CH-1-4 A Decision-Making Perspective on Marketing Intelligence – Marketing Research : Chapter Notes

This Document Contains Chapters 1 to 4 PART 1 TEACHING NOTES FOR CHAPTERS CHAPTER ONE A DECISION-MAKING PERSPECTIVE ON MARKETING INTELLIGENCE Learning Objectives • Describe the concept of business intelligence. • Describe the need and use of marketing intelligence in an organization. • Describe how marketing intelligence fits in the bigger scheme of the marketing environment. • Explain the role of marketing intelligence in decision making. • Discuss the factors that affect marketing intelligence decisions. • Describe how and when marketing research is used. • Discuss the implication of ethical issues in gathering marketing intelligence. • Discuss the ethical responsibilities and rights of the respondent in marketing research. • Explain the impact international trade has had on marketing research. Teaching Suggestions This chapter will be discussed in the context of the introductory session to the course. This section comprises of new material on emerging trends in marketing related to Business Intelligence and Marketing Intelligence. The scope of this session will be largely dictated by the type of students, their previous marketing courses and the length of the course. However, it is always useful to put the marketing research course into context by discussing its relationship to other marketing courses and defining the nature and scope of the marketing research process. In addition, it could be a good beginning to use Figure1-1 below to highlight the increasing importance of concepts such as Business Intelligence and Marketing Intelligence. It is important to upfront educate the students on the hierarchical relationships of these new concepts and emphasize the relationships between Business Intelligence and Marketing Intelligence and that between Marketing Intelligence, Marketing Research and Database Marketing. This can also be used to provide a rationale for the course objectives, structure and project assignments. After this introduction, there are several alternative directions an instructor may wish to pursue. Figure 1-1: Typical areas under the umbrella of Business Intelligence Some Guidelines Based on the new material added in the 13th edition of this text book, it may be useful for instructors to begin this course by highlighting the changes that emerging information technology (IT) solutions have brought in to the marketing field. It may be highlighted to students that, often times organizations are not aware that valuable information lies hidden across disparate databases of their enterprise. Latest IT tools and technologies enable businesses to analyze, synthesize and collate key information pertaining to their business, market and customers. Such tools help organizations to create a structure to the information being collected by the organization, identify the critical information that impact the business, monitor changes and respond to situations with appropriate strategies. Instructors should highlight the emergence of concepts such as Business Intelligence, Marketing Intelligence which help to gain a granular focus on important parameters that affect business performance. Students should be enlightened with the emerging need for organizations to identify evolving customer preferences, online and offline habits etc., which would help organizations to accurately position their products and services and realize enhanced customer engagement and profitability. Discussions on the examples provided on Kit Kat and Mosaic would be relevant at this point. Before delving further into marketing research, instructors should refer to Figure 1-1 adequately to ensure that the students understand the definition, scope and benefits of concepts such as Business Intelligence, Marketing Intelligence and Database Marketing. It is also important to emphasize the hierarchical relationships between the above concepts with marketing research. For those instructors who wish to draw the distinction between public versus private sector applications of marketing research, they can begin with the American Marketing Association’s definition of marketing research and discuss how marketing research can aid decision making in both the private and public sector research applications. For those instructors who wish to give more emphasis to the marketing planning process Table 2-1 will be an ideal starting point. The revenues of the top 25 firms in the US marketing research industry stood at $22.5 billion in 2016, with a growth of 4.6% over 2015. It is worth noting that the revenue generated by the top 25 firms outside their home countries was more than twice the revenue they generate in their home countries. It is important that students understand two fundamental points which will be emphasized in subsequent chapters. These concepts should be established early in the course. The first is that research plays a continuous and cumulative role in the development of any marketing strategy. This can be illustrated by reviewing how research supports marketing decisions. The second is that research is a tool and like any tool, it can be misused. This can be illustrated by discussing ethical research and the barriers to effective research utilization. Some instructors prefer to begin their course with a motivating case that illustrates the facets and issues that will be covered. The Clover Valley Dairy case at the end of Part I is well suited to this purpose. A further advantage to using this case early in the course is that it provides a useful context for subsequent discussions of the value of research information. Questions and Problems 1. In the chapter introduction, we note that the purpose of this chapter is to illustrate the role that marketing research should play in any organization. The basic research questions are shared by all organizations that need to understand and react to market requirements. This point can be reinforced with the aid of this question. Perhaps the best way to use the question is to divide the class into small groups, assign each group to one organization, and give them fifteen or twenty minutes in class to develop the possible uses of marketing research. Then each group is given a few minutes to make a presentation to the other groups. To clarify what is required of the groups it is useful to take one organization and discuss it in depth before giving them the assignment. Considering the various cases that are presented in 1.1, there are some basic marketing research studies that can be conducted to gain an overall understanding of businesses in general: (a) surveys of consumer satisfaction and dissatisfaction, and complaints, (b) store location analyses (i.e., assessing market potentials for new stores or expansion of present stores), (c) surveys of customer buying patterns to measure Sears competitive position in each region and product group, (d) experiments to evaluate alternative pricing levels, (e) analysis of product movement data to estimate acceptance of new products of fashion items, (f) new product concept and market testing, (g) studies of the effectiveness of media advertising (television and local print advertising) (h) testing alternative formats and layouts for catalogs, as well as evaluating different catalog distribution methods, (i) studies of the effectiveness of media advertising (television ad local print advertising), (j) life style research to help anticipate changing product requirements. These are only illustrative, but help to reveal the scope—and excitement of marketing research. Additionally, there are specific marketing research studies that can be undertaken by certain businesses, to answer more targeted questions that address unique aspects of those businesses. In recent times, advances in marketing through social media, big data, and novel data collection methods (e.g., Amazon Mechanical Turk) have changed the way companies collect data and conduct research. These aspects can be brought out through these organizations. For instance, a business that wants to design an indoor children’s play area can use virtual reality to get feedback on different layouts, games and user experiences. An online video streaming that collects vast amounts of big data on users’ clickthroughs, search activities, viewing patterns etc. can integrate this information with data from its digital engagement activities to identify key consumer insights that might aid promotional activities. Also note that although Sears Roebuck (now Sears) may be dated, this exercise is to test students to see how they would conduct market research for this firm if it was to exist as Sears Roebuck today. 2. Students should understand how marketing research can make a contribution to clarifying and resolving issues and choosing between the decision alternatives present in each stage of the Marketing Planning Process. (a) Situation analysis. This involves understanding how the organization fits into its market environment. Both primary and secondary information can be used to identify the threats and opportunities facing an organization. These include socio economic trends, data available from the Census, industry information, customer research on why they buy or use the organization’s product or service and/or competitive offerings, sales force input on the competition or channel concerns and trade association data. (b) Strategy development. This involves combining external marketing research with internal organizational objectives. Selection of a served market should reflect what market the business is well positioned to serve. Insights into this question can be obtained by conducting customer research and analyzing competitive strengths and weaknesses in product offerings, distribution channels, customer loyalty and so on. Research can help select the served market segment by revealing gaps between customer preferences and competitive offerings. Marketing Research in Action 1-2 is a good example of how a retail company followed a winning strategy to achieve market leadership. (c) Marketing program development. This involves using marketing research to support specific management decisions. The decisions listed in Table 1-4 could be supported by research as follows: (i) Segmentation decisions. A bank could gain insights into this question by conducting a survey of all retail bank customers in the area being served by the bank. Information on banking patterns, benefits sought, satisfaction with present branch and classification information could be obtained to address this need. (ii) Product features decisions. These often involve trade-offs between price and type of features. Also, there are many possible combinations of features. Surveys of customer preferences for combinations of features are useful here. (iii) Distribution decisions. Useful information on the appropriate type of retailer can be obtained from industry trade association statistics on trends in the type of retailers. Is one type replacing another? (iv) Choice of advertising appeal. The choice is often made on the basis of the results or a more or less realistic experiment comparing the ability of alternative appeals to change attitudes or influence behavior. (v) Personnel selling decisions. Usually high potential customer types for a particular product can be described using socioeconomic and demographic data available from the Census. The relationship between product usage and these variables may be obtained from a survey of present and prospective customers. (vi) Price decisions. The type of trade-off analysis used to identify product features can also be used to choose among alternative price levels for particular sets of product features. (vii) Branding decisions. Branding provide firms an identification for consumers among the competing offerings in the market. This identification is achieved by logos, slogans, symbols dedicated to the product. Such an identification helps in product positioning and a place in the consumer’s choice set. (viii) Customer satisfaction decisions. Satisfaction arises out of a consumer’s feeling of pleasure or disappointment upon comparing a product’s actual performance to expectations. Customer satisfaction has an important impact on repeat usage and companies use various approaches to measure it. An important aspect of this is customer complaint management, and the policies adopted to help recover customer goodwill when faced with complaints. (d) Implementation. This involves controlling the marketing program. Analyzing actual sales results with marketing objectives to determine product/service acceptance on a variety of dimensions including price, advertising, product/service feature, etc. In addition, the sales force can provide valuable input in the reaction of retailers or distribution to the new product or service. 3. Ethical problems that marketing researchers face in designing and conducting field studies stem from the potential to abuse the rights of respondents. Marketing Research in Action 1-5 discusses the code of ethics of The Marketing Research Association. Students should be encouraged to read the code in order to be able to appreciate the importance and relevance of ethics in marketing research. Some issues that would present the conscientious researcher with an ethical dilemma are: ● Deciding how much to reveal to respondents about the research without jeopardizing the research objectives. This could rise in product testing in which the research wants to judge product acceptance by conducting simulated product tests in which the identical product is tried by the respondent except for variations in characteristics such as color that have no influence on product quality; ● The need to code respondent answers for subsequent analysis vs. promising anonymity to the respondents; ● The trade-off between gaining respondent cooperation and revealing the true duration of a lengthy interview; ● Withholding information on the purpose and sponsorships of the interview in order to ensure respondents answers remain unbiased; ● Misrepresenting the compensation or not mentioning to a respondent that a follow up interview will be made in order to gain cooperation. 4. Much marketing research information is used directly to formulate and evaluate strategic alternatives at the business level, and evaluate new opportunities at the corporate level. By having marketing research report to a senior planning executive, the resulting research is more likely to be responsive to strategic requirements and take a long-run perspective. Obviously, this arrangement does not provide adequately for short-term information requirements, such as territorial sales analyses or advertising campaign evaluations. Thus, it is desirable to have a separate group at a lower level in the organization with responsibility for these requirements. 5. Virtually all research users will at some time use the services of outside research specialists. This will be discussed further in Chapter 3. Some factors affecting the choice of whether a firm will contract out a research study or do it themselves are: the skill or experience level of internal personnel, the time constraint of the projects, the confidentiality of the projects, the facilities required to conduct the research, the intended use of research results and the cost of using internal vs. external researchers. 6. Marketing research directed toward strategy development answers three critical questions: what business should we be in? How will we compete? What are the objectives for the business? Programs embrace specific tasks, such as developing a new product or launching a new advertising campaign. An action program usually focuses on a single objective in support of one element of the overall business strategy. This is where the bulk of ongoing marketing research is directed. 7. a. Factors that influence marketing research decisions: relevance, type and nature of information sought, timing, availability of resources, and cost-benefit analysis. b. A marketing research company should avoid ethical issues: violating client confidentiality, improper execution of research. c. Generally, the factors that influence a manager’s decision to use research information are: research quality, conformity to prior expectation, clarity of presentation, political acceptability within the firm, challenge to the status quo. 8. The process of production and the finished product is finalized, and the target market determined, so marketing research for program development is needed here. Marketing research should help make decisions in the following areas: segmentation, product, distribution, advertising and promotion, personal selling, price, branding, customer satisfaction. 9. From the sponsor’s point of view, it depends on the purpose for which the research was initiated in the first place. If the very purpose of the research is for an unethical purpose like publishing false or highly exaggerated advertisements, a written code of ethics cannot stop the sponsor. Sponsors could also use research as a tactic to get a foot in the door of prospective customers and then use the opportunity to launch a sales pitch. From the supplier’s point of view, the information collected while conducting research is supposed to be confidential. However, in some instances they could be tempted to use that to their own benefit. It may also not be possible for all individuals to overcome their personal biases while conducting research and this could have an impact on the results. PART I TEACHING NOTES FOR CHAPTERS CHAPTER TWO MARKETING RESEARCH IN PRACTICE Learning Objectives • Discuss briefly the practice of marketing research. • Discuss the concept of information systems and decision support systems. • Discuss marketing decision support systems. • List the various suppliers of marketing research information and the types of services offered by them. • Discuss the criteria used to select suppliers. • Explain the impact international trade has had on marketing research. • Describe the career options available in the marketing research industry. Teaching Suggestions The chapter provides an overview of the practice of the marketing research. The students should be clear about the three categories of marketing research-programmatic selective and evaluative. The need to properly analyze information from the marketing decision support system (MDSS) is illustrated in the chapter by the discussion of the Alpha and Delta brand shares. Students could be asked to examine Figures 2-3 and 2-4 and pose other questions the managers have asked about these sales trends. For those instructors who wish to give more emphasis to private sector applications, a useful departure point is the structure of the marketing research industry which appears in Figure 2-7. The total revenue for the top 25 firms in the industry was $22.55 billion in 2016, and continues to grow. It is worth noting that although nearly two in three of the top 25 firms earn more than 60% of their annual revenues from their home countries, the revenue generated by the top 25 firms outside their home countries was more than twice the revenue they generate in their home countries. Questions and Problems l.a. It is important to understand what an information system is. An information system is a continuing or interactive structure of people, structures and procedures designed to sort, analyze, evaluate and distribute pertinent, timely and accurate information to decision makers. An information system is concerned with managing the flow of data from different projects and secondary sources and disseminate usable information to the managers who use it. An information system would require databases to organize and store the information and a decision support system (DSS) to retrieve data, transform the data to information for use by the managers. Data, as such is not of use to the manager. It is the data transformed to information that provides the manager with a meaningful framework to evaluate decision alternatives and thereby make decisions. b. Marketers need to develop a good marketing information system in order to aid their decision making process. The marketing information is of three types: Recurring information that is obtained on a day to day basis, Non recurring information obtained infrequently and market intelligence information relevant to devising the future strategy of the company. Let us illustrate this with an example. Assume that the marketing manager of a well known automobile lubricant wishes to expand into a newer market for his or her range of engine lubricants. The market potential can be calculated by obtaining data on monthly car sales from the government sources and the number of vehicles in the geographic area which can be obtained from the trade journals and government sources, a recurring type of information. The market share of the competitors can be calculated by information from trade organizations. Information pertaining to the competitors' activities in the market, impending product launches by the competition is relevant to the manager to make strategic plans for his product launch. The manager could decide to carry out a market survey to identify the consumers' buying habits and motives which would be a one time information to assist the manager in decision making. 2. Databases organize and store information that can be retrieved. A decision support system allows the manager to retrieve information from the database by interactive means and also provides a modeling function to help make sense of the retrieved information. Imagine the position of a marketing manager of a consumer durable sold nationwide. Data comes to his desk in various levels of detail and aggregation: Factory shipments, Dealer distribution lists, Industry sales reports, Sales reports from internal sales people, Consumer panel data, Scanner data etc. Added to this is the different reporting periods, incompatible computer software and all the associated problems. There is a virtual data explosion at the manager's desk. Owing to paucity of time and energy to pore over this pile of data, managers seek decision relevant information. A Marketing decision support system (MDSS) is used to provide managers with the required information that is both accessible and comprehensible. The MDSS should be interactive and user friendly and the interaction process should be simple and direct. The MDSS should be able to provide the manager with various output options depending upon his need. The system should also assist the managers in discovering new trends. 3. Some of the considerations that prompt firms to prefer external research suppliers over in-house research teams are: ● In-house researchers may not have the necessary skills or experience ● External help may be called in to boost internal capacity in response to urgent requirements ● Cost benefits to the firm by using external suppliers who are likely to have specialized skills that enable efficient utilization of time and resources ● Opportunities for savings exist, on account of shared cost and multiclient studies coordinated by external suppliers ● External suppliers are likely to have special competencies or facilities that would be expensive for in-house research teams to emulate ● External suppliers are likely to have greater acceptability within the firm, where political considerations make it difficult for in-house research teams to be objective and unbiased ● In situations where research findings are to be used in legal or regulatory matters, the credibility of the findings are likely to be enhanced if the study is conducted by a reputed third-party research supplier 4 a. The research problem is unique to the particular company. Hence the company needs customized services from the market research firm. If the company in question is small and does not possess its own market research wing, it has to look outside for the supplier of research services. The decision to zero in on a particular supplier should be made after considerable thought and after making sure that all the following issues have been addressed. i. A search for all the companies with acknowledged expertise in this type of study. ii. A selection of a small number of bidders on the basis of references from previous clients and recommendations from colleagues. iii. Personal interviews with the project coordinator, asking for proof of similar work. iv. A check of the references of the supplier with attention given to the creativity in dealing with problems, the quality and adequacy of their resources. v. Final selection of the supplier based on the price, comments from references and on the basis of the supplier's understanding of the problem. b. It should be made sure that the research firm has sufficient experience in the type of study and is familiar with the various markets of Europe. In case the research firm is not European, it should also be made sure, that the external supplier has a strong base in Europe and also has enough resources to undertake such a study in Europe. The manager should go through all of the above mentioned steps before deciding on the research firm for his study in Europe. 5. a. Comparison of brand performance in the pizza industry shows that there are tremendous growth opportunities b. Automobile industry relies on reports about new sources of power to automobiles as it plays a very important role in the future strategy of business. c. The growth of information technology industry is heavily dependent on research and development capabilities. Reports about spending in this area will have strategic importance for competitors in this industry. PART I TEACHING NOTES FOR CHAPTERS CHAPTER THREE THE MARKETING RESEARCH PROCESS Outline of the Chapter • Describe the various stages of the marketing research process. • Discuss the importance of the problem/opportunity identification stage of the research process. • Discuss the issues related to hypotheses development. • Explain the concept of value of information and its role in deciding when marketing research is beneficial. • Discuss how the research purpose and the research objectives are developed. • Describe the international marketing research process. Teaching Suggestions The principal objective of the session dealing with this chapter should be to ensure that the students: a) appreciate that marketing research involves a sequence of activities, each compatible with the preceding stages. b) can clearly differentiate between a research purpose and the research objectives, and c) understand the concept of value of information. The second objective is the most difficult to achieve. Students can intuitively grasp the notion that the research purpose reflects the manager/user perspective while the research objectives are used by the researcher to guide all subsequent research designs. The problem is that they have difficulty putting the distinction into practice. One approach to this problem is to put a specific research purpose on the blackboard and have the students develop the relevant research objectives. For example, suppose the research purpose were to determine how quickly an integrated oil company should switch to self-service gasoline stations. The appropriate research objectives, which specify the information that is needed, can be based on the following hypotheses concerning the rate of motorist acceptance. 1. Motorists prefer self-service because they are unhappy with reliance on attendants, and the level of service they receive, and appreciate the time savings gained by not having to wait for an attendant. 2. Preference for self-service further depends on the perceived price-spread between full-service and self-service (further, the perceived and actual price spreads might be quite different). 3. The more self-service stations there are in operation in an area the greater the acceptance. 4. Different segments have different levels of preference for self-service. 5. Those who prefer full-service lack confidence in their ability to maintain their car, and rely on the garage attendant to point out and rectify problems. 6. Competitive gasoline companies rate of switching to self-service will depend on the savings inherent in trading large corner sites for smaller sites, and reduced staffing problems. The instructor should be careful to point out what constitutes a hypothesis. A useful further step is to translate the research objectives into specific information requirements. For example, the last objective listed above is to determine the plans of competitors based on their past conversion performance and present willingness to maintain costly full-service stations. The objective can lead to a useful discussion of how to collect the appropriate information. Some instructors may want to spend more time on the value of research information issue. We have not dealt with this issue in depth in this chapter for two reasons: (1) Bayesian analysis is seldom used by marketing researchers in a formal sense, although the logic framework offers strong conceptual guidance, and (2) Different students have widely differing backgrounds in the subject. In our view a course in marketing research is not the place to introduce students to the intricacies of this subject, especially since it would make little contribution to subsequent chapters. This is certainly an arguable position, so we encourage those with a different perspective to introduce supplementary material at this point. The Clover Valley Dairy case is a good vehicle for such a discussion. Questions and Problems 1. This question is designed to give students practice at generating research questions and hypotheses, and how they would address the research purpose. The student should be able to explain how the research question answered will help make the decision. For the stated purpose of deciding whether there is a reasonable chance of winning the following are possible questions: The student should be encouraged to make the question and hypothesis as specific as possible. 2. This questions requires the student to carefully read the two examples from Chapter 1, and classify the examples into purposes or objectives. 3. This is a good example of the need to have clearly defined hypotheses before proceeding with the research design. The purpose of the research is evidently to find meaningful segmentation variables that can be used to pick targets for marketing efforts. Ownership and use of garage is clearly one of the variables that distinguishes heavy from light buyers and users of automobile polishes. The problem is that it may be acting as a proxy for other variables. That is, people who don't have garages may polish their cars more frequently because: (a) the finish of the car weathers more quickly because of the constant exposure to the environment, (b) they have older cars with finishes which fade more quickly, (c) they are more likely to be “do-it-yourselfers” either because of inclination or lack of money, (d) they live in older areas where the houses were not built with garages, (e) they live near factories or smelters which emit substances which corrode automobile finishes, or live near the shore and are exposed to salt water, and people in these areas are less likely to have a garage attached to their house. Only in the case of hypothesis (a) being true, is access to a garage going to be a useful segmentation variable. If the other hypotheses are also found to be true, the implications for segmentation strategies are quite different, for most of them imply that the availability of a garage is not the real reason for the amount of polishing. 4. A few purposes of this research could be: a) To identify changes in consumer preferences, both generally related to technological devices, and specifically about mobile device accessories. Based on this, the firm may decide its future line of products to be manufactured. This research would not need to be brand specific, and could be focused on the attributes of the products. b) To identify brand preferences to understand how consumers are perceiving the firm’s products in comparison to its competitors’. This research would be brand focused in addition to understanding the relative strengths and weaknesses of the firm’s products. c) To identify gaps in the market, to gauge opportunities that can be leveraged by creating new offerings or improving existing opportunities. d) To identify threats to the market as a whole and the firm’s products in particular, on account of new products from existing competitors, or from new offerings from new competitors. The purpose of this research probably relates to providing input into the company's marketing of stoves and refrigerators. Other purposes might be to aid sales or manufacturing forecasts. If the research purpose were marketing-oriented, then the research approach would involve asking potential customers what colored appliances they would like to have. If the research purpose were sales or manufacturing-oriented, then customers might be asked to rank existing appliance colors in order of preference. The research designs for each of these purposes would be different which can be discussed in detail by the students. 5. The research purpose is whether to alter the product line carried or more fundamentally to change the target segment and the image of the store. The research questions are: (a) Who are the competitors of this clothing chain? (b) What is their image and how does this image compare with that of its competitors? (c) Who is their typical customer and how do they differ from that of their competitors? Other research questions could easily be considered such as: (a) Would the younger buyer be attracted if the line would change? (b) Would the current customers reduce their loyalty if the product line changed? If so, to what store would they go? (c) Where do the younger buyers now shop? What attracts them to those stores? 6. Students should understand the purpose of an information system and the two components (data banks and decision support system) that make up an information system. In the Agree Shampoo example mentioned in Chapter One, there were a number of projects providing data into the new product launch ranging from consumer focus groups to test marketing. The information system would have to be capable of organizing the input from these research projects plus product sales and inventory levels into a usable form. The roles of an information system for Mary Kay and L’Oreal would differ based on differences in product line range, new product development, and channels of distribution, among others. Also, the information system at Mary Kay would be used differently than it would be at L’Oreal. Students are encouraged to identify more such points of differences after closely studying how the two companies operate, and the respective markets they aim to serve. 7. If the loss were $1 million, the potential savings from knowing the outcome would be $1 million. Thus, EVPI = ($1 million)(0.4) = $400,000 If the loss were $10 million, the product would not be introduced. Thus, the potential savings from knowing the outcome would be $4 million and the EVPI = ($4 million)(0.6) = $2.4 million. If the failure probability were .2 the decision would be to introduce even if the loss were $10 million. Thus, the EVPI = (Potential Loss)(0.2) = (-2.5)(0.2) = -$500,000 if the loss would be $2.5 million. The EVPI is the savings expected from knowing the outcome with certainty. The savings, of course, is zero when the known outcome would not affect the decision, it is thus the value at the “wrong” outcome times its prior probability. 8. (a) Pv(Neg≥ F): 0.9 and Pv(Pos≥F): 0.1 Pv(Pos) = (0.8) (0.6) + (0.1) (0.4) = 0.52 Pv(neg) = (0.2)(0.6) + (0.9) (0.4) = 0.48 Under Pos test EV of “introduce” is ($4 million)(0.923) + (-$2.5 million)(0.077) = 3.692 million - 0.192 million = $3.5 million Under a Neg test of “introduce” is ($4 million)(0.25) + (-$2.5 million) (0.75) = 1 million - 1.875 million = -0.875 million Thus the “do not introduce” value of zero would apply. The EV of the concept test would then be ($3.5 million)(0.52) + ($0) (0.48) = $1.82 million The value of research information = 1.82 million - 1.42 million = $400,000 (b) Pv(Pos/S) = 0.7 Pv(Neg/S) = 0.3 Pv(Pos) = (0.7)(0.6) + (0.4)(0.4) = 0.58 Pv(Neg) = (0.3)(0.6) + (0.6)(0.4) = 0.42 Under a Pos test EV of “introduce” is: ($4 million)(0.724) + ($2.5)(0.276) = 2.896 million - 0.69 million = $2.206 million Under a Neg test EV of “introduce” is: 1.716 million - 1.428 million = 0.289 million The EV then is ($2.206 million)(0.58) + (0.289 million)(0.42) = 1.279 million + .121 million = $1.400 million Thus, there is no value to the concept test. (c) Pv(Pos/S) = 0.9 Pv(Neg/S) = 0.1 Pv(Neg/F) = 0.9 Pv(Pos/F) = 0.1 Pv(Pos) = (0.9)(0.6) + (0.1)(0.4) = 0.58 Pv(Neg) = (0.1)(0.6) + (0.9)(0.4) = 0.42 Under a Pos test EV of “introduce” is: ($4 million)(0.93) + (-$2.5 million)(0.7) = 3.72 million - 0.175 million = 3.545 million Under a Neg test EV of “introduce” is: ($4 million)(0.143) + (-$2.5 million)(0.857) = 0.572 million - 2.143 million = - 1.57 million Thus, the “do not introduce” option would be selected. The EV of a concept test is: (3.545 million)(0.58) + (0)(0.42) = 2.056 million The value of research information would be: 2.056 million - 1.4 million = 0.656 million. 9 a. NaturaSkin Inc wishes to expand its marketing activities to the foreign markets. When a firm enters an international market, it requires some information to aid decision-making. The aim of the foreign market opportunity analysis is not to collect an exhaustive and detailed analysis of the world but to gather information that would aid the top management in decision making. The objective is to help the management to narrow down the possibilities for international marketing activities. b. NaturaSkin, a manufacturer of vegan skincare products with natural ingredients should do a ‘foreign market opportunity analysis’ to aid in the management's decision making. The questions that are to be asked depends upon the goals and objectives of NaturaSkin, the production capacity that can be shipped abroad and a host of other factors. It should be made clear to the students that there are no clear cut questions to be asked and the questions depend upon the firm’s objectives. For instance, it would be fair to conclude that the product formulation of NaturaSkin is not typical of conventional skin care items. Consequently, one can expect such a product to be priced at a premium, and be sold in the local markets through selective distribution channels. Further, the company may also wish to position themselves in the same way in foreign markets. In such a scenario, the researcher might decide to ask the following questions: ● Which are the foreign markets that warrant detailed investigation? ● What are the major economic, political, legal and other environmental issues in these countries? ● Do opportunities exist for NaturaSkin products in these countries? ● What is the market potential in each of these countries? ● What should be the mode of entry in these markets? ● What is the nature of competition in these markets? ● What is the strategy to cater to these markets? NaturaSkin might decide to look at Europe, South-East Asia and the Middle East for their preliminary consideration. NaturaSkin might consider basic criteria such as Gross National Product of the countries in these regions, the political structure, the legal structure, whether profits can be repatriated back to the US etc., to arrive at a list of possible countries. The market potential in each of the countries is calculated and the nature of competition ascertained. The market conditions in each of the countries is studied. This gives the management a narrow list of countries with their salient features and aids in objective decision making and the list of countries to be entered into is arrived at. c. The most probable cause of failure for businesses is the Self-Reference Criterion (SRC) adopted by researchers in defining the problem in a foreign country. SRC implies that the environmental variables found in the researcher's home country is applied to the foreign market in consideration. For example, if NaturaSkin assumes that the consumer preferences in skincare products in Great Britain are the same as those in the US, it is known as employing a Self-Reference criterion. This assumption may or may not be true. If the consumer tastes do vary in this product category, then NaturaSkin would make a serious error if it markets the same products that it markets in the US to Britain. The error could prove costly and there may never be a chance again for NaturaSkin to cater to the same market. 10 a. It should be emphasized that the basic functions of marketing research and the various stages the research process does not differ between the domestic and international research. b. The international marketing research process is more complex than that of a domestic research process because of the presence of varied, diverse environments around the world. Consider this example. Assume that a watch manufacturer from the US wishes to expand their market to Germany, France and Italy in Europe. The firm cannot assume that the designs in the US will be accepted totally by the countries in consideration. In order to ascertain the consumer tastes, buying motives and habits, the firm has to conduct marketing research studies in those three countries. For one, the languages in these three countries are different and hence makes communicating in English difficult. Similarly, the cultural and the environmental context will be totally different and hence it will not be a surprise if the researcher comes up with three different findings in these countries. It is this diversity in environments that make international marketing research process much more complicated than domestic research. 11 a. Research Purpose: To identify the reasons for low sales, plaguing Crystal-Clear lens inc., the mail order contact lens company. b. The research purpose comprises a shared understanding between the decision maker and the researcher of the following: (i) Problems or opportunities to be studied * Anticipated problems or opportunities * Scope of the problems (ii) Decision alternatives to be evaluated * Alternatives being studied? * Criteria for choosing among alternatives * Timing and importance of the decision (iii) Users of the research results * Decision makers The research objective is a statement of what information is needed. The research purpose is framed in such a way that the research purpose is satisfied. The research objective has three components: (i) Research question: Specifies the information needed by the decision maker (ii) Hypotheses Development: Alternative answers to a research question (iii) Scope of research Research Purpose: To identify the reasons for low sales, plaguing Crystal-Clear lens inc., the mail order contact lens company. Research Objective: To identify the behavior characteristics of the consumer that makes them prefer retail optical outlets to Crystal-Clear lens inc., c. Research questions: * What is the risk perception of the average consumer when he buys contact lens? * What is the effect of coupons in the retail optical outlets ? * Do the retail optical outlets have an in-house optometrist who checks up the eye * Is ‘trial’ important in case of buying contact lens? d. Preliminary hypotheses: * Consumers find it more convenient to go to retail outlets to get their prescription contact lenses, as compared to the mail order process * Consumers place a high level of importance on receiving their prescription contact lenses in less than 2 weeks of placing the order * Consumers consider it risky to purchase contact lenses via mail order as compared to physical retail outlets * Consumers place a high level of importance on the follow-up visits that are offered by the retail outlets, and are not available in the mail order process PART I TEACHING NOTES FOR CHAPTERS CHAPTER FOUR RESEARCH DESIGN AND IMPLEMENTATION Learning Objectives • Discuss the definition and purpose of research design and describe the different types of research designs. • Identify the appropriate data collection method for a given research design. • Describe and briefly discuss the various sources of errors in a design. • Discuss the concepts of budgeting and scheduling a project. • Describe the elements of a research proposal. • Describe the added complexities of designing a research process for international marketing decision making. • Discuss the issues in international marketing research design. Teaching Suggestions This chapter provides a vehicle for achieving the following objectives: 1. Further clarifying the nature of the research purpose and objectives (discussed in Chapter 3), by distinguishing them from the subsequent research design steps. 2. Emphasize the need for research designs which are internally consistent (all the pieces fit together) and consistent with the research objective. 3. Distinguish the 3 basic types of research designs in the minds of the students. 4. The instructor may wish to use this chapter to discuss detailed aspects of marketing research department organization. There are a variety of ways to achieve these objectives. The questions for discussion and cases offer useful vehicles. The course project should be reviewed within this context. If the project is limited to the design, as described in the introduction, then it is important to review progress and get the students to appreciate the magnitude of the task ahead. Finally, a variety of studies can be briefly described with the students being queried as to the type of research design. The following is an illustration of the kind of vignette that can be used (it comes from a speech by Emmanuel Demby reported in the January 12, 1979 Marketing News): “Let's take the case of Davis and Geck. Davis and Geck is a leading manufacturer of surgical sutures. To help the company reach brand decision makers, it published a magazine for surgeons. We were asked to do a study to see if readership of the magazine affected the surgeon's image of Davis and Geck, and to see if this raised image also resulted in more frequent specification of Davis and Geck sutures,” he said. “Based on previous research we had done in the medical area—and our hunch—we felt that while it might be desirable to improve Davis and Geck's image among surgeons, this improvement might not be sufficient to improve Davis & Geck's share of market. “Therefore we devised a simple, but radical experiment. In anterooms of operating theaters, we posted interviewers. As surgeons came out of operating rooms, their uniforms still stained with the fresh blood of patients, the interviewers posed simple queries, among which was one critical question: “Doctor, what brand suture did you use? “The most often-given answer was: “I don't know. Ask the operating rooms’ supervisor.’ “That answer told us the market target for any suture efforts to improve market share had to be operating room supervisors. No doubt it was important to keep propagandizing surgeons, but share of market depended on the attitude and behavior of the operating room supervisors.” Demby said. Questions and Problems 1. A research design is a detailed blueprint for the conduct of the research study. The process of design involves ensuring that the elements of the design fit together. Given this definition, it is not possible to conduct a research study without some kind of design. Granted the design may be very tentative and subject to change, as is the case with exploratory research, but nonetheless the researcher must have some plan of approach to the topic. This may be as rudimentary as saying, “I should visit the following kinds of people and ask the following questions.” The more thought that is given prior to the interview the more likely the exploratory research will be productive. Similarly, a research study which is limited to interrogating an internal information system must be guided by specific questions and relationships that are relevant in light of the research objectives. 2. Exploratory, descriptive and causal research designs differ with respect to: (a) the specificity of the hypotheses, (b) the amount of structure in the data collection instrument, (c) the extent of intervention by the researcher in ongoing events. For example, a test market involves a deliberate marketing action initiated in order to learn about market response to a new concept, product etc., and (d) the appropriate research methods. At this point, it is useful to ask why a survey cannot yield an unambiguous causal inference, even when there is a strong association between two variables. First it is difficult to assess the time sequence of events. Second, there may be competing explanations for the relationship which cannot be distinguished from the survey results. The relative importance of each type of research design (approach) at each phase of the marketing program development process can be assessed from the following grid (the more stars in the cell, the more important the research approach to that phase): 3. The alternative research approaches that could be considered for the HMO, are mail, personal or telephone interviews. Each has strengths and weaknesses in this situation, as noted in the text. It is useful to get the students to enumerate these strengths and weaknesses, as a basis for understanding why a leave-behind, pick-up approach using a self-administered questionnaire was chosen in this situation. The determining factor, which ultimately made this approach feasible, was the availability of an up-to-date list of faculty and students to serve as a sampling frame. Other research approaches are possible, such as intercept interviews on campus, or group meetings with faculty and staff, but their shortcomings should be evident. 4. The purpose of an exploratory study in this situation would be to generate hypotheses as to specific consequences of the proposed inventory control procedure that would either enhance or detract from the manufacturers present relationships with industrial supply houses. The first step is to learn what kinds of problems exist in the present relationship (with emphasis on ordering, supplying, receiving and billing activities). A review of salesmen's call reports, plus meetings and visits with salesmen and informal discussions with industrial supply houses—including those who do not presently handle the company's line of products - should be sufficient to assess the current situation. To explore the problems and opportunities that will derive from the new control system the following could be done: (a) the industrial supply houses could be asked about their experience with other suppliers who have introduced similar inventory control systems and (b) equipment/systems suppliers could be asked about applications problems, barriers to acceptance and ways to surmount them that they have learned in other situations. 5. There is an implied causal hypothesis here: that receipt of food stamps leads to an increase in the total food budget of the amount of the stamps. The competing hypothesis is that the total food budget remains the same and the cash freed up from the food budget is used for other expenditures. Thus it is not sufficient to conduct a descriptive study in which the food expenditure patterns and family budgets of food stamp recipients are compared to non-food stamp recipients (if indeed it would be possible to obtain accurate income on such sensitive topics from low income households). Instead a causal study which traces the effect of receipt of good stamps on individual budgets would be more appropriate. The problem with such a longitudinal study is the control of competing explanations for the observed changes in food expenditure patterns. 6. The implied purpose of the research is to learn why certain geographic areas have below average penetration in order to decide what action to take to improve the penetration. The relevant research objectives are to: (I) describe the non-cable TV user in low penetration areas, and (2) test specific hypotheses (listed in Chapter 3) as to the reasons why people in the area do not have cable TV. A number of problems must over come before the objectives can be achieved. Firstly, it is not a question of how many individuals want or do not want Cable TV but how many households want the service, because the service is available to everyone in the household or family. Second, the records of the cable company are limited to the names and addresses of subscribers, but not the telephone number. Further, the telephone exchanges do not correspond to the area to be studied, and are usually much broader. On the other hand, because the research is confined to a small geographic area, a personal interview with multiple call-backs is economically feasible. The instructor may wish to have the class develop specific questions to test each of the hypothesis. The attached questionnaire was developed by the student project group which dealt with the problem, and illustrates one way to proceed. SUPPLEMENT TO QUESTION 6 K-T RESEARCH GROUP QUESTIONNAIRE FOR ROGERS CABLE TV 7a. In general, the decision of choosing external research suppliers over in-house research teams is driven by the following considerations, among others: Internal personnel may not have the skills or experience. Few but the largest companies have specialists in all areas from psychologists able to conduct focus group interviewing to elec- tronics engineers with MBAs who have studied the telecommunications equipment market. Outside help may be called in to boost internal capacity in response to an urgent deadline. It may be cheaper to go outside. Specialists who have encountered similar problems with other clients probably are more efficient in dealing with the problem, and because they are not on the staff there is no risk of underutilization of their time. Shared cost and multiclient studies coordinated by an outside supplier offer considerable savings possibilities. Multiclient studies are feasible when several organizations have related needs for information about a major topic, such as the future of electronic funds transfer systems. Each client pays an agreed share of the total cost. The ultimate in shared‐ cost studies are the large standardized data collection services, such as store audits of product sales activity or omnibus surveys, which combine questions from several clients. Often, outside suppliers have special facilities or competencies (an established national interviewing field force, conference rooms with one‐way mirrors, banks of telephone lines, or test kitchens) that would be costly to duplicate for a single study. Political considerations may dictate the use of an outside research specialist whose creden- tials are acceptable to all parties in an internal policy dispute. Research people within the organization may be well advised to avoid being on one side or the other of a sensitive issue. Marketing research is used increasingly in litigation or in proceedings before regulatory or legislative bodies. The credibility of the findings generally will be enhanced if the study is conducted by a respected outsider. Also, this kind of research often is subjected to critical questioning or cross‐examination and is likely to stand up only if designed to high stand- ards, which may exceed those used within the organization for routine decision‐making purposes. b. Advanced Computing, Inc., need help in the development of marketing program. Marketing program could embrace specific tasks. An actionable marketing program usually focuses on a single objective in support of one element of the overall business strategy. As discussed earlier in Chapter 1, marketing research could contribute to a large extent to arriving at the right marketing mix decisions. The students should be encouraged to look at this problem from various angles and come out with their prescription of a research type. Explained below is one way of looking at this problem. In our case, Advanced Computing are already in the business of personal computing, with their distribution channels in place. However, they are looking at a new product launch. Advanced Computing, Inc. are looking at a sustainable competitive advantage by differentiating themselves by marketing low cost, superior technology product as compared to their competitors. The research purpose for Advanced Computing, Inc. would be to achieve a particular market share within a specified time period for their new product. The research objective would be to identify the target segment(s) that would be receptive to possessing a low cost, high quality, superior machine. For instance, should the company look at corporate clients or should they look at customers purchasing material for their personal use. If it is corporate clients, are we looking at targeting to larger firms or medium sized firms or smaller firms? What are the requirements of each of these? In this case, the purpose of the purpose of the research is to provide a snapshot of a particular aspect of the marketing environment. The research needed by Advanced Computing is conclusive research of a descriptive type. A description of the most favorable segment is required. On the basis of the information acquired by the marketing research firm, the company can design the marketing program to target the desired market. c. The usefulness of a research project depends on the overall quality of the research designed and the data collected and analyzed based on the design. Several types of error could occur and cause problems in achieving an accurate methodology. Design errors: if the research design has an ill defined problem or research problem, or does not identify precisely the information requirements, it could lead to an imprecise measurement. Researcher induced errors like a faulty sample selection, or wrong population specification or use of a wrong sampling frame can lead to errors. Response and Non response errors: Improper field work activities like improper selection of interviewers could lead to errors. Also incomplete responses or failure to contact all members can lead to errors that can distort the final findings. Measurement and analysis errors: Ambiguous or poor experimental designs can result in responses that are imprecise. Similarly, errors can occur during the process of transforming raw data from questionnaires into findings. d. A research proposal is a plan for conducting and controlling a research project. A research proposal serves various purposes. Administratively, it is the basis for the written agreement between the manager and the researcher, as well as a record of what was agreed. Also, a proposal could be used by the firms to compare among competing suppliers and select the research firm that demonstrates the researcher's grasp of the problem and ability to conduct the research. The content outline for a research proposal for Advanced Computing, Inc. should be on the following lines. Executive Summary: A brief overview of the contents of the proposal should be given so that reading the summary gives a fair idea of the research proposal. An executive summary is a very important part as it is often the only part read by the top management who have the pressures of time. Purpose of the survey and scope: The purpose of the survey in our case is to achieve a particular market share in a specified time period for the new product of Smith computers. The parameters that will or may limit the study should also be laid out. Objectives and approach: The research objective, in our case the identification of target market segments should be clearly identified. The research approach should highlight the aspects of research that might be elements of a contract. The justification of the methods and limitations chosen relative to the alternatives are to be discussed. All the other details pertaining to the research approach should be confined to the appendix. Time and Cost estimates: All the financial aspects like fees, payment installments, treatment of contingencies and schedule for the submission and presentation of the research study are to be discussed. e. It is important to note that issues and problems concerning the conduct of International marketing research are different as compared to domestic marketing research. The critical issues that must be considered while designing an international marketing research study are: Determining information requirements: The research team should help Advanced Computing in choosing the countries which are to be targeted (market selection) and the mode of entry decision(s) which fall under the ambit of strategic decisions. These decisions are usually made at the corporate headquarters. The tactical decisions will pertain to the implementation of the marketing program designed for a particular market. Such decisions are taken at the subsidiary level. It is obvious that the information requirements are totally different for the two types of decision making. This should be borne in mind while designing an international research design. Determining the unit of analysis: While conducting the research study, the unit of analysis has to be determined to avoid confusion. Should be the level of analysis be at a global level, regional level, local level is to be identified before embarking on a research project. Construct Equivalence: It should be noted that owing to socioeconomic, cultural, political differences the perspective of the researcher and the subjects belonging to a different country may be different. Therefore, the researcher should see to it that he understands the subjects' perspectives. For example, a personal computer is relatively inexpensive and widely used in the US whereas the same product is only used by the affluent and elite in the third world countries. Therefore, the product has to be defined differently in the third world. Measurement and Sample equivalence: It should be kept in mind that the methods and procedures used to collect data in different countries are similar. Similarly, the samples to be used in various countries are to be identical. For instance, if a sample was drawn of the purchase decision making authorities in various firms. While in some countries, purchasing manager could make the decision to buy computers, in some countries, owing to the nature of the product, the decision could be made by the top management themselves. If a sample was drawn of purchase managers in all countries, then his design will be flawed. Therefore, it is important to maintain measurement and sample equivalence to arrive at the right findings. 8. Domestic research companies can be bogged down by the Self-reference criterion. Also, they may not possess the requisite international experience to conduct international research. It is difficult to find domestic marketing research companies that are dedicated and an expert in conducting international research. Also, the limited manpower and financial resources of the domestic companies may prevent them from doing an effective international study. 9a. In planning for a research project, decisions regarding the allocations of time, money and human resources are important. Budgeting enables a company to use the resources effectively and efficiently. A cost benefit analysis gives the management a preliminary idea regarding the worth of a marketing project. By comparing the expected research information with its anticipated costs, the management can decide whether a particular project is worth conducting or not. If the costs, in terms of both money and time, exceeds the value of information then the company would do well to shelve the project. If the perceived value of information exceeds costs, then the company would proceed to the blueprint stage. b. The two approaches to budgeting for a market research project are: Estimating the dollar costs associated with each activity: This is the approach used when the project is unusual or expensive. Determining the costs through use of standard estimates: The number of hours for each task is determined and the total costs ascertained through the use of standard hourly estimates. This approach is typically used for routine marketing research projects or when the researcher has considerable knowledge of research activity costs. Estimating the dollar costs associated with each activity: This is approach is typically used when a marketing research project is relatively unusual or expensive. Determining the costs through use of standard estimates: This approach is typically used for routine marketing research projects or when the researcher has considerable knowledge of research activity costs. 10. Since Sugarland Creamery already has a distribution network in place and the decision is whether or not to introduce a new flavor, they could conduct an exploratory research. The hypothesis is that this flavor will be appreciated by the premium market segment. The research purpose is to determine if the hypothesis is valid. Samples of research questions that need to be answered are as follows. Who comprises the premium market? Which are the retail outlets frequented most by premium segment? What is the price that customers will be willing to pay for the new flavor? How should the flavor be positioned? (What is the attitude of the target segment towards this flavor?) Instructor Manual for Marketing Research V. Kumar; Robert P. Leone; David A. Aaker; George S. Day 9781119497493