1. Chapter Eight 8-1

2. An Experiment: A research approach in which one variable is manipulated and the effect on another variable is observed. Key Variables: Independent: variables one controls directly such as price, packaging, distribution, product features, etc. Dependent: variables one does not directly control such as sales or customer satisfaction - (might control them by manipulating the independent variable) Treatment: the independent variable manipulated during and experiment to measure its effect on the dependent variable Extraneous: Factors one does not control but has to live with such as the weather What is an Experiment? 8-2 Key Terms & Definitions

3. Research designed to determine whether a change in one variable likely caused an observed change in another. A causal relationships must demonstrate three things: Concomitant variation (correlation) Appropriate time order of occurrence Elimination of other possible causal factors A causal relationships must demonstrate three things: Concomitant variation (correlation) Appropriate time order of occurrence Elimination of other possible causal factors What is Causal Research? 8-3 Key Terms & Definitions

4. A statistical relationship between variables Change in an independent variable occurred before an observed change in the dependent variable “If you eliminate the impossible, whatever remains, however improbable, must be the truth.” -- Sherlock Holmes Hard to prove that something else did not cause change in B. Concomitant Variation: Appropriate Time Order of Occurrence: Elimination of Other Possible Causal Factors: Demonstrating Causation 8-4 Key Terms & Definitions

5. Experiments conducted in a controlled setting. Tests conducted outside the laboratory in an actual environment, such as a marketplace. Experimental Setting 8-5 Key Terms & Definitions

6. The extent to which competing explanations for the experimental results observed can be ruled out. The extent to which causal relationships measured in an experiment can be generalized to outside persons, settings, and times. Experimental Validity 8-6 Key Terms & Definitions

7. “X” = Independent Variable: Indicates the exposure of an individual or a group to an experimental treatment. This variable is something the researcher can change and manipulate, such as prices and new packages. It is hoped that the change in the independent variable will cause a change in the dependent variable. “O” = Dependent Variable: Indicates a variable the researcher cannot change directly. It is hoped that changing the independent variable will cause changes in the dependent variable (sales of the product). Thus the dependent variable is dependent on what the researcher does with the independent variable. Experimental Notation 8-7 Key Terms & Definitions

8. History: Intervention, between the beginning and end of an experiment, of outside variables that might change the dependent variable. Maturation: Changes in subjects occurring during the experiment that are not related to the experiment but which might affect subjects’ response to the treatment factor. Instrument Variation: Changes in measurement instruments (e.g., interviews or observers) that might affect measurements. Selection Bias: Systematic differences between the test group and the control group due to a biased selection process. Extraneous Variables 8-8 Key Terms & Definitions

9. Mortality: Loss of test units or subjects during the course of an experiment which might result in non-representativeness. Testing Effect: An effect that is a by-product of the research process itself. Regression to the Mean: Tendency of subjects with extreme behavior to move toward the average for that behavior during the course of the experiment. Extraneous Variables Continued 8-9 Key Terms & Definitions

10. Main Testing Effects: The effect of earlier observation on later observation. For example, students taking the GMAT twice tend to do better the second time around even without knowing the results of the first test. Interactive Testing Effect: The effect of prior measurement on a subject’s response to a later measurement. If subjects had prior exposure to advertising for various products and advertising for them under test conditions could result in a joint effect to both conditions. Extraneous Variables Testing Effects 8-10 Key Terms & Definitions

11. The random assignment of subjects to treatment conditions to ensure equal representation of subject characteristics. Holding constant the value or level of extraneous variables throughout the course of an experiment. Use of the experimental design to control extraneous causal factors. Adjusting for the effects of extraneous variables by statistically adjusting the value or the dependent variable for each treatment condition. Randomization: Physical Control: Design Control: Statistical Control: Controlling Extraneous Variables 8-11 Key Terms & Definitions

12. A test in which the researcher has control over and manipulates one or more independent variables. The independent variable that is manipulated in an experiment. The effect of the treatment variable on the dependent variable. Experimental Design: Treatment Variable: Experimental Effect: Experimental Design, Treatment, and Effects 8-12 Key Terms & Definitions

13. High Cost: Is the research affordable? Will the research be beneficial and help solve problems? Has a cost and benefit analysis been done? Security Issues: Particularly critical with field experiments. The competition might be tipped off. Are the data and findings secure? Implementation Problems: Process contamination People who unwittingly get caught into the survey Outside factors unnaturally affecting the experiment Participants who intentionally try to skew the results High Cost: Is the research affordable? Will the research be beneficial and help solve problems? Has a cost and benefit analysis been done? Security Issues: Particularly critical with field experiments. The competition might be tipped off. Are the data and findings secure? Implementation Problems: Process contamination People who unwittingly get caught into the survey Outside factors unnaturally affecting the experiment Participants who intentionally try to skew the results Limitations of Experimental Design 8-13 Key Terms & Definitions

14. Pre-Experimental Design: Designs that offer little or no control over extraneous factors. 1. One-Shot Case Study 2. One-Group Pretest-Posttest 1. One-Shot Case Study 2. One-Group Pretest-Posttest Selected Experimental Designs 8-14 Key Terms & Definitions

15. O = Measurement of the dependent variable X = Manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable O = Measurement of the dependent variable X = Manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable Experimental Design Examples 8-15 Key Terms & Definitions

16. O = The measurement of the dependent variable X = The manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable O = The measurement of the dependent variable X = The manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable Experimental Design Examples 8-16 Key Terms & Definitions

17. 1. Before and after with control group 2. After only with control group 1. Before and after with control group 2. After only with control group Research using an experimental group and a control group to which test units are randomly assigned. True Experimental Design 8-17 Key Terms & Definitions

18. O = The measurement of the dependent variable X = The manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable O = The measurement of the dependent variable X = The manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable Experimental Design Examples 8-18 Key Terms & Definitions

19. O = The measurement of the dependent variable X = The manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable O = The measurement of the dependent variable X = The manipulation/change of independent variable E = Experimental effect--change in dependent variable due to change in the independent variable Experimental Design Examples 8-19 Key Terms & Definitions

20. Examples of True Experimental Designs 8-20 Key Terms & Definitions

21. Studies in which the researcher lacks complete control over the scheduling of treatments or must assign respondents to treatments in a non-random manner. Quasi Experiments Research in which repeated measurement of an effect “interrupts” previous data patterns. Interrupted time-series design with a control group. 8-21 Key Terms & Definitions

22. Real world testing of a new product or some element of the marketing mix using an experimental or quasi- experimental design. Test Markets 8-22 Key Terms & Definitions Traditional or standard test markets Scanner or electronic test markets Controlled test markets

23. What do you think test markets said about the iPhone? Test Market Benefits 8-23 Key Terms & Definitions Estimates market share and volume Estimates effects the new product will have on current products (cannibalization rate)

24. Demographic Data – Characteristics of consumers is almost always collected, and lifestyle, psychographic, and other types of classification data may also be collected. Test Market Benefits 8-24 Key Terms & Definitions Who purchased can help predict who will likely purchase? Lifestyle characteristics can tell you how to position the product. Information tells you what type of promotional messages appeal

25. Advertising expenses Point-of-purchase materials Coupons and sampling Travel and setup expenses Need for customized research Possible diversion of sales from your other products Potentially bad press/public reaction if experiment fails Letting competitors know what your company is doing Falsely thinking the sample results are always representative of the population Test Markets 8-26 Key Terms & Definitions

26. 1. Define the Objective: What do you hope to learn? What are the characteristics of the people/products of interest? 2. Select a Basic Approach: Simulated, controlled, or standard test? 3. Develop Detailed Test Procedures: How will you execute the study? Who will be involved? How long will it take and how much can you spend? Steps in a Test Market Study 8-27 Key Terms & Definitions

27. 4. Select the Test Market: Market should not be over tested Should have little media spillover Demographics should be similar to your target population Market should be large enough to provide useful results Distribution and other patterns should be similar to the nation. 5. Execute the Plan: How long should the test run? Who should execute it? 6. Analyze the Test Results: Purchase data? Awareness data? Competitive response? Source of sales? Test Market Steps Continued 8-28 Key Terms & Definitions

28. Purchase data? The most important data produced. The initial rate - Levels of initial purchase throughout the course provide an indication of how well advertising and promotion is working The repeat rate – percentage of initial triers who make second and repeat purchases indicates how well the product meets expectations Test Market Steps Purchase Data 8-29 Key Terms & Definitions

29. Awareness data? This information can help drive future marketing efforts by answering: How effective were the media expenditures and media plan in creating awareness of the product? Do consumers know how much the product costs? Do they know its key features? Test Market Steps Awareness Data 8-30 Key Terms & Definitions

30. Competitive Response? Monitoring your competitors during test markets can keep you aware of possible distortions when they offer: Special promotions Price deals Quantity discounts These actions are useful to measure what will happen when a product goes national. Test Market Steps Competitive Response 8-31 Key Terms & Definitions

31. Source of sales? If you’re marketing a new product, you need to know where the sales are coming from. Do you know what products the people who purchased the test product purchased before? Those products may represent your true competitors. Test Market Steps Source of Sales 8-32 Key Terms & Definitions

32. Rolling Rollout: A product is launched in a certain region rather than in one or two cities. Scanner data can provide information on how the product is doing in a few days resulting in the possible product launch in additional regions. General Mills has used this approach for products such as MultiGrain Cheerios. Lead Country Strategy: A product is tested in a foreign market before rolling it out globally. Colgate-Palmolive Company launched Palmolive Optims shampoo and conditioner in the Philippines, Australia, Mexico, and Hong Kong. Later, the products were rolled out in Europe, Asia, Latin America, and Africa. Other Types of Product Tests 8-33 Key Terms & Definitions

33. 8-34 Key Terms & Definitions Experiment Causal Research Concomitant Variation Appropriate Time Order of Sequence Elimination of Other Possible Causal Factors Laboratory Experiments Field Experiments Internal Validity External Validity Dependent and Independent Variables History Maturation Instrument Variation Selection Bias Mortality Testing Effect Regression to the Mean Randomization Rolling Rollout Links and button are active when in “Slide Show Mode” Key Terms & Definitions Physical Control Design Control Statistical Control Experimental Design Treatment Variable Experimental Effect Contamination Pre-experimental Designs Limitations on Experimental Design One-shot Case Study Design One-group Pretest-Posttest Design True Experimental Design Before and After with Control Group Design After-only with Control Group Design Quasi Experiments Interrupted Time-series Design Multiple Time-series Design Test Market Lead Country Strategy