1. Chapter Seven Copyright © 2006 John Wiley & Sons, Inc. Primary Data Collection: Experimentation

2. John Wiley & Son, Inc 2 1.To understand the nature of experiments. 2.To gain insight into requirements for proving causation. 3.To learn about the experimental setting. 4.To examine experimental validity. 5.To learn the limitations of experimentation in marketing research. 6.To compare types of experimental designs. 7.To gain insight into test marketing. Learning Objectives

3. John Wiley & Son, Inc 3 An Experiment: The researcher changes an explanatory, independent, or experimental variable to observe changes in the dependent variable. To understand the nature of experiments. What is an Experiment? Dependent variable Experimental variable total sales price advertisingmarket share

4. John Wiley & Son, Inc 4 Demonstrating Causation To gain insight into requirements for proving causation Causal Research: –The only types of research that has the potential to demonstrate that a change in one variable causes some predictable change in another variable To Demonstrate Causation: –Concomitant Variation (Correlation –Appropriate Time Order Of Occurrence –Elimination Of Other Possible Causal Factors

5. John Wiley & Son, Inc 5 To gain insight into requirements for proving causation Scientific Definition—Causation and Causality 1.X is only one of a number of determining conditions that caused the observed change in Y. 2.X can be a cause of Y if the presence of X makes the occurrence of Y more probable or likely 3.One can never definitively prove that X is a cause of Y but only infer that a relationship exists 4.Causal relationships are always inferred and never demonstrated conclusively beyond a shadow of a doubt. Demonstrating Causation

6. John Wiley & Son, Inc 6 To gain insight into requirements for proving causation Concomitant Variation: –A predictable statistical relationship between two variables—A caused a particular change in B Appropriate Time Order of Occurrence: –A change in an independent variable must occur before a change in the dependent variable Elimination of Other Possible Causal Factors –The change in B was not caused by some factor other than A Demonstrating Causation

7. John Wiley & Son, Inc 7 To learn about experimental setting Laboratory experiments: –Conducted in a controlled setting. –Advantages of laboratory experiments: Ability to control all variables Greater internal validity –Disadvantages of laboratory experiments: External validity Not transferable to the actual marketplace The Experimental Setting

8. John Wiley & Son, Inc 8 To learn about experimental setting Field experiments: –Tests conducted outside the laboratory –Advantages Creates realism of the environment –Disadvantages Internal validity No control over spurious factors –Action of competitors- societal trends –Weather- political climate –economy The Experimental Setting

9. John Wiley & Son, Inc 9 Validity –Degree to which an experiment actually measures what it is trying to measure Internal and External Validity –Internal Validity: The extent to which competing explanations can be ruled out. – External Validity: The extent to which causal relationships can be generalized to outside persons, settings, and times Experimental Validity To examine experimental validity

10. John Wiley & Son, Inc 10 Experimental Treatment –Factors whose effects are to be measured and compared Experimental Notation: –X indicates exposure –O for observation –O 1 X O 2 for time periods –X 1 O 1 for simultaneous exposure and measurement X 2 O 2 Experimental Notation To understand the nature of experiments

11. John Wiley & Son, Inc 11 To examine experimental validity Extraneous Variables Extraneous Variables: Threats to Experimental Validity –History –Maturation –Instrument Variation –Selection Bias Randomization or matching –Mortality –Testing Effect –Regression to the Mean

12. John Wiley & Son, Inc 12 To examine experimental validity Confounding Variables—extraneous causal factors because they confound the treatment condition Four Basic Approaches to Control Extraneous Factors –Randomization –Physical Control –Design Control –Statistical Control Extraneous Variables

13. John Wiley & Son, Inc 13 To learn about experimental setting Experimental Design, Treatment, and Effects Experimental Design –Ex Post Facto Research—non-experimental designs Factors of the Experimental Design: –Researcher has control of variables and manipulates them. Treatment Subjects Dependent variable Plan for dealing with extraneous causal factors

14. John Wiley & Son, Inc 14 To learn about experimental setting Treatment Variable –Independent variable that is manipulated Experimental Groups –Control Group –Test Group --Experimental Effects –The effect of the treatment variable on the dependent variable Experimental Design, Treatment, and Effects

15. John Wiley & Son, Inc 15 To learn the limitations of experimentation in marketing research Limitations of Experimental Research The High Cost of Experiments Time Money Security Issues exposing to the actual marketplace competitors Implementation Problems cooperation contamination lack of control group

16. John Wiley & Son, Inc 16 To compare experimental designs Selected Experimental Designs Three Pre-experimental Designs –Offer little or no control over extraneous factors One-Shot Case Study –X O 1 –Basic weakness No pretest observations No control group of test units Lacks internal validity

17. John Wiley & Son, Inc 17 One-Group Pretest-Posttest Design –O 1 X O 2 –Pre- and postmeasurements but no control group –Threats History Maturation Only one pretest observation Selected Experimental Designs To compare experimental designs

18. John Wiley & Son, Inc 18 Static-Group Comparison Design Experimental Group: X O 1 Control Group O 2 –Pre-experimental with a control group –Threats Absence of pretests Not assigned to the groups randomly Selected Experimental Designs To compare experimental designs

19. John Wiley & Son, Inc 19 True Experimental Designs –Before and After with Control Group Design Experimental Group (R) O 1 X O 2 Control Group (R) O 3 O 4 –Threats Mortality History Selected Experimental Designs To compare experimental designs

20. John Wiley & Son, Inc 20 –Solomon Four-Group Design Second experimental group no pretest Second control group only posttest measurement Experimental Group 1: (R) O 1 X O 2 Control Group 1: (R) O 3 O 4 Experimental Group 2: (R) X O 5 Control Group 2: (R) O 6 Selected Experimental Designs To compare experimental designs

21. John Wiley & Son, Inc 21 –After-Only with Control Group Involves random assignment of test units to experimental and control groups, no premeasurement of the dependent variable. Experimental Group: (R) X O 1 Control Group: (R) O 2 Selected Experimental Designs To compare experimental designs

22. John Wiley & Son, Inc 22 Quasi-Experiments –Developed to deal with external validity –Researcher lacks complete over the scheduling of treatment or must assign treatment in a nonrandom manner. Interrupted Time-Series Designs –The treatment interrupts repeated measurements. –Cannot control history –O 1 O 2 O 3 O 4 X O 5 O 6 O 7 O 8 Selected Experimental Designs To compare experimental designs

23. John Wiley & Son, Inc 23 Multiple Time-Series Designs –An interrupted time-series design with a control group –Experimental Group O 1 O 2 O 3 X O 4 O 5 O 6 –Control Group: O 1 O 2 O 3 O 4 O 5 O 6 Selected Experimental Designs To compare experimental designs

24. John Wiley & Son, Inc 24 To gain insight into test marketing Test Markets Test Markets Defined –Any research that involves: Testing a new product or change in an existing marketing strategy. The use of experimental or quasi - experimental procedures Test Market Usage and Objectives –Estimate of market share –Effect on sales of similar products –Characteristics of consumers –Behavior of competitors Simulated Test Markets

25. John Wiley & Son, Inc 25 To gain insight into test marketing Direct Costs of Test Marketing Costs include: –Commercials –Advertising –Media –Research –POP –Coupons –Sampling –trade allowances Indirect Costs of Test Marketing Costs include: –Management time –Diversion of sales activity –Negative impact of test market failure –Negative trade reactions to products –Cost of letting competitors know what the firm is doing Test Markets

26. John Wiley & Son, Inc 26 To gain insight into test marketing Decision To Conduct Test Marketing Benefits –Good estimate of product’s sales potential –Identify weaknesses of the product and the proposed marketing strategy Factors to Consider –Weight the cost and risk of failure –Likelihood and sped product can be copied –Damage an unsuccessful new product would inflict Test Markets

27. John Wiley & Son, Inc 27 Steps in a Test Market Study 1.Define the Objective 2.Select a Basic Approach 1.Simulated test market 2.Standard, or traditional, test market 3.Controlled test market 3.Develop Detailed Procedures for the Test Test Markets To gain insight into test marketing

28. John Wiley & Son, Inc 28 4.Select Markets for the Test 1.Minimum of 2 test sites 2.Geographically dispersed 3.Demographically representative of US 4.Run at least 6 months 5.Media 50% of current levels 6.Variety of media outlets 7.TV spill-over less 15% 8.TV spill-in less 15% 9.Dominant newspaper 10.Market should be at least 0.2% of US no more 2% 5.Execute the Plan 6.Analyze the Test Results 1.Purchase data 2.Awareness data 3.Competitive response 4.Source of sales Test Markets To gain insight into test marketing

29. John Wiley & Son, Inc 29 Simulated Test Market (STMs) –Not actual test markets—rely instead on laboratory Steps in the STM 1.Intercept consumer at shopping malls 2.Screen 3.Expose to the new product concept or prototype 4.Give subject opportunity to buy new product 5.After time interval interview those who made a purchase determine their assessment of it 6.Use the trial and repeat purchase for input into a mathematical model Test Markets To gain insight into test marketing

30. John Wiley & Son, Inc 30 Four Reasons for the Popularity of STMS 1.Competitors less likely to know about test 2.STMs can be completed quickly 3.STMs are much cheaper than standard test 4.STMs can be very accurate –Other Types of Test Marketing –Rolling rollout –Lead country strategy Test Markets To gain insight into test marketing

31. John Wiley & Son, Inc 31 SUMMARY –What is an Experiment –Demonstrating Causation –The Experimental Setting –Experimental Validity –Experimental Notation –Extraneous Variables –Experimental Design, Treatment and Effects –Limitations of Experimental Research –Selected Experimental Design –Test Markets

32. John Wiley & Son, Inc 32 The End Copyright © 2006 John Wiley & Son, Inc