chapter 7

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter 7Chapter 7

Marketing Research Decision-Support

Systems, and Sales Forecasting


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Chapter ObjectivesChapter Objectives1. Describe the development of the marketing research

function and its major activities.2. List and explain the steps in the marketing research

process3. 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.


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In this advertisement H&R Block uses one numerical

statistic, generated by Marketing Research, to

make a point.


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The Marketing Research FunctionThe Marketing Research Function

Marketing research: the process of collecting and using information for marketing decision-making

Development of the Marketing Research Development of the Marketing Research FunctionFunctionFirst organized marketing research project done

by N.W. Ayer in 1879First 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


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L'Oreal KidsUsing Marketing

Research to Match New Products to Potential Customers.

The Tangle Free Shampoo and the Bottle Design Resulted From Research Among Mothers and Children.


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Who Conducts Marketing ResearchWho Conducts Marketing ResearchThe 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


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Types of questions Marketing Research can help answer.


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“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.

Products& Services Info Press Search MRI+

MRIInteractive MEMRI

StaffDirectory

Top-LineReports


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Age Influences on ConsumptionAge Influences on ConsumptionAge Influences on ConsumptionAge Influences on Consumption

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18-24 25-34 35-44 45-54 55-64 65+ProductsTequila 156 174 115 57 64 5Scotch 44 66 98 143 119 137Laptop/notebook 94 115 124 139 98 15Doctor visits 74 88 91 107 110 135

ActivitiesBarbecuing 69 116 139 130 82 32Aerobics 171 140 118 99 28 18Cruise ship 60 80 95 114 144 121Volunteer work 75 96 117 121 97 82

100 = Average level of use, purchase, or consumptionSource: Mediamark Spring 1997 (New York: Mediamark Research, Inc., 1997).


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Age Influences on ConsumptionAge Influences on ConsumptionAge Influences on ConsumptionAge Influences on Consumption

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18-24 25-34 35-44 45-54 55-64 65+ShoppingMontgomery Ward 91 87 106 94 117 110The Gap 217 140 85 82 52 26Dominos Pizza 161 132 124 80 52 30Marie Callenders 77 80 105 135 110 96

MediaReader’s Digest 64 75 96 109 119 144Rolling Stone 290 158 93 46 14 2MTV 286 153 81 42 22 16CNN 73 93 99 114 117 107

100 = Average level of use, purchase, or consumptionSource: Mediamark Spring 1997 (New York: Mediamark Research, Inc., 1997).


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Full-Service Research SuppliersOrganizations that contract with clients to

conduct complete marketing research projects


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Limited-Service Research SuppliersA marketing research firm that specializes in

selected activities like:Field or telephone interviewsData-processingFocus groups

Customer Satisfaction Measurement ProgramsProcedure for measuring customer feedback

against customer satisfaction goals and developing a plan of action for improvement


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The The Marketing Marketing Research Research ProcessProcess


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ShellShell Followed

the Marketing Research Process to develop its “Count on Shell” Campaign


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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.


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Step 1: Define the ProblemStep 1: Define the ProblemAvoid confusing symptoms of a problem with

the problem itselfThe problem(s) should be agreed upon by

all concerned partiesDoing 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-too-common tendency to spend resources attempting to answer “interesting, but not necessary” questions


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Step 2: Conduct exploratory researchStep 2: Conduct exploratory researchAn 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 DataThree commonly available sources of

valuable internal data are sales records, financial statements, and marketing cost analyses.


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Step 3: Formulate a HypothesisStep 3: Formulate a HypothesisHypothesis: 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


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Step 4: Create a Research DesignStep 4: Create a Research DesignResearch 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


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Step 5: Collect DataStep 5: Collect DataSecondary data is data from previously

published or compiled sources (e.g. Census data)

Two important advantages of secondary data:Almost always less expensive to gatherLess time is usually necessary to locate

and use itPrimary 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


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Primary Research Methods Primary Research Methods Slide 1 of 2Slide 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.


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Primary Research Methods Primary Research Methods Slide 2 of 2Slide 2 of 2

Experimental Method. Least-used method for collecting primary data. Most common use of this method by marketers is test-marketing. 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.


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Levels of MeasurementLevels 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.


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ObjectivesObjectives

Characteristics of questionnaire items Distinguish between single-item measures versus

composite scales, “batteries of items.” Qualities of measurements

ValiditySensitivityReliability and error

Examples of scales used in marketing research


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BASIC QUESTION-RESPONSE FORMATSBASIC 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


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Open-Ended Response FormatOpen-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?


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Closed-Ended Response FormatClosed-Ended Response Format

Dichotomous: Only two choicesGood for qualifying items, screening

questions

Multiple category: More than two choices


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Who is your major wholesaler?Who is your major wholesaler?

Affiliated Foods (1)

Topco (2)

Fleming Foods (3)

Other (4)

Closed-ended item that is nominally coded.


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Scaled-Response Format QuestionsScaled-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.


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Likert item:Likert item: LabeledLabeled People should shop at local merchants even though the prices may People should shop at local merchants even though the prices may

be significantly higher.be significantly higher.

1 . . . . . . 2 . . . . . . 3 . . . . . . 4 . . . . . . 5

Stronglydisagree

NeutralDisagreeStrongly

agreeAgree

Numeric differential item: Unlabeled Paying higher prices at local merchants...

1 . . . . 2 . . . . 3 . . . . 4 . . . . 5 Showsintelligence

Showsignorance


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Single-items adequate for Single-items adequate for measurement?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.


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Composite, or Multiple-Item ScalesComposite, 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.


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Semantic Differential ScaleSemantic Differential Scale

Indicate your impression of shopping at Dillard’s by checking the box corresponding to your opinion for each pair of descriptions.

Good valueUnfamiliar brandsDistinctive fashionLow qualityHelpful staff

Poor valueBest brandsNo fashionHigh qualityNo staff


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VALIDITY AND RELIABILITY OF MEASUREMENTSVALIDITY 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.


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Step 6: Interpret and Present Research Step 6: Interpret and Present Research InformationInformationFindings must be presented to decision-

makers 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


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The Research Report and Presentation: Linking the Study and the Research User


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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.


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How and why can marketing research help to prevent failures of new businesses and new products?

Class Discussion


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Marketing Research MethodsMarketing Research Methods


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Secondary Data CollectionSecondary Data CollectionGovernment Data

Nation’s most important source of marketing data

Most frequently used government statisticsCensus information available at no chargeTIGER System: Topographically

Integrated Geographic Encoding and Referencing SystemThe system combines topographic

features like railroads, highways, and rivers with census data such as household income figures


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Persuading People to Participate in Census 2000


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Secondary Data CollectionSecondary Data CollectionOnline 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


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Bureau of Labor Statistics


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Sampling TechniquesSampling TechniquesSampling: 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


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Probability sample: sample that gives every member of the population a known chance of being selectedSimple 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


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Non-probability sample: arbitrary grouping that produces data unsuited for most standard statistical testsConvenience 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


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Primary Research TechniquesPrimary Research TechniquesObservation 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


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Observation research results in new products


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Survey MethodTelephone Interviews

An inexpensive and quick method for obtaining a small quantity of relatively impersonal information

Relatively high response ratesLimitations include:

Only simple, clearly worded questions draw appropriate responses

Personal information difficult to obtain Respondents can’t view pictures


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Survey MethodPersonal Interviews

Best means for obtaining detailed information about consumers

Interviewer can explain confusing or vague questions

Offer Good FlexibilityLimitations:

Slow Expensive


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Survey MethodFocus 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


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Survey MethodMail Surveys

Cost EffectiveProvides anonymity that may encourage

respondents to give candid answersLimitations 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


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Survey MethodOnline Surveys and Other Internet-Based

MethodsGrowing 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


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Survey MethodExperimental 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


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DryelUsing the

Experimental Primary Research Method: P & G Test Marketed Its New Product Category – Dryel Home Dry-cleaning in Columbus, Ohio and in Ireland


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Conducting International Marketing ResearchConducting International Marketing ResearchAs 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 CommerceForeign Economic Trends and Their

Implications for the United StatesOverseas Business Reports


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Computer Technology in Marketing Computer Technology in Marketing ResearchResearch

Marketing Information System (MIS)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


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Marketing Decision Support SystemMarketing 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


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Functions of an MDSS


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Data MiningData MiningThe process of searching through computer

files to detect patternsThe data is stored in a huge database called

a data warehouseCan be an efficient way to make sense of

huge amounts of dataCan 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


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Sales ForecastingSales Forecasting

Estimate of company revenue for a specified future period.Qualitative Forecasting TechniquesQuantitative Forecasting Techniques


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Qualitative Forecasting TechniquesQualitative Forecasting TechniquesThese 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


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Techniques Benefits Limitations

Jury of executive Jury of executive opinionopinion

Opinions come from executives in many different departments; quick; inexpensive

Managers may lack sufficient knowledge and experience to make meaningful predictions

Delphi techniqueDelphi technique Group of experts can accurately predict long-term events such as technological breakthroughs

Time-consuming; expensive

Sales force Sales force compositecomposite

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 Survey of buyer intentionsintentions

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; time-consuming; expensive


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Quantitative Forecasting TechniquesQuantitative Forecasting TechniquesThis method uses statistical computations

such as trend extensions, computer simulations, and economic models.Market Tests

Trend Analysis

Exponential Smoothing


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Techniques Benefits Limitations

Market testMarket test Provides realistic information on actual purchases rather than on intent to buy

Alerts competition to new product plans; time-consuming; expensive

Trend analysisTrend analysis Quick; inexpensive; effective with stable customer demand and environment

Assumes the future will continue the past; ignores environmental changes

Exponential Exponential smoothingsmoothing

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

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