CH-9 Marketing Research – MKTG: Principles of Marketing : Book Guide

CHAPTER 9 Marketing Research This chapter begins with the learning outcome summaries, followed by a set of lesson plans for you to use to deliver the content in Chapter 9. • Lecture (for large sections) on page 3 • Company Clips (video) on page 4 • Group Work (for smaller sections) on page 6 Review and Assignments begin on page 8 • Review questions • Application questions • Application exercise • Ethics exercise • Video Assignment • Case assignment Great Ideas for Teaching Marketing from faculty around the country begin on page 19 LEARNING OUTCOMES 9-1 Define marketing research and explain its importance to marketing decision making Marketing research is a process of collecting and analyzing data for the purpose of solving specific marketing problems. Practically speaking, marketers use marketing research to improve the decision-making process, trace problems, serve customers, gauge the value of goods and services, understand the marketplace, and measure customer service efforts. 9-2 Describe the steps involved in conducting a marketing research project The marketing research process involves several basic steps. First, the researcher and the decision maker must agree on a problem statement or set of research objectives. Social media and big data may be helpful in this pursuit. The researcher then creates an overall research design to specify how primary data will be gathered and analyzed. Before collecting data, the researcher decides whether the group to be interviewed will be a probability or nonprobability sample. Field service firms are often hired to carry out data collection. Once data have been collected, the researcher analyzes them using statistical analysis. The researcher then prepares and presents oral and written reports, with conclusions and recommendations, to management. As a final step, the researcher determines whether the recommendations were implemented and what could have been done to make the project more successful. 9-3 Discuss the profound impact of the Internet on marketing research The Internet has simplified the secondary data search process. Internet survey research is surging in popularity. Internet surveys can be created rapidly, are reported in real time, are relatively inexpensive, and are easily personalized. Often researchers use the Internet to contact respondents who are difficult to reach by other means. The Internet can also be used to conduct focus groups, to dispute research proposals and reports, and to facilitate collaboration between the client and the research supplier. 9-4 Describe the growing importance of mobile research Mobile survey traffic now accounts for approximately 30 percent of interview responses. Mobile surveys are designed to fit into the brief cracks of time that open up when a person waits for a plane, is early for an appointment, commutes to work on a train, or stands in a line. Marketers strive to engage respondents in the moment because mobile research provides immediate feedback when a consumer makes a decision to purchase, consumes a product, or experiences some form of promotion. Mobile research has also expanded into qualitative research. 9-5 Discuss the growing importance of scanner-based research A scanner-based research system enables marketers to monitor a market panel’s exposure and reaction to such variables as advertising, coupons, store displays, packaging, and price. By analyzing these variables in relation to the panel’s subsequent buying behavior, marketers gain useful insight into sales and marketing strategies. 9-6 Explain when marketing research should be conducted Because acquiring marketing information can be time consuming and costly, to acquire additional decision-making information depends on managers’ perceptions of its quality, price, and timing. Research, therefore, should be undertaken only when the expected value of the information is greater than the cost of obtaining it. Implementing a Customer Relationship Management system is integral to deciding if marketing research should be conducted. 9-7 Explain the concept of competitive intelligence Intelligence is analyzed information, and it becomes decision-making intelligence when it has implications for the organization. By helping managers assess their competition and vendors, competitive intelligence (CI) leads to fewer surprises. CI is part of a sound marketing strategy, helps companies respond to competitive threats, and helps reduce unnecessary costs. TERMS behavioral targeting (BT) experiment open-ended question BehaviorScan field service firm primary data big data focus group probability sample central-location telephone (CLT) facility frame error random error InfoScan random sample closed-ended question mall intercept interview research design competitive intelligence (CI) management decision problem sample computer-assisted personal interviewing marketing research sampling error marketing research objective scaled-response question computer-assisted self-interviewing marketing research problem scanner-based research convenience sample measurement error secondary data cross-tabulation mystery shoppers social media monitoring ethnographic research neuromarketing survey research executive interview nonprobability sample universe observation research LESSON PLAN FOR LECTURE Brief Outline and Suggested PowerPoint Slides: Learning Outcomes and Topics PowerPoint Slides LO1 Define marketing research and explain its importance to marketing decision making 9-1 The Role of Marketing Research 1: Marketing Research 2: Learning Outcomes 3: Learning Outcomes 4: The Role of Marketing Research 5: The Role of Marketing Research 6: The Role of Marketing Research 7: Management Uses of Marketing Research LO2 Describe the steps involved in conducting a marketing research project 9-2 Steps in a Marketing Research Project 8: Steps in a Marketing Research Project 9: Exhibit 9.1: The Marketing Research Process 10: The Marketing Research Project 11: Sources of Secondary Data 12: Advantages of Secondary Data 13: Disadvantages of Secondary Data 14: Social Media and Big Data 15: Planning the Research Design 16: Primary Data 17: Disadvantages of Primary Data 18: Survey Research 19: Forms of Survey Research 20: Questionnaire Design 21: Questionnaire Design 22: Observation Research 23: Exhibit 9.5: Observational Situations 24: Observation Research 25: Ethnographic Research 26: Virtual Shopping 27: Experiments 28: Sampling Procedure 28: Types of Samples 30: Probability Samples 31: Nonprobability Samples 32: Types of Errors 33: Collecting the Data 34: Analyzing the Data 35: Preparing and Presenting the Report 36: Following Up LO3 Discuss the profound impact of the Internet on marketing research 9-3 The Profound Impact of the Internet on Marketing Research 37: The Profound Impact of the Internet on Marketing Research 38: Impact of the Internet 39: Advantages of Internet Surveys 40: Uses of the Internet by Marketing Researchers 41: Methods of Conducting Online Surveys 42: Advantages of Online Focus Groups 43: Web Community Research LO4 Describe the growing importance of mobile research 9-4 The Growing Importance of Mobile Research 44: The Growing Importance of Mobile Research 45: Mobile Research LO5 Discuss the growing importance of scanner-based research 9-5 Scanner-Based Research 46: Scanner-Based Research 47: Scanner-Based Research 48: Scanner-Based Research LO6 Explain when marketing research should be conducted 9-6 When Should Marketing Research Be Conducted? 49: When Should Marketing Research be Conducted? 50: When Should Marketing Research be Conducted? 51: Exhibit 9.8: A Simple Flow Model of the Customer Relationship Management System LO7 Explain the concept of competitive intelligence 9-7 Competitive Intelligence 52: Competitive Intelligence 53: Competitive Intelligence (CI) 54: Sources of Competitive Intelligence 55: Chapter 9 Video 56: Part 2 Video Suggested Homework: • The end of this chapter contains assignments for the Nederlander Organization video and for the Axe case. • This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and other resources that can be assigned or used as the basis for longer investigations into marketing. LESSON PLAN FOR VIDEO Company Clips Segment Summary: The Nederlander Organization The Nederlander Organization is at the forefront of using technology to understand its customers and the ways that those theatregoers purchase tickets. This video clip discusses specific ways the Nederlander Organization collects data and then leverages that information to the benefit of the customer. These teaching notes combine activities that you can assign students to prepare before class, that you can do in class before watching the video, that you can do in class while watching the video, and that you can assign students to complete as assignments after watching the video in class. During the viewing portion of the teaching notes, stop the video periodically where appropriate to ask students the questions or perform the activities listed on the grid. You may even want to give the students the questions before starting the video and have them think about the answer while viewing the segment. That way, students will be engaged in active viewing rather than passive viewing. PRE-CLASS PREP FOR YOU: PRE-CLASS PREP FOR YOUR STUDENTS: • Preview the Company Clips video segment for Chapter 9. This exercise reviews concepts for LO1, LO2, and LO3 • Review your lesson plan. • Make sure you have all of the equipment needed to show the video to the class, including the DVD and a way to project the video. • You can also stream the video HERE • Have students familiarize themselves with the following terms and concepts: marketing research, marketing research process, marketing research problem, marketing research objective, management decision problem, open- and close-ended questions, research design, primary data, and secondary data. • Ask students to define and provide a detailed example of a marketing research problem and a management decision problem. VIDEO REVIEW EXERCISE ACTIVITY Warm Up Begin this session by asking students to explain the difference between a marketing research problem and a management decision problem. In-class Preview • Segue into a review of the importance of marketing research to marketing decision making. • Have students form teams of up to four members. Ask each team to brainstorm several ways they can capture data about customers (e.g., frequent shopper program, credit card databases, internet research, surveys, etc.). • Move from team to team and prompt them with additional questions. Examples include “How will you turn that data into useful, valuable information?” and “What are the risks of not collecting data, or collecting the wrong data?” • Have teams remain in place to watch the video segment about The Nederlander Organization. • Review the Company Clips questions below and make sure students are prepared to discuss them with their group after viewing the video. Viewing (Solutions below.) 1. What are some of the methods mentioned in the video that The Nederlander Organization uses to gather primary data? 2. In what way does The Nederlander Organization use secondary data? Follow-up • Have the student teams re-form to respond to the viewing activity. Again, move from team to team to respond to questions or redirect discussion. • Take-home activity: Have each student reread the book section on questionnaire design and then design their own questionnaire on a product or service of their own choosing to be turned in later. Solutions for Viewing Activities: 1. What are some of the methods mentioned in the video that The Nederlander Organization uses to gather primary data? How does the company leverage that data? Answer: The Nederlander Organization has several ways it gathers information about its theatregoers. Students could mention monitoring activity from the Broadway direct newsletter, Audience Rewards program, as well as people opting in to receive the newsletter. The Nederlander Organization uses its primary data to re-target customers and send out targeted marketing messages (as in the Evita example). It also gives its renters access to segmented information gathered from its newsletters, web site, and audience rewards program so they can appropriately program and market shows. It also allows the Nederlander Organization to make informed decisions about what shows to lease space to because they can evaluate what shows will appeal to specific markets. 2. In what way does The Nederlander Organization use secondary data? Answer: The primary use of secondary data mentioned in this clip is using the contact information gathered by Ricky Martin’s fan club, and using that to sell tickets to Evita. The Audience rewards mailer is also considered secondary data, because people who signed up for that program did so for a different show, but their contact information is being used by Evita. LESSON PLAN FOR GROUP WORK In most cases, group activities should be completed after some chapter content has been covered, probably in the second or third session of the chapter coverage. (See “Lesson Plan for Lecture” above.) • For “Class Activity – Pepsi/Coke Taste Test,” provide the information and the questions asked by the class activity. • Application questions 6, 8, and 12 lend themselves well to group work. For those activities, divide the class into small groups of four or five people. Each group should read the question and then use their textbooks, or any work that was completed previously, to perform the exercise. Then, each group should discuss or present their work to the class. Class Activity – Pepsi/Coke Taste Test Part One First, ask each student to select either the letter M or Q. Next, ask them to select a number from 1 to 4. Tally the results. How did the Pepsi/Coke taste test evolve? In the late 1970s, Pepsi was looking for a creative promotion for its big problem area: the southwestern United States. Pepsi’s national market share was 17 percent at the time but only 8 percent in the Southwest. Pepsi decided to stage a blind taste test using a sample of loyal Coke drinkers in the Southwest. Pepsi had the volunteers taste test two colas—one labeled M (Pepsi) and one labeled Q (Coke)—and state their preference. In this test, more than half the Coke drinkers chose the product labeled M (Pepsi). Pepsi advertised the results in a promotion in the Dallas-Fort Worth area, and sales of Pepsi doubled. The promotion was so successful that Pepsi introduced it into seven other market areas. At this point, Coca-Cola announced that Pepsi’s taste test was biased and unfair. Coca-Cola pointed out that variables other than taste were affecting volunteers’ choices. One extraneous variable is that people have a natural preference for the letter M over the letter Q. As a result, the preference for product M could be based on taste or could be a subconscious preference for the letter. In extensive testing, when people were asked to pick either Q or M, 78 percent chose M and 22 percent preferred Q. When people were asked to chose a number from 1 to 4, 70 percent chose 2 or 3, and only 30 percent chose 1 or 4. How do your class results compare? Part Two Before Coke introduced its reformulated “New Coke” in 1985, it conducted almost 200,000 blind taste tests with consumers. The results: New Coke (55 percent) chosen over original Coke (45 percent) New Coke (52 percent) chosen over Pepsi (48 percent) However, after New Coke was introduced, it failed miserably in the market. The original formula was reintroduced a few months later as “Coca-Cola Classic.” You can replicate the taste test comparing Coke Zero, Coca-Cola Classic, and Pepsi as follows: 1. Get 40 small paper cups and label 10 with the letter R, 10 with S, 10 with T, and 10 with the letter W. 2. Outside the room have a student volunteer randomly assign Coke Zero, Coca-Cola Classic, and Pepsi to the letters R, S, and T. Write down which soft drink goes with which letter. 3. At the start of class, select 10 students as taste testers. The subjects should be regular consumers of non-diet cola (at least six 12-ounce bottles in the last month). Place the students at the front of the classroom. 4. Outside the room, the student volunteer should be filling each cup with the appropriate soda. Fill the W cups with water. 5. Put an R, S, T, and W cup in front of each student, and hand each student a copy of the Cola Taste Test Form provided. 6. To eliminate order bias, have three of the students begin the taste test with cup R, three with cup S, and four with cup T. Have them take a sip of water between colas and continue to sample and test in any order they wish. They can resample as needed to fill out the questionnaire. 7. Have a student tabulate the answers during class and share the results at the end of class. The form could even lend itself to cross-tabulations (between preferences and answers to questions 5 or 6) if the sample were larger. Cola Taste Test Form 1. In comparing the tastes of R and S, ____ I prefer R. ____ I am indifferent between R and S. ____ I prefer S. 2. In comparing the tastes of S and T, ____ I prefer S. ____ I am indifferent between S and T. ____ I prefer T. 3. In comparing the tastes of T and R, ____ I prefer T. ____ I am indifferent between T and R. ____ I prefer R. 4. Which of the following brands are R, S, and T? a. Coke Zero is ____ b. Pepsi Cola is ____ c. Coca-Cola Classic is ____ 5. During the past month, estimate your consumption of the three colas so that they total 100 percent: Coke Zero _______ percent Pepsi Cola _______ percent Coca-Cola Classic _______ percent Total 100 percent 6. How many 12-ounce cans or bottles of sugared cola have you consumed in the past 30 days? ____ 6 or fewer ____ 13 to 24 ____ 7 to 12 ____ 25 or more REVIEW AND ASSIGNMENTS FOR CHAPTER 9 REVIEW QUESTIONS 1. The task of marketing is to create exchanges. What role might marketing research play in the facilitation of the exchange process? Answer: Marketing research will help a firm develop products and communication that aid in the exchange process by ensuring that the company is meeting the needs of the customers. 2. Give an example of 1) the descriptive role of marketing research, 2) the diagnostic role, and 3) the predictive function of marketing research. Answer: Descriptive marketing research examples should describe gathering and presenting factual statements. Diagnostic marketing research examples should describe projects that explain data. Predictive marketing research examples should describe answering “what if” questions. 3. Marketing research has traditionally been associated with manufacturers of consumer goods. Today, we are experiencing an increasing number of organizations, both profit and nonprofit, using marketing research. Why do you think this trend exists? Give some examples. Answer: Students will need to explain that every type of firm should be endeavoring to serve their customers better, and one way to do this is to understand customer wants and needs. Students will come up with a variety of firms, such as medical groups or hospitals, that are doing active market research. The trend of increased use of marketing research by both profit and nonprofit organizations exists due to the growing need for data-driven decision-making. Marketing research helps organizations understand consumer needs, market trends, and competition, which are essential for effective targeting, resource allocation, and strategy development. For example, nonprofits like UNICEF use research to better engage donors and assess program impact, while tech companies like Apple use it to develop products that align with customer preferences. Ultimately, marketing research enables organizations across sectors to optimize outcomes and remain competitive in their markets. 4. Why are secondary data sometimes preferred to primary data? Answer: Secondary data is readily available and much less expensive than primary data. Often the secondary data will save a company from doing unnecessary primary research and guide the development of primary studies. 5. What is a marketing research aggregator? What role do these aggregators play in marketing research? Answer: Companies whose role it is to acquire, catalog, reformat, segment, and resell reports already published by large and small marketing research firms. Their databases of research reports are more comprehensive, so therefore more useful. Their databases are easier to search and their deliveries speedier, allowing a narrower search—especially useful for the small- and medium-sized clients, a segment that would have been unable to afford the expense of a commissioned, full report. 6. Ethnographic research is a new (and expensive) trend in marketing research. Find an article on ethnographic research. Read and summarize the article. What is your opinion of ethnographic research? Do you think it will be the wave of the future? Explain your reasoning. Answer: Ethnographic research in marketing involves observing customers in their natural environments to gain deeper insights into their behaviors, attitudes, and needs. It moves beyond traditional surveys or focus groups by immersing researchers directly into the customer's world. For instance, a snack company might observe how busy professionals manage their snack choices throughout the day, leading to a more effective product design tailored to real consumer behaviors. This approach can yield more authentic and unbiased insights compared to self-reported data, as it captures how customers actually interact with products rather than relying on what they say in interviews. While ethnographic research offers rich, real-time insights and a holistic view of consumer behavior, it can be costly and time-consuming. It often requires travel, extended observation periods, and higher participant incentives. Moreover, there’s a risk of the "Hawthorne effect," where participants alter their behavior simply because they know they are being observed. Despite these challenges, ethnographic research can provide powerful data that is more accurate and reflective of actual consumer decision-making processes than traditional methods. In my opinion, ethnographic research will likely continue growing in popularity, especially as businesses look for more precise ways to understand complex consumer behaviors in real-life settings. However, due to its high costs, it might not fully replace other methods but rather complement them as part of a broader research strategy. 7. Describe the advantages and disadvantages of online surveys. Answer: Advantages of Internet surveys include speed, low cost, creation of longitudinal studies, cost effectiveness of short surveys, the ability to reach large audiences, and eye appeal. Disadvantages include skewing of online survey results because of the composition of people active online does not necessarily mirror the general population. Therefore, sampling error may occur. 8. Why has scanner-based research been seen as “the ultimate answer” for marketing researchers? Do you see any disadvantages of this methodology? Answer: Scanner-based research provides an accurate, objective picture of the direct causal relationship between different kinds of marketing efforts and actual sales. Many non-scanner marketing research projects involve gathering attitudinal data—that is, asking respondents what they might do or how they think. Scanner-based research does not rely on such subjective answers; it tracks behavior, not opinions or attitudes. One disadvantage to scanner-based research is that it may not be appropriate for the type of information you are trying to gather. For instance, if you wanted to know what consumers thought of a new product idea, scanner-based research would not help. Another disadvantage is that there is no simple way of gathering information on why consumers buy certain products, only what they buy. Scanner-based research may not be able to isolate certain marketing efforts if there are many activities going on at once. APPLICATION QUESTIONS 1. Write a reply to the following statement: “I own a restaurant in the downtown area. I see customers every day whom I know on a first-name basis. I understand their likes and dislikes. If I put something on the menu and it doesn’t sell, I know that they didn’t like it. I also read the magazine Modern Restaurants, so I know what the trends are in the industry. This is all of the marketing research I need to do.” Answer: Although students’ answers will vary, they should address some of these points: Making correct decisions is as important to small firms as it is to larger ones; managers at any level need information to make better decisions; for the small firm, the task is how to provide that information within a reasonable cost range; the owner cannot assume he knows what customers like without asking them. There may be several reasons they do not buy a new menu item. While personal connections with customers and keeping up with industry trends are valuable, relying solely on these methods for marketing research can limit your insights. Observing sales trends and reading magazines may not fully capture the reasons behind customer behavior or reveal new opportunities. More formal marketing research, such as customer surveys, competitor analysis, or even digital tools to track preferences, can provide data-driven insights that go beyond anecdotal experiences. This approach helps you make informed decisions, reach new customers, and adapt to changes more effectively. 2. Critique the following methodologies and suggest more appropriate alternatives: a. A supermarket was interested in determining its image. It dropped a short questionnaire into the grocery bag of each customer before putting in the groceries. b. To assess the extent of its trade area, a shopping mall stationed interviewers in the parking lot every Monday and Friday evening. Interviewers walked up to persons after they had parked their cars and asked them for their ZIP codes. c. To assess the popularity of a new movie, a major studio invited people to call a 900 number and vote yes, they would see it again, or no, they would not. Each caller was billed a two-dollar charge. Answer: a. The supermarket should have short intercept interviews or phone interviews in order to get more participation. If it does decide to hand out questionnaires, someone should explain and ask for each customer’s participation. b. They are surely going to scare customers by casually approaching them and asking for their ZIP codes. Perhaps uniformed security officers could do this, but it would be easier and safer to ask people their ZIP codes at the exit doors of the mall. c. People are not going to be willing to pay to vote for a movie. Exit interviews are the way to go for this one. Or just wait and watch box office receipts. 3. You have been charged with determining how to attract more business majors to your school. Write an outline of the steps you would take, including the sampling procedures, to accomplish the task. Answer: The first step is to define the problem or questions that this research needs to examine. The next step, planning the research design, specifies the method that will be used to collect data. Then the sampling procedures that best fit the situation are selected. Next the data are collected, often by an outside firm. Data analysis then takes place, and the results are interpreted. Subsequently, a report is drafted and presented to management. A follow-up on the usefulness of the data and the report is the final step. 4. Discuss when focus groups should and should not be used. Answer: Focus groups are used when a researcher needs detailed information or needs to brainstorm. The group dynamics of a focus group may mean that a response from one person will stimulate ideas and more comments from others. Focus groups should not be used if the researcher just wants standard question–answer information. 5. Divide the class into teams of eight persons. Each group will conduct a focus group on the quality and number of services that your college is providing to its students. One person from each group should be chosen to act as moderator. Remember, it is the moderator’s job to facilitate discussion, not to lead the discussion. These group sessions should last approximately 45 minutes. If possible, the groups should be videotaped or recorded. Upon completion, each group should write a brief report of its results. Consider offering to meet with the dean of students to share the results of your research. Answer: 1. Divide the Class: Create teams of eight students each. 2. Assign Roles: Select one moderator per group to facilitate the discussion. 3. Conduct Focus Groups: Hold 45-minute sessions discussing the college's services. 4. Record Sessions: Videotape or record if possible. 5. Write Reports: Summarize findings in a brief report per group. 6. Share Results: Offer to present findings to the dean of students. 6. Go to http://www.strategicbusinessinsights.com/vals/presurvey.shtml and take the VALS Survey. Report on how marketing researchers are using this information. Answer: Marketing researchers use the VALS (Values and Lifestyles) survey to categorize consumers based on their values, attitudes, and lifestyles. This segmentation helps in: 1. Targeting: Identifying specific consumer groups for tailored marketing strategies. 2. Positioning: Crafting messages and products that resonate with different consumer segments. 3. Product Development: Designing products that align with the needs and preferences of different lifestyle categories. 4. Advertising: Creating targeted advertising campaigns based on consumer psychographics. Overall, VALS insights enable marketers to better understand and predict consumer behavior and preferences. 7. Divide the class into teams. Each team should go to a different opt-in survey site on the Web and participate in an online survey. A spokesperson for each team should report the results to the class. Answer: 1. Divide the class into teams. 2. Assign each team to a different opt-in survey site. 3. Have each team complete the online survey. 4. Each team's spokesperson reports the results to the class. 8. Detractors claim that scanner-based research is like “driving a car down the road looking only in the rearview mirror.” What does this mean? Do you agree? Answer: This is a major disadvantage to scanner-based research: it gathers information on the past but may not be able to predict the future. Students can argue for or against this statement: FOR the statement: Past purchasing behavior does not necessarily predict future behavior. Consumers may be sensitive to promotional activity, competitive activity, and even impulse purchasing. Scanner-based research does not provide reasons why consumers purchase certain products, so inaccurate conclusions may be drawn from their buying behavior. AGAINST the statement: Scanner-based research can predict future buying behavior. For instance, if a consumer purchases a certain brand of baby formula on a regular basis, it can be predicted that he or she will continue purchasing this brand due to brand loyalty. It can also be predicted that the purchases will disappear after one year when the baby is old enough to drink cow’s milk. It can also be predicted that, within a few months, the consumer will be buying chunkier baby food in microwavable containers. Scanner-based research may only report what’s happened in the past, but history often predicts the future. 9. Why do you think that competitive intelligence (CI) is so hot in today’s environment? Answer: With the level of competition in today’s business environment, firms that are to survive and prosper must be aware of the events and entities that will affect their profitability. 10. Prepare a memo to your boss at United Airlines and outline why the organization needs a CI unit. Answer: Students’ responses will vary depending on the specific reasons that the student chooses to target. Some of those factors might be safety, regulation, competition, fuels prices, and so forth. Memo To: [Boss’s Name] From: [Your Name] Date: [Today's Date] Subject: Proposal for a Competitive Intelligence Unit Summary: Establishing a Competitive Intelligence (CI) unit at United Airlines will enhance market insights, improve risk management, support strategic planning, boost operational efficiency, and better understand customer needs. Recommendation: Approve the creation of a CI unit to strengthen strategic decision-making and competitive positioning. Action Needed: Approval to proceed with the CI unit. Thank you. [Your Name] 11. Form a team with three other students. Each team must choose a firm in the PC manufacturing industry. Next, each team will go to the Web site of the firm and acquire as much competitive intelligence as possible. Each team will then prepare a five-minute oral presentation on its findings. Answer: Students’ results will vary depending on the firm they have chosen. However, they should be able to glean some product, marketing, and financial information. 1. Form a team with three other students. 2. Choose a PC manufacturing firm. 3. Visit the firm's website to gather competitive intelligence. 4. Prepare a five-minute oral presentation on your findings. 12. Why do companies hire mystery shoppers? Answer: Mystery shoppers are researchers posing as customers who gather observational data about a store. Companies also hire these shoppers to study customer-employee interactions. Mystery shoppers also: • Enable an organization to monitor compliance with product/service delivery standards and specifications • Enable marketers to examine the gap between promises made through advertising/sales promotion and actual service delivery • Help monitor the impact of training and performance improvement initiatives • Identify differences in the customer experience across different times of day, locations, product/service types and other potential sources of variation in product/service quality APPLICATION EXERCISE For its Teens and Healthy Eating: Oxymoron or Trend? study, New York–based BuzzBack Market Research focused on snacking. Among its findings: Teens eat an average of three snacks per day, and breakfast is the meal they skip most often. Though scads of snacks are stacked on store shelves, when it comes to healthier treats targeting adolescents, it’s a bit of a teenage wasteland. BuzzBack asked 532 teen respondents to conjure up new foods they’d gobble up. The following are some of their ideas: • “Travel fruit. Why can’t fruit be in travel bags like chips or cookies? Canned fruit is too messy. Maybe have a dip or something sold with it, too.” –Female, age 17 • “A drink that contains five servings of fruits and vegetables.” –Male, age 16, Caucasian • “I would invent all natural and fat-free, vitamin-enhanced cookies and chips that had great flavor.” –Female, age 16 • “I would make fruit-based cookies.” –Male, age 16, Caucasian • “Low-carb trail mix, because trail mix is easy to eat but it has a lot of fat/carbs.” –Female, age 15, Caucasian • “I would create some sort of microwavable spaghetti.” –Male, age 16, Caucasian • “Something quick and easy to make that’s also cheap. I’ll be in college next year, and I’m trying to find things that are affordable, healthier than cafeteria food, and easy to make.” –Female, age 17 • “Good vegan mac n’cheese.” –Female, age 18, Caucasian • “A smoothie where you could get all the nutrients you need, that tastes good, helps you stay in shape, and is good for you. Has vitamins A, B3, B12, C, ginkgo. Packaging would be bright.” –Female, age 16, African American • “A breakfast shake for teens. Something easy that tastes good, not necessarily for dieters like Slim Fast, etc. Something to balance you off in the morning.” –Male, age 18 SOURCE: Becky Ebenkamp, “The Market Is the Message,” “What If Teenagers Ruled the R&D Roost?” Brandweek, July 11, 2005, 16 and 17. Activities 1. You are a new-product development specialist at Kraft. What guidance can you get from the BuzzBack study? 2. Choose one of the suggestions from the above list of healthy snack concepts. Imagine that your company is interested in turning the idea into a new product but wants to conduct market research before investing in product development. Design a marketing research plan that will give company managers the information they need before engaging in new-product development of the idea. Once you have finished your plan, collect the data. Depending on the data-collection methods you have outlined in your plan, you may need to make adjustments so that you can collect actual data to analyze. 3. Analyze the data you collected and create a report for your company either recommending that the company pursue the idea you chose or investigate another. Purpose: To show how marketing research supports all of the marketing functions. Setting It Up: This exercise is well suited to small group work in class. Once groups have made their lists, have groups come together to share their results as a class. This exercise was inspired by the following Great Idea in Teaching Marketing: Matthew D. Shank, Northern Kentucky University Fred Beasley, Northern Kentucky University UNDERSTANDING THE IMPORTANCE OF MARKETING RESEARCH (OR WHY DO I HAVE TO TAKE THIS CLASS?) What three words best describe how students feel about marketing research before entering the course? Do hard, boring, and unnecessary come to mind? In order to combat these negative expectations, an in-class exercise can be used in the first class meeting to hopefully change students’ attitudes towards marketing research. The exercise begins by asking students to list and describe the basic functions of marketing. This task may be facilitated by providing the students with any product or service (e.g., athletic footwear, cars, universities) and asking what functions should be performed to successfully market this product or service. After discussing the functions, the students are told to list all of the potential research activities needed to support each of the marketing functions. The typical list of functions and some of the related marketing research activities are shown below: Basic Marketing Functions Examples of Research Activities Promotion Planning Ad Effectiveness Media Research Sales Promotion Effectiveness Distribution Planning Retail Image Studies Site Location Analysis Price Planning Price Elasticity Demand Analysis Product/Service Planning Brand Image Research Package Design Studies Test Marketing Scope of the Organization Concept Testing Market Development Studies Consumer Analysis Satisfaction Studies Attitude and Usage Studies Environmental Analysis Secondary Data Collection Competitive Analysis Marketing Management Target Market Identification Positioning Studies Segmentation Studies The broad purpose of this in-class exercise is to stress the importance of marketing research and set the tone for the semester. More specifically, the exercise has the following benefits: • Serves as a review of the basic marketing functions • Provides the students with a basis for developing a list of questions for their initial client meeting (Note: students conduct research for businesses in the community) • Positions research in the context of the overall marketing discipline • Explores the critical link between research and the basic marketing functions ETHICS EXERCISE John Michael Smythe owns a small marketing research firm in Cleveland, Ohio, which employs 75 people. Most employees are the sole breadwinners in their families. John’s firm has not fared well for the past two years and is on the verge of bankruptcy. The company recently surveyed over 2,500 people in Ohio about new-car purchase plans for the Ohio Department of Economic Development. Because the study identified many hot prospects for new cars, a car dealer has offered John $8,000 for the names and phone numbers of people saying they are “likely” or “very likely” to buy a new car within the next 12 months. John needs the money to avoid laying off a number of employees. 1. Should John Smythe sell the names? Answer: This dilemma is particularly tricky because it involves the interests of John as both a marketing research provider and as an employer. The situation does not specifically state that the people in the survey were promised privacy as part of their participation in the survey. That would be one reason to support John selling the names. Survey participants surely did not participate in the project, however, expecting to hear a sales pitch from a new car dealer shortly thereafter. 2. Does the AMA Code of Ethics address this issue? Go to http://www.marketingpower.com and review the code. Then, write a brief paragraph on what the AMA Code of Ethics contains that relates to John Smythe’s dilemma. Answer: The AMA Code of Ethics does have verbiage requiring marketers to “apply confidentiality and anonymity in professional relationships with regard to privileged information.” If the list of names and the survey results are considered privileged, then John is bound by the Code not to sell the names. In addition, the Code prohibits marketers from taking advantage of situations to maximize personal welfare in a way that unfairly deprives or damages others. And it also prohibits selling under the guise of marketing research (known as sugging). Although John did not explicitly do this, if John were to sell the list of names, sugging would be the eventual result. VIDEO ASSIGNMENT: The Nederlander Organization 1. Using information collected for Ricky Martin’s fan club would be considered: A. primary data B. meeting the research objective C. secondary data D. survey research Answer: C The Nederlander organization using this information to market Evita would be considered using secondary data, because the information was originally gathered for Ricky Martin’s fan club’s use. 2. Broadway Direct offers a collection of people who have signed up to receive a newsletter about Nederlander theatre events. Most of these individuals also purchased tickets to see a show at a Nederlander owned theatre. If used as a sample for a marketing research project, Broadway Direct would be a A. judgment sample B. probability sample C. observation research D. convenience sample Answer: D Because the sample is people who chose to sign up or already purchased tickets from one organization, and the list would be easy to obtain, this group would be considered a convenience sample. 3. When the Nederlander Organization “retargets” recipients of email pre-sale blasts (such as the one used for Evita) based on whether they clicked “buy tickets” and did not make the purchase, they are A. using behavioral targeting to send follow-up messages. B. using behaviorscan to understand why they didn’t purchase tickets. C. performing observation research on email marketing success and failure. D. demonstrating how virtual shopping can use personal selling techniques. Answer: A This type of data collection is a type of observation research that monitors consumer online activity and adds that information to a profile—behavioral targeting—and using that profile to segment the market and send targeted marketing messages. 4. When someone opts in to receive Broadway direct newsletters, what step in the CRM system are they fulfilling for the Nederlander organization? A. They are helping Nederlander understand its interactions with the current customer base. B. They are helping Nederlander capture customer data based on interactions. C. They are helping Nederlander identify its best customers. D. They are helping Nederlander leverage stored information. Answer: B By opting in, customers are providing Nederlander with customer data based on how they interact with the company. CASE ASSIGNMENT: Axe Though it has been in production since 1983, Unilever’s Axe body fragrance skyrocketed from a small European brand to a $2.5 billion global enterprise in recent years. Axe holds 76 percent of the body fragrance market, and grew 13.6 percent in 2012 alone. Without question, the key to Axe’s success has been its excellence in marketing. As other companies do, Axe sponsors events and places advertisements that are aimed at connecting with young men. Axe, however, takes things a step further by tying all of its marketing efforts to an incredible level of research. Axe’s core target demographic is men aged 20 to 25. It does not try to “age” with the group, meaning that it does not chase its customers as they age. The company operates a relentless research system that focuses squarely on this segment, tracking fads, trends, likes and dislikes, interests, and relationship patterns. Axe marketers know that what appealed to the 20 to 25 demographic five years ago will not appeal to the current 20 to 25 group, and that whatever is popular now will likely be out of style in another five years. Axe’s research skills have led to a significant shift in its advertising strategy. Early on, marketers found that males and females would often spend time in separate groups. This knowledge led to advertising that focused on how guys could use Axe to get close to girls. In one commercial, a cheerleader, driven insane by Axe, tackles a football player wearing the fragrance. Recently, however, researchers found that males and females are spending more time together. Axe shifted its advertising strategy, playing to both men and women. The newer commercials show women being more demanding, telling males to groom themselves better and females to take charge of the budding romance. Jason Feifer, “Axe’s Highly Scientific Typically Outrageous and Totally Irresistible Selling of Lust,” Fast Company, August 8, 2012, www.fastcompany.com/3000041/axes-highly-scientific-typically-outrageous-and-totally-irresistible-selling-lust (Accessed March 26, 2013). TRUE/FALSE 1. Axe engages in market research when it tracks fads, trends, likes and dislikes, interests, and relationship patterns. Answer: True 2. Axe relies primarily on secondary data to discover what appeals to 20- to 25-year-old males. Answer: False Axe uses primary data, information collected for the first time, to stay up to date on its target market. 3. If Axe surveyed students at Harvard University to represent the entire 20- to 25-year-old market, it might encounter a random error. Answer: True 4. An effective way for Axe to reduce its research costs while improving respondent participation would be to utilize internet surveys. Answer: True 5. Axe likely collects data through behavior-based research, a system for gathering information from a single group of respondents by continuously monitoring the advertising, promotion, and pricing they are exposed to and the things they buy. Answer: False This defines scanner-based research. MULTIPLE CHOICE 1. Which of the following statements illustrates the predictive role of marketing research? A. Axe holds 76 percent of the body fragrance market. B. Online sales account for 8 percent of all sales. C. The new television commercial will likely drive sales up 21 percent. D. Axe’s packaging redesign resulted in a 2 percent drop in sales. E. None of these. Answer: C The predictive function addresses “what if” questions. 2. Suppose Axe gathered eight 23-year-old males together to have a moderated discussion about what they liked and disliked about the new Axe body spray fragrance. This is an example of a(n): A. In-home personal interview. B. Mail survey. C. Focus group. D. Executive interview. E. Web survey. Answer: C A focus group is a type of personal interviewing. Often recruited by random telephone screening, seven to ten people with certain desired characteristics form a focus group. These qualified consumers are usually offered an incentive (typically $30 to $50) to participate in a group discussion. 3. “Which fragrance of Axe body spray do you like the least?” is an example of this type of questionnaire question: A. Open-ended. B. Dichotomous. C. Multiple choice. D. Scaled-response. E. None of these. Answer: C Closed-ended questions can either be dichotomous or multiple choice. This closed-ended question is multiple choice. 4. According to the case, American males age 20 to 25 represent the _____ for Axe’s market research: A. Universe. B. Focus group. C. Sample. D. Big data. E. Competitive intelligence. Answer: A A universe is comprised of the population from which a sample will be drawn. 5. Which of the following represents an example of neuromarketing? A. Posing as a customer and buying Axe body spray products in a supermarket. B. Using cookies to track the Internet habits of individuals who visit Axe’s Web site. C. Interviewing Axe customers at the local mall. D. Collecting and analyzing InfoScan data to predict where and when consumers buy Axe products. E. Measuring changes in consumers’ heart rates as they watch Axe television commercials. Answer: E Some companies have begun studying microscopic changes in skin moisture, heart rate, brain waves, and other biometrics to see how consumers react to things such as package designs and ads. This neuromarketing approach is a fresh attempt to better understand consumers’ responses to promotion and purchase motivations. GREAT IDEAS FOR TEACHING CHAPTER 9 James S. Cleveland, Sage College of Albany DISCUSSION BOARD TOPICS TO ENCOURAGE PARTICIPATION Discussion board questions provided to students to encourage them to engage in thinking and writing about the content of the Principles of Marketing course usually take the form of a provocative statement to which students are asked to respond. An example of this would be “All PR is good PR.” Discussion topics such as this one are abstract and often require that the instructor provide an initial reply to show students what is expected of them in their own replies. For students with limited work experience, this approach may be quite appropriate. For adult students with extensive experience as employees and consumers, however, the abstract nature of such topics can be frustrating. I have developed, therefore, a series of discussion board questions to use with experienced, adult students. These questions are designed to encourage them to use their experiences as employees and consumers as doorways to better understand the course material, and to make their own responses more interesting to themselves and to the other students in the class who will read and comment on them. Each question has three parts: 1. First, there is a sentence or two from the students’ textbook introducing the topic. By using the text author’s own words, students are enabled to locate relevant material in the text more easily, the text content is reinforced, and confusion resulting from use of variant terms or expressions is minimized. 2. Second, there is a reference to text pages the students should review before proceeding. Since the goal of the exercise is for students to apply the course content to their own experiences, reviewing the content first is important. 3. Third, there is a request for the students to think about or remember some specific situation in their experiences to which they can apply the text material, and a question or questions for them to address in their replies. Here are additional such discussion board questions developed for Chapter 9 of MKTG10. Each is written to fit the same text cited above but could easily be rewritten and revised to fit another text. Series A 1. Marketing research is the process of planning, collecting, and analyzing data relevant to a marketing decision. 2. Review the information on the role of marketing research from section 9-2 of your text. 3. Then describe how your employer uses marketing research or, if you do not think your employer does, how it could use marketing research. Series B 1. All forms of survey research require a questionnaire. 2. Review the information on questionnaire design from section 9-3c of your text. 3. Suppose you wished to design a questionnaire that could be used by your employer to do marketing research. Describe what the questionnaire would be designed to find out and write one good closed-ended question that could be used on it. Deborah C. Calhoun, College of Notre Dame of Maryland SECONDARY RESEARCH DATA HUNT AND MARKETING STRATEGY DEVELOPMENT The purpose of this assignment is to acquaint the student with the many diverse business information sources available to them in their college library as well as introduce them to the types of data marketers often use when making a strategy decision. As you are aware, the ability to locate and analyze secondary data in an efficient and effective manner is critical to their success as a business student as well as a future business decision maker. It has been said that “To manage a business well is to manage its future; and to manage the future is to manage information.” Increasingly, marketers view information not just as an input for making better decisions, but also as an important strategic asset and marketing tool. I write a new data hunt every year around one of the cases in the marketing principles text book and assign it relatively early on in the semester. I have treated it as either a pass/fail or a graded assignment and both approaches seem to work. I used to suggest to the students which sources might be consulted in completing each question but found certain logistical problems with this approach. I now provide the students with a list of sources that includes a brief description of some of the key sources available. A business library tour and a demonstration on accessing information through the Internet and the various online indexes are also provided. After the students complete the data hunt, I ask them to analyze the case using the secondary data they have gathered. The students often aren’t very excited about the assignment in the beginning but many have indicated on course evaluations later that the data hunt was one of the strengths of the course and a worthwhile learning assignment. The following is an example of the type of questions I include on the data hunt. Petco Products Data Hunt 1. Who are Petco Products’ competitors in the dog-food and cat-food industry? Identify the competitors by both brand name and manufacturer. You may wish to supplement your library research with a trip to the local grocery or pet store. While at the store, note shelf space allocation, types of product offerings, packaging, and pricing among the brands. 2. Ralston Purina is one of the largest competitors in the dog- and cat-food market. Develop a profile of the Ralston Purina Company. Include information such as ownership, history, market share (both domestically and internationally), and marketing practices such as product/brand offerings. 3. What Standard Industrial Codes (S.I.C.) do dog food and cat food fall under? What S.I.C. codes do pet stores and dog kennels come under? 4. Before investing a significant sum of money into the “First in Show” (F.I.S.-27) dog food product, Petco Products needs to further investigate the domestic and international pet food industry, in particular the dog food market. What are the significant trends and what do sales and profitability forecasts look like for both the consumer market and the pet store/kennel market? 5. Trade Associations and trade journals are excellent sources of industry specific information. The American Pet Products Manufacturers Association supplied much of the pet ownership information in the case. What is the address and phone number of the American Pet Products Manufacturers Association? Should Petco Products join the Association and why or why not? Does your library carry any of the Association’s publications? Name three other associations Petco may wish to join. 6. The case describes the characteristics of a pet owner nationally. How would you describe dog and/or cat owners in your area? How do pet owners in your area differ from pet owners nationally? Kay Tracy, Gettysburg College IN-CLASS EXERCISE IN RESEARCH To illustrate a few of the trials and tribulations of conducting marketing research, I have the students do the following exercise in class. This exercise is intended to demonstrate, through an experiential approach, how market research should and should not be conducted. Students are asked to survey ten of their classmates as to what brand of a personal-use item they own, and to collect benefit, demographic, psychographic and AIO information from each interviewee. Those students conducting the “survey” on the same item then meet together, compile the data they have gathered, and, based on the pooled results, present a short oral report of their findings to the class. Time Required: One 50-minute class period Materials: Survey forms for each class member, signs indicating where groups should meet after interviews are completed Procedure: Before class, reproduce survey forms for different products based on the format below. You will need enough different products so that five students are interviewing about the same product. (So, if you have 35 students, you will need a total of 35 forms, 5 for each of 7 different products.) Substitute products such as toothpaste, stereo system, shampoo, etc. for the automobile in (1) on the student form below: MARKETING EXERCISE Directions Briefly interview ten of your classmates as to: 1. Which brand of automobile they own 2. Why they own that brand 3. Demographic information (sex, age, fraternity or sorority affiliation, major) 4. Psychographic information (lifestyle) 5. AIO information (favorite type of movie, hobby, music) After you have interviewed ten individuals, team up with four of your classmates—meet under the sign for the product about which you are interviewing. Pool the results of your interviews with your research team. Based on the pooled results: 1. Determine the market segment that the top three brands appear to target (based on demographic data). 2. Do a benefit analysis for the top brand. (Hint: What benefits do people seek from their ownership of a certain brand?) 3. Prepare a profile of the top brand target market based on the psychographic and AIO data you have collected. Debriefing At the conclusion of the various teams’ reports, ask participants if they would care to base a product decision on this survey. Students are quick to point out the shortcomings of collecting marketing research data in a classroom setting. They are apt to mention duplication of subjects, social desirability of answers, limited data, failure of interviewers to ask questions exactly (e.g., “What brand of toothpaste do you like?” rather than “What brand of toothpaste do you use?”), assumptions on part of interviewer, lack of a random sample, etc. For each of the problems they mention, ask the class to provide an appropriate solution. Elwin Myers, Texas A&M University – Corpus Christi COLLECTING, CREATING, AND MARKET RESEARCHING DIRECT MAIL SALES LETTERS Direct mail advertising continues to comprise a substantial component of the advertising budget. In spite of the large sums spent on producing millions of pieces of direct mail sales letters, many of those pieces are not read by their intended readers. This assignment helps students observe the current writing practices used by direct mail sales letter writers and suggests ways of improving upon what they observe. The assignment consists of two components; instructors interested in using the assignment in class may use one or both segments as time and interest permit. Collecting and Analyzing Direct Mail Sales Pieces 1. Students are required to locate 20 different direct mail sales writing pieces—10 from local advertisers and 10 from national advertisers. The pieces may be ones received by students, their friends, family, or from the post office trash receptacle. 2. Students carefully analyze each piece to determine distinctions between local and national advertisers. Students will notice that the local pieces are more likely to be a single page—often in a postcard format. The national advertisers are more likely to include an actual sales letter and perhaps several enclosures placed within an envelope. 3. Since many sales letter recipients discard letters unopened, sales letter writers realize the need to include some form of persuasive message on the outside of the envelopes. Therefore, students should not fail to analyze whether envelopes include written messages on the outside of the envelope. Students will notice that some of the written messages may entice or encourage readers to open the envelope while other messages may distract or annoy potential readers. The better written envelope messages generally contain the following three elements: 1) a clever verbal or graphic attention getter, 2) a phrase that informs the reader that the product or service is targeted toward their interests (such as “Attention: For Accomplished Golfers Only”), and 3) the irresistible word “free” if such an offer is discussed within the letter inside. 4. After examining the sales letters envelopes, students next peruse the sales matter inside the envelope. Although all enclosed pieces should be inspected, students should concentrate on the actual sales letter itself. An effective sales letter should be organized as other sales messages: attention, interest, desire, and action. Most sales letters excel on the first and last sections and flounder on the sections in between. Conducting Market Research on Student-Written Sales Letters 5. After students have analyzed their 20 sales letters including the envelopes and enclosures, they should be qualified to identify effective sales letter concepts. Their next assignment is to write a complete sales letter, including enclosures and an envelope design, incorporating the effective concepts and avoiding the ineffective concepts they observed during the first part of the assignment. 6. After writing what students think are effective sales letters, their last task is to conduct a marketing research investigation designed to find out the likely outcome of their creations if they were to be used in a sales campaign. Gregory S. Martin, University of West Florida USING SECONDARY DATA FOR MARKETING DECISIONS Many of us would like our Marketing Principals students to have a direct experience with using market research data as an input for marketing decision making. Time constraints and large class sizes can make the collection and use of primary data impractical. (I know, I’ve tried!) Cases can provide a context for the consideration and use of secondary data, but most deprive the student of the experience of actually doing “research” to develop decision-relevant information. I’ve found the following exercise to be manageable and at the same time provide some hands-on experiential benefits. It makes use of one of the most widely available sources of basic secondary market data, the annual Sales & Marketing Management Survey of Buying Power. The following example assignment is customized for use in my classes, but variations on the basic format are endless. Students will develop many different variations of the decision process (e.g., ranking methods, weighting schemes, etc.) that can be discussed and compared in an in-class debriefing session after completion of the assignment. This discussion does a good job of illustrating the “fuzzy” nature of most marketing decision processes. Assignment: Copies of the Florida section of Sales & Marketing Management Survey of Buying Power are on reserve in the Library. Use this secondary source of market information to complete your choice of one (1) of the following tasks. Report your findings in a one-page report. a. A home electronics company wants to test market a new product in a Florida Metro Area that has a high proportion of (1) residents age 24 to 31 and 2) household EBIs of around $42,000. Recommend a metro area for this test market and explain why you made this decision. Be sure to also consider and report median household EBI, BPI, and an estimate of per capita sales for the retail store group that includes stores selling home electronics. (Instructor note: Don’t assume that all students understand the concept of “per capita”—many don’t have a clue.) b. A growing regional retailer of furniture not currently doing business in Florida wants to expand its market coverage into two Florida counties by August 1, 2015. The firm’s market planners know from past experience that a county must have a population of at least 300,000 people to support a store and that the bulk of its sales are to people between the ages of 27 and 32. Based only on information available in the Survey of Buying Power, which two counties would you recommend for new stores and why? Be sure to also consider and report median household EBI, BPI, and an estimate of per capita sales for the retail store group that includes stores selling furniture. Michael C. Murphy, Langston University at Rogers University Jon Shapiro, Northeastern State University at Rogers University STORYTELLING: METAPHOR GENERATION AS A CUSTOMER UNDERSTANDING RESEARCH TOOL Traditional market research techniques such as surveys and focus groups often fail to reveal the customer’s hidden inner feelings that are not easily verbalized or quantified. As a result, storytelling is gaining recognition as a useful tool that gives marketers a richer insight into consumer behavior and attitudes. Researchers such as Gerald Zaitman—the creator of Harvard’s Metaphor Lab, have successfully utilized variations of storytelling to aid DuPont and other consumer product companies. In our classrooms, storytelling is an informative and entertaining way to help students expose non-verbalized feelings as well as behaviors associated with product usage. We typically work with a class of 30 and proceed as follows. First, we divide the class into three groups of 10 students, and assign each group one specific product to analyze. (Products such as backpacks, athletic shoes, cereals, candy bars, pens, sandals, and automobiles typically elicit student interest. Merchandise such as perfumes, jeans, and undergarments elicit even more interest due to their inherently hedonistic nature). Next, each student is instructed to clip out magazine pictures and to assemble them into a collage that serves as a metaphor for that student’s experiences and emotions associated with the product. We generally give participants three weeks to create their collages. This allows them time to purchase (if necessary) and experience the product. We believe that current usage yields a richer description of product–user interaction than past consumer experience(s). After three weeks, each student brings his or her collage to class, and is allotted several minutes to display it while explaining why he or she chose certain clips and what they mean (i.e., to tell his or her collage-related story). In the next learning phase, each product group of 10 meets outside of class to interpret the metaphorical meanings within the stories. The final task of each group is to produce a paper detailing product uses, consumer preferences and dislikes, opportunities, and threats. For this phase, students are typically allotted two weeks. We think both you and your students will have fun utilizing one of the new emergent tools in marketing research—storytelling! PART 2 – Integrated Case Assignments MARKETING MISCUES Four Loko Targets Young College Hedonists Phusion Projects, LLC was founded in 2005 when three friends from Ohio State University had the entrepreneurial idea to start their own company. From this company came the Four Loko product that caused much panic in the fall of 2010. While news reports focus on Four Loko’s ingredients—caffeine and alcohol, the real marketing mistake likely came from the market segment that enjoyed the product. That is, Four Loko had quickly become the drink of choice for college students across the United States. The Product Referred to as an alcoholic energy drink, Four Loko comes in a 23.5-ounce can, with alcohol content of 12 percent (comparable to four beers). The Four Loko product, in several fruit-flavored varieties, was displayed on store shelves in brightly colored cans at a retail price of $2.50 to $3.00. In addition to the alcohol, the energy drink is packed with caffeine (equivalent to that found in a cup of coffee), taurine, and guarana. What sets Four Loko apart from other energy drinks, however, is wormwood oil. Wormwood oil is the key ingredient in absinthe, a very high-proof spirit believed to cause hallucinations. The hallucinogenic aspect of absinthe, from the thujone in the oil, resulted in its prohibition for years in many countries. However, federal regulators now allow absinthe as long as the thujone has been extracted from the wormwood oil. Health advocates contend that the caffeine masks the effects of the alcohol that is being consumed when drinking Four Loko. Thus, a person is likely to consume more alcohol than he or she would normally. Four Loko and other caffeinated alcoholic beverages have been referred to as “blackout in a can” and “wide-awake drunk.” The Target Market Today’s college students grew up with energy drinks on store shelves. From the high school sports field with Gatorade and Powerade, today’s younger generation easily graduated to Red Bull, Monster, Rockstar, and AMP. As such, this twenty-something generation was a primary target market for Four Loko. These energy drink consumers could go away to college and consume their energy drinks in conjunction with alcohol—premixed—and get drunk quickly and cheaply. The Panic According to health experts, ingesting caffeine with 12 percent alcohol can lead to a heart attack, especially for someone fatigued or with a cardiac condition. The alcoholic energy drink could lead to high blood pressure and arrhythmia. Four Loko gained national attention in the fall of 2010 when nine university freshmen, ranging in age from 17 to 19, were hospitalized with blood-alcohol levels from 0.12 percent to 0.35 percent (a blood-alcohol concentration of 0.30 percent is considered potentially lethal). One of the nine students almost died. All nine had consumed Four Loko in conjunction with drinking vodka, rum, and beer. Response In response to the panic around the safety of Four Loko, law makers in numerous states began lobbying for legislation prohibiting the product, and universities across the nation banned the drink from campus. In the state of Washington, an emergency ban was put into effect, with the product pulled from store shelves almost immediately. In a statement released by Phusion Projects, the company noted that it marketed its products responsibly to those of legal drinking age and shared the concerns of college administrators about underage drinking and abuse of alcoholic beverages. However, the company held strongly to its belief that combining caffeine and alcohol was safe and provided examples such as Irish coffees and rum and cola. Plus, anyone could mix vodka and an energy drink such as Red Bull. In support of Phusion Projects, some commentators expressed concern over the apparent panic surrounding the consumption of alcohol and caffeine and, in particular, Four Loko. It was noted that the publicity surrounding Four Loko was probably one of the best forms of advertising—that is, politicians jumped on the ban-Four-Loko–bandwagon, which resulted in a lot of press for a product targeted to hedonistic young people that then prompted more and more young people to sample the product. Sources: Phusion Projects, www.phusionprojects.com; Shannon Dininny, “Four Loko Sickened Several Central Washington University Students,” Huffington Post, October 25, 2010, www.huffingtonpost.com/2010/10/25/four-loko-sickened -centra_n_773597.html; Mike Hughlett, “Caffeinated Alcohol Drinks Stir up Legal Concerns,” Chicago Tribune, August 24, 2009, http://articles.chicago tribune.com/2009-08-24/news/0908230370_1_caffeine-energy-drinks -alcoholic; Giselle Phelps, “College Students Going Loco for Four Loko Drink,” October 22, 2010, www.the33tv.com/news/kdaf-loko-alcoholic-energy-drink -health-story,0,3345148.story; Noah Rosenberg, “Maker Halts Distribution of Alcoholic Energy Drink,” New York Times, November 14, 2010, www.nytimes .com/2010/11/15/nyregion/15loko.html; Jacob Sullum, “Loco over Four Loko: The Moral Panic behind the Ban,” Patriot Post, November 24, 2010, http:// patriotpost.us/opinion/jacob-sullum/2010/11/24/loco-over-four-loko-the -moral-panic-behind-the-ban. Open-ended questions 1. Profile the target market for Four Loko. Age: college student, probably under 21, although should be at least 21 years of age since the product is an alcoholic beverage Gender: male or female Income: college student budget Ethnicity: any Psychography: partiers, out for a good time, hedonistic 2. Outline the consumer decision-making process for Four Loko. •Need Recognition—internal stimuli: student decides he or she wants to party; external stimuli: friends and depiction of partiers having more fun •Information Search—internal: recall drinks of choice among college students; external: ask friends with whom student will be partying and recall hearing about certain drinks •Evaluation of Alternatives—product attributes: Four Loco provides a cheap party drink •Purchase—purchase may be made by student (if 21 years of age) or by someone else •Postpurchase Behavior—the news reports provided information about postpurchase behavior, which is what led to the negative attention the product received; essentially, postpurchase behavior led to the product being pulled from the shelf Close-ended questions TRUE/FALSE 1. University and governmental policymakers responded to consumer behavior rather than the legality of Four Loko. Answer: True 2. The founders of Phusion Projects went to college together and quickly founded their company after graduation. They did not need sophisticated market research to know their potential customers. Answer: True 3. There is no such thing as “bad press.” The banning of Four Loko increased its sales. Answer: False This is only true in the sense that it made for black market sales and publicity for whatever Phusion Projects did next after it withdrew its sports drink, reformulated it, and marketed it without its original ingredients. 4. When Phusion Projects defended its product and compared it to mixing rum and Coke, it was actually repositioning Four Loko. Answer: True MULTIPLE CHOICE 1. What consumer value does the Four Loko address that is in the American tradition of such products as the Egg McMuffin and the breakfast bar? A. portability B. no waiting C. convenience D. surprise E. colorful packaging Answer: C Four Loko—unfortunately—allows for customers to buy a drink that premixes alcohol and caffeine.. 2. Which of the following factors or influences provided a “gateway” to drinking and abusing Four Loko? A. sport hydrating drinks consumed in childhood B. social class C. income D. college drinking subculture E. all of the above Answer: E The target market, college students, grew up with energy drinks on store shelves. Phusion Projects further design Four Loko to exploit middle-class lifestyle and income of the market’s youth as well as the daredevil subculture of using energy drinks and alcohol at the same time. 3. It was the __________, that psychological factor in particular, which made Loko Four seem healthy, even good for you. A. convenience B. perception C. eye candy cans D. hierarchical need of thirst E. motivation Answer: B Four Loko relies on perception in the vivid, shocking colors encoded of cans that encode athleticism, sex appeal, the forbidden (the perception of doing an illegal drug), and like subculture values. 4. Four Loko is obviously a product that relies on peer pressure and self-image. Does this product depend on nonaspirational groups in influencing its consumers? Choose the best answer. A. No, Four Loko is entirely dependent on its athletic, herbal lifestyle image. B. Yes, drinking Four Loko separates its largely male athlete consumers from female college students. C. Yes, Four Loko uses legal wormwood extract and thus disassociates the product from drug addicts. D. Yes, groups perceived as unhealthy or social pariahs, such as drunken beer drinkers and hard core alcoholics. E. No, Four Loko relies more on the consumer achieving the ideal, athletic drinker self-image. Answer: D Nonaspirational reference groups, or dissociative groups, influence our behavior when we try to maintain distance from them. 5. Phusion Products used __________ to make Four Loko attractive to young people mixing and abusing such energy–alcoholic drink combinations such as Red Bull and Jägermeister. A. perceptual mapping B. positioning C. product differentiation D. cannibalization E. niche marketing Answer: B Since Jägermeister and Red Bull are competing for the same consumer in this relationship, then positioning is the best answer here. 6. In the end, Phusion Products had to remove caffeine and other stimulants that masked Four Loko’s inebriating effects. New variations of the product will be an alcoholic beverage. This is an example of __________. A. repositioning B. cannibalization and repositioning C. cannibalization D. an FDA ruling E. a change of product class Answer: A The new products, although not the same formulation, would be a reorientation of the brand for drinkers of fruit-flavored alcoholic drinks, such as wine coolers and the like. CRITICAL THINKING CASE Mary Kay Inc. Taps into a Changing Demographic Founded in 1963 by Mary Kay Ash and her son, Richard, Mary Kay Inc. is a company that has long believed in the power of women. Dedicated to making life more beautiful for women, the company was founded on the Golden Rule of “praising people to success” and on the principle of placing faith first, family second, and career third. Before her death in 2001, Mary Kay Ash received numerous awards that exemplified her personal beliefs, which were embedded as the heart and soul of the company. Beauty and Personal Care Products and Direct Selling While the economic situation is such that consumers are scaling back on spending for high-end nonessential items, many beauty and personal care products are considered necessities. At the same time, beauty and personal care products do not have country boundaries—such products are universal. According to one report, beauty and personal care products are a cornerstone of the direct selling industry and, likewise, direct selling is good for the beauty and personal care products industry. By 2009, direct sellers were capturing more than $10 billion in annual sales of beauty and personal care products. Direct selling is a method of distributing products directly to the consumer via person-to-person selling or party plan selling and away from permanent retail locations. According to the Direct Selling Association, there are an estimated 15.1 million people involved in direct selling in the United States, with more than 66 million people engaged worldwide. Interestingly, more than 80 percent of direct sellers in the United States are women. The predominance of women in the direct selling marketplace has proven especially important for direct sellers like Mary Kay Inc. Mary Kay Inc. Mary Kay Inc. develops and manufactures beauty and personal care products for both women and men. The company spends millions of dollars and conducts more than 300,000 product tests to ensure that Mary Kay products meet the highest standards of quality, safety, and performance. With products ranging from skin care to makeup to spa and body to fragrances, the company sells its products through its direct sales force of more than two million independent beauty consultants in countries such as Argentina, Armenia, Australia, Brazil, Canada, China, the Czech Republic, El Salvador, Finland, Germany, Guatemala, Hong Kong, India, Kazakhstan, Korea, Malaysia, Mexico, Moldova, New Zealand, Norway, the Philippines, Poland, Portugal, the Russian Federation, Slovakia, Spain, Sweden, Taiwan, Ukraine, the United Kingdom, the United States, and Uruguay. The company’s worldwide wholesale sales topped $2.5 billion in 2009. With women as its primary target market, Mary Kay has stayed abreast of changing buyer behavior. For example, the company knows that the younger generation expects to touch and experiment with products, so the company offers products, shades, packaging, and forms that both enable and encourage the potential user to try something new. Although there are geographic differences among preferences (e.g., Asian women focus on skin care, while Latin American and some European women are more interested in color cosmetics and fragrances), the company has found that, worldwide, women are more similar than dissimilar in their preferences. While the company has been successful product-wise with the younger demographic, Mary Kay Inc. has been particularly astute at tapping into this changing demographic with respect to its independent sales consultants. The average age of the Mary Kay consultant is now 36 years old, and the company’s fastest growing segment of consultants is in the 24- to 35-year-old age group. Representing the future of the company, Mary Kay Inc. can provide these women with the opportunity to meet any goal they are willing to work toward—whether it is additional income or financial independence. Yet, the company recognizes that other direct-selling companies want to harness the power and dynamic of this age group. These young leaders are known for wanting increased flexibility, unlimited earning power, and the freedom to experiment in their work lives. There is a vast market opportunity for Mary Kay Inc. in the millennial generation, and the company wants to take advantage of that opportunity to usher in a new era of direct selling of Mary Kay products. Sources: www.marykay.com; Lauri Dodd, “Youthful [R]evolution,” Direct Selling News, December 2010, 10–21; Michael Rice, Ivy Carter, and Rebecca Larson, “Beauty Everlasting,” Direct Selling News, October 2010, www.directsellingnews .com/index.php/site/entries_archive_display/beauty_everlasting (Accessed February 9, 2011); Barbara Seale, “Younger every Day,” Direct Selling News, October 2010, 24–33. Open-ended questions 1. The younger demographic is important to Mary Kay Inc. both as consumers of the company’s products and as its sales force. Since the market is one and the same, can the company utilize one marketing strategy targeting both consumers and sellers? Why or why not? Answer: No, the company cannot use the same marketing strategy to attract both its independent sales consultants and consumers. While both groups are in the same demographic and thus possess the same demographic characteristics, Mary Kay must utilize this demographic (and other) knowledge differently in designing a customized marketing strategy for each purpose (i.e., attracting a sales force and getting people to consume product). For example, Mary Kay focuses upon the younger demographic’s desire for experimentation by offering a Virtual Makeover Tool on its Web site and videos on its YouTube channel. These tools are appealing to the younger demographic when it comes to being a sales consultant too, as it shows that the company is abreast of digital capabilities. Yet, the company focuses upon the desire for increased flexibility, unlimited earning power, and the freedom to experiment (same characteristic but tapped into differently) in their work lives when targeting the same demographic for the sales consultant role. While both groups are a digitally-driven demographic, the company has to utilize this information in different ways and design different marketing strategies for the different purposes. 2. What are particular characteristics about this younger demographic that Mary Kay Inc. will have to tap into in order to capture and maintain the segment’s attention? Answer: • Digitally-driven (technology) • Desire for experimentation • Desire for flexibility Close-ended questions TRUE/FALSE 1. Mary Kay relies on consultants and direct-selling, which is essentially one-to-one marketing. Answer: True 2. The marketing that exists between Mary Kay and its consultants is not B2B. Answer: False Mary Kay, vis-à-vis its independent beauty consultants, who are small business, is the producer and distributor in this B2B role. 3. Mary Kay’s seeking consultants who fit the segmentation of the target market is a form of product user positioning. Answer: True 4. Mary Kay is not only vulnerable to losing a younger generation of consultants to direct-sellers like itself. Answer: True MULTIPLE CHOICE 1. Which of the following segmentations are probably least important to Mary Kay? A. ethnic B. gender C. age D. family life cycle E. none of the above Answer: E All of these demographic segmentation basses are important to Mary Kay, which is an ethnically oriented global company that sells to females and males clients, seeks to broaden its target market in a younger clientele that tends to marry later and delay having children. 2. By designing its products to vary, to seem “new” in shade, scent, forms, even packaging, Mary Kay is counteracting which aspect of a younger generation of users? A. skepticism B. disloyalty to brands C. less income D. the desire for an “experience” E. all of the above Answer: B Those generations after the baby boomers, such as Generation X tend to be disloyal to brands. Mary Kay now markets its products to foil that tendency. 3. Mary Kay recognizes geographic and ethnic segmentation. It also sees most women as having similar preferences. These would probably lead to what strategy? A. Continue to create product lines specifically for each target market. B. Produce makeup and the like in the most uniform way possible because women tend not to recognize cultural differences when it comes to beauty care projects. C. Treating customers in different countries as reference groups. D. Pursue a geodemographic segments to target women in even smaller, more diverse markets. E. Produce products with the same formulations yet intensify marketing to individual cultures and the like. Answer: E Even though the trend in global business is toward less variation, firms have little chance of selling products in a culture that they do not understand. 4. Unlike other companies, Mary Kay must compete with other direct-selling firms for ____________ from a business-to-business perspective. A. beauty care product customers B. the same demographic segments C. a largely female demographic D. its beauty consultants E. none of the above Answer: D Mary Kay recognizes that other direct selling companies want to harness the power and dynamic of consultants in the younger age group. 5. When a Mary Kay identifies and focuses on the younger age of its largely female clientele, their unlimited earning power, their preferences for certain product lines, and the like, it is looking at __________. A. segmentation descriptors B. target market variables C. evoked sets D. consideration sets E. optimizers Answer: A Segmentation descriptors identify the specific segmentation variables. 6. From reading the Mary Kay case, which of the following would be the least important in its approach to one-to-one marketing? A. loyalty B. technology C. personalization D. time-savings E. none of the above Answer: B For direct selling, technology (in the form of m-commerce mass marketing apps, mobile sites, Web sites, and the like) is typically the least important marketing tool when it comes to a individualized face-to-face sale. Solution Manual for MKTG: Principles of Marketing Charles W. Lamb, Joe F. Hair, Carl McDaniel 9781305631823, 9781285860145, 9781337116800