1. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-1 CHAPTER SEVEN MARKETING RESEARCH AND DECISION SUPPORT SYSTEMS Text by Profs. Gene Boone & David Kurtz Multimedia Presentation by Prof. Milton Pressley The University of New Orleans

2. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-2 CHAPTER OBJECTIVES Describe the development of the marketing research function and its major activities List and explain the steps in the marketing research process Differentiate between the types and sources of primary and secondary data Explain the different sampling techniques used by marketing researchers Identify the methods by which marketing researchers collect primary data Discuss the challenges of marketing research in global markets Outline important uses of computer technology and marketing research

3. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-3 Marketing Research Marketing research: the process of collecting and using information for marketing decision-making © PhotoDisc

4. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-4 THE MARKETING RESEARCH FUNCTION Development of the marketing research function Development of the marketing research function First organized marketing research project done by N.W. Ayer in 1879 First commercial research department in the U.S. established by Charles C. Parlin for the Curtis Publishing Co. in 1911 Parlin counted soup cans in garbage to convince the Campbell soup Company that working-class families would buy canned soup

5. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-5 THE MARKETING RESEARCH FUNCTION Development of the marketing research function Development of the marketing research function First organized marketing research project done by N.W. Ayer in 1879 First commercial research department in the U.S. established by Charles C. Parlin for the Curtis Publishing Co. in 1911 Parlin counted soup cans in garbage to convince the Campbell soup Company that working-class families would buy canned soup

6. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-6 THE MARKETING RESEARCH FUNCTION Who conducts marketing research? Who conducts marketing research? Fortune 200 firms typically budget about 11 million dollars each for in-house marketing research departments The size and organizational form of the marketing research function is typically tied to a given company’s structure Many firms depends on independent marketing research firms

7. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-7 THE MARKETING RESEARCH FUNCTION Syndicated Services Who conducts marketing research? Organizations that regularly provide a standardized set of data to all customers Mediamark Research Inc. (MRI) operates a syndicated service interviewing adults about their exposure to advertising media

8. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-8 Experian A Marketing Research Firm Supplying a Syndicated Service Copyright © 2001 by Harcourt, Inc. All rights reserved.

9. 7-9 Mediamark Research Inc. (MRI) Operates a Syndicated Service Interviewing Adults About Their Exposure to Advertising Media Copyright © 2001 by Harcourt, Inc. All rights reserved.

10. 7-10 THE MARKETING RESEARCH FUNCTION Syndicated Services Full-Service Research Suppliers Who conducts marketing research? Organizations that contract with clients to conduct complete marketing research projects J. D. Power and Associates is a full-service firm specializing in domestic and international automobile markets

11. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-11 J. D. Power and Associates: A Full-service Firm Specializing in Domestic and International Automobile Markets Copyright © 2001 by Harcourt, Inc. All rights reserved.

12. 7-12 Figure 7.1: A Full-service Marketing Research Firm

13. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-13 THE MARKETING RESEARCH FUNCTION Syndicated Services Full-Service Research Suppliers Limited-Service Research Suppliers Who conducts marketing research? A marketing research firm that specializes in selected activities like: Field or telephone interviews Data-processing Focus groups

14. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-14 STRATEGIC IMPLICATIONS OF MARKETING RESEARCH Can help an organization develop effective marketing strategies Can help to prevent the high failure rate of new products (approximately 75 percent) by helping sellers to understand market needs © PhotoDisc

15. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-15 L'Oreal Kids Using Marketing Research to Match New Products to Potential Customers. The Tangle Free Shampoo and the Bottle Design Resulted From Research Among Mothers and Children. Copyright © 2001 by Harcourt, Inc. All rights reserved.

16. 7-16 L’Oreal Kids Website: Fun for Kids and Parents Copyright © 2001 by Harcourt, Inc. All rights reserved.

17. 7-17 STRATEGIC IMPLICATIONS OF MARKETING RESEARCH Estimates of new business failures run as high as 95 percent Many, if not most, of those who fail had business insurance coverage for catastrophes such as fire and liability Yet, few of those who fail acquired an arguably more important type of “insurance” – insurance against failure to understand market needs – which of course comes about through good marketing research © PhotoDisc Copyright © 2001 by Harcourt, Inc. All rights reserved.

18. 7-18 MARKETING RESEARCH ACTIVITIES Marketing research activities can be divided into three main categories: scanning, risk assessment, and monitoring © PhotoDisc

19. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-19 MARKETING RESEARCH ACTIVITIES Scanning activities Scanning activities Searching for opportunities and challenges in the firm’s environment Since a firm’s environment can change rapidly, the marketing research function should play a key role to track and identify any changes that will affect the firm Scanning activities primarily involve in future-oriented research © PhotoDisc

20. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-20 DiGiorno Marketing Research Helped Kraft Develop the Product and Effective Advertising for Its DiGiorno Pizza DiGiorno Marketing Research Helped Kraft Develop the Product and Effective Advertising for Its DiGiorno Pizza Copyright © 2001 by Harcourt, Inc. All rights reserved.

21. 7-21 MARKETING RESEARCH ACTIVITIES Risk assessment activities Risk assessment activities Market research helps to develop risk-inherent strategies and tactics. Therefore, risk assessment activities evaluate the likelihood of commercial success by linking proposed actions to feedback from customers in real or simulated situations Risk assessment also helps measure the costs and benefits of a particular course of action © PhotoDisc

22. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-22 MARKETING RESEARCH ACTIVITIES Monitoring activities Monitoring activities Include analyzing sales and profit data, customer satisfaction levels, and results from advertising and promotional programs Can be thought of as diagnostic tools Aim marketing research efforts towards identifying problems and suggesting ways to correct these problems © PhotoDisc

23. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-23 Figure 7.2: Types of Questions Marketing Research Can Help Answer

24. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-24 Customer Satisfaction Measurement Programs Customer Satisfaction Measurement (CSM) Program: procedure for measuring customer feedback against customer satisfaction goals and developing a plan of action for improvement © PhotoDisc

25. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-25 SMART --- Strategic Marketing And Research Techniques: A Firm That Assists in Measuring Customer Satisfaction Copyright © 2001 by Harcourt, Inc. All rights reserved.

26. 7-26 Figure7.3: The Marketing Research Process THE MARKETING RESEARCH PROCESS

27. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-27 Shell Shell Followed the Marketing Research Process to develop its “Count on Shell” Campaign Copyright © 2001 by Harcourt, Inc. All rights reserved.

28. 7-28 THE MARKETING RESEARCH PROCESS Step one Step one Define the problem Define the problem A well-defined problem permits the researcher to focus on securing the exact information needed It increases the speed and accuracy of the research process Must avoid confusing symptoms with the problem © PhotoDisc

29. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-29 THE MARKETING RESEARCH PROCESS Step one Step one Define the problem Define the problem The problem(s) should be written down, agreed upon by all concerned parties, and then distributed to them Doing so helps to keep everyone concerned in agreement and to keep the project focused on solving the problem(s) Doing so also helps to prevent the all-too-common tendency to spend resources attempting to answer “interesting, but not necessary” questions © PhotoDisc Copyright © 2001 by Harcourt, Inc. All rights reserved.

30. 7-30 THE MARKETING RESEARCH PROCESS Step two Step two Conduct exploratory research Conduct exploratory research Seeking to discover the cause of a problem by discussing it with informed internal and external sources Can include evaluation of company records such as sales and profit analyses Can also include sales and profit analyses of competitors’ products © PhotoDisc

31. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-31 Figure7.4: Advertising Guided by Exploratory Research

32. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-32 Using Internal Data Three commonly available sources of valuable internal data are sales records, financial statements, and marketing cost analyses. Sales analysis, an in-depth evaluation of a firm’s sales, can provide revealing results for marketing executives Marketing cost analyses, evaluations of expenses for tasks like selling, billing, and advertising to determine the profitability of particular customers, territories, or product lines, are also helpful © PhotoDisc

33. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-33 THE MARKETING RESEARCH PROCESS Step three Step three Formulate a hypothesis Formulate a hypothesis Hypothesis: a tentative explanation for some specific event – a statement about the relationship among variables that carries a clear implication for testing this relationship Sets the stage for more in-depth research by further clarifying what researchers need to test Not all marketing research tests specific hypotheses © PhotoDisc

34. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-34 THE MARKETING RESEARCH PROCESS Step four Step four Create a research design Create a research design Research design: a series of decisions that, taken together, comprise a master plan or model for conducting marketing research Must ensure that the study will measure what the marketer intends to measure Must also ensure an appropriate selection of respondents © PhotoDisc

35. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-35 THE MARKETING RESEARCH PROCESS Step five Step five Collect data: Collect data: Secondary data Secondary data Primary data Primary data Secondary data Secondary data is data from previously published or compiled sources (e.g. Census data) Two important advantages of secondary data: Almost always less expensive to gather Less time is usually necessary to locate and use it © PhotoDisc

36. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-36 THE MARKETING RESEARCH PROCESS Step five Step five Collect data: Collect data: Primary data Primary data Secondary data Secondary data Primary data Primary data refers to data collected for the first time specifically for a marketing research study Primary data can provide richer, more detailed information than secondary data © PhotoDisc

37. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-37 THE MARKETING RESEARCH PROCESS Step six Step six Interpreting and presenting research information Interpreting and presenting research information Findings must be presented to decision- makers in a format that allows them to make effective judgments Cardinal rule of presenting marketing research requires that it assists decision- making rather than being an end in itself © PhotoDisc

38. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-38 THE MARKETING RESEARCH PROCESS Step six (continued) Step six (continued) Interpreting and presenting research information Interpreting and presenting research information Researchers must remember to speak in managerial terms rather than in the terminology understood only by research specialists Reports should outline technical details of the research project and methods in an appendix, if at all Researchers should spell out their conclusions in clear, concise, and actionable terms © PhotoDisc

39. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-39 THE MARKETING RESEARCH PROCESS Step six (continued) Step six (continued) Interpreting and presenting research information Interpreting and presenting research information An executive summary, outlining the entire research report in no more than two pages should be the first part of the market researcher’s written report This will help to insure that busy executives, especially those outside of the marketing area who might be copied with the report, will at least read the major points. © PhotoDisc Copyright © 2001 by Harcourt, Inc. All rights reserved.

40. 7-40 Figure 7.5: The Research Report and Presentation - Linking the Study and the Research User

41. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-41 Class Discussion How and why can marketing research help to prevent failures of new businesses and new products? Copyright © 2001 by Harcourt, Inc. All rights reserved.

42. 7-42 MARKETING RESEARCH METHODS

43. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-43 MARKETING RESEARCH METHODS

44. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-44 Secondary Data Collection Government data Nation’s most important source of marketing data Most frequently used government statistics Census information available at no charge In local libraries On computer disks On the Internet © PhotoDisc

45. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-45 Figure7.6: Persuading People to Participate in Census 2000

46. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-46 U.S. Census Bureau Website Offers Computerized Access to the Most Frequently Used Government Statistics Copyright © 2001 by Harcourt, Inc. All rights reserved.

47. 7-47 The U.S. Census Bureau Website Explains the Economic Census and Offers Helpful Advice on How to Use Its Data Copyright © 2001 by Harcourt, Inc. All rights reserved.

48. 7-48 Secondary Data Collection Government’s TIGER System TIGER System: Topographically Integrated Geographic Encoding and Referencing System The system combines topographic features like railroads, highways, and rivers with census data such as household income figures Marketing researchers often find even more valuable resources in this computerized mapping database © PhotoDisc

49. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-49 Secondary Data Collection Private data Encyclopedia of Associations provides contact information for trade associations that may have useful data Other valuable information can be found in: Urich’s Guide to International Periodicals Sales & Marketing Management’s Annual Survey of Media Markets A. C. Nielsen’s SalesNet scanner data from supermarkets © PhotoDisc

50. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-50 Harris InfoSource One of Many Providers of Secondary Data Copyright © 2001 by Harcourt, Inc. All rights reserved.

51. 7-51 In Addition to the Encyclopedia of Associations, the Gale Group Offers A Number of Other Useful Secondary References Copyright © 2001 by Harcourt, Inc. All rights reserved.

52. 7-52 Figure 7.7: A Private Source of Secondary Data

53. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-53 Secondary Data Collection Online Sources of Secondary Data Cyberspace sometimes simplifies the search for secondary data A Web-based research project can cost less, and can yield significantly faster results than offline research Experts estimate that approximately 50 percent of all marketing research could easily be done online © PhotoDisc

54. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-54 Online Periodical Databases Like eLibrary.com Can Save Hours of Time That Would Otherwise Be Spent in the Stacks of a Library Copyright © 2001 by Harcourt, Inc. All rights reserved.

55. 7-55 dNET.com Offers Access to Online Databases: A Potentially Useful Site for Market Researchers Copyright © 2001 by Harcourt, Inc. All rights reserved.

56. 7-56 Figure 7.8: Online Sources of Secondary Data

57. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-57 The Bureau of Economic Analysis- Another Potentially Useful Site for Market Researchers Copyright © 2001 by Harcourt, Inc. All rights reserved.

58. 7-58 The Site for Bureau of Labor Statistics- Yet Another Potentially Useful Site for Market Researchers Copyright © 2001 by Harcourt, Inc. All rights reserved.

59. 7-59 MARKETING RESEARCH METHODS

60. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-60 Sampling Techniques Sampling: the process of selecting survey respondents or other research participants Population (universe): total group that researchers want to study Census: a collection of data on all possible members of a population or universe © PhotoDisc

61. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-61 Sampling Techniques Probability sample: sample that gives every member of the population a known chance of being selected Simple random sample: basic type of probability sample in which every individual in the relevant universe has an equal opportunity of selection Stratified sample: probability sample constructed to represent randomly selected subsamples of different groups within the total sample Cluster sample: probability sample in which researchers select geographic areas or clusters, and all of the chosen individuals within this area become respondents © PhotoDisc

62. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-62 Sampling Techniques Non-probability sample: arbitrary grouping that produces data unsuited for most standard statistical tests Convenience sample: nonprobability sample selected from among readily available respondents Quota sample: nonprobability sample divided to insure representation of different segments or groups in the total sample © PhotoDisc

63. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-63 MARKETING RESEARCH METHODS

64. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-64 Primary Research Methods Observation Method Observation Method Researchers actually view, or watch, the overt actions of the research subjects Useful in helping to understand how consumers actually behave in certain situations Can be as simple as counting passing cars or as sophisticated as people meters recording household TV-viewing habits © PhotoDisc

65. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-65 Figure 7.9: Observation Research Results in New Products

66. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-66 Primary Research Methods Survey Method Survey Method Telephone Interviews Telephone Interviews An inexpensive and quick method for obtaining a small quantity of relatively impersonal information Relatively high response rates Limitations include: Only simple, clearly worded questions draw appropriate responses Personal information difficult to obtain Respondents can’t view pictures Bias due to households without telephones © PhotoDisc

67. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-67 Primary Research Methods Survey Method Survey Method Personal Interviews Personal Interviews Best means for obtaining detailed information about consumers Interviewer can explain confusing or vague questions Offer Good Flexibility Limitations: Slow Expensive © PhotoDisc

68. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-68 Primary Research Methods Survey Method Survey Method Focus Groups Focus Groups A Focus Group is an information gathering procedure in marketing research that typically brings together 8 to 12 individuals to discuss a given subject Can provide quick and relatively inexpensive insights May not produce completely honest responses to questions © PhotoDisc

69. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-69 Figure 7.10: Using Focus Groups to Develop Advertising

70. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-70 Primary Research Methods Survey Method Survey Method Mail Surveys Mail Surveys Cost Effective Provides anonymity that may encourage respondents to give candid answers Limitations include: Typically low response rates Take a long time to conduct Questionnaires cannot answer unanticipated questions that occur to respondents as they complete the forms Complex questions may not be suitable Bias from nonresponse © PhotoDisc

71. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-71 Primary Research Methods Survey Method Survey Method Fax Surveys Fax Surveys Low response rates and long follow-up times associated with mail surveys have spurred interest in the alternative of faxing survey documents Faxing provisions may supplement mail surveys Or, faxing may be the primary method for contacting respondents and obtaining their answers © PhotoDisc

72. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-72 Primary Research Methods Survey Method Survey Method Online Surveys and Focus Groups Online Surveys and Focus Groups Growing number of Internet users has sparked interest in going online to conduct surveys... and even focus groups Benefits include the lack of geographic restrictions, faster turn-around time, and dramatically lower costs A limitation: certain groups (e.g., females, seniors, certain minority groups) are currently underrepresented on the internet © PhotoDisc

73. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-73 Primary Research Methods Survey Method Survey Method Experimental Method Experimental Method Experiment: Scientific investigation in which a researcher manipulates test group(s) and compares the results with those of a control group that did not receive the experimental controls or manipulations The most common use to date has been test marketing Major problem with controlled experiments comes from the failure to account for all variables in a real-life situation © PhotoDisc

74. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-74 Figure 7.11: Testing a Global Advertisement

75. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-75 Dryel Using the Experimental Primary Research Method: P & G Test Marketed Its New Product Category – Dryel Home Dry-cleaning in Columbus, Ohio and in Ireland Dryel Using the Experimental Primary Research Method: P & G Test Marketed Its New Product Category – Dryel Home Dry-cleaning in Columbus, Ohio and in Ireland Copyright © 2001 by Harcourt, Inc. All rights reserved.

76. 7-76 MARKETING RESEARCH METHODS

77. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-77 Conducting International Marketing Research As corporations expand globally, they need to gather knowledge about consumers in other countries The basic steps for international studies are the same as for domestic studies International studies do, however, face some different challenges © PhotoDisc

78. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-78 Conducting International Marketing Research A major secondary information source is the U.S. Department of Commerce Two of their publications provide useful information for more than 100 countries: Foreign Economic Trends and Their Implications for the United States Overseas Business Reports © PhotoDisc

79. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-79 The Home Page for the U.S. Department of Commerce: A Useful Site for International Market Researchers Copyright © 2001 by Harcourt, Inc. All rights reserved.

80. 7-80 Figure 7.12: A Firm Specializing in Global Marketing Research

81. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-81 COMPUTER TECHNOLOGY IN MARKETING RESEARCH The Marketing Information System (MIS) is a planned, computer-based system designed to provide managers with a continuous flow of information relevant to their specific decisions and areas of responsibility © PhotoDisc

82. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-82 COMPUTER TECHNOLOGY IN MARKETING RESEARCH The Marketing Decision Support System (MDSS) consists of computer software that helps users quickly obtain information and apply that information in a way that supports marketing decisions An MDSS can create simulations or models to illustrate the likely results of changes in marketing strategies or marketing conditions © PhotoDisc

83. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-83 Figure 7.13: Functions of an MDSS

84. Copyright © 2001 by Harcourt, Inc. All rights reserved. 7-84 COMPUTER TECHNOLOGY IN MARKETING RESEARCH Data Mining is the process of searching through computer files to detect patterns The data is stored in a huge database called a data warehouse Can be an efficient way to make sense of huge amounts of data Can help create customer profiles, pinpoint reasons for customer loyalty or the lack thereof, analyze the potential returns on changes in pricing or promotion, and sales forecasts © PhotoDisc