketing Advisory Council
39
20b
(formed of top marketing executives ant
marketing educators to advise the
Commerce Department) has a taskforce
studying inner city prices. The head of this
study group recently called to ask if they
could have a copy of a recent X company
study which showed that inner city appliance
prices are significantly higher than in
suburban areas. Since X company sells
appliances to these inner city merchants,
the Marketing Research Director felt
compelled to refuse the request."
__________________
b
Difference between 1989 and 1970 study is significant at .001 level.
c
Difference between 1989 and 1970 study is significant at .01 level.
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