Conducting Marketing Research Chapter 5 Notes

The Scope of Marketing Research

 Marketing Research
o Is the function that links the consumers, customer, and public to the marketer
through information used to identify and define marketing opportunities and
problems
 Generate, refine, and evaluate marketing actions
 Monitor marketing performance
 Improve understanding of marketing as a process

Importance of Marketing Insights

 Marketing research is all about generating insights
 Insights provide diagnostic information about how and why we observe
certain effects in the marketplace and what that means to marketers
 Often form the basis of successful marketing programs

General Foods
o In 1970s, a successful marketing research executive left General Foods to try a daring
gambit:
o Brining market research to Hollywood to give films studios access to the same
research that had spurred General Foods’s success

Who Does Marketing Research?

o Marketing research firms fall into (3) categories:
o (1) Syndicated-services research firms gathering consumer and trade information
that they sell for a fee
 Ex: Nielsen Company, Kantar Group, Westat, and IRI
o (2) Customer marketing research firms carry out specific projects
o (3) Specialty-level marketing research firms provide specialized research services
 Ex: a field-service firm that sells field interviewing services to other firms
o Companies need not break their budgets to get helpful marketing research data
o Libraries, universities, and chamber of commerce are all great sources of
information
o Government agencies
o The internet
 o Buying mailing list or using inexpensive online tools like SurveryMonkey
o A company might gain market insights by observing its competitors
o A company might gather market insights by tapping into employee knowledge and
experience

The Marketing Research Process

o The Marketing Research Process
o Define the problem Develop the research plan Collect the information 
Analyze the information  Make the decision
o Defining the problem
o Marketing management must be careful not to define the problem too broadly or
too narrowly for the marketing researcher
 Must ask questions that focus on the key issues that manager must address
and, at the same time, are specific enough to be actionable
o Marketing research varies with the type of information it aims to generate
 Some is exploratory
 Its goal is to identify the problem and suggest possible solutions
 Some is descriptive
 It seeks to quantify demand, such as how many first-class
passenger would purchase ultra-high-speed Wi-Fi service at 25
 Some is casual
 Its purpose is to test a cause-and-effect relationship
o Developing the research plan
o developing the most efficient plan for gathering the needed information and then
discovering what that will cost
o To design a research plan, need to make decisions about
 Data Sources
 The research can gather secondary data, primary data, or both
o Secondary data are data that were collected for another
purpose and already exist somewhere
o Primary data are data freshly gathered for a specific
purpose or project
 When needed data does not exist or are dated or
unreliable, researcher use this approach
 After determining the type of data
o Researcher usually stat their investigation by examining
where some of the data that the company has already
collected can be useful in addressing the research question
 o The next step involves utilizing the rich variety of low-cost
and readily available secondary data from outside sources
to partly or wholly solve the problem without collecting
costly primary data
 Research Approaches
 Collect primary data in (5) main ways:
o Through observation
 Observational research is a means of obtaining data
by unobtrusive observation of customer’s shopping
or consumptions habits
 Ethnographic research used concepts and tools from
anthropology and other social sciences to provide
deep cultural understanding of how people live and
work
 Goal is to immerse the researcher into
consumers’ lives to uncover unarticulated
desires that might not surface in any other
forms of research
 Any type of firm can benefit from the deep
consumer insights produce by this research
 Isn’t limited to consumer products
o Focus groups
 A focus group is a gathering of 6 to 10 people
carefully selected for demographic, psychographic,
or other considerations and convened to discuss
various topics at length for a small payment
 Goal is to uncover consumers’ real
motivation and the reasons why they say and
do certain things
 Sessions are typically recorded
 Is a useful exploratory step, especially if a series of
focus groups have revealed consistent preferences
and attitudes
o Surveys
 Survey research, companies undertake surveys to
assess people’s knowledge, beliefs, preferences and
satisfaction
 May risk crating “survey burnout” and see response
rates plummet
  Keep survey short and simple is one key to
drawing participants
o Behavioral data
 Behavioral research uses these data to gain a better
understanding of customers and their actions
 Actual purchases reflect consumer’s
preferences and often are more reliable than
statements consumers offer to market
researchers
o Experiments
 Experimental research is designed to capture cause-
and-effect relationships by eliminating competing
explanations for the findings
 Well designed and executed can give
confident in the conclusion
 Research Instruments
 Marketing researchers have a choice of (3) main research
instruments in collecting primary data:
o Questionnaires
 A questionnaire is a set of questions presented to
respondents to collect primary data
 Most common instrument for collecting
primary data
 Closed-end questions specify all the possible
answers, and the responses are easier to interpret
and tabulate
 Dichotomous
o A question with two possible
answers (Yes or No)
 Multiple Choice
o A question with three or more
answers
 Likert Scale
o A statement with which the
respondent shows the level of
agreement/disagreement
 Semantic differentia
o A scale connecting two bipolar
words. The respondent selects the
 point that represents his or her
opinion
 Important scale
o A scale that rates the importance of
some attribute
 Rating scale
o A scale that rates some attribute from
“poor” or “excellent”
 Intention-to-buy scale
o A scale that describes the
respondent’s intention to buy
 Open-end questions allow respondents to answer in
their own words
 Completely unstructured
o A question that respondents can
answer in an almost unlimited
number of ways
 Word association
o Words are presented, one at a time
and respondents mention the first
word that comes to mind
 Sentence completion
o An incomplete sentence is presented,
and respondents complete the
sentence
 Story completion
o An incomplete story is presented,
and respondents are asked to
complete it
 Picture interpretation
o A picture of two characters is
presented, with one making a
statement. Respondents are asked to
identify with other and fill in the
empty balloon
 Especially useful in exploratory research
o Qualitative measures
 Qualitative research techniques are
 relatively indirect and unstructured
measurement approaches, limited only by
 the marketing researcher’s creativity, that
permit a range of responses
 especially useful first step in exploring
consumers’ perceptions because respondents
may be less guarded and may reveal more
about themselves in the process
 has its drawbacks
o samples are often very small, and
results may not generalize to broader
populations
 Nevertheless, interest in using qualitative methods
is increasing. Popular methods follow.
 Word association
o To identify the range of possible
brand associations, ask subjects what
words come to mind when they hear
the brand’s name
 Projective techniques
o Give people an incomplete or
ambiguous stimulus and ask them to
complete or explain it
 Visualization
o Requires people to create a collage
from magazine photos or drawing to
depict their perceptions
 Brand personification
o This asks subject to compare the
brand with a person (or even an
animal or object)
 Laddering
o A series of increasingly specific
“why” questions can reveal
consumers motivation and deeper
goals
o Technological devices
 Technology enables marketers to use skin sensors,
brain wave scanners, and fully-body scanners to get
consumer responses
 The term neuromarketing describes brain research
on the effects of marketing stimuli
  Firms are using EEG technology to collate
brand activity with physiological cues such
as skin temperature or eye movements and
thus gauge how people react to ads
 Sampling Plan
 Data collection phase of marketing research is generally the most
expensive and error prone
o In order to control cost while maintaining high-quality
responses, a company must develop a meaningful sampling
and data collection plan
 This calls for (3) decisions:
o Sampling unit
 The respondents who should be surveyed to glean
information about a specific market, product or
behavior
 Key question here is Whom should we
survey?
o Sample size
 The number of people who should be surveyed to
provide credible results that can be extrapolated to
the entire target population
 Key question here is How many people
should we survey?
o Sampling procedure
 A means of choosing survey respondents that makes
the sample more presentative of the total target
population
 Key question here is How should we choose
the respondents?
 Contact Methods
 Must decide how to contact the subjects:
o Online
 Online product testing can provide information
much faster than traditional new-product marketing
research techniques
 Can also host a real-time consumer panel or virtual
focus group or sponsor a chat room, bulletin board,
or blog where they introduce questions from time to
time
  Other means to use the internet as research tool
includes tracking how customers clickstream
through the company’s website and move to other
sites
 Text messaging is also a useful way to get teenagers
to open up on topics
o In person
 Is the most versatile method
 Also, the most expensive method, is subject to
interviewer bias, and requires more planning and
supervision
 Arranged Interviews
 Marketers contact respondents for an
appointment and frequently offer a small
incentive or payment
 Intercept Interviews
 Researchers stop people at shopping mall or
busy street corner and request an interview
on the spot
o Must be quick, and they run risk of
including nonprobability (not
random) samples
o By mail or e-mail
 Is one way to reach people who would not give
personal interviews or who responses might be
biased or distorted by the interviewers
 Responses are usually few or slow
o By telephone
 Allows the interviewer to gather information
quickly, clarify questions if respondents do not
understand them, and follow up on responses that
have the potential to provide additional valuable
information
 Must be brief and not too personal
 Higher than mailed questionnaires, however,
increasingly difficult because of consumers’
growing antipathy toward telemarketers
 Data Mining
o Marketing statisticians can extract from the mass of data
useful information about individuals, trends and segments
  Uses sophisticated statistical and mathematical
techniques such as
 Cluster Analysis
o Grouping objects to ensure that
object in the same group or cluster
are more similar to one another than
to those in other groups
 Predictive Modeling
o Forecasting outcomes of uncertain
events
 Cognitive Modeling
o Simulating human decision making
and problem solving using a
computerized model
 Companies can use their data in several ways to
create customer value and gain competitive
advantage:
 To identify prospects
o Sort through the databases to identify
the best prospect and then contact
them by mail, e-mail, or phone to try
to convert them into customers
 To decide which customers should receive a
particular offer
o Set up criteria describing the ideal
target customer for a particular offer
 To deepen customer loyalty
 To reactivate customer purchases
 To avoid serious customer mistakes
o Analyzing the information and making the decisions
 The next-to last step in the process is to extract findings by tabulating the
data and developing summary measures
 When analyzing the available information and deciding, it is important to
draw a line between market data and market insight
 Thus, interpreting the data and relating them to the problem at hand play a
curial role in managerial decision making
 Measuring the Market Demand
o Understanding the marketing environment and conducting marketing research can help to
identify marketing opportunities
o The company must then measure and forecast the size, growth, and profit potential of
each new opportunity

Key Concepts in Demand Measurement

o The Major concepts in demand measurement are
o Market/Company demand
 Market demand is the total volume of a product that would be bought by a
defined customer group in a defined geographic area in a defined time
period in a defined marketing environment under a defined marketing
program
 Company demand is the company’s estimate share of market demand at
alternative levels of company marketing effort in a given time period
o Market forecast
 Market forecast is the market demand projected for a future time period
 Shows expected market demand, not maximum market demand
o Company sales forecast
 Company sales forecast is the expected level of company sales based on a
chosen marketing plan and an assumed marketing environment
 (2) other concepts are important here
o Sales quota is the sale goal set for a product line, company
division, or sale representative
 Primarily managerial device for defining and
stimulating sales effort
 Often slightly higher than estimates sales
o Sales budget is a conservative estimate of the expected
volume of sales, primarily for making current purchasing,
production, and cash flow decisions
 Based on the need to avoid excessive risk
 Generally, set slightly lower than sales forecast
o Market potential
 Market potential is the maximum sales that can be achieved in a specific
market in a given time period
 Limited approached by market demand as industry marketing expenditures
approach infinity for a given marketing environment
  To Estimate: (the potential number of buyers) * (the average quantity each
buyer purchases) *(the price)
o Company sales potential
 Company sales potential is the sales limit approached by company demand
as company marketing effort increases relative to that of competitors
 Absolute limit of company demand is the market potential
 In most cases, company sales potential is less than the market potential,
even when company marketing expenditures increased considerably

Forecasting Marketing Demand

o Forecasting is the art of anticipating what buyers are likely to do under a given set of
conditions
o Companies prepare a macroeconomic forecast  Industry forecast  Company sales
forecast
o Macroeconomic forecast projects inflation, unemployment, interest rates,
consumer spending, business investment, government expenditure, net export,
other variables
 Ending result is GDP  used to forecast industry sales
 The company derives its sales forecast by assuming it will win a certain
market share
o All forecasts are built on (1) of (3) information bases:
o What people say
 Requires surveying buyer’s intentions, composites of sales force opinions,
and expert opinion
 Conjoint analysis helps determine how consumers value different
attributes (product features, service benefits, and price) that make
up a particular offering
 A “grassroot” forecasting procedure provides detailed estimates
broken down by product, territory, customer, and sales rep
 Group-discussion method: expert exchange views and produce an
estimate as group
 Pooling of individual estimates: individual views from expert are
combine by an analyst to result into a single estimate
o What people do
 Means putting the product into a test market to measure buyer response
 Direct market test can help forecast new-product sales or the sales
of established products in a new distribution channel or territory
o What people have done
 Firm analyze records of past buying behavior or use time-series analysis or
statistical demand analysis
  Time-series analysis breaks past sales into four components (trend,
cycle, seasonal, and erratic) and projects them into the future
 Exponential smooth projects the next period’s sales by combining
and the most recent sales, given more weight to the latter
 Statistical demand analysis measures the impact of a set of causal
factors (such as income, marketing expenditures, and price) on the
sale level
 Economic analysis builds set of equations that describes a system
and statistically derives the difference parameter that make up the
equations

Measuring Marketing Productivity

o (2) complementary approaches to measuring marketing productivity are
o (1) marketing metrics to assess marketing effects
o (2) marketing mix modeling to estimate causal relationships and measure how
marketing activity affects outcomes
o Marketing dashboards are structure way to disseminate the insights gleaned from
these two approaches

Marketing Metrics
o Marketing metrics is the set of measures that help marketer quantify, compare and
interpret their performance
o Marketers choose one or more measures based on the particular issues or problem they
face
o Online Metrics:
o Website Analytics detail site navigation and online interaction
o Social media presence shows demographic and geographic responses to social
media channels across different markets
o Permission marketing statistics measures interactions and engagement with
consumer from automated email
o Evaluation of marketing performance into (2) parts
o Shor-term results
 Results often reflect profit-and loss concerns are shown by sales turnover,
shareholder value, or some combination of the two
o Changes in brand equity
  Measures could include
 Customer awareness, attitudes, and behaviors
 Market share
 Relative price premium
 Number of complaints
 Distribution and availability
 Total # of customers
 Perceived quality, and loyalty and retention
o Companies can also monitor extensive set of internal metrics, such as innovation

Marketing-Mix Modeling
 Marketing-mix model analyze data from a variety of sources such as retailer scanner data,
company shipment data, as well as pricing, media, and promotion expenditure data, to
understand more precisely the effects of specific marketing activities
 Conduct multivariate analysis such as
o Regression analysis to investigate how each marketing element influences
marketing outcomes such as brand sales or market share
 (3) short coming of marketing-mix model
o (1) Marketing-mix modeling focuses on incremental growth instead of on baseline
sales or long-term effects
o (2) The integration of important metrics such as customer satisfaction, awareness,
and brand equity into marketing mix modeling is limited
o (3) Marketing-mix modeling generally fails to incorporate metrics related to
competitors, the trade, or the sales force (the average business spends far more on
the sales force and trade promotion than on advertising or consumer promotion)

Marketing Dashboards
 Marketing dashboards are “a concise set of interconnected performance drive to be
viewed in a common throughout the organization”
 Marketing dashboard should include (2) key market-based scorecards:
o One that reflects performance
o One that provides possible early warning signals
 There are (4) common measurement “pathways” marketers’ purse today:
o Customer metrics pathway looks at how prospects become customers, from
awareness to preference to trial to repat purchase, or some less linear model
o Unit metrics pathway reflects what marketers know about sales of product/
service units
o Cash-flow metrics pathway focuses on how well marketing expenditures are
achieving short-term returns
o Brand metrics pathway tracks the long-term impact of marketing through brand-
equity measures that asses both the perceptual health of the brand from customer
and prospective customer perspective and the overall financial health of the brand