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Chapter 7 Marketing Research Decision-Support Systems, and Sales Forecasting Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter Objectives 1. Describe the development of the marketing research function and its major activities. 2. List and explain the steps in the marketing research process 3. Differentiate between the types and sources of primary and secondary data. 4. Explain the different sampling techniques used by marketing researchers. 5. Identify the methods by which marketing researchers collect primary data. 6. Discuss the challenges of conducting marketing research in global markets. 7. Outline important uses of computer technology and marketing research. 8. Identify the major types of forecasting methods and explain the steps in the forecasting process. 7-2 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. In this advertisement H&R Block uses one numerical statistic, generated by Marketing Research, to make a point. 7-3 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Marketing Research Function Marketing research: the process of collecting and using information for marketing decision-making Development of the Marketing Research Function First organized marketing research project done by N.W. Ayer in 1879 First commercial research department in the U.S. established by Charles C. Parlin for the Curtis Publishing Co. in 1911 Parlin counted soup cans in garbage to convince the Campbell soup Company that working-class families would buy canned soup 7-4 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. L'Oreal Kids Using Marketing Research to Match New Products to Potential Customers. The Tangle Free Shampoo and the Bottle Design Resulted From Research Among Mothers and Children. 7-5 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Who Conducts Marketing Research The size and organizational form of the marketing research function is typically tied to a given company’s structure Many firms depend on independent marketing research firms 7-6 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Types of questions Marketing Research can help answer. 7-7 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Products & Services Info Press Search MRI+ MRI Interactive MEMRI Staff Directory “Mediamark Research offers comprehensive demographic, lifestyle, product usage and exposure to all forms of advertising media collected from a single sample.” Source Mediamark Web Site. 7-8 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Top-Line Reports Age Influences on Consumption 4-1 18-24 25-34 35-44 45-54 55-64 Products Tequila Scotch Laptop/notebook Doctor visits 156 44 94 74 174 66 115 88 115 98 124 91 57 143 139 107 64 119 98 110 5 137 15 135 Activities Barbecuing Aerobics Cruise ship Volunteer work 69 171 60 75 116 140 80 96 139 118 95 117 130 99 114 121 82 28 144 97 32 18 121 82 100 = Average level of use, purchase, or consumption Source: Mediamark Spring 1997 (New York: Mediamark Research, Inc., 1997). 7-9 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 65+ Age Influences on Consumption 4-1 (II) 18-24 25-34 35-44 45-54 55-64 Shopping Montgomery Ward The Gap Dominos Pizza Marie Callenders 91 217 161 77 87 140 132 80 106 85 124 105 94 82 80 135 117 52 52 110 110 26 30 96 Media Reader’s Digest Rolling Stone MTV CNN 64 290 286 73 75 158 153 93 96 93 81 99 109 46 42 114 119 14 22 117 144 2 16 107 100 = Average level of use, purchase, or consumption Source: Mediamark Spring 1997 (New York: Mediamark Research, Inc., 1997). 7-10 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 65+ Full-Service Research Suppliers Organizations that contract with clients to conduct complete marketing research projects 7-11 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Limited-Service Research Suppliers A marketing research firm that specializes in selected activities like: Field or telephone interviews Data-processing Focus groups Customer Satisfaction Measurement Programs Procedure for measuring customer feedback against customer satisfaction goals and developing a plan of action for improvement 7-12 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Marketing Research Process 7-13 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Shell Shell Followed the Marketing Research Process to develop its “Count on Shell” Campaign 7-14 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Did eTrade conduct research to establish that there may be a need for their type of service? Based on their success it is safe to assume they did. 7-15 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Step 1: Define the Problem Avoid confusing symptoms of a problem with the problem itself The problem(s) should be agreed upon by all concerned parties Doing so helps to keep everyone concerned in agreement and to keep the project focused on solving the problem(s) Doing so also helps to prevent the all-toocommon tendency to spend resources attempting to answer “interesting, but not necessary” questions 7-16 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Step 2: Conduct exploratory research An Informal investigation seeking to discover the cause of a problem by discussing it with informed internal and external sources Can include evaluation of company records such as sales and profit analyses Can also include sales and profit analyses of competitors’ products Using Internal Data Three commonly available sources of valuable internal data are sales records, financial statements, and marketing cost analyses. 7-17 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Step 3: Formulate a Hypothesis Hypothesis: a tentative explanation for some specific event – a statement about the relationship among variables that carries a clear implication for testing this relationship Sets the stage for more in-depth research by further clarifying what researchers need to test Not all marketing research tests specific hypotheses 7-18 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Step 4: Create a Research Design Research design: a series of decisions that, taken together, comprise a master plan or model for conducting marketing research Must ensure that the study will measure what the marketer intends to measure Must also ensure an appropriate selection of respondents 7-19 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Step 5: Collect Data Secondary data is data from previously published or compiled sources (e.g. Census data) Two important advantages of secondary data: Almost always less expensive to gather Less time is usually necessary to locate and use it Primary data refers to data collected for the first time specifically for a marketing research study Primary data can provide richer, more detailed information than secondary data 7-20 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Primary Research Methods Slide 1 of 2 Observation Method. Researchers view the overt actions of the subjects. Survey Method. Ask questions to get information on attitudes, motives, and opinions. Researchers can use either interviews or questionnaires. A. Telephone Interviews. – A quick and inexpensive method for obtaining a small quantity of relatively impersonal information. B. Personal Interviews. – The Best means for obtaining detailed information about consumers C. Focus Groups. – Brings together 8 to 12 individuals in one location to discuss a subject of interest. – Usually encourages a general discussion of a predetermined topic. D. Mail Surveys. – Cost-effective alternative and also provide anonymity. – Help markets track consumer attitudes through ongoing research. – Response rates are typically much lower than for personal interviews. – Usually takes a long time to conduct. – Questionnaire cannot answer unanticipated questions that occur. – Researchers must worry about bias. 7-21 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Primary Research Methods Slide 2 of 2 Experimental Method. Least-used method for collecting primary data. Most common use of this method by marketers is testmarketing. Three Problems with test-marketing: Test-marketing is expensive. Competitors quickly learn about the new product. Some products are not well-suited to test-marketing. 7-22 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Levels of Measurement Nominal coded data: Ability to distinctly categorize, or conversely, allows the determination of equality. Ordinal coded data: Allows determination of magnitude, rank, greater or less than. Interval coded data: Captures the distance apart two or more respondents are with respect to an attribute. Ratio data possess a natural or absolute zero, indicating a true absence of a characteristic. Permits statements concerning the equality of ratios. 7-23 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives Characteristics of questionnaire items Distinguish between single-item measures versus composite scales, “batteries of items.” Qualities of measurements Validity Sensitivity Reliability and error Examples of scales used in marketing research 7-24 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. BASIC QUESTION-RESPONSE FORMATS Open-Ended Response Format Questions Unprobed Probed Format Closed-Ended Response Format Questions Dichotomous Multiple Category Scaled-Response Format Questions Labeled Unlabeled 7-25 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Open-Ended Response Format Unprobed: Unaided awareness: “List some competing brands of toothpaste. Store choice: “What grocery store receives the majority of your household’s purchases? Probed: “Can you think of anymore brands? “Are there anymore stores where you shop? 7-26 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Closed-Ended Response Format Dichotomous: Only two choices Good for qualifying items, screening questions Multiple category: More than two choices 7-27 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Closed-ended item that is nominally coded. Who is your major wholesaler? Affiliated Foods •(1) Topco •(2) Fleming Foods •(3) Other •(4) 7-28 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Scaled-Response Format Questions Labeled: All positions, especially mid-point and intermediate positions for the respondent are marked, or bear “labels” Unlabeled: No intermediate points are labeled, sometimes positions bear only numbers. 7-29 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Likert item: Labeled People should shop at local merchants even though the prices may be significantly higher. 1......2 ...... 3 ...... 4 ...... 5 Strongly disagree Disagree Neutral Agree Strongly agree Numeric differential item: Unlabeled Paying higher prices at local merchants... Shows ignorance 1.... 2 .... 3 .... 4 .... 5 7-30 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Shows intelligence Single-items adequate for measurement? Suppose an instructor had single-question exams? Suppose the ACT (or GMAT) had only 5 possible scores (similar to A,B,C,D,F grades)? Suppose the ACT had only 4 questions, 1 each for mathematics, English, reading comprehension, and science? These are the issues behind marketing research use of multiple-item scales. 7-31 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Composite, or Multiple-Item Scales Capture the sensitivity to the continuous nature of many subtle differences in between consumers. Simultaneously address concerns of: Accuracy: Just as a 25-question exam can ask questions evaluating the many topics covered in a course, multiple-item scale can ask the many subtle aspects that underlie a consumer attitude or behavior. Consistency: Though we do not administer the same surveys repeatedly to the same consumers, we strive to develop scales that consumers would provide consistent responses to over time. All relate to larger issue of measurement error. 7-32 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Semantic Differential Scale Indicate your impression of shopping at Dillard’s by checking the box corresponding to your opinion for each pair of descriptions. Good value Unfamiliar brands Distinctive fashion Low quality Helpful staff Poor value Best brands No fashion High quality No staff 7-33 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. VALIDITY AND RELIABILITY OF MEASUREMENTS Validity: Accuracy Conceptual Issue Face Validity Predictive Validity Reliability: Consistency Proportion of statistical error Test-Retest Inter-Item Correlation Increasing the number of questions (items) can increase both the validity and reliability of a scale. 7-34 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Step 6: Interpret and Present Research Information Findings must be presented to decisionmakers in a format that allows them to make effective judgments Cardinal rule of presenting marketing research requires that it assists decision-making rather than being an end in itself 7-35 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The Research Report and Presentation: Linking the Study and the Research User 7-36 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. The film industry is extremely competitive and blunders are costly. In order to enhance the success rate of a film producers can turn to marketing research. 7-37 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Class Discussion How and why can marketing research help to prevent failures of new businesses and new products? 7-38 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Marketing Research Methods 7-39 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Secondary Data Collection Government Data Nation’s most important source of marketing data Most frequently used government statistics Census information available at no charge TIGER System: Topographically Integrated Geographic Encoding and Referencing System The system combines topographic features like railroads, highways, and rivers with census data such as household income figures 7-40 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Persuading People to Participate in Census 2000 7-41 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Secondary Data Collection Online Sources of Secondary Data Cyberspace sometimes simplifies the search for secondary data A Web-based research project can cost less, and can yield significantly faster results than offline research Caveat Emptor should guide Internet searches for secondary data 7-42 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Bureau of Labor Statistics 7-43 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Sampling Techniques Sampling: the process of selecting survey respondents or other research participants Population (universe): total group that researchers want to study Census: a collection of data on all possible members of a population or universe 7-44 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Probability sample: sample that gives every member of the population a known chance of being selected Simple random sample: basic type of probability sample in which every individual in the relevant universe has an equal opportunity of selection Stratified sample: probability sample constructed to represent randomly selected sub-samples of different groups within the total sample Cluster sample: probability sample in which researchers select geographic areas or clusters, and all of the chosen individuals within this area become respondents 7-45 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Non-probability sample: arbitrary grouping that produces data unsuited for most standard statistical tests Convenience sample: nonprobability sample selected from among readily available respondents Quota sample: nonprobability sample divided to insure representation of different segments or groups in the total sample 7-46 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Primary Research Techniques Observation Method Researchers actually view, or watch, the overt actions of the research subjects Useful in helping to understand how consumers actually behave in certain situations Can be as simple as counting passing cars or as sophisticated as people meters recording household TV-viewing habits 7-47 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Observation research results in new products 7-48 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Survey Method Telephone Interviews An inexpensive and quick method for obtaining a small quantity of relatively impersonal information Relatively high response rates Limitations include: Only simple, clearly worded questions draw appropriate responses Personal information difficult to obtain Respondents can’t view pictures 7-49 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Survey Method Personal Interviews Best means for obtaining detailed information about consumers Interviewer can explain confusing or vague questions Offer Good Flexibility Limitations: Slow Expensive 7-50 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Survey Method Focus Groups A Focus Group is an information gathering procedure in marketing research that typically brings together 8 to 12 individuals to discuss a given subject Can provide quick and relatively inexpensive insights May not produce completely honest responses to questions 7-51 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Survey Method Mail Surveys Cost Effective Provides anonymity that may encourage respondents to give candid answers Limitations include: Typically low response rates Take a long time to conduct Questionnaires cannot answer unanticipated questions that occur to respondents as they complete the forms Complex questions may not be suitable Bias from nonresponse 7-52 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Survey Method Online Surveys and Other Internet-Based Methods Growing number of Internet users has sparked interest in going online to conduct surveys . . . and even focus groups Benefits include the lack of geographic restrictions, faster turn-around time, and dramatically lower costs Growth of the Internet is creating a need for new research techniques to measure and capture information about website visitors 7-53 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Survey Method Experimental Method Scientific investigation in which a researcher manipulates test group(s) and compares the results with those of a control group that did not receive the experimental controls or manipulations The most common use to date has been test marketing Major problem with controlled experiments comes from the failure to account for all variables in a real-life situation Expensive to conduct 7-54 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Dryel Using the Experimental Primary Research Method: P & G Test Marketed Its New Product Category – Dryel Home Drycleaning in Columbus, Ohio and in Ireland 7-55 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Conducting International Marketing Research As corporations expand globally, they need to gather knowledge about consumers in other countries The basic steps are the same as for domestic studies, however, face some different challenges A major secondary information source is the U.S. Department of Commerce Foreign Economic Trends and Their Implications for the United States Overseas Business Reports 7-56 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Computer Technology in Marketing Research Marketing Information System (MIS) A planned, computer-based system designed to provide managers with a continuous flow of information relevant to their specific decisions and areas of responsibility 7-57 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Marketing Decision Support System (MDSS) Consists of computer software that helps users quickly obtain information and apply that information in a way that supports marketing decisions An MDSS can create simulations or models to illustrate the likely results of changes in marketing strategies or marketing conditions 7-58 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Functions of an MDSS 7-59 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Data Mining The process of searching through computer files to detect patterns The data is stored in a huge database called a data warehouse Can be an efficient way to make sense of huge amounts of data Can help create customer profiles, pinpoint reasons for customer loyalty or the lack thereof, analyze the potential returns on changes in pricing or promotion, and sales forecasts 7-60 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Sales Forecasting Estimate of company revenue for a specified future period. Qualitative Forecasting Techniques Quantitative Forecasting Techniques 7-61 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Qualitative Forecasting Techniques These techniques rely on subjective data that repots opinions rather than exact historical data. Jury of Executive Opinion Delphi Technique Sales Force Composite Survey of Buyer Intentions 7-62 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Techniques Benefits Limitations Jury of executive opinion Opinions come from executives in many different departments; quick; inexpensive Managers may lack sufficient knowledge and experience to make meaningful predictions Delphi technique Group of experts can accurately predict long-term events such as technological breakthroughs Time-consuming; expensive Sales force composite Salespeople have expert customer, product, and competitor knowledge; quick; inexpensive Inaccurate forecasts may result from low estimates of salespeople concerned about their influence on quotas Survey of buyer intentions Useful in predicting short-term and intermediate sales for firms that serve only a few customers Intentions to buy may not result in actual purchases; timeconsuming; expensive 7-63 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Quantitative Forecasting Techniques This method uses statistical computations such as trend extensions, computer simulations, and economic models. Market Tests Trend Analysis Exponential Smoothing 7-64 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Techniques Benefits Limitations Market test Provides realistic information on actual purchases rather than on intent to buy Alerts competition to new product plans; timeconsuming; expensive Trend analysis Quick; inexpensive; effective with stable customer demand and environment Assumes the future will continue the past; ignores environmental changes Exponential smoothing Same benefits as trend analysis, but emphasizes more recent data Same limitations as trend analysis, but not as severe due to emphasis on recent data 7-65 Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.