Chapter 4 Marketing Research and Information Systems TEACHING RESOURCES QUICK REFERENCE GUIDE Resource Location Purpose and Perspective IRM, p. 75 Lecture Outline IRM, p. 76 Discussion Starters IRM, p. 86 Class Exercises IRM, p. 87 Chapter Quiz IRM, p. 90 Answers to Issues for Discussion and Review IRM, p. 91 Answers to Marketing Applications IRM, p. 94 Answers to Internet Exercise IRM, p. 96 Answers to Developing Your Marketing Plan IRM, p. 98 Comments on Video Case 4 IRM, p. 99 PowerPoint Slides Instructor’s website Note: Additional resources may be found on the accompanying student and instructor websites at www.cengagebrain.com. PURPOSE AND PERSPECTIVE This chapter focuses on the information-gathering methods needed to make sound marketing decisions. First, it discusses the role of marketing research in decision making and problem solving. It identifies a set of basic steps to follow when conducting a marketing research project: 1) locating and defining problems or research issues, 2) designing the research project, 3) collecting data, 4) interpreting research findings, and 5) reporting research findings. Then it turns to the methods of gathering marketing research data. It describes various sources of secondary data and explores primary data collection methods in detail, focusing on sampling, survey methods, observation methods, and experimentation. It then discusses the nature and role that databases, decision support systems, and the internet play in collecting, organizing, and interpreting marketing research data. Finally, it considers ethical and international issues in marketing research. LECTURE OUTLINE I. The Importance of Marketing Research A. Marketing research is the systematic design, collection, interpretation, and reporting of information to help marketers solve specific marketing problems or take advantage of marketing opportunities. 1. As the word research implies, it is a process for gathering the information needed that is not already available to decision makers. 2. The purpose of marketing research is to inform an organization about customers’ needs and desires, marketing opportunities for particular goods and services, and changing attitudes and purchase patterns of customers. B. Marketing research can help a firm better understand market opportunities, ascertain the potential for success of new products, determine the feasibility of a marketing strategy, and also reveal trends. C. The real value of marketing research is measured by improvements in a marketer’s ability to make decisions. 1. Marketing research is used by all sorts of organizations to help develop marketing mixes to match the needs of customers. D. Changes in the economy have changed marketers’ decision-making strategies to focus more on small-scale surveys and short-range forecasting. Businesses need speed and agility to survive and to react quickly to changing consumer behavior. 1. Marketers should treat information in the same manner as other resources utilized by the organization, and must weigh the costs of obtaining information against the benefits derived. 2. Information should be considered worthwhile if it results in marketing activities that better satisfy the firm’s target customers, leads to increased sales and profits, or helps the organization achieve some other goal. II. Types of Research A. The nature and type of research a firm conducts vary based on the research design and the hypotheses under investigation. B. Marketing research involves two types of data. 1. Qualitative data yields descriptive non-numerical information. 2. Quantitative data yields information that can be communicated through numbers. C. To collect data, marketers conduct either exploratory research or conclusive research. D. Exploratory Research 1. When marketers need more information about a problem or want to make a tentative hypothesis more specific, they conduct exploratory research. a. The main purpose of exploratory research is to better understand a problem or situation and/or to help identify additional data needs or decision alternatives. b. Exploratory research can help marketers better understand how consumers view a topic or a product, which can assist a firm as it develops better products and more targeted marketing mixes. 2. Some organizations utilize customer advisory boards, which are small groups of actual customers who serve as sounding boards for new product ideas and offer researchers insights into their feelings and attitudes toward a firm’s marketing strategy, including products, promotion, pricing, and distribution. 3. A focus group brings together multiple people to discuss a certain topic in a group setting led by a moderator. a. It is a common method of conducting exploratory research. b. Focus groups are often conducted informally, without a structured questionnaire. c. Focus groups allow customer attitudes, behaviors, lifestyles, needs, and desires to be explored in a flexible and creative manner. d. Questions are open-ended and stimulate respondents to answer in their own words. e. Focus groups can provide companies with ideas for new products or can be forum to test different marketing strategies for existing products. f. In-person focus groups have some disadvantages: (1) Sometimes the focus group’s discussion can be hindered by overly talkative, confrontational, or shy individuals. (2) Some participants might be less than honest in an effort to be sociable or to receive money and/or food in exchange for their participation. (3) Focus groups do not provide quantitative data, and are thus best used to uncover issues that can be explored using quantifiable marketing research techniques. g. A current trend is online focus groups in which participants sign in to a website and type their comments and responses, or log into a video chat. (1) Online focus groups can be a cost-effective way to gather data from large and geographically-diverse groups. (2) Online focus groups are much more convenient for the participants than traditional focus groups because they can participate in their own homes, no matter where they are located. (3) This method is not well-adapted to ask participants about a product’s smell or taste, so it is not suitable for all goods. (4) Researchers also cannot observe the participants’ nonverbal cues and body language, which can often reveal “gut” reactions to questions discussed. B. Conclusive Research 1. Conclusive research verifies insights through an objective procedure to help marketers make decisions; it is used in the final stages of decision making, when the marketer has narrowed his or her decision down to a few alternatives. a. It is helpful when a marketer requires a well-defined and structured research project to help decide which of a set of approaches is best for a specific product and target consumers. 2. If marketers need to understand the characteristics of certain phenomena to solve a particular problem, descriptive research is a good aid. a. Descriptive research may range from general surveys of customers’ educations, occupations, or ages to seeking out specific information on how they use products or how often they purchase them. b. Descriptive studies generally demand significant prior knowledge and assume the problem or issue is clearly defined. (1) Some descriptive studies require statistical analysis and predictive tools. c. Descriptive research does not provide sufficient information to allow researchers to make causal inferences (i.e., that variable X causes a variable Y). (1) Experimental research allows marketers to make these causal deductions about relationships between variables. (a) Experiments involve manipulating an independent variable (Variable X, one that is not influenced by or acted on by other variables) and measuring the resulting changes in a dependent variable (Variable Y, one that is influenced by the dependent variable). (b) Manipulation of the dependent variable while controlling for other variables is what makes experimental research different from descriptive research. (c) Through experimental research, researchers can determine causality, which is highly important when developing marketing strategy. III. The Marketing Research Process A. To maintain the control needed to obtain accurate information, marketing research should be approached as a process with logical steps. These steps should be viewed as adaptable and as an overall approach to conducting research rather than as a rigid set of rules. B. Locating and Defining Problems or Research Issues 1. The first step in launching a research study is defining the problem, or issue. a. This will encourage researchers to focus on the true nature and boundaries of a situation as it relates to marketing strategy or implementation. b. The first sign of a problem is typically a departure from some normal functioning, such as failures to meet an objective that was previously attainable. 2. Marketing research often focuses on identifying and defining market opportunities or changes in the environment. a. When a firm discovers a market opportunity, it should conduct research to more precisely understand the situation so it can craft an appropriate marketing strategy. 3. In order to identify and define an issue correctly, marketers must be careful not to be distracted by superficial symptoms. 4. Researchers and decision makers should remain in the problem or issue definition stage as long as needed until they are certain they have designed a research plan that addresses the issue. a. Taking the necessary steps to allow researchers to refine a broad, indefinite problem or issue into a precise and testable research statement is a prerequisite for the next step in the research process. C. Designing the Research Project 1. Once the problem or issue has been defined, the next step is to create a research design, an overall plan for obtaining the information needed to address the issue. a. This step requires formulating a hypothesis and determining what type of research is most appropriate for testing the hypothesis. D. Developing an Hypothesis 1. A hypothesis is an informed guess or assumption about a certain problem or set of circumstances. 2. A hypothesis is what a researcher seeks to prove or disprove and is based on all the insight and knowledge available about the problem or circumstances from previous research studies and other sources. a. Sometimes several hypotheses are developed during a research project; the accepted or rejected hypotheses become the study’s conclusions. E. Research Reliability and Validity 1. In designing research, marketing researchers must ensure that research techniques are both reliable and valid. 2. A research technique has reliability if it produces almost identical results in repeated trials. 3. To have validity, the research method must measure what it is supposed to measure, not something else. a. This means than not all reliable research findings are valid. 4. Research projects should be replicable as well, otherwise it is impossible to establish reliability. F. Collecting Data 1. The next step in the marketing research process is collecting data to help prove or disprove the research hypothesis. The research design must specify the types of data to collect and how the data is collected. 2. Types of Data a. Primary data are observed and recorded or directly collected from respondents. This type of data must be gathered through observation of phenomena or by surveying people of interest. b. Secondary data are compiled inside and outside the organization for some purpose other than the current investigation. (1) Secondary data include general reports compiled by other organizations and internal and online databases. (a) Reports might address a variety of topics, including market share, retail inventory levels, and customers’ buying behavior. (b) They are useful for research if the information contained is pertinent to the hypothesis marketers are testing. 3. Sources of Secondary Data a. Marketers often begin the data collection phase of the marketing research process by gathering secondary data. b. Internal sources of secondary data, such as databases, sales records, and research reports, can be helpful because they provide information on the firm’s own marketing activities. c. External sources of data include trade associations, periodicals, government publications, unpublished sources, and online databases. d. The Internet is a very useful research tool. (1) Search engines help marketers to locate quickly many types of secondary data or news and scholarly information research topics of interest. 4. Methods of Collecting Primary Data a. The collection of primary data is a more lengthy, expensive, and complex process than the collection of secondary data. b. Sampling (1) Because the time and resources available for research are limited, it is almost impossible to investigate all the members of a target market or other population. (a) A population, or “universe,” includes all the elements, units, or individuals of interest to researchers for a specific study. (b) Researchers can predict the behaviors of a total market or market segment by systematically selecting a limited number of units—a sample—to represent the characteristics of a total population. (2) Sampling in marketing research is the process of selecting representative units from a population. Most types of marketing research employ sampling techniques. There are two basic types of sampling: probability sampling and nonprobability sampling. (3) With probability sampling, every element in the population being studied has a known chance of being selected for study. (a) When marketers employ random sampling, all the units in a population have an equal chance of appearing in the sample. (b) Stratified sampling divides the population of interest into groups according to a common attribute, and a random sample is then chosen within each sub-group. (4) Nonprobability sampling is more subjective than probability sampling because there is no way to calculate the probability that a specific element of the population being studied will be chosen. (a) One type of nonprobability sampling is quota sampling, in which researchers divide the population into groups and then arbitrarily choose participants from each segment. c. Survey Methods (1) Marketing researchers often employ sampling to collect primary data through mail, telephone, personal interview, online, or social network surveys. (a) Selection of a survey method depends on the nature of the problem or issue, the data needed to test the hypothesis, and the resources (such as funding and personnel) available to the researcher. (b) Gathering information through surveys can be difficult because many people believe responding to surveys requires too much scarce personal time and may have concerns about invasions of privacy and how personal information will be used. (2) In a mail survey, questionnaires are sent to respondents, who are encouraged to complete and return them. (a) Mail surveys are used most often when the individuals in the sample are spread over a wide area and funds for the survey are limited. (b) A mail survey is less expensive than a telephone or personal interview survey, as long as the response rate is high enough to produce reliable results. (c) Premiums, or incentives, that encourage respondents to return questionnaires can be effective in encouraging mail survey response rates and developing panels of respondents who are interviewed regularly. (3) In a telephone survey, an interviewer records respondents’ answers to a questionnaire over the phone. (a) A telephone survey has some advantages over a mail survey. The rate of response is higher because it takes less effort to answer the telephone and talk than to fill out and return a questionnaire. (b) In addition, a telephone survey permits interviewers to gain rapport with respondents and ask probing questions. (c) Automated telephone surveys, also known as interactive voice response or “robo surveys,” rely on a recorded voice to ask the questions while a computer program records respondents’ answers. The primary benefit of automated surveys is the elimination of any bias that might be introduced by a live researcher. (4) A telephone depth interview combines the traditional focus group’s ability to probe with the confidentiality provided by a telephone survey. (a) This type of interview is most appropriate for qualitative research projects among a small targeted group. (b) This method can be appealing to busy respondents because they can choose the time and day for the interview. (c) Although this method is difficult to implement, it can yield revealing information from respondents who otherwise would be unwilling to participate in marketing research. (5) Telephone surveys and interviews have several disadvantages. (a) Few people like to participate in telephone surveys which limit participation and distort representation. (b) Telephone surveys are limited to oral communication; visual aids or observation cannot be included. (c) Interpreters of results must make adjustments for subjects who are not at home, do not have telephones, have unlisted numbers, or screen or block calls. (6) In a personal interview survey, participants respond to questions face-to-face. (a) One such research technique is the in-home (door-to-door) interview, which takes place in the respondent’s home and offers a clear advantage when thoroughness of self-disclosure and elimination of group influence are important. (b) Shopping mall intercept interviews involve interviewing a percentage of individuals passing by certain “intercept” points in a mall. (c) An on-site computer interview is a variation of the mall intercept interview, in which respondents complete a self-administered questionnaire displayed on a computer monitor. d. Online and Social Media Surveys (1) In an online survey, questionnaires can be transmitted to respondents either through e-mail or through a website. (a) Because e-mail is semi-interactive, recipients can ask for clarification of specific questions or pose questions of their own. (b) The potential advantages of online surveys are quick response time and lower cost than traditional mail, telephone, and personal interview surveys if the response rate is adequate. (2) Marketers can also use social networking sites such as chat rooms, blogs, newsgroups, and research communities and other digital media forums to identify trends in consumer interests and consumption patterns. (a) Often consumers must choose to go to a particular social media site or blog and then take the survey, which eliminates sample randomness and it may be difficult to obtain a representative sample size if site traffic or participation rates are low. (b) By merely monitoring ongoing online conversations, marketers may be able to identify new-product opportunities and consumer needs. (c) A major advantage of online data is that it can be gathered at little incremental cost compared to alternative data sources. (3) Crowdsourcing combines the words crowd and outsourcing and calls for taking tasks usually performed by a marketer or researcher and outsources them to a crowd, or potential market, through an open call. (a) In the case of digital marketing, crowdsourcing is often used to obtain the opinions or needs of the crowd (or potential markets). (b) It is a way for marketers to gather input straight from willing consumers and to actively listen to people’s ideas and evaluations on products. (4) Marketing research is likely to rely heavily on online surveys in the future. (a) Internet surveys have especially strong potential within organizations whose employees are networked and for associations that publish members’ e-mail addresses. (5) There are some ethical issues to consider when using digital marketing research, such as unsolicited e-mail, and privacy concerns (6) A serious challenge for firms conducting online surveys is obtaining a sample that is representative of the desired population. e. Questionnaire Construction (1) Questions must be clear, easy to understand, and directed toward a specific objective. (2) Defining the objective of a questionnaire before construction will provide a guide to the substance of the questions and ensure that they yield useful information that contributes to the research project. (3) Questions are usually of three kinds: open-ended, dichotomous, and multiple-choice. (4) Researchers must be careful not to ask questions which may be considered too personal or require an admission of activities that other people are likely to condemn. f. Observation Methods (1) In using observation methods, researchers record individuals’ overt behaviors, taking note of physical conditions and events. Direct contact with subjects is avoided. (2) Observation may include the use of ethnographic techniques, such as watching customers interact with a product in a real-world environment. (3) Observation may also be combined with interviews. (4) Data gathered through observation can sometimes be biased if the subject is aware of the observation process and adapts his or her behavior accordingly. (a) An observer can be placed in a natural market environment, such as a grocery store, without biasing or influencing shoppers’ actions. (b) If the presence of a human observer is likely to bias the outcome or if human sensory abilities are inadequate, mechanical means may be used to record behavior. Mechanical observation devices include cameras, recorders, counting machines, scanners, and equipment that records physiological changes. (c) Observation is straightforward and avoids a central problem of survey methods: motivating respondents to state their true feelings or opinions. However, observation tends to be descriptive and may not provide insights into causal relationships. G. Interpreting Research Findings 1. After collecting data to test hypotheses, marketers need to interpret the research findings. 2. In most cases, the first step researchers will take is to assemble the data into a table format. 3. Next, the data must be analyzed: statistical interpretation focuses on what is typical and what deviates from the average. 4. Data require careful interpretation and a firm may choose to enlist an expert consultant or computer software to ensure accuracy. 5. Managers must understand the research results and relate them to a context that permits effective decision making. H. Reporting Research Findings 1. The final step in marketing research is to report the research findings. The marketer must objectively analyze the findings to see how well the gathered facts answer the research question or support or negate the initial hypothesis. 2. The report of the research results is usually a formal, written document. 3. Report writers should keep in mind that corporate executives prefer reports that are short, clear, and simply expressed. To address this desire, researchers often give their recommendations first, in an executive summary, followed by details on how the results were obtained. a. Researchers must recognize the needs and expectations of the report user and adapt to them. IV. Using Technology to Improve Marketing Information Gathering and Analysis A. Technology and the Internet have made the information required for marketing decisions more accessible than ever. B. Information technology permits for easy internal research and quick information gathering to help marketers better understand and satisfy customers. C. Consumer feedback is an important aspect of marketing research, and new technology such as digital media is enhancing this process. D. Companies of all sizes have unprecedented access to industry forecasts, business trends, and customer buying behavior—which improves communication, understanding of the marketing environment, and marketing research capabilities. E. Many firms use marketing information systems, CRM technologies, and cloud computing to network technologies and organize the marketing data available to them. F. Marketing Information Systems 1. A marketing information system (MIS) is a framework for the day-to-day management and structuring of information gathered regularly from sources both inside and outside the organization. a. It provides a continuous flow of information about prices, advertising, expenditures, sales, competition, and distribution expenses and can be an important asset for developing effective marketing strategies. 2. The main focuses of an MIS are on data storage and retrieval, as well as computer capabilities and management’s information requirements. 3. An effective MIS starts by determining the objective of the information by identifying decision needs which require certain information. The firm then specifies an information system for continuous monitoring to provide regular, pertinent information on both the external and internal environment. G. Databases 1. A database is a collection of information arranged for easy access and retrieval. 2. Databases are often accessed through a computer system and allow marketers to tap into an abundance of information useful in making marketing decisions: internal sales reports, newspaper articles, company news releases, government economic reports, bibliographies, and more. 3. Customer Relationship Management (CRM) employs database marketing techniques to identify different types of customers and develop specific strategies for interacting with each customer. It incorporates these three elements: a. Identifying and building a database of current and potential customers. b. Delivering differential messages according to each consumer’s preference and characteristics through established and new media channels. c. Tracking consumer relationships to monitor the costs of retaining individual customers and the lifetime value of their purchases. 4. Single-source data is information provided by a single firm about household demographics, purchases, television viewing behavior, and responses to promotions, such as coupons and free samples. H. Marketing Decision Support Systems 1. A marketing decision support system (MDSS) is customized computer software that aids marketing managers in decision making by helping them anticipate the effects of certain decisions. 2. An MDSS has a broader range and offers greater computational and modeling capabilities than spreadsheets and lets managers explore a broad range of alternatives. a. For this reason, MDSS software is often a major component of a company’s MIS. b. Some decision support systems incorporate artificial intelligence and other advanced computer technologies. V. Issues in Marketing Research A. The Importance of Ethical Marketing Research 1. Marketing managers and other professionals increasingly rely on marketing research, marketing information systems, and new technologies to make better decisions. 2. Organizations like the Marketing Research Association have developed codes of conduct and guidelines to promote ethical marketing research. 3. Consumer privacy has also become a significant issue as firms now have the ability to purchase and collect data on customer demographics, interests, and more personal matters such as bankruptcy filings and past marriages. a. This information has allowed companies to predict customer behavior more accurately, but many feel it infringes upon consumer privacy. b. While such data enable companies to offer more personalized services, policy makers fear that it could also allow them to discriminate against consumers who do not appear “valuable” customers. c. Many consumers also believe that their online behavior could be used to identify them personally. B. International Issues in Marketing Research 1. The marketing research process described in this chapter is used globally, but to ensure research is valid and reliable, data-gathering methods may be modified to allow for differences in sociocultural, economic, political, legal, and technological forces in different world regions. 2. Experts recommend a two-pronged approach to conducting international marketing research. a. The first phase involves a detailed search for and analysis of secondary data to gain a greater understanding of a particular marketing environment and to pinpoint key regional issues that could affect primary research data. (1) Secondary data can be particularly helpful in building a general understanding of the market, including economic, legal, cultural, and demographic issues, as well as in assessing the opportunities and risks of doing business in that market, and in forecasting demand. b. The second phase involves field research using many of the methods described in the chapter, including focus groups and telephone surveys, to refine a firm’s understanding of specific customer needs and preferences. (1) Specific differences among countries can have a profound influence on data gathering. (2) Primary data gathering generally will have a greater chance of success if the firm employs local researchers who understand how to approach potential respondents and can do so in their own languages. DISCUSSION STARTERS Discussion Starter 1: Sources of Secondary Data ASK: What is held every 10 years in the United States as required by the Constitution and yields crucial data for marketers? The answer is the U.S. Census. ASK: Why is it called the U.S. Census and not the U.S. Sample? Every person in the U.S. must be counted. It is a full accounting of the population and yields a treasure trove of information for marketers. For example, you can visit the Census Bureau website and get very specific details about the population in a given town, such as total population, percentages of males and females, breakdowns by age, home ownership, and income levels. The same information can be obtained by state, region, and the nation. Visit the following link for more information: http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml. When U.S. Census data is fresh, as it is now because the most recent census was conducted in 2010, marketers have access to accurate information from a very reliable source. The data may be used in a variety of ways for planning purposes. Discussion Starter 2: Marketing Analytics ASK: What is the fastest growing area of marketing research? The answer is marketing analytics. Many of the new analytic firms assist organizations in understanding consumer web use to optimize website design. In the following link, the CEO of one of the leading optimization firms discusses how information is used. http://www.youtube.com/watch?v=KrqjXgid2MY Discussion Starter 3: Market Research In using observation methods, researchers record individuals’ overt behavior, taking note of physical conditions and events. Direct contact with subjects is avoided. Observation may include the use of ethnographic techniques, such as watching customers interact with a product in a real-world environment. The movie, Big, starring Tom Hanks is a classic for portraying ethnographic field research. In the movie, Tom Hanks is a kid trapped in an adult’s body. The business executive in the movie brings Hanks to FAO Schwartz to study his reaction to various toys. Discuss how this is an effective way to gain consumer insights into the psyche of key target markets. CLASS EXERCISES Class Exercise 1: The Marketing Research Process The objective of this class exercise is to apply the marketing research process to solving a marketing problem. Prompt for Students: You are considering opening a new “Fluff-and-Fold” laundry pick-up, cleaning, and delivery service for students. You are uncertain whether sufficient demand exists, and you have questions about when students will need your service most and what level of service they will require. You realize that marketing research can help solve your information needs. You must now decide how to best answer these questions. 1. Define the problem. 2. Design the research project. 3. After consulting any secondary data available, you decide to conduct an exploratory study with students in your classes. Develop open-ended questions to ask other students that will provide information regarding your hypotheses. 4. Having gained some insight into the problem, you are now ready to conduct a descriptive study. You decide to conduct a survey to further test your refined hypotheses. However, you have several decisions to make regarding this study. a. What type of sampling approach (random, stratified, area, quota) will you use and why? b. What survey method (mail, telephone, personal interview) will you use and why? c. How will you construct the questionnaire? Develop open-ended, dichotomous, or multiple-choice questions that will test your hypotheses. Remember to remain impartial and inoffensive. Answers: 1. The answers to this question will depend on how the students view the opportunity on the campus. Typical problem statements might include “We don’t know if a sizable, profitable market exists for Fluff and Fold,” or “We don’t know which dorms at what times offer good opportunities for our service.” You might suggest that focus groups could help define the problem more clearly. 2. Most students will take the example and adapt it. However, you might push them further by asking, “Can you be any more specific about the target market? For instance, do you expect more underclassmen will use the service? More males or females?” Other typical hypotheses might involve service expectations (one-day pick-up and delivery) and daily operation issues (primary demand on weekends versus weekdays). 3. This may be a good time to explain how a focus group can help resolve or clarify research problems. You may even want to set up a focus group discussion in class. After students have developed a few open-ended questions (for example, “How much would you be willing to pay for Fluff and Fold service?”), you might want to allow time for students to gather from one another information related to the questions. You might also point out that inexpensive data collection such as focus groups or polling customers can ensure better marketing decisions. 4. Observation, combined with interviews, may be an efficient way to determine what times students will need the service. However, observation alone will not assess true feelings or opinions. a. Perhaps the best way to select a sample is through the use of stratified sampling, especially if demand is likely to vary by classification (freshmen, etc.). The student directory should provide this information. However, quota sampling, which is non-probabilistic, may suffice for exploratory research. b. Mail surveys may be the cheapest (because of campus mail) and may be suitable for the short surveys most students will develop. However, response rate may be low. Phone surveys might increase the response rate, but finding students at home may be problematic. Personal interviews conducted at central meeting points on campus might help overcome refusals but might also introduce interviewer and sample bias. c. You may want to illustrate the problems associated with double-barreled, leading, non-mutually exclusive, and exhaustive questions, among others. You might even have students collect data by using these questions. Class Exercise 2: Solving Data Collection Problems This exercise is designed to prompt students to think about how to solve data collection problems. Students should discuss the merits of alternative data collection methods as they solve each problem. Obviously, each problem can be solved by more than one collection method. The students should decide which data collection procedure is best for each situation and be able to defend their choices. Prompt for Students: What is the most appropriate data collection method for each of the following research questions? 1. How do consumers in South Dakota feel about Christmas shopping? 2. How do J.C. Penney customers feel about J.C. Penney’s customer service? 3. What is the opinion of U.S. consumers toward a Chrysler advertisement that questions the quality of Japanese cars? 4. How many people nationwide currently live in apartments? 5. How do Sears charge customers view the company’s new pricing policy? Answers: 1. Telephone interviews or possibly focus group interviews 2. Mall intercept interviews 3. Telephone interviews 4. This information can be obtained most easily in a census report. However, if census information is too dated to be useful, the next best source might be the U.S. Department of Housing. Overall, this type of data is usually available in secondary form from government or industry sources. 5. A mail survey of Sears charge customers Class Exercise 3: Designing a Research Study Recommended as a group activity Prompt for Students: In this chapter you were introduced to the various techniques used by marketers to collect data from consumers. In this exercise your group is asked to design a research study to address the following scenario. You have been hired by a small used-CD shop to survey its customers about what other types of products they should stock. The owners have considered the following: comic books, anime, collectible figures, posters, used DVDs, used video games, and used musical instruments. The owners are uncertain which products to add to their inventory. Step 1: Define the problem. Step 2: Design the research project. a. Who do you need to collect the data from? b. What is the best way to collect this data? c. How would you analyze this data? Step 3: Design a questionnaire for your client. Justify why you are asking each question. CHAPTER QUIZ 1. Research design means developing a plan for obtaining the necessary market information. When a researcher forms an informed guess or assumption about a certain problem, he or she is a. conducting a search of secondary data. b. forming a hypothesis. c. examining research reliability. d. considering how to collect primary data. e. examining research validity. 2. The first step in the marketing research process is a. defining the problem or research issue. b. designing the research project. c. collecting data. d. interpreting research findings. e. reporting research findings. 3. When a population is divided into distinct groups based on some particular characteristic and a probability sample is taken from each group, this exemplifies _________ sampling. a. area b. quota c. stratified d. cluster e. simple random 4. External sources of secondary data include trade associations, periodicals, government publications, unpublished sources, and a. focus groups. b. exploratory research. c. personal interviews. d. experimental research. e. online databases. Answers to Chapter Quiz: 1. b; 2. a; 3. c; 4. e. ANSWERS TO ISSUES FOR DISCUSSION AND REVIEW 1. What is marketing research? Why is it important? Marketing research is the systematic design, collection, interpretation, and reporting of information to help marketers solve specific marketing problems or take advantage of market opportunities. It is important because it can help a firm better understand market opportunities, ascertain the potential success for new products, and determine the feasibility of a particular marketing strategy. 2. Describe the five steps in the marketing research process. Students should be able to describe each of the following steps: • Locate and define the problem or research issue • Design the research project • Collect data • Interpret research findings • Report research findings 3. What is the difference between defining a research problem and developing a hypothesis? A research problem is the question to be answered, and while defining a research problem researchers focus on the true nature and boundaries of a situation as it relates to marketing strategy or implementation. Whereas a hypothesis is an assumption or supposition about the solution to be explored, which involves a researcher seeking to prove or disprove based on all the insight and knowledge available about the problem or circumstances from previous research studies and other sources. 4. Describe the different types of approaches to marketing research, and indicate when each should be used. Exploratory research is conducted to gather more information about a problem or to make a tentative hypothesis more specific. Conclusive research is designed to verify insights through an objective procedure to help marketers in making decisions; it is used when the marketer has in mind one or more alternatives and needs assistance in the final stages of decision making. Conclusive research may be descriptive or experimental. Descriptive research is conducted to clarify the characteristics of certain phenomena to solve a particular problem. Experimental research allows marketers to make causal deductions about relationships. It is used when information is needed on causal relationships and more complex hypotheses are required. 5. Where are data for marketing research obtained? Give examples of internal and external data. Data for marketing research can come from internal or external sources. Internal sources may include the company’s financial and operational records or customer contacts. Examples of internal data are advertising expenses, sales figures, and customer complaints. External sources may include government publications, trade associations, marketing research companies, and business magazines. Examples of external data would be census information, consumer trends, or competitors’ prices. 6. What is the difference between probability sampling and nonprobability sampling? In what situation would random sampling be best? Stratified sampling? Quota sampling? In probability sampling, every element in the population being studied has a known chance of being selected for study. In nonprobability sampling, there is no way to calculate the likelihood of choosing a specific element of the population being studied. Random sampling works best when it is easy to number or identify all units in a population and give each unit a known or equal opportunity of appearing in the sample. Stratified sampling is useful when units such as individuals are not available on a list but geographic areas such as blocks or census tracts can be used. Then researchers use a random selection process to pick out units or individuals to be sampled. Quota sampling differs from the other sampling techniques because it is judgmental. Quota samples are often used in exploratory research not projected to the total population. 7. Suggest some ways to encourage respondents to cooperate in mail surveys. Students’ responses may vary but should indicate an understanding of the growing challenges of nonresponse in marketing research. Many will suggest that incentives such as premiums be offered to those who participate. A well-written letter stating the importance of the survey can be helpful. Sampling from a population interested in the topic under investigation will increase response. Using a short, easy-to-fill-out questionnaire is also helpful. 8. If a survey of all homes with listed telephone numbers is to be conducted, what sampling design should be used? A simple random probability sample of phone numbers should be acceptable in this case. 9. Describe some marketing problems that could be solved through information gained from observation. Personal observation can be used to solve problems such as shoplifting, spoilage, and breakage. Also, demographic characteristics can be observed and classified. One could observe and plot license plates on a map to obtain a geographic market profile. Other examples in which observation is important are television ratings (such as Nielsen’s) and traffic flow. 10. What is a marketing information system, and what should it provide? A marketing information system is a framework for the day-to-day management and structure of regularly gathered information from sources both inside and outside the organization. A marketing information system should provide information about prices, advertising expenditures, sales, competition, consumer behavior, and distribution expenses. The value of a marketing information system is measured by the improvements it makes in the marketer’s ability to make decisions. 11. Define a database. What is its purpose, and what does it include? A database is a collection of information arranged for easy access and retrieval, usually stored in a computer. A database allows a marketer to retrieve information to be used in making marketing decisions. A database may include newspaper articles, company news releases, government reports, and economic data. 12. How can marketers use online services and the Internet to obtain information for decision making? Through online services and the Internet, marketers can access databases, send e-mail, and create and conduct surveys on their websites. They also can communicate with other marketers and customers. 13. What role do ethics play in marketing research? Why is it important that marketing researchers be ethical? It is essential that professional standards be established by which research may be judged reliable because marketing managers and other professionals increasingly rely on marketing research, marketing information systems, and new technologies to make decisions. Without clear understanding and agreement among all parties, including mutual adoption of standards, ethical conflict can lead to mistrust and questionable research results. 14. How does marketing research in other countries differ from marketing research in the United States? Marketing research in other countries uses the same five-step process described in this chapter. However, modifications may be necessary to allow for differences in sociocultural, economic, political, legal, and technological forces of the marketing environment in other countries. ANSWERS TO MARKETING APPLICATIONS 1. Suppose you are opening a health insurance brokerage firm and want to market your services to small businesses with fewer than 50 employees. Determine the information you must pull from your database and analyze in order to pursue your marketing efforts. What variables did you select and why? Students will need to conduct some outside research or visit the business school’s library to get a sense of what databases and other sources of information exist to answer this question. For example, a database such as LexisNexis could provide information on consumer preferences and marketing techniques, and a local chamber of commerce or Book of Lists could provide a list of small businesses to target. 2. After observing customers’ traffic patterns, Bashas’ Markets repositioned the greeting card section in its stores, and card sales increased substantially. To increase sales for the following types of companies, what information might marketing researchers want to gather from customers? a. Furniture stores b. Gasoline outlets service stations c. Investment companies d. Medical clinics Students will have to provide a variety of ideas. a. Furniture stores: traffic patterns; online research habits; responses to different payment options; responses to different promotions b. Gasoline outlets service stations: traffic patterns; impulse purchase habits c. Investment companies: the amount of personal contact desired by customers; responses to different service packages d. Medical clinics: reasons that customers choose to see a doctor or to not seek medical help; responses to different payment options 3. When a company wants to conduct research, it must first identify a problem or possible opportunity to market its goods or services. Choose a company in your city that you think might benefit from a research project. Develop a research question and outline a method to approach this question. Explain why you think the research question is relevant to the organization and why the particular methodology is suited to the question and the company. Students’ answers will vary depending on the local business, but students should present a logical argument for why they asked the particular research questions and why they chose their particular methodology as a solution to the research question. 4. Input for marketing information systems can come from internal or external sources. Nielsen Corporation is the largest provider of single-source marketing research in the world. Identify two firms in your city that might benefit from internal sources and two that might benefit from external sources. Explain why these sources would be useful to these companies. Suggest the type of information each company should gather. Students’ answers will vary depending on the local businesses, but students should be able to justify their answers and differentiate between internal and external sources of information. 5. You work as a marketing researcher for a manufacturer of energy drinks. Your company is designing a new product that will be targeted at college and university students. In order to learn more about energy drink consumption habits, the company plans to conduct a survey of the target market. After conducting some research, you determine that the best survey method that fits your firm’s budget is a mail survey. You know from past experience that the response rate for mail surveys is approximately 10 percent. Your manager tells you that he wants at least 550 completed surveys in order to make an informed decision. You also know that approximately 14 percent of respondents who mail surveys back to you fail to answer certain questions. Your manager tells you that he wants at least 550 completed surveys in order to make an informed decision. Given the low response rate and the rate of unfinished surveys, how large will the sample size need to be to comply with your manager’s request? With this estimated response rate and the number of surveys that the company plans to distribute, do you feel that this sample will be representative of the entire population of college and university students? This is an example of the type of question that marketing researchers face. The logic and math behind this question is usually taught in a marketing research course, so we suggest using a survey random sample calculator like the one available at http://custominsight.com/articles/random-sample-calculator.asp. With a 10 percent response rate, you would need to send out 5500 surveys. However, 14 percent (77) of those will be incomplete. You would need to send 5577 surveys to comply with your manager’s request. According to the National Center for Education Statistics, there were 20.4 million college students in 2009. For a 5 percent error rate and 95 percent confidence, you would need at least 384 completed surveys to ensure a representative sample. 550 completed surveys will likely be representative of the entire population of college and university students. 6. Develop your analytical and communication skills using the Role-Play Exercises Online at www.cengagebrain.com. Students can visit the website and develop their analytical and communication skills. ANSWERS TO INTERNET EXERCISE ESOMAR ESOMAR, the European Society for Opinion and Marketing Research, was founded in 1948. It is a nonprofit association for marketing research professionals. ESOMAR promotes the use of opinion and marketing research to improve marketing decisions in companies worldwide and works to protect personal privacy in the research process. Visit the association’s website at www.esomar.org. 1. How can ESOMAR help marketing professionals conduct research to guide marketing strategy? This information can be found under the “About ESOMAR” tab. According to the website, “ESOMAR facilitates an on-going dialogue with its 4,900 members, in over 130 countries, through the promotion of a comprehensive program of industry specific and thematic conferences, publications and best practice guidelines. ESOMAR also provides ethical guidance and actively promotes self-regulation in partnership with a number of associations across the globe.” 2. How can ESOMAR help marketers to protect the privacy of research subjects when conducting marketing research in other countries? This information can be found under Article 7 in the International code (http://www.esomar.org/uploads/public/knowledge-and-standards/codes-and-guidelines/ESOMAR_ICC-ESOMAR_Code_English.pdf), which is located under the “Knowledge & Standards” tab. It includes standards about collection and use of research data. 3. ESOMAR introduced the first professional code of conduct for marketing research professionals in 1948. The association continues to update the document to address new technology and other changes in the marketing environment. According to ESOMAR’s code, what are the specific professional responsibilities of marketing researchers? This information can be found in the International code (http://www.esomar.org/uploads/public/knowledge-and-standards/codes-and-guidelines/ESOMAR_ICC-ESOMAR_Code_English.pdf), which is located under the “Knowledge & Standards” tab. The code is currently 36 pages long, so be sure to specify how detailed student responses should be. The four basic principles are: • Market research shall be legal, honest, truthful and objective and be carried out in accordance with appropriate scientific principles. • Researchers shall not act in any way that could bring discredit on the market research profession or lead to a loss of public confidence in it. • Market research shall be conducted with professional responsibility and conform to the principles of fair competition, as generally accepted in business. • Market research shall be clearly distinguished and separated from non-research activities including any commercial activity directed at individual respondents (e.g. advertising, sales promotion, direct marketing, direct selling etc.). ANSWERS TO DEVELOPING YOUR MARKETING PLAN The information obtained from these questions should assist students in developing various aspects of their marketing plan found in the Interactive Marketing Plan exercise at www.cengagebrain.com. 1. Define the nature and scope of the questions you must answer with regard to your market. Identify the types of information you will need about the market to answer those questions. For example, do you need to know about the buying habits, household income levels, or attitudes of potential customers? This question asks students to think seriously about all of the questions they must ask themselves with regard to the market for their product. Many issues will likely come up when determining a strategy for marketing research, and this question should present students with an early opportunity to think about the questions that need answering. Students should utlize the textbook as a resource and come up with a list of questions, as well as another list that covers the types of information they will need. 2. Determine whether or not this information can be obtained from secondary sources. Visit the websites provided in Table 4.3 as possible resources for the secondary data. Students may want to review their understanding of primary versus secondary sources of data before proceeding with this question. They can use Table 4.3, which provides websites for sources of secondary data, as a starting point to this question. Students need to ask themselves what kinds of information they will need to gather in order to answer the questions they asked in question one of this exercise. Will secondary data be helpful, or will primary data be needed? Possibly, students will want to gather a mix of both. 3. Using Table 4.4, choose the appropriate survey method(s) you would use to collect primary data for one of your information needs. What sampling method would you use? The final question asks students to review Table 4.4, which compares different survey methods, and to decide which of these methods would be most useful when collecting primary data for their marketing research. Students should also think about the sampling method they will use—which will vary depending on their goals, their target market, and the product. COMMENTS ON VIDEO CASE 4: MARKETING RESEARCH REVEALS MARKETING OPPORTUNITIES IN THE BABY BOOMER GENERATION Summary This case illustrates how a variety of marketing research techniques can help marketers meet the needs of a target market. Baby Boomers are a profitable demographic, and with approximately 20 percent of the U.S. population estimated to be 65 years or older by 2030, marketers are beginning to research better ways to market to this population. Baby Boomers desire to have a variety of products available to them, and many of the products traditionally thought to belong to the younger generation are actually bought the most by older generations, such as cars and technological products. As they age, Baby Boomers are also creating a market for new products and services. Questions for Discussion 1. Why are Baby Boomers such a lucrative market? Baby Boomer spending has been increasing, and they are estimated to have $3.4 trillion in annual buying power. Baby Boomers desire to have a variety of products available to them, and many of the products traditionally thought to belong to the younger generation are actually bought the most by older generations, such as cars and technological products. With approximately 20 percent of the U.S. population estimated to be 65 years or older by 2030, the spending potential for this market is growing. 2. How has the marketing research process been used to understand how Baby Boomers shop and interact in stores? Because marketers often target younger generations of consumers, little thought has been given to how accessible stores and products are for older generations. Businesses are using marketing research to understand the customer preferences of Baby Boomers, including how they shop, what they desire in products, and how to customize promotions to attract this lucrative demographic. 3. How have stores used marketing research findings to tailor their stores and products to appeal to Baby Boomers? Many businesses have used marketing research findings to customize their retail environments and their products. CVS lowered its shelves, made its store lighting softer, and installed magnifying glasses for hard-to-read labels. Diamond Foods Inc. designed the packaging of its Emerald snack nuts to be more easily opened and decreased the time it takes to rotate the caps to open its products. However, because Baby Boomers don’t like to be reminded that they are getting older, companies avoid directly mentioning how their changes help “aging” consumers. Solution Manual for Foundations of Marketing William M. Pride, O. C. Ferrell 9781305361867, 9781305405769, 9780357033760
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