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Revision Session: Suggested Answers
Module: Marketing Research- June, 2011Time: Weeks 16 -17
Day 1:
Case Question 1: Theme Park (Jun 2009 - M 10)
June 2009 Examiner's Solution
Case 1 Answer Base
1. Explain to the managers of the theme park the value they might derive from multivariateregression analysis of the data.
(15 marks)
The relevant module isModule 10.
Multivariate regression analysis will help the managers of the theme park to identify
what factors are important to customers during their visit to the theme park and the
relative contribution of these key factors to the development of customer satisfaction.
So, for example, multivariate regression analysis can show whether queue managementactually affects customer satisfaction and to what extent compared with other variables,
e.g. staff friendliness.
Multivariate regression analysis allows the development of a predictive equation which
shows what changes in overall customer satisfaction may be anticipated as a result of, for
example, initiatives to reduce queue waiting time. This will allow the theme park
managers to gauge future investment priorities, if development of increased levels of
customer satisfaction is a key business objective.
The use of interval scales in the market research study allows the use of the multiple
regression procedure for the analysis of the theme park market research data.
Multiple regression analysis finds the weighted linear combination of independent
variables, e.g. queue management, safety, etc., that has the maximum correlation with
the dependent variable, which is overall customer satisfaction.
In undertaking this analysis, clearly the value of information produced is very much
dependent on inclusion of the independent variables in the market research questionnaire.
A good student answer will note that if there is doubt that the set of independent variables
researched is not fully inclusive in terms of what is important in delivering customer
satisfaction in a theme park environment, it may justify qualitative research to identify
what these key variables are. If other variables are at work, then the quantitative researchmust be re-commissioned.
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2. Are these data helpful in determining investment priorities to increase customersatisfaction levels in future? Explain your reasoning.
(15 marks)
The regression function takes the form
Y = a + b1 X1 + b2 X2 + + b n X n
The computer output suggests the following equation for customer satisfaction:
Customer satisfaction = 1.0 + (0.6 Queue management) + (0.3 Staff friendliness)
(0.3 Security procedures)
So, for example, for every scale point that queue management increases, holding other
variables constant, customer satisfaction levels increase by 0.6 units.
A good student answer will note that, interestingly, for every scale point increase insecurity procedures, customer satisfaction decreases by 0.3 units.
To understand whether these variables are statistically significant, it is necessary to test
the significance of the regression coefficients. The individual values of the t-statistic for
each of the variables can be compared with the critical t-statistic at the 5% level ofsignificance, i.e. 1.96.
Since the calculated t-statistic for queue management (2.73) and staff friendliness (2.50)
are greater than the critical t-value of 1.96 at the 5% level of significance , it is
concluded that both queue management and staff friendliness are statistically related to
customer satisfaction.
In considering future investment priorities, improved queue management is likely to
have more impact on customer satisfaction than programmes to increase staff
friendliness. This of course only holds in the current equation. The values of the
coefficients will all change when safety is excluded.
A good student answer will note that security procedures are observed to have a
negative effect on customer satisfaction, but that the findings are not statistically
significant at the 5% level and, therefore, security procedures should be excluded from
the regression equation. The regression analysis should be run again and the variablestested for statistical significance.
As noted above only queue management, staff friendliness and security procedures have
been considered in the multiple regression analysis. If it is the case that other unidentified
variables affect customer satisfaction (and the adjusted R square would tend to
support this thinking as it suggests that only 40% of the variation in customer
satisfaction is explained by queue management, staff friendliness and security
procedures), then the theme park managers should investigate what these other variables
might be and their relative impact on customer satisfaction levels.
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To do so the theme park managers should undertake qualitative research (to identify the
key variables) and then commission a further quantitative study to provide ratings across
all variables together with measures of customer satisfaction.
June 2009 Selected Student Answer
Case 1 Solution: Theme Park
1. Explain to the managers of the theme park the value they might derive from multivariateregression analysis of the data.
Multivariate regression analysis (MRA) is a statistical method of finding whether there is
a relationship between independent and dependent variables. This is the equation formultivariate regression:
Y = b0 + b1 X1 + b2 X2 + b3 X3 + + b n X n
In this case, the MRA will find out the relationship between customer satisfaction with a
different set of independent variables, such as queue management, staff friendliness and
security procedures. If we find out, for example, that there is a relationship between
customer satisfaction and queue management and/or staff friendliness then the manager
might have to consider improving the queue management and staff friendliness, but if we
find out there is no relationship between customer satisfaction with security procedures
then we might consider trying to establish whether there are other independent variableswhich might affect or have a relationship with customer satisfaction.
Multivariate regression analysis helps to analyse the information and it is one of the
quantitative research technique. Also there is a need to explain the regression correlation
(r) which 1 < r< +1.
o r= 0 This means there is no relationship betweenx andy
o r 1 This means there is a relationship between x and y which means ifx
increases by 1 theny will increase by 1.
o r 1 This means there is a relationship between x and y which means ifx
increase by 1 theny will decrease by 1.
Suppose regression analysis, with customer satisfaction as the dependent variable,
produced the following output:
Aspects of
operation
Coefficient Standard error t-statistic
Queue management 0.6 0.22 2.73
Staff friendliness 0.3 0.12 2.50
Security procedures 0.3 0.27 1.11
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Constant 1.0
Adjusted R square 0.4
2. Are these data helpful in determining investment priorities to increase customer
satisfaction levels in future? Explain your reasoning.
In analysing the variable by using regression coefficient analysis we will first set:
o H0 = 0 (No relationship between x and y) In this case customer satisfaction and
either queue management/staff friendliness/security procedures
o HA 0 (relationship betweenx andy)
As % confidence level = 1.96
Degree of freedom = 17.1
t-statistic = 2.73 (for Queue management, 2.50 for Staff Friendliness, and 1.11 for
Security Procedures.
If we are using these data to analyse the regression coefficient then we can say that queue
management and staff friendliness have a relationship with customer satisfaction. It
means that if queue management is improved and staff are more friendly then there will
be increase in customer satisfaction.
However, to determine an investment we might have to consider other factors or
undertake other types of research because it may give information which will be more
accurate for the manager to make a decision.
First we might consider sample size because a bigger sample gives more accuracy. Also
we need to consider whether to use probability or non-probability sampling. In this casewe might use stratified sampling. Moreover, we have to design a proper questionnaire
which includes the preliminary considerations, age, sex, status, social and economy. Also
it have to provide closed-end and open-end question which will give more opportunity to
understand feelings and attitudes.
Then we have to conduct a survey which is one method of quantitative research but
before that we might have to provide a qualitative research in which we might set up a
focus group or in-depth interview to understand feelings and attitudes, and, then conduct
the quantitative research.
The survey can be postal survey, personal survey/interview or telephone survey. In thiscase, we might decide to use postal survey and personal survey.
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Day 2:
Case Question 1: Electronic Waste (December 2007 M10)
December 2007 Examiner's Solution
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Case 1 Answer Base
1. What does the market research tell us about the effectiveness of the Amnesty?
(15 marks)
The market research gives us only limited insight into the effectiveness of the Amnestybecause:
o the findings of the research study are not representative of the views, attitudes
and behaviour of the wider population of companies located in and around
Greenville; the marketing research undertaken by Marson Ltd was conducted
amongst only those companies taking part in the Amnesty event.
o the views of non-participants may be quite different to those of participants; it
may well be worthwhile to undertake a wider study to ascertain these.
The validity of the findings may be affected by the sampling method used. Sampling
errormay have arisen from, for example:
o The way the sample was drawn (for example, were there strict rules to interview
every nth visitor, or did interviewers have freedom to choose their
interviewees?)
o The layout of the site and the location of interviewers (for example, was there
more than one entry point to Marsons site or site office? Did large trucks use a
separate access point? Were all companies visiting the site on the day equally
likely to be interviewed or not? Were interviews evenly spread over the day or did
interviewers simply do their assigned quota and leave?)
o
Was the individual interviewed the right person to speak to about such matters?There is a big difference between the views of the van driver and those of top
management!
o The number and treatment of spoiled interviews.
o The level of supervision of the interviewers and whether attempts were made to
back-check a sample of the interviews.
In addition, the research undertaken on the Amnesty day may have been subject to non-sampling errors which may also have affected the validity of the research, for example:
o The market research was conducted by face-to-face interview but no information
is provided on whether these were undertaken by professionally trainedinterviewers were questions asked in a leading way? Were responses recorded
correctly?
o Did any tabulation errors arise during data input and analysis?
A good student answer will note that the focus of the market research is only on those
taking part in the Amnesty and, therefore, the key findings of the research can only be
considered in this context. The market research, therefore, tells us little about the
effectiveness of the Amnesty generally but, assuming satisfactory resolution of the
concerns relating to the potential for sampling and non-sampling error in the
implementation of the research, it is possible to draw some statistically sound conclusions
from the research. The richness of the analysis will depend largely on the questions asked
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and careful profiling of the companies participating in the research (details of which we
do not have). Of interest, for example, might be to analyse by type and size of company:
o type of equipment handed in
o average amount of equipment handed in
o distance travelled to the recycling site
o difference in awareness of recycling possibilitieso willingness to pay for disposal/recycling
o proportion of companies who clean own PC systems before hand-in
o proportion of companies seeking security reassurances
2. Is there a statistically significant association between size of company and awareness
that some electronic equipment can be recycled? Explain the implications of your
answer.
(15 marks)
A chi-square test can be used to test whether a statistically significant association exists
between size of company and awareness that some electrical equipment can be recycled.
The chi-square statistic is calculated by the formula:
where O i is the observed value and E i is the expected value, assuming in this case that
there is no difference between the backgrounds of respondents.
For a particular cell, the expected value is calculated as:
Awareness that some electronic equipment can be
recycled
Company size Not
aware
Aware Total
Large (O = observed) 862 288 1150
(E = expected) 759 391
Small (O = observed) 1018 682 1700
(E = expected) 1122 578
Total 1880 970 2850
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We hypothesise that there is no relationship between awareness that some electronic
equipment can be recycled and company size. The chi-square statistic at 1 degree of
freedom at the 5% level is 3.84 and because 69.46 > 3.84, the difference noted in the
sample is statistically significant.
The research findings indicate that 59% of small companies, and 74% of large
companies, are not aware that some electronic equipment can be recycled. The chi-squaretest reveals that the difference in awareness is statistically significant.
A good student answer will note the importance of this finding in terms of the methods
used to communicate recycling opportunities. It may well be the case that the
involvement of more people in waste management issues in larger companies makes
targeting of messages about recycling opportunities more difficult and that a multi media
strategy is required to reach all of the individuals concerned. On the other hand, this
research finding may reflect another problem in the way the sample was drawn for the
survey. In large companies waste management is likely to be a delegated responsibility;
the individual visiting the Marson site and interviewed on Amnesty day may be well
down the decision-making hierarchy and, therefore, not knowledgeable about suchmatters, i.e. their views cannot be held to be representative of those held by senior
management of the company.
December 2007 Selected Student AnswerCase 1 Solution: Electronic Waste
1. What does the market research tell us about the effectiveness of the Amnesty?
In conducting any marketing research it is always important to clearly define what the
objective of the research is. In the case in question, the aim of the amnesty was to
publicise that irresponsible disposal of electronic waste is bad for the environment and
that a lot of electronic equipment, particularly personal computers, can be recycled and
have second life market potential.
It was felt the electronic recycling companies could do much more to raise awareness of
proper disposal of electronic waste.
The method employed to conduct the research on the day of the amnesty was based on
face-to-face interviews. The market research informs us that all those interviewed felt the
amnesty was a good idea. However it must be noted that these were the persons who
attended and a good result of the research would have considered a population frame that
included other persons in the community who may have had a different view or a
suggestion not thought about by the recycling company.
A random sample was taken. However we are not sure of the questions on the structuredresearch questionnaire that were asked. The research appeared to be simply to confirm in
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the minds of the researcher that the amnesty was a good undertaking. Marketing research
must be undertaken to guide the decision of the manager and not simply to confirm what
one wants to do. The sample was taken from persons who handed in unwanted electrical
or electronic equipment on the day and this may have been a way of helping those
persons to get rid of obsolete equipment and not necessarily that their intentions
supported the objective of the researcher.
However the fact that 2850 companies handed in unwanted equipment is a success for the
company (Marson Ltd). But there is no knowledge of the population of persons
(companies) with unwanted equipment on hand.
The fact that 84% of the companies taking part were not aware that recycling was
available informs the researcher that there is a need for more advertising and possibly
promotional opportunities to ensure that the knowledge is more widespread.
55% of the companies felt that Marson Ltd could charge companies a small fee for
disposal and recycling raises an opportunity for a business venture for Marson Ltd and
the research may be considered effective to some level. However further research will benecessary. A combination of focus group and a more structured survey of companies,
possibly by mail (since companies are involved and these are busy people), or by mixing
with telephone interviews. While 55% is a notable number of persons, we must
remember that the interview was conducted on the day of the amnesty and only the
persons who were interested enough attended; and yet only 55% of those who attended
were of the view.
68% of companies sought assurance of hard drives being checked and cleaned before
recycling may be considered to give Marson Ltd extra work to be done and of course at a
cost. This would have to be evaluated further by the company to see whether that
consideration is one that they had thought about.
In conclusion, it is difficult to say whether the research was effective. As noted before,
marketing research must be undertaken in a structured manner and objectives must be
clearly defined to identify the information objective. Parameters must also be set before
research is undertaken. This is in respect to budget and related issues to the success of the
research. The entire process must be clearly planned including the sampling method and
the sample design. The population units and boundaries were previously touched on. The
analysis of the report is also important bearing in mind the objectives that were outlined.
The market research essentially does not tell us much about the amnestys effectiveness
because there are several unknowns in the equation.
2. Is there a statistically significant association between size of company and awarenessthat some electronic equipment can be recycled? Explain the implications of your
answer.
A chi-squared analysis of the data could be conducted to determine whether there is an
association between the two data groups. Based on the findings, a hypothesis can be
drawn. This is usually represented as follows:
HO no association
HA association
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An expected frequency can be calculated using the following formulae where:
The chi-square statistic can then be calculated using the following formulae where:
The chi-critical statistic is then calculated as follows d f (rows 1) (columns 1) where
dfrefers to degrees of freedom.
According to the information provided the chi-critical statistic at 1 degree of freedom at
the five percent level is 3.84.
Company size Not
aware
Aware Total
Large (O = observed) 862 288 1150
(E = expected) 758.5 391.4
Small (O = observed) 1018 682 1700
(E = expected) 1121.4 578.59
Total 1880 970 2850
Using the formulae for expected frequency:
Calculations
Calculations
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Chi statistic at one degree of freedom is 3.84.
According to the calculations with chi-squared statistic at 69.44 being higher than chi
critical at 3.84, a HA hypothesis can be drawn where there seems to be an association
between company size and awareness.
There needs to be greater communication between WEEE and companies. Suggest they
organise visits to all companies to inform of the standards and efforts to better ensure
compliance.
Day 3: Dec 2010 exam questions
Case Question 1: Fruity Juice Bubbles
December 2010 Examiner's Solution
Case 1 Answer
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1. Advise Pete Martin on how he might use focus groups to help develop a marketingstrategy for Fruity Juice Bubbles.
(20 marks)
The relevant module isModule 8.
It is appropriate to first consider what focus groups are and the general procedures used
in running focus groups, including the role of the moderator in facilitating the discussion
As far as process is concerned, the focus group method relies on self-reports from
individuals in a group situation which are moderated by a professional market researcher.
The group moderator uses a semi-structured, and sometimes unstructured, approach to
discussion of a subject a method designed to reveal respondents full flow of thought in
relation to the subject matter. The intention in focus group interviewing is not just to
ascertain what peoples overall views and opinions are, but also to understand why
people think, feel and behave in the way they do.
The different types of focus group are: exploratory, clinical and experiencing. As far as
Fruity Juice Bubbles is concerned, and in line with the aim of the research which is to
help guide the development of marketing strategy, developing a better understanding of
the target customer is vital. The exploratory or experiencing format looks to be most
appropriate. The focus groups will provide an opportunity for Pete to develop his
understanding of target audience motivations and purchasing patterns (how often to buy,
where to buy, purchase occasions, etc.), the product attributes considered to be most
important to the target audience (determinant attributes), the competitive set and the
relative positions held by different carbonated soft drinks, the strength of the various
positions held by competitive brands in this category, and potentially attractive positions
for Fruity Juice Bubbles.
2. Prepare a focus group discussion guide for the research.
(10 marks)
The discussion guide will include a welcome and introduction to the subject to be
discussed. The facilitator should set respondents at their ease and explain at the outset
that there are no correct opinions, and that each group members comments and opinions
are valid.
The guide to the focus group discussion for Fruity Juice Bubbles will reflect the aim of
the research, which is to help guide the development of marketing strategy.
Understanding consumer behaviour in the carbonated soft drinks category is key, as is the
development of a clear picture of the perceived positions held by competitive brands and
potential positions which offer marketing opportunity to Fruity Juice Bubbles.
An example of a discussion group guide for Fruity Juice Bubbles would be:
1. Opening
Explain focus groups
No correct opinions, only opinions Need to hear from everyone
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Audiotapes
Procedure one person to talk at a time, etc.
Any questions
2. Carbonated soft drinks
Which carbonated soft drinks are consumers aware of, which have they
tried and which do they like?
What like/dislike about individual brands?
When drink (usage occasions)?
Where purchase?
Who purchases?
Individual item purchase or multi-pack?
Value for money perceptions
Image of individual brands
What are the important and determinant attributes in purchase decision-
making and reasons?
3. Fruit Juice Bubbles
Initial reaction to product concept
Perception of key competition Is there a gap in the market?
Distinctiveness of concept
What like/dislike about concept?
Likelihood of trying and perceptions of usage occasion
Reaction to intended price premium
Tasting opportunity reaction to taste and range of flavours
Reaction to proposed size(s) of bottle
Where would expect to buy, etc.?
4. Final questions and comments
5. Thank you for your co-operation
December 2010 Selected Student Answer
Case 1 Solution: Fruity Juice Bubbles
1. Advise Pete Martin on how he might use focus groups to help develop a marketingstrategy for Fruity Juice Bubbles.
Nowadays, when almost each market is highly competitive and rapidly changing, when
customers needs and wants become more and more sophisticated, it is becoming more
and more difficult for companies to compete. So, understanding customers needs and
wants, attitudes, preferences and beliefs in order to match them is essential. To do this
marketing research can help.
Talking about our case, the company is going to launch a new product, so they have to
understand if the product will succeed. The product is carbonated soft drinks. As I
understand from this case, the product concept is already developed, so the company has
to know if the customers will like it.
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In order to understand customers attitudes, motivations and preferences qualitative
research can be conducted. The most popular and the most appropriate technique of
qualitative research in this case is focus groups.
Focus groups this is when 712 people are led by a moderator discussing particular
topics. There are 3 types of focus groups:
1. Exploratory helpful in generation of new ideas.
2. Clinical used in order to reveal peoples inner attitudes and feelings.
3. Experiencing this allows us to evaluate customers during product use, their
emotions, feelings, likes and dislikes concerning the product.
The last type of focus group is what our company needs, as product concept is already
developed, people have to buy it and give their judgements. What they like about the
product, what they dislike, what they would like to change or add, how likely they will
buy this product, how often and in what quantities. Answers on all these questions will
help the company to match their potential customers needs ideally, so becoming
successful and increasing profits.
Focus group discussions can help not only in product evaluation. Pete Martin is
developing a marketing strategy and focus groups can help him to develop it in the best
way, related to product. Focus groups can discuss such aspects as preferable set of
marketing mix 4 Ps. I already mentioned the product, the rest are:
Price at what price they are likely to buy the product.Place where it is better to sell
the product in order to reach availability and convenience, Promotion what kind ofadvertising can be attractive, create awareness and goodwill around the product.
Additional decisions could be made about the packaging of the product it should be
attractive, as well as convenient, and eye-catching.
During the discussion, the moderator can have an influence, so it is a position with high
responsibility, and the person has to understand this. The moderator has to be well
trained, with a quick mind, a good memory on names, socially acceptable and as neutral
as possible in order to avoid negative influence and biased results.
Once the data of research is collected and analysed, the results can help Pete Martin to
develop an appropriate strategy and compete on the market successfully.
2. Prepare a focus group discussion guide for the research.
As I mentioned above, the valid results in most cases depend on the moderator, who leads
the group discussions. He has to be well-trained, be able to identify if respondents have
enough knowledge about the topic, to quieten those who are talkative and encourage to
talk those who are quiet. He doesnt have to push on the people, avoid biased words and
be as neutral as possible. He has to have a quick mind in order to catch good ideas and
lead a discussion in a necessary way.
At the start of the discussion he has to warm up the group. Create a warm friendly
atmosphere, and make people feel relaxed and safe.
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He has to identify the level of knowledge of respondents about the topic. Maybe some
screening questions should be asked. Then the discussion on the main topic is to follow.
In our case, it is a new product, so following questions should be asked:
o Do they like the product?
o What they dislike about it?o What they would like to change in it?
o At what price they would likely to buy the product?
o How often and in what quantities?
o Where it would be convenient to them to buy the product?
o What kind of advertising can attract them and encourage to buy the product?
o Will they advise the product to their friends, relatives, etc.?
After the needed information is obtained, the moderator has to give a possibility to ask
any last questions.
It is necessary to summarise what was said in order to check if everythings understoodcorrectly. Then thank them for participating and warmly finish the session.
The better the atmosphere in the group, the better results obtained.
Case Question 2: Business Solutions Ltd.
December 2010 Examiner's Solution
Case 2 Answer
1. Critically explain the threats to experimental validity.
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(15 marks)
An experiment implies some sort of test to allow the effects of independent variables on a
dependent variable to be discerned.
Dependent variables are the outcomes of interest in this case, visits to the website. The
independent variable, i.e. the variable which the researcher has some control over is thetelesales initiative. The use of an experiment will help Business Solutions Ltd. to decide
whether a telesales initiative will increase visits to the website.
In examining whether there is a causal relationship between telesales activity and visits to
the website, three types of evidence are important:
o concomitant variation, which influences the extent to which telesales activity and
web sites visits occur together in a predictable way
o time order of occurrence of telesales activity and the effect on website visits
o absence of other causal factors, i.e. no other factor is affecting website visits
Experimental validity has two components:
o Internal validity
o External validity
Internal validity is the extent to which an experiment controls the effects of all non-
manipulated variables so that any difference in web site visits (the dependent variable)
between groups can be regarded as valid effects of the different promotional programmes
used (experimental factor).
Threats to internal validity include:
o History and maturation
o Repeated testing
o Impact of the researchers
o Mortality of participants
o Selection errors
o Regression effects
Each of these effects should be considered in the context of the case situation. For
example, in relation to the impact of researchers, the fact that an SME is beinginterviewed may affect visits to Business Solutions Ltd website.
External validity refers to the extent to which experimental effects will generalise to the
marketplace. Whereas a laboratory experiment is generally believed to be more internally
valid, the field experiment (as used in the case situation) provides more external validity
as it is undertaken in a real market situation.
As the experiment is being undertaken in the field, it offers more realistic conditions in
which to evaluate the effect of the supporting telesales campaign.
2. What type of experimental design do you suggest Business Solutions Ltd should use?Explain your reasoning.
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(15 marks)
The different types of experimental designs are:
o Basic (informal) designs: only measure the treatment impact.
o Statistical (formal) designs: measure treatment impact and also other factors that
may have been at work during the experiment.
Basic designs can be described as follows:
o After only
o Beforeafter without control
o Beforeafter with control
o Afteronly with control
o Ex-post facto designs: groups chosen only after treatment has been applied
o Four group six-study design
o Time series design
Regarding the statistical designs, they are as follows:
o Completely randomised design: only takes account of one variable.
o Randomised block design: measures treatment plus one extra variable.
o Latin square: measures treatment and two extra variables.
o Factorial designs: takes into consideration the fact that variables may interact with
each other.
The best approach for Business Solutions Ltd. may be the use of the basic design,
beforeafter with control.
By using the design beforeafter with control, the control group should be comparable
in make-up to the group who will receive the treatment (tele-sales activity). The major
assumptions in the design are that both groups are affected in a similar manner by
extraneous factors. For this to be the case, the subjects must be selected at random and
the treatment should be randomly assigned.
The statement of the design is:
o EG: O1 O2o CG: O3 O4
The effect of the treatment may be measured as:
o (O2 O1) (O4 O3
Therefore, if the following visits occurred:
O1 = 45 visits O2 = 68 visits
O3 = 34 visits O4 = 42 visits
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The assumption is that the increase in website visits in the control group (8 visits) was
caused by extraneous factors. If this impact is subtracted from the change in website
visits in the companies contacted by the telesales team (23 website visits), the resulting19 website visits can be viewed as the direct impact of the treatment.
It may also be helpful to use a statistical design (randomised block design) to take
account of other variables that may influence visits to the website apart from telesales
activity.
December 2010 Selected Student Answer
Case 2 Solution: Business Solutions Ltd.
1. Critically explain the threats to experimental validity.
An experiment involves a test to determine the causal relationship between variables i.e.
the dependent and in this case interest in and visits to the website. The independent, in
this case invest in telesales and the effect or results. All experiments must have both
external and internal validity.
Internal validity refers to the extent to which the effect of the dependent (x) was caused
by the independent (treatmenty): this takes into account the confidence that the effect of
x was not caused by other extraneous factors.
External validity on the other hand, refers to the extent the findings/results from the
experiment can hold for other situations. An experiment conducted in a laboratory lacks
external validity, whilst an experiment conducted in the field lacks internal validity.
Hence in this case, if the company Business Solutions Ltd were to conduct a field
experiment, this experiment would lack internal experimental validity as the results may
have been caused by other extraneous factors.
Extraneous factors are factors that affect the dependent variable other than the
independent i.e. the treatment. Some extraneous factors are: regression effects (the use of
extreme values which skew the results), the influence of the interviewer, selection errors,
the maturation and history, repeat testing and the mortality rate of respondents.
2. What type of experimental design do you suggest Business Solutions Ltd should use?Explain your reasoning.
There are two types of experimental design i.e. (i) basic design (informal) and (ii)
statistical design (formal).
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The basic informal design looks primarily at the effect of the treatment and not
extraneous factors, whilst the statistical/formal designs look at both the affect of the
treatment in addition to extraneous factors. Examples of basic/informal experimental
designs include:
o After only ( O),
o Beforeafter without control O1 O2 (O2 O1),o Beforeafter with control,
o EG (experiment group) O1 O2,
o CG (control group) O3 O4 (O2 O1) (O4 O3),
o After only with control (EG O1) (O1 O2) (CG O1), and
o ex-factor post design which is a hybrid of after only design.
The statistical/formal design examples include completely randomised design,
randomised design and Latin square design just to name a few. The completely
randomised assumes ceteris paribus and applies the treatment to all the elements
randomly and then analyses the results.
Given the fact that the Business Solutions Ltd wishes to draw a simple random sample
and divided into two groups, where both groups are exposed to direct mail brochure, but
only one group is exposed to the telesales activity, I would suggest Business Solutions
Ltd use a before-after with control group to determine the effects of the treatment, which
in this case is the telesales activity. However, it should be born in mind the caused
components i.e. concomitant effect, time, order of occurrence and absence of other
factors, if this experiment is to hold on both internal and external validity, hence it may
be advisable to use triangulation i.e. more than one experimental design, perhaps group
design, bearing in mind the cost and time involved, as well as one other statistical design.
Essay Question The Uganda Coffee Development Authority
December 2010 Examiner's Solution
Essay Solution Answer Base
1. Advise The Ugandan Coffee Development Authority on the need for, and design of, amarketing information system to help realise their goals.
(20 marks)
The relevant module isModule 16.
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A marketing information system is vital to help The Ugandan Coffee Development
Authority to make good decisions and provide sound research and information to their
various stakeholders (exporters, farmers, processors, roasters, etc.).
A well designed information system enables the efficient handling, organisation and
storage of data and may comprise the following sub-systems:
o an internal reporting system
o a marketing intelligence system
o a market-research system
o an analytical marketing system.
o
Useful sources of data will include both internal and external sources: for example,
economic trends, political trends, competitor activity, socio-cultural environment and
impact on coffee consumption, physical environment, transportation costs, members
sales reports, market prices, export data, government sources, etc.
2. What tools do you suggest the Authority use to help forecast market demand forUgandan coffee?
(20 marks)
Various forecasting tools may be used to help forecast market demand. In choosing
which to use the following considerations should be taken into account:
o Time horizon
o
Technical sophisticationo Cost
o Quality of data that can be used
The basic approach is to make an environmental forecast before making a forecast of
sales and profits.
Methods to be considered include: asking people questions (surveys of buyer intentions,
composite of sales force opinion, expert opinion, analysing past data) and time dependent
approaches (classical time-series, moving average, exponential smoothing, and statistical
demand analysis).
December 2010 Selected Student Answer
Essay Solution
1. Advise The Ugandan Coffee Development Authority on the need for, and design of, amarketing information system to help realise their goals.
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The Ugandan Coffee Development Authority has many goals and objectives that they are
seeking to achieve. They are striving to excel in their coffee industry and at the same time
keep abreast of the dynamics within the environment. A Marketing Information System
will assist the Ugandan Coffee Development Authority greatly in achieving their
initiatives. A Marking Information System deals with a constant flow of information and
coordination of this information to assist decision makers, and to provide the best
possible information in an effort to stay abreast in ones industry. A MarketingInformation System is made up of four aspects: internal data, marketing intelligence,
market research systems and analytical systems. These four aspects produce a sufficient
flow of data to decision makers so that they can make the most suitable and efficient
decisions.
The Ugandan Coffee Development Authority can use each aspect of the Marketing
Information System to help them achieve these goals. In terms of internal data this
includes things such as information on inbound logistics, outbound logistics, production
and operations, customer information and complaints and sales and marketing.
Information from all these internal sources can be used to help the Ugandan Coffee
Development Authority achieve their objectives. For instance, in an effort to promote,improve and monitor marketing of coffee to optimise foreign exchange, special attention
can be paid to sales and marketing information on how sales are doing and the strategies
being used by marketing can be assessed. How people respond to different marketing
strategies can be assessed and if ineffective it can be tweaked.
Information on sales for example can lead the Ugandan Coffee Development Authority to
recognise their most profitable segments in their domestic market. They can assess what
is attributing to success in these segments and try to transfer the source of success to
other segments. They can also look at production and operations information and
determine the best, most efficient ways to produce and to provide the best coffee. A very
important source of internal information is from customers. Customer complaints,
customer enquiries and customer feedback can all be used to develop the product and
even give the Ugandan Coffee Development Authority ideas on how to promote coffee as
a value added product. It can also give them information on how the domestic market feel
about coffee and what can be done to promote their consumption. It can therefore be seen
that an abundance of information can be attained internally to help the Ugandan Coffee
Development Authority make decisions.
Information can also be gained externally. Such information is especially important since
the dynamics of the environment are constantly changing. Marketing intelligence and
market research systems aid in accumulating helpful information about the industry,about competitors, about consumers (both users of coffee and non-users). Marketing
intelligence is the knowledge gained by a firm from everyday interaction with the
environment. It can entail information on competitive behaviour, consumer behaviour,
sales force attitudes and behaviour, and so on. Having a proper understanding of such
information can help the Ugandan Coffee Development Authority understand the
environment and industry and thus set the necessary objectives to maintain
competitiveness. It can also assist in gaining a competitive advantage over others.
Market research systems are another integral part of the Marketing Information System
that can greatly assist decision makers in solving problems and setting and achieving
objectives. Market research involves collecting, analysing and interpreting data from theenvironment in an effort to solve problems, meet objectives and understand consumers.
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Information on answers received from marketing research therefore can help the
Ugandan Coffee Development Authority promote domestic coffee consumption.
Information from market research can help them segment the market and thus have a
more focused approach to satisfying needs. This would inevitably improve the coffee
industry.
Market research information can also be used in gaining information in internationalforeign markets. The Ugandan Coffee Development can determine if they are meeting
international standards, if the quality is good, how can their coffee be marketed better,
and so on.
Other external sources of information may include commercial information such as
scanners in stores. This can give information of where sales are concentrated, which can
help the Ugandan Coffee Development Authority in setting distribution and marketing
objectives. Channel distribution information from the sales force can also be attained to
help the decision makers in choosing the most suitable channels and selling methods.
A final aspect of the Marketing Information System is the analytical systems. These arebasically decision support mechanisms that help decision makers in making valuable
decisions from the information that they have received throughout the Marketing
Information System. It entails forecasting tools, mathematical tools and expert systems.
Forecasting tools for example help forecast demand. This can greatly benefit the
Ugandan Coffee Development Authority since they can use these forecasts to set
appropriate objectives and develop certain aspects of their strategy to meet future
demand.
The Ugandan Coffee Development Authority can therefore benefit immensely from
designing an appropriate Marketing Information System. Special emphasis must be
placed on the aspects of the system that give relevant feedback on customers and the
coffee industry. All information gained from the different components of the system can
be used to help realise goals.
2. What tools do you suggest the Authority use to help forecast market demand for
Ugandan coffee?
Forecasting demand is an essential aspect of a firm. It allows a firm to recognise the
potential of their market and how they can make the necessary arrangements to meet this
forecast or even improve this forecast. Sales can be forecasted by a time period e.g. short
term, long term, medium term or by location e.g. locally, internationally, or regionally.There are many different methods to use when forecasting. The analytical system of a
Marketing Information System deals with the different methods that can be used to
forecast sales. Forecasting tools in this system can either be basic or statistical.
In terms of basic tools this deals with asking people questions, asking sales forces valid
questions, asking experts valid questions and gaining information by looking at past data.
Statistically, forecasting can be done by using time series analysis, moving average,
extrapolation and statistical demand analysis. The Ugandan Coffee Development
Authority can use any one of these methods in assisting them to forecast market demand
for their coffee. For instance, they can embark on asking customers about the coffee. This
can be done via questionnaires, focus groups, telephone interviews and so on. Findingsuch information is valid since it allows the Ugandan Coffee Development Authority to
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recognise how probable an increase in demand is. Asking sales people questions is also
very relevant since they are the ones who are in direct contact with the market whose
sales you are trying to forecast. Sales force can give information on how and where
demand would most probably come from.
The Ugandan Coffee Development Authority can also seek help and forecast using
estimates from experts. Such experts may be ones from similar industries who may befamiliar with coffee drinkers and their habits, information on past demand can also be
used to forecast what kind of demand is to come.
The Ugandan Coffee Development Authority can also take a statistical approach and use
methods such as time series analysis, moving average, extrapolation and statistical
demand. Time series analysis for instance is based on the assumption that sales change
due to different influences over time. In time series analysis sales can either be seasonal,
erratic, follow a trend or rise and fall at different times. Using this method may not be
very appropriate for the Ugandan Coffee Development Authority since they are more
concerned about forecasting demand of a potential market rather than really focusing on
the demand of the current market. A good approach to use statistically is the statisticaldemand analysis which deals with looking at all the external influences that may affect
demand. It looks at things such as personal income, advertising and so on to determine
future demand. Ugandan Coffee Development Authority can use this since they can
ascertain how these influences affect demand and use it to project future demand. They
may also manipulate these influences to further increase demand. The statistical demand
analysis balances the equation where S = a0 + b1P + b2A
In conclusion Ugandan Coffee Development Authority can collaborate both statistical
ways and non-statistical methods of forecasting demand.
Day 4:
Case Question 1: Software House (Module 4 June 2008)
June 2008 Examiner's Solution
Case 1 Answer Base
1. How confident should Steven be in the results of his own market research?
(8 marks)
Steven has undertaken market research already, based on a sample of 80 customers, and
the results appear to be favourable to the introduction of interactive voice response
technology, with 70% of customers in support of the idea.
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The question is how confident can Steven be in these results. The Confidence Interval
Approach to sample size can assist the evaluation of whether these results are satisfactory
as a basis for such investment decisions.
Therefore, we can be 95% certain that the true population proportion of those in favour of
the introduction of telephone based voice response is between 60% and 80%.
2. If Steven were to undertake additional research and wished the percentage in favour to
be accurate to within 5%, what size of sample do you recommend?
(8 marks)
One option available to Steven is to conduct further research, increasing the sample size.
To be within 5% of 70% Steven would require a sample size as follows:
3. What other methods might Steven use to determine sample size?
(6 marks)
Other methods of deciding on sample size include:
o intuition
o cost limitation
o
industry standards
Each of these should be discussed with reference to section 4.6.1.1,4.6.1.3and 4.6.1.4.
4. Do you think Steven should press on with the installation of the voice response service orshould he conduct more market research? Explain your reasoning.
(8 marks)
In deciding whether to press on with the installation of interactive voice response services
or conduct more market research, Steven should consider the confidence level attached to
his existing market research findings. The key issue he has to consider is the extent to
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which his comfort zone would be enhanced if the confidence interval were narrowed by
conducting further market research amongst his customers.
Increasing the sample size to 323 would produce a 5% confidence interval which Steven
may feel is enough for him to feel confident in making the investment. The cost of
undertaking additional market research, i.e. conducting telephone interviews, is not likely
to be prohibitive.
Steven should take into account the cost of research and the value of the investment
decision being undertaken.
A good student answer will note that Steven should keep in mind that the survey referred
to in the article is a year old and that, in the past year alone, many changes are likely to
have taken place in consumer reaction to modern technology. This in itself may explain
the differences between the findings of the two surveys.
June 2008 Selected Student Answer
Case 1 Solution: Software House
1. How confident should Steven be in the results of his own market research?
Market research helps the supplier to allay uncertainty inherent in all marketing
decisions.
Relating to the case study, Steven is trying to assess if he should go ahead and purchase a
new interactive voice response service (bearing in mind the benefits that his may bring to
his company) or decide against purchasing due to articles that mention the frustration of
consumers with automated telephone systems.
The first consideration in evaluating his research methods is sampling. The research used
a probability sampling (where elements in the sample have a known chance of being
selected) and therefore it is possible to estimate sampling error. In the case, a very small
sample was used (only 80 customers out of his total customer base=2500) and this may
influence the accuracy of results or quality of the data. To overcome this flaw, Stevenshould increase his sampling size because larger samples imply smaller sampling error. It
is worth mentioning that the total survey error comprises sampling and non-sampling
error. Sampling error refers to the sample not being a perfect representation of the target
population and non sampling error can be either non response error (not all in the sample
do in fact respond) and response error (respondents giving inaccurate answers).
Therefore, although Steven has used a probability sampling and error can be estimated,
the small sample size may have affected the quality of the research and hence misled the
results. It may well be that the 70% represents the opinion of those who have strong
feelings about the subject, or those who feel comfortable with the technology (interactive
voice response service) proposed. We should also take into consideration that telephoneinterviews may cause annoyance to the consumer if not properly conducted and if that is
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the case maybe all those 70% in favour of the new system just replied positively because
they wanted to finish the interview as soon as possible.
In short, to produce more accurate results Steven should increase the sample size.
Lets calculate the Stevens study accuracy:
If Steven would be satisfied with 10% accuracy which translates to the lowest 60% and
highest 80% of satisfaction then he could go ahead.
2. If Steven were to undertake additional research and wished the percentage in favour tobe accurate to within 5%, what size of sample do you recommend?
To calculate the size sample we can use the level of accuracy formula. It is as follows:
L = Z S p
Notes:
L = level of precision
Sp = standard deviation for proportion
Z= value given for a determined level of confidence
Therefore the sample size at 5% level of confidence should be n = 324.
3. What other methods might Steven use to determine sample size?
The methods used to calculate sample size are:
o Intuition
o Statistical precision
o Cost limitations
o Industry standards
o Other factors
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Intuition is based on informed intuition but its not the most satisfactorily method. Its used
in industrial marketing research more often.
Statistical precision take into consideration that larger samples are more accurate and that
data that flows from it have more quality. It also takes account of the level of precision
required ( L = Z S x or L = Z S p) and the confidence interval (the interval within which
a population means or proportion have a stated probability of lying). Therefore, thismethod ticks all the boxes and provides a more accurate result.
Cost limitations only consider the available budget despite all the other factors (e.g. level
of precision). Therefore, it should only be used when there is no other possibility.
Industry standards refers to the rules of thumb developed by experts in the industry.
Other factors concern any other variable that may affect/influence how to calculate the
sample size.
4. Do you think Steven should press on with the installation of the voice response service orshould he conduct more market research? Explain your reasoning.
Steven should undertake more research before going ahead with the installation of the
new system. His first interview used a sample too small and therefore its results may be
misleading. Considering the benefits that the new system may bring, but also the costs
that the firm will incur (and bearing in mind all the articles that show a negative feeling
from customers towards automated telephone systems), Steven should undertake more
research but this time increasing the sample size to decrease sampling error and provide
more accurate results.
If after undertaking research using the same method telephone survey with a larger
sample of respondents he still was not convinced about which decision to make, he may
consider the use of qualitative research to complement his quantitative research. Through
focus groups they may assess attitudes and opinions on the subject (automated telephone
systems) and what underlies these feelings. This more detailed research could provide
valuable insights on how the firm may contribute (for those responsible for the
development and design of those systems) to a positive customer experience, thus
changing the perceptions of those who feel frustrated and disappointed when dealing with
this system (maybe the hatred comes from a lack of understanding or ability to use the
system and may be easily resolved).
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Case Question 2: Blood Test Equipment (Module 4 and 8 - June 2006)
June 2006 Examiner's Solution
Case 2 Answer Base
Advise the manufacturer of the new home kit on what kind of marketing research they shouldundertake to develop an understanding of the views and opinions of young people towards heartdisease and the use of home testing kits to assess personal risk of contracting the disease.
(Total 30 marks)
The terms of reference of the marketing research would seem to indicate a need for data of a
qualitative nature in relation to the attitudes of young people towards heart disease and use of
home test kits to assess personal risk. Clearly, the issues are of a sensitive nature and attitudes
may be influenced by personal circumstances, e.g. death rates/disease rates amongst family and
friends. Because of the emotional, and potentially distressing, background to the research it is
likely that in-depth personal interviewing would be the most appropriate qualitative research
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The full range of advantages of in-depth interviewing should be discussed together with their
drawbacks, including the fact that they are expensive and time consuming and will require
considerable preparatory work in terms of sample recruitment and selection. The need to involve
medical practitioners should be considered.
Once an understanding of attitudes and opinions has been achieved, the qualitative research may
be followed up by a quantitative study to assess the extent to which various views and opinionsare held amongst the wider population.
The merits of different survey methods should be assessed in the context of the case and some
attempt should be made to explain desirable sampling techniques and the range of issues which
would lend themselves to quantitative examination.
une 2006 Selected Student Answer
Case 2 Solution: Blood Test Equipment
Advise the manufacturer of the new home kit on what kind of marketing research they should
undertake to develop an understanding of the views and opinions of young people towards heart
disease and the use of home testing kits to assess personal risk of contracting the disease.
This is quite a sensitive and serious issue that involves young people. To be able to get the best
out of research, I would recommend the use of both Quantitative and Qualitative research
methods.
Quantitative research is research that is based on numerical or statistical figures. This can be
undertaken at the initial phase of the research to ascertain the statistics of how many young
people actually have attacks, what treatments actually exist and what specialists exist to deal
with this situation.
This data will be obtained by the use of secondary data. This can be gathered from health
institutions and government bodies such as the Ministry of Health. This will also assist us to
define the population the group that fall into our research study for our following qualitative
research.
The qualitative market research I would recommend to be undertaken is personal interviews and
telephone interviews.
1. Personal Interviews
Advantages
o Allow interviewer to observe reaction to questions.
o Enables interviewer to ask questions in a systematic order.
o Interviewer can steer off sensitive questions depending on reaction of interviewee.
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Disadvantages
o Interviewer can be biased.
o Personality of interviewer can influence answers.
2. Telephone Interviews
Advantages
o Eliminates interviewer influence.
o Interviewee can express self freely with the knowledge that interviewer does not
know them personally.
o High response rate since most people have impulse to pick up the phone when it
rings and especially so when it is to deal with young people.
3. Depth interviews such as focus groups can be used as well to identify feelings andattitudes to heart disease and the home testing kit.
Selecting the Sample
The success of the research mostly depends on how large the sample size is, and how
representative of the population. Samples may be non-probability or probability.
Non-probability Sampling
Here the sample is not random, but rather managed for practical reasons. Examples of non-
probability sampling are:
1. Quota sampling;
2. Convenience sampling;3. Judgement sampling.
Probability Sampling
Here there is a known chance of selection. This is seen as most appropriate since it avoids bias in
the selection process and hence is most representative. Some examples of probability sampling
are:
1. Systematic sampling. For example, every 80th number from a telephone book is selected
as part of the sample.
2. Random sampling. For example, the names of all the students in a university are writtenon various sheets of paper and put together in a basket or container. The first 40 names
that are picked are used as the sample.
3. Stratified sampling. The sample is stratified into e.g. social classes and a number
randomly selected.
4. Cluster sampling. This is as stratified sampling except that in this case, the cluster is more
demographic.
In the case of the blood test equipment, I would recommend that the probability sampling
technique be used for the reasons stated above. The specific method I would recommend is the
stratified sampling technique. This will give perspective from different sections of social class.
This will affect pricing, promotions message and means, distribution methods and where toactually sell the product.
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Essay Question: Inter-European (Module 4 Dec 2008)
December 2008 Examiner's Solution
Essay Solution Answer Base
1. Describe the potential problems which Inter-European might face in drawing up asampling frame for the research study. How might Inter-European deal with each of
these potential problems?
(20 marks)
The relevant module isModule 4.
Potential problems with the sampling frame lie in any deviation which may exist from
one to one correspondence between the customer list used and the population of credit
card customers.
For example, the list used must be up-to-date (for example, regarding income status) and
not omit any members of the population. Ineligibility (i.e. listing individuals who are
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not/no longer members of the population lapsed customers) is a further potential
problem.
Other problems may include duplication (holding more than one credit card) and
clustering (joint account holders).
A good student answer will consider possible methods of dealing with each of theseproblems.
2. Discuss the benefits and drawbacks of Inter-European using stratified and cluster sampling methods to determine the relationship, if any, between socio-economic
characteristics and credit card usage amongst their credit card customers
(20 marks)
Stratified and cluster sampling are both probability sampling methods so sampling error
may be stated in mathematical terms.
In stratified sampling, the population is separated into sub-groups called strata. The
division is mutually exclusive and exhaustive which means that every population element
is assigned to one stratum only and no population elements are omitted in the assignment
procedure. Separate simple random samples are drawn from each sub-group.
In cluster sampling, the population is separated into sub-groups called clusters and a
sample of clusters is drawn.
The element which distinguishes the procedures is that with stratified sampling a sample
of elements is selected from each sub-group, whereas in cluster sampling a sample of
sub-groups is chosen.
In the case of Inter-European, it may make sense to separate the population of credit card
customers by country, e.g. credit card customers in UK, France, Germany, etc.
Using stratified sampling, samples of credit card customers will be drawn from each
country. This will allow comparisons to be made between countries.
Using cluster sampling, a sample of countries will be chosen as the focus of the research
study.
A good student answer will note that stratified sampling can improve the cost-
effectiveness of a research project as this technique allows sampling error goals to be
achieved with smaller sample sizes than are required in simple random sampling. A
consequential reduction in the total cost of the research can result under certain
conditions.
Cluster sampling can also be cost-effective. Despite having higher sampling errors than
simple random sampling of equal size, cluster samples allow a large enough increase in
sample size to more than offset their inefficiency so that overall sampling error is reduced
for any given budget.
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In the case of Inter-European, cluster sampling may be the logical approach if analysis of
credit card spending patterns by country is not part of the survey objectives.
Cluster sampling will deliver cost savings in terms of interviewers required by country
and questionnaire translation expenses.
December 2008 Selected Student Answer
Essay Solution: Inter-European
1. Describe the potential problems which Inter-European might face in drawing up asampling frame for the research study. How might Inter-European deal with each of
these potential problems?
The banking network of the Inter-European Bank is extremely large and widely
dispersed. Therefore, conducting such a research study will not be an easy task and
certain constraints need to be overcome.
The Inter-European Bank wants to draw up a sampling frame for their research study.
This sampling frame is basically a list of the population, that is, their customer base.
However, unfortunately, no sampling frame will ever be perfect, and there will always be
an element of error. The difference between the actual population, and the one that is
used (the working population/operational) will always be different, no matter how
cautious one is.
Reasons for this are due to the information used. Lists of a population are essentially out-
of-date on their publication day as changes are constantly happening. Telephone numbers
and addresses will change with move-outs and move-ins and peoples marital, educational
and income will change too. This all impacts on their credit card usage, as their lifestyles
change to new circumstances. Also, in lists, it is quite common to find duplications and
omissions of data. So maybe, using two lists instead of one for the sampling frame will
assist Inter-European in narrowing this gap.
It is important that measures are taken so that such a gap is reduced, otherwise their
research can bring about misleading results.
Two elements that will also contribute to increasing error are random sampling error and
non-sampling error. Random sampling error occurs when the chosen sample is not a
perfect representation of the required population. This will evidently occur due to the less
than perfect lists and sampling frames used. Non-sampling error is made up of response
error and non-response error. Non-response error occurs when people do not reply; and
this may occur quite frequently. People may be very difficult to get a hold of or else will
refuse to participate in their research study. Such individuals are also generally different
in some way from those who reply. Those who do reply may induce error by providing
them with socially acceptable and pleasing answers, or else may forget and provide the
wrong information.
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Inter-European could inform their customers either by a personalised letter, or a
telephone call beforehand, to inform them that their participation is to be required in a
research study. This can substantially aid participation.
2. Discuss the benefits and drawbacks of Inter-European using stratified and cluster
sampling methods to determine the relationship, if any, between socio-economic
characteristics and credit card usage amongst their credit card customers
A stratified sample is a form of random sample, meaning that each and every element of
a population has a known non-zero chance of being selected to participate in a sample.
Such results can then be projected to the entire population, and sampling error can also be
estimated.
A stratified sample is most appropriate when used with large consumer populations,
which is precisely the case with Inter-European. The members of the population (its
customer base) are divided into mutually exclusive groups to reflect specific social and
economic backgrounds. Random samples are then taken from each of these groups.
The benefits for Inter-European with this method are that they will have an equal,
extensive and detailed coverage of their whole customer base. The customer base will
effectively be divided into its specific socio-economic characteristics and credit card
usage patterns, so their behaviours will be easy to analyse and this will make it easier for
them to target. The drawback is that they may not be able to assess the likely importance
and impact of such a group. It could also be that particular members may be categorized
according to their extensive and repeated card usage; but the amounts (deposited and
withdrawn) may be very small and not compare to those are categorised as less frequent
users; but involving larger amounts.
A cluster sample is also a random sampling method. Here, specific areas that are known
to include a lot of their members are assessed. People in the particular area are targeted as
many of their customers live there. This is beneficial as they know where to locate them
and target them in future. However, still, little is known about the usage patterns. Are
many of their card holders in that area students, or high powered lawyers or executives?
And what are the individuals attitudes and perceptions towards the usage of their credit
card? Is it used for special occasions large purchases or for frequent every day use?
Stratified and cluster sampling methods do provide the opportunity to have their
customer base neatly categorized and classified by specific characteristics, but usage
patterns, as we have seen, can be quite tricky to determine. Other research mustcomplement such a study in order to get more variable and insightful information.