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PART 1
TEACHING NOTES FOR CHAPTERS
CHAPTER ONE
A DECISION-MAKING PERSPECTIVE ON MARKETING INTELLIGENCE
Outline of the Chapter
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Understand the concept of Business Intelligence
Understand the need and use of marketing intelligence in an organization.
Comprehend how marketing intelligence fits in the bigger scheme of the marketing environment.
Explain the role of marketing intelligence in decision making.
Discuss the factors that affect marketing intelligence decisions.
Understand the implication of ethical issues in gathering marketing intelligence
Understand the need and use of Marketing Research
Comprehend how Marketing Research fits in the bigger schema of marketing environment
Role of Marketing Research in Decision Making
Discuss the factors that affect Marketing Research
Understand the implications of ethical issues in conducting Marketing Research
Introduce International Marketing Research
Teaching Suggestions
This chapter will be discussed in the context of the introductory session to the course. This section
comprises of new material on emerging trends in marketing related to Business Intelligence and Marketing
Intelligence. The scope of this session will be largely dictated by the type of students, their previous
marketing courses and the length of the course. However, it is always useful to put the marketing research
course into context by discussing its relationship to other marketing courses and defining the nature and
scope of the marketing research process.
In addition, it could be a good beginning to use Figure1-1 below to highlight the increasing
importance of concepts such as Business Intelligence and Marketing Intelligence. It is important to upfront
educate the students on the hierarchical relationships of these new concepts and emphasize the relationships
between Business Intelligence and Marketing Intelligence and that between Marketing Intelligence,
Marketing Research and Database Marketing. This can also be used to provide a rationale for the course
objectives, structure and project assignments. After this introduction, there are several alternative directions
an instructor may wish to pursue.
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Figure 1-1: Typical areas under the umbrella of Business Intelligence
Some Guidelines
Based on the new material added in the 11th edition of this text book, it may be useful for instructors
to begin this course by highlighting the changes that emerging information technology (IT) solutions have
brought in to the marketing field. It may be highlighted to students that, often times organizations are not
aware that valuable information lie hidden across disparate databases of their enterprise. Latest IT tools and
technologies enable businesses to analyze, synthesize and collate key information pertaining to their
business, market and customers. Such tools help organizations to create a structure to the information being
collected by the organization, identify the critical information that impact the business, monitor changes
and respond to situations with appropriate strategies.
Instructors should highlight the emergence of concepts such as Business Intelligence, Marketing
Intelligence which help to gain a granular focus on important parameters that affect business performance.
Students should be enlightened with the emerging need for organizations to identify individual
customer preferences, spending habits etc., which would help organizations to accurately position their
products and services and realize enhanced customer satisfaction and profitability. Discussions on the
examples provided on Erlanger (Ky.) Police Department and Mozilla Firefox would be relevant at this
point.
Before delving further into marketing research, instructors should refer to Figure 1-1 adequately to
ensure that the students understand the definition, scope and benefits of concepts such as Business
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Intelligence, Marketing Intelligence and Database Marketing. It is also important to emphasize the
hierarchical relationships between the above concepts with marketing research.
For those instructors who wish to draw the distinction between public versus private sector
applications of marketing research, they can begin with the American Marketing Association’s definition of
marketing research and discuss how marketing research can aid decision making in both the private and
public sector research applications.
For those instructors who wish to give more emphasis to the marketing planning process Table 2-1 will
be an ideal starting point. The revenues of the top 25 firms in the US marketing research industry exceeded
$21 billion in 2008, with a growth of 1.6% over 2007. It is worth noting that more than half of the revenues
are estimated to come from foreign operations.
It is important that students understand two fundamental points which will be emphasized in
subsequent chapters. These concepts should be established early in the course. The first is that research
plays a continuous and cumulative role in the development of any marketing strategy. This can be
illustrated by reviewing how research supports marketing decisions. The second is that research is a tool
and like any tool, it can be misused. This can be illustrated by discussing ethical research and the barriers to
effective research utilization.
Some instructors prefer to begin their course with a motivating case that illustrates the facets and issues
that will be covered. The Clover Valley Dairy case at the end of Part I is well suited to this purpose. A
further advantage to using this case early in the course is that it provides a useful context for subsequent
discussions of the value of research information.
Questions and Problems
1.
In the chapter introduction, we note that the purpose of this chapter is to illustrate the role that
marketing research should play in any organization. The basic research questions are shared by all
organizations that need to understand and react to market requirements. This point can be reinforced
with the aid of this question. Perhaps the best way to use the question is to divide the class into small
groups, assign each group to one organization, and give them fifteen or twenty minutes in class to
develop the possible uses of marketing research. Then each group is given a few minutes to make a
presentation to the other groups. To clarify what is required of the groups it is useful to take one
organization and discuss it in depth before giving them the assignment. A good example is Sears
Roebuck which is reported to have conducted over 1,000 marketing research studies in 1988. These
studies include:
(a) surveys of consumer satisfaction and dissatisfaction, and complaints,
(b) store location analyses (i.e., assessing market potentials for new stores or expansion of present
stores),
(c) surveys of customer buying patterns to measure Sears competitive position in each region and
product group,
(d) experiments to evaluate alternative pricing levels,
(e) analysis of product movement data to estimate acceptance of new products of fashion items,
(f) new product concept and market testing,
(g) studies of the effectiveness of media advertising (television and local print advertising)
(h) testing alternative formats and layouts for catalogs, as well as evaluating different catalog
distribution methods,
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(i) studies of the effectiveness of media advertising (television ad local print advertising),
(j) life style research to help anticipate changing product requirements.
These are only illustrative, but help to reveal the scope—and excitement of marketing research. In the
context of this equation, the instructor may also ask how the organization can make decisions in this area
without marketing research. Sears Roebuck established Indiana University’s school of Business’s center for
Education and Research in Retailing in the mid 1990s. It sponsors research projects in retailing.
2.
Students should understand how marketing research can make a contribution to clarifying and
resolving issues and choosing between the decision alternatives present in each stage of the Marketing
Planning Process.
(a) Situation analysis. This involves understanding how the organization fits into its market
environment. Both primary and secondary information can be used to identify the threats and
opportunities facing an organization. These include socio economic trends, data available from the
Census, industry information, customer research on why they buy or use the organization’s
product or service and/or competitive offerings, sales force input on the competition or channel
concerns and trade association data.
(b) Strategy development. This involves combining external marketing research with internal
organizational objectives. Selection of a served market should reflect what market the business is
well positioned to serve. Insights into this question can be obtained by conducting customer
research and analyzing competitive strengths and weaknesses in product offerings, distribution
channels, customer loyalty and so on. Research can help select the served market segment by
revealing gaps between customer preferences and competitive offerings. Marketing Research in
Action 1-2 is a good example of how a consumer packaged goods (CPG) company studied
consumer trends to launch bottled water.
(c) Marketing program development. This involves using marketing research to support specific
management decisions. The decisions listed in Table 1-2 could be supported by research as
follows:
(i) Segmentation decisions. A bank could gain insights into this question by conducting a
survey of all retail bank customers in the area being served by the bank. Information on
banking patterns, benefits sought, satisfaction with present branch and classification
information could be obtained to address this need.
(ii) Product features decisions. These often involve trade-offs between price and type of
features. Also, there are many possible combinations of features. Surveys of customer
preferences for combinations of features are useful here.
(iii) Distribution decisions. Useful information on the appropriate type of retailer can be
obtained from industry trade association statistics on trends in the type of retailers. Is
one type replacing another?
(iv) Choice of advertising appeal. The choice is often made on the basis of the results or a
more or less realistic experiment comparing the ability of alternative appeals to change
attitudes or influence behavior.
(v) Personnel selling decisions. Usually high potential customer types for a particular product
can be described using socioeconomic and demographic data available from the Census.
The relationship between product usage and these variables may be obtained from a
survey of present and prospective customers.
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(vi) Price decisions. The type of trade-off analysis used to identify product features can also
be used to choose among alternative price levels for particular sets of product features.
(d) Implementation. This involves controlling the marketing program. Analyzing actual sales results
with marketing objectives to determine product/service acceptance on a variety of dimensions
including price, advertising, product/service feature, etc. In addition, the sales force can provide
valuable input in the reaction of retailers or distribution to the new product or service.
3.
Ethical problems that marketing researchers face in designing and conducting field studies stem from
the potential to abuse the rights of respondents. Marketing Research in Action 1-5 discusses the code
of ethics of the marketing research association. Students should be encouraged to read the code in
order to be able to appreciate the importance and relevance of ethics in marketing research. Some
issues that would present the conscientious researcher with an ethical dilemma are:
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Deciding how much to reveal to respondents about the research without jeopardizing the research
objectives. This could rise in product testing in which the research wants to judge product
acceptance by conducting simulated product tests in which the identical product is tried by the
respondent except for variations in characteristics such as color that have no influence on product
quality;
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The need to code respondent answers for subsequent analysis vs. promising anonymity to the
respondents;
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The trade-off between gaining respondent cooperation and revealing the true duration of a lengthy
interview;
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Withholding information on the purpose and sponsorships of the interview in order to ensure
respondents answers remain unbiased;
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Misrepresenting the compensation or not mentioning to a respondent that a follow up interview
will be made in order to gain cooperation.
4.
Much marketing research information is used directly to formulate and evaluate strategic alternatives
at the business level, and evaluate new opportunities at the corporate level. By having marketing
research report to a senior planning executive, the resulting research is more likely to be responsive to
strategic requirements and take a long-run perspective. Obviously, this arrangement does not provide
adequately for short-term information requirements, such as territorial sales analyses or advertising
campaign evaluations. Thus, it is desirable to have a separate group at a lower level in the organization
with responsibility for these requirements.
5.
Virtually all research users will at some time use the services of outside research specialists. This will
be discussed further in Chapter 3. Some factors affecting the choice of whether a firm will contract out
a research study or do it themselves are: the skill or experience level of internal personnel, the time
constraint of the projects, the confidentiality of the projects, the facilities required to conduct the
research, the intended use of research results and the cost of using internal vs. external researchers.
6.
Marketing research directed toward strategy development answers three critical questions: what
business should we be in? How will we compete? What are the objectives for the business?
Programs embrace specific tasks, such as developing a new product or launching a new advertising
campaign. An action program usually focuses on a single objective in support of one element of the
overall business strategy. This is where the bulk of ongoing marketing research is directed.
7.
a. Factors that influence marketing research decisions: relevance, type and nature of information
sought, timing, availability of resources, and cost-benefit analysis.
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b. A marketing research company should avoid ethical issues: violating client confidentiality, improper
execution of research.
c. Generally, the factors that influence a manager’s decision to use research information are: research
quality, conformity to prior expectation, clarity of presentation, political acceptability within the firm,
challenge to the status quo.
8. The equipment has been made and the target market determined, so marketing research for program
development is needed here. Marketing research should help make decisions in the following areas:
segmentation, product, distribution, advertising and promotion, personal selling, price, branding,
customer satisfaction.
9. From the sponsor’s point of view, it depends on the purpose for which the research was initiated in the
first place. If the very purpose of the research is for an unethical purpose like publishing false or highly
exaggerated advertisements, a written code of ethics cannot stop the sponsor. Sponsors could also use
research as a tactic to get a foot in the door of prospective customers and then use the opportunity to
launch a sales pitch.
From the supplier’s point of view, the information collected while conducting research is
supposed to be confidential. However, in some instances they could be tempted to use that to their own
benefit. It may also not be possible for all individuals to overcome their personal biases while
conducting research and this could have an impact on the results.
Supplementary Exercise: Coke’s Brand Loyalty Lessons*
The instructor who wants to discuss the potentials and limitations of marketing research will find the
following background information useful to share with the class.
Marketers battling to keep competitors from grabbing off customers complain that there just doesn’t
seem to be as much loyalty around as there used to be. Yet when Coca-Cola Co. dared to tamper with a 99year old formula to bring out a “new” Coke, outraged U.S. consumers quickly forced the red-faced
company to bring back the old brand. Coke’s abrupt about-face, front-paged and prime-timed, raises
questions about brand loyalty that every marketer has to ponder: how companies get it, how they keep it,
and which products inspire such fierce loyalty that they’re best left old and unimproved.
Brand loyalty—that certain something that makes a consumer keep buying over and over again—is an
exclusive quality. It begins with the customer’s preference for a product on the basis of objective reasons—
the drink is sweeter, the paper tower more absorbent. The brand name is the customer’s guarantee that he
will get what he expects. But when a branded product has been around along time and is heavily advertised,
it can pick up emotional freight: it can be come part of a person’s self-image or summon fond memories of
days gone by.
The sense of emotional attachment was palpable among consumers who for years had agreed with
Coca-Cola that “Coke is it.” They wanted the Real Thing they had grow up with and in some cases grown
old with. They inundated Coca-Cola’s Atlanta headquarters with protests (“Dear Chief DoDo: What
ignoramus decided to change the formula of Coke?”). In Seattle strident loyalists calling themselves Old
Coke Drinkers of America laid plans to file a class action suit against Coca-Cola. The searched out shop
owners, vending machines owners, and others who claimed that the company’s formula change had cost
them business. When June sales didn’t pick up as the company had expected, bottlers too demanded old
Coke’s return-fast.
Coke thought it had moved cautiously in deciding to retire the old formula. The company spent about
$4 million to taste-test the new pop on nearly 200,000 customers. The tests took many forms. Some were
blind tests without the emotion laden brand name attached to them. Others posed questions such as: What if
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this were a new Coke taste?” But Coca-Cola never disclosed that the product it was testing would replace
the old favorite entirely.
So, while it learned that more people liked the new, sweeter formula than the old, it failed to gauge
how people would react once they learned that old Coke was being replaced. Dennis Rosen, who teaches
marketing at Indiana University’s Graduate School of Business thinks Coca-Cola unwittingly ran afoul of
too many fond memories. “Tastes tests,” he says, “don’t take into account people’s childhoods. Now that
consumers are drinking out of cans labeled new Coke, naturally there is an emotional backlash.”
When the new Coke hit the shelves in the U.S., in April, consumers felt that the company had broken
the first promise of branding; that what you get today will be what you got yesterday. “All of the time and
money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep
and abiding emotional attachment to original Coca-Cola,” says Donald R. Keough, Coke’s president and
chief operating officer. He adds, “Some critic will say Coca-Cola made a marketing mistake. Some cynic
will say that we planned the whole thing (for the publicity value). The truth is we are not that dumb and we
are not that smart.”
Many marketing experts are sympathetic with Coke’s giant mis-step. “All research on brand loyalty is
flawed,” says John O’Toole, chairman of the Chicago based advertising agency, Foote, Cone and Bedding,
“because you can’t get at people’s private motivations. In any kind of interview or questionnaire, they want
to seem sensible and prudent. They aren’t going to tell you how they feel.” In Coca-Cola’s case,
consumer’s feelings were not only unfathomable but fickle too. The company’s research after the new
formula hit the supermarket shelves showed a curious turn-around. Before May 30, 53% of shoppers said
they liked new Coke, the rest said they didn’t. In June the vote began to change, with more than half of all
the people surveyed saying they didn’t care for the new Coke. Says a Coke spokesman: “We had taken
away more than the product Coca-Cola. We had taken away a little part of them and their past. They said,
“You had no right to do that. Bring it back.” By the time the company decided it had erred in changing the
formula, only 30% of the 900 consumers surveyed every week answered that they liked the new Coke.
With the old formula reintroduced as Coca-Cola Classic, complete with old-fashioned script logo,
shoppers will now find six kinds of Coke on U.S. supermarket shelves—new, classic, caffeine-free, diet,
diet caffeine-free, and cherry. One more variety, the New York Daily News noted, and Coca-Cola “will
have seven up.” Softdrink experts believe that the welter of Cokes will give the company a tough time
keeping a dear identity in shoppers’ minds. Some Coke executives are said to share that fear, although
Chief Executive Roberto C. Goinzueta called the line-up a “megabrand” and a marketing plus.
He might be right. Other products come in a variety of forms with no evident consumer befuddlement;
Marlboro comes to mind, with its king-size and longs and low-tar lights in boxes and soft packs. Goinzueta
believes his megabrand gives the company an edge in supermarkets, where he who grabs the most shelf
space wins. Wall Street seemed to share his confidence: stock priced jumped $5.50, closing at $73.75 a
share.
Some consumers are quite capable of a kind of purchasing polygamy: they can be, and often are,
faithful to more than one brand at a time. The phenomenon, known as brand-cluster loyalty, has long been
common in the soft drink aisle, and Coke in all its multiple guises is in the same brand cluster with Pepsi
and all its variations, “in lots of stores, Coke and Pepsi are on special during alternate weeks,” says Allen
Rosenshine, president of the ad agency BBDO International, so, a lot of people switch back and forth
regularly-even though they buy only Coke and Pepsi, and wouldn’t buy any other colas,” Pepsi executives,
who have been crowing over Coke’s embarrassment—Pepsi Cola USA President Enrico calls the new
Coke “the Edsel of the 1980’s”—might pause to consider that Coca-Cola now has more entries in that cola
cluster.
For companies intent on changing a product without stirring up the natives, brand-loyalty pundits offer
some advice First, some products are safer to change than others. Brand loyalties seem to be most intense
with products that are ingested or dose to the skin; a study by the Ogilvy and Mather ad agency found that
men care about brand name on their underwear than on their ties. The more closely a brand is bound to a
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person’s image of himself, the more likely he will be to resist any change in it. This might be called the “I
use this, this is me” principle, and it applies to things like cigarettes, perfume, and beer, all personal items
that their users associate with particular ideas about status or even personality. It’s not for nothing that
Marlboro is the U.S. market leader in the high-loyalty cigarette category: the macho image of the Marlboro
Man speaks volumes about how certain smokers see themselves.
Another high-loyalty market leader is Budweiser. “Anheuser-Busch would drop dead before they’d put
‘new and improved’ on that product,” says Charlotte Beers, chief executive of the Chicago ad agency,
Tatham-Laird and Kudner. “Tradition is a big part of its appeal.” Having the biggest market share, as
Marlboro and Bud do, is helpful in establishing brand loyalty, simply because many people are most
comfortable buying something that a lot of other people buy. But less ubiquitous products still attract
ferocious loyalty. Asks Beers, “Can you imagine a new and improved Chanel No. 5?”
In their quest to make sense of the emotional side of brand loyalty, some marketers have devised quasiscientific systems for measuring it. One of these is a model, in the form of a grid, that Foote, Cone and
Belding uses to pinpoint how emotionally involved a customer is likely to be with a given purchase. The
higher the level of involvement, the stronger the brand loyalty—and the more hazardous it is to trumpet a
big change in the product. At one end of the scale are products like hair coloring, where involvement is
high partly because of the elements of risk: you’d best get it right the first time, or buy lots of hats!
According to John O’Toole of Foote, Cone and Belding, consumer’s loyalty to Clairol, A Foote Cone
client, is “amazingly high.”
At the other extreme, in this model, are products like cat litter, paper towels, and clothes pins, which
are designed to get boring tasks done as inexpensively as possible. With these humdrum products, most
consumers switch back and forth between brands with abandon, picking up whatever’s on sale—although
some will pay for quality when they come across a brand that they believe does the job better than any
other. In any research designed to measure loyalty, cautions Morgan Hunter, vice chairman of Marketing
Corp. of America, a Westport, Connecticut marketing firm, it is important not to confuse a stated
preference with what consumers actually do when they’re in the store. They may not actually buy the brand
they say they prefer if it costs too much more.
Marketers agree that food products, especially those that have been around a long time, are among the
riskiest to “improve,” as Coca-Cola has discovered the hard way. “You can make small improvements, but
watch out,” says Charlotte Beers. “Velveeta cheese, for example, has a distinct taste, but more than that, it
is a part of childhood for a lot of people—the way it stirs and mixes and melts. It would be very risky to
change any of that.” If you must alter a product that reminds consumers of their childhood days, brandloyalty experts say, change it without a lot of hoopla.
Whether Coca-Cola could have gotten away with changing quietly is unknown. It might have
succeeded had the change been less noticeable, as it was in Canada. When new Coke was introduced in
Canada, shipments of concentrate reportedly jumped 42% in the first seven weeks over the year-earlier
period. A Coke spokesman also notes that Canadians have less emotional attachment to Coke. Much of
Coca-Cola’s U.S. advertising has been steeped in Americana.
Over the past few years, marketers have worried that generic and other bargain products were making
brand loyalty a thing of the past among increasingly savvy and recession-weary consumers. An annual
study by the ad agency Needham, Harper and Steers asks 4,000 heads of households, half of them men and
half women, whether they agree with the statement: “I try to stick to well-known brand names.” The
percentage who answer “yes” had dropped from 77% in 1975 to 61% this year. Coke’s debacle has shown
decisively that, for some products at least, consumers would still rather fight than switch.
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