1. Defining the Marketing Research Problem and Developing an Approach
Chapter Two
Defining the Marketing Research Problem and Developing an Approach

2. Chapter Outline
1) Marketing Research process
2) Step 1: Defining the Problem
3) Step 2: Developing an Approach
4) An Example of steps 1 and 2: a case of United Airlines

3. Marketing Research Process
Step 1: Defining the Problem
Step 2: Developing an Approach to the Problem
Step 3: Formulating a Research Design
Step 4: Doing Field Work or Collecting Data
Step 5: Preparing and Analyzing Data
Step 6: Preparing and Presenting the Report
Chapter 2 covers the first two steps of the marketing research process.

4. Step 1: Defining the Problem

5. Chain Restaurant Study
One day I received a phone call from a research analyst who introduced himself as one of our alumni.
He was working for a restaurant chain in town and wanted help analyzing the data he had collected while conducting a marketing research study.

6. Chain Restaurant Study
When we met, he presented me with a copy of the questionnaire and asked how he should analyze the data. My first question to him was,
What is the problem being addressed?

7. Chain Restaurant Study
When he looked perplexed, I explained that data analysis is not an independent exercise.
Rather, the goal of data analysis is to PROVIDE INFORMATION RELATED TO THE PROBLEM COMPONENTS.

8. Chain Restaurant Study
I was surprised to learn that he did not have a clear understanding of the marketing research problem and that a written definition did not exist. So before going any further, I had to define the marketing research problem.
Once that was done, I found that much of the data collected was not relevant to the problem. In this sense, the whole study was a waste of resources. A new study had to be designed and implemented to address the problem defined.

9. The Problem Definition
The Problem Definition is the most important step, because only when a problem has been clearly and accurately identified, a research project can be conducted properly.
Defining the marketing research problem sets the course of the entire project.
All effort, time and money spent on the research will be wasted if the problem is misunderstood or ill defined

10. The Problem Definition Process
Discussion
with
Decision Maker(s)
Interviews
Experts
Secondary
Data
Analysis
Qualitative
Research
Management Decision Problem
Marketing Research Problem
Tasks Involved
Environmental Context of the Problem
Step 1: Problem Definition
Step 2: Approach to the Problem
Objective/
Theoretical
Foundations
Questions
Hypotheses
Step 3: Research Design
Analytical Model: Verbal, Graphical, Mathematical
Specification of
Information
Needed
To define the problem the researcher should do some important task:
1- discussion with decision key decision makers in the company, these meetings well help the researcher determine the management decision problem. In those discussions, the researcher makes what is called “problem Audit” which is a comprehensive examination of the marketing problem to understand its origin and nature.
2- Interviews with industry experts either inside or outside the company. The purpose of these interviews is to help the researcher define the marketing research problem rather than to develop a conclusive solution.
3- secondary data analysis is very important in defining the problem. These data include information made by business and government sources, commercial marketing research firms, and computerized databases.
4- qualitative research is an unstructured, exploratory research methodology based on small samples intended to provide insight and understanding of the problem and its underlying factors (e.g. focus groups and depth interviews.
5- Environmental context of the problem (inside or outside) is done so that the research understand the factors that impact on the definition of the marketing research problem. These factors include: a. past information pertaining to the firm and industry (e.g. sales, market shares, profitability, population, and demographics), b. resources and constraints of the firm (e.g. money and time – the scope of the research is affected by such factors), c. objectives of the decision makers of the organization should be considered in order to conduct successful marketing, simply because the research is done to help decision makers’ decisions in attaining their objectives , d. buyer behavior study to understand and predict consumers’ actions and the factors (e.g. buying habit, preferences, and demographics) that affect these actions, e. legal environment that influence the performance of firms (e.g. taxes tariffs, trade regulations) , f. economic environment influences that performance of the company, for example, the state of rapid growth is different than the state of recession, and g. marketing and technological skills in the firm affects its performance and may be causes of some marketing problems.
After gaining an adequate understanding of the environmental context of the problem the researcher can define both the management research problem and the marketing research problem.

11. The Problem Definition Process
Tasks involved:
To define the problem the researcher should do some important task:
1-Discussion with key decision makers in the company. those meetings help the researcher determines the management decision problem. In discussions, the researcher makes what is called “problem Audit” which is a comprehensive examination of the marketing problem to understand its origin and nature.
2-Interviews with industry experts either inside or outside the company. The purpose is to help the researcher define the marketing research problem rather than to develop a conclusive solution.
3-secondary data analysis is very important in defining the problem. Those data include: information made by business and government sources, commercial marketing research firms, and computerized databases.
4-qualitative research is an unstructured, exploratory research methodology based on small samples. The intended purpose of it is to provide insights and understandings of the problem and its underlying factors (e.g. focus groups and depth interviews).

12. The Problem Definition Process
Environmental context of the problem:
Environmental context analysis is done so that the researcher could understand the internal or external factors that impact on the definition of the marketing research problem. Those factors include:
Past information pertaining to the firm and industry (e.g. sales, market shares, profitability, population, and demographics).
Resources and constraints of the firm (e.g. money and time – the scope of the research is affected by such factors).
Objectives of the decision makers of the organization should be considered; simply because the research is done to help decision makers’ decisions in attaining their objectives.
Buyer behavior study to understand and predict consumers’ actions and the factors (e.g. buying habit, preferences, and demographics) that affect these actions.
Legal environment that influence the performance of firms (e.g. taxes tariffs, trade regulations).
Economic environment influences the performance of the company, for example, the state of rapid growth is different than the state of recession.
Marketing and technological skills in the firm affects its performance and may be causes of some marketing problems.

13. The Problem Definition Process
After gaining an adequate understanding of the environmental context of the problem, the researcher can define both the management research problem and the marketing research problem.
Management Decision Problem
Marketing Research Problem
Action oriented
(asks what the decision makers need to do)
Information oriented
(asks what information is needed and how it should be obtained)
Focus on symptoms
Focus on the underlying causes
Examples:
 Examples:
Should a new product be introduced?
To determine consumer preferences and purchase intentions for the proposed new product.
Should the advertising campaign changed?
To determine the effectiveness of the current advertising campaign.
Should the price of the brand be increased?
To determine the price elasticity of demand and the impact on sales and profits of various levels of price changes.

14. The Problem Definition Process
Iceberg principle: Symptoms and Causes
Low traffic = low website visitors.
Poor image of the company or brand

15. The Link between Management Decision Problem and Marketing Research Problem
While distinct, the marketing research problem has to be closely linked to the management decision problem. A good way to link is the use of Conceptual Map of three components: action, topic, and question.
Conceptual Map Steps
Example
Management Decision Problem
1. Management wants to take (action)
Management wants to Develop retention program that will retain 90% of the product’s heavy users over the next 2 years
Marketing Research problem
2. Therefore, we should study (topic)
Therefore, we should study (heavy-users loyalty)
3. So that, we can explain (question)
What will be the most important variables in retaining these customers over the next 2 years?

16. Proper Definition of the Research Problem
Marketing Research Problem
Broad Statement
Specific Components
Component 1
Component 2
Component 3

17. Example: Department Store Project
Problem Definition
In the department store project, the marketing research problem (broad statement) is to determine the relative strengths and weaknesses of Sears, vis-à-vis other major competitors, with respect to factors that influence the customer store patronage. Specifically, research should provide information on the following questions (specific components):
Component 1: criteria for selecting the store.
Component 2: customer actual evaluation of different stores.
Component 3: customer patronage to stores.
Component 4: the market share of the store’s product categories.
Component 5: demographic and psychographic characteristics of consumers in
different stores.

18. Step 2: Developing an Approach
to the Problem

19. Components of an Approach
Objective/Theoretical Foundations (Framework): Research should be based on objective evidence and supported by theoretical and empirical findings (literature review)
Analytical Model: a set of variables and their interrelationship. It could be verbal, graphical, or mathematical.
Research Questions: refined statements of specific components of the problem.
Hypotheses: A hypothesis is an unproven statement or proposition about the studied phenomenon.
Specification of the Information Needed: information that should be obtained to test the hypotheses of the research.

20. Steps of Research approach
Components of the
Research Questions
Hypotheses
Objective/
Theoretical
Framework
Analytical
Model
Marketing Research Problem
Specification of the Information Needed

21. Components of an Approach
Objective/Theoretical Foundations (Framework): Research should be based on objective evidence and supported by theoretical and empirical findings (literature review) to:
Determine which variables should be investigated and how to measure them.
Know how the research could be design and how a sample is selected.
Guide in selecting data analysis methods.
Help in organizing and interpreting the research findings in light of the previous research findings.

22. Components of an Approach
Analytical Model: a set of variables and their interrelationship. It could be verbal, graphical, or mathematical.
Analytical model
Example: consumer’s store patronage
Verbal model
the variables and their relationships are stated in prose (written) form.
A consumer first becomes aware of a department store. That person then gains and understanding of the store by evaluating the store in terms of factors comprising the choice criteria. Based on the evaluation, the consumer forms a degree of preference for the store. If the preference is strong enough, the consumer will patronize the store.
Graphical models
they are visual and used to isolate variables and to suggest directions of relationships, but are not designed to provide numerical results.
Mathematical models
explicitly specify the relationships among variables, usually in equation form.
Y = degree of preference, a = model parameters to be estimated statistically, x= store patronage factors (choice criteria)
Awareness
Evaluation
Preference
Patronage
Prose = written form.
Store Patronage = store preference (adoption) å = + n i x a y 1

23. Components of an Approach
Research Questions: (RQs) are refined statements of the specific components of the problem.
Hypotheses: (H) is an unproven statement or proposition about a factor or phenomenon that is of interest to the researcher. Often, a hypothesis is a possible answer to the research question.
Example:
RQ: Do the customers of Sears exhibit store loyalty?
H1: Customers who are store-loyal are less knowledgeable about the shopping environment.
H2: Store-loyal customers are more risk-averse than are non-loyal customers.
A risk-averse investor dislikes risk, and therefore will stay away from adding high-risk stocks or investments to their portfolio and in turn will often lose out on higher rates of return.  Read more: Risk Averse Definition | Investopedia  Follow us: Investopedia on Facebook
The hypotheses would like to uncover the causes of loyalty.

24. Components of an Approach
Department Store Project
Specification of the Information Needed: information that should be obtained to test the hypotheses of the research. Specification of the information needed could be determined focusing on each component of the problem, analytical framework and models, research questions, and hypotheses.
Component 1 (choice criteria)
The researcher identified the following factors as part of the choice criteria: quality of merchandise, variety and assortment of merchandise, returns and adjustment policy, service of store personnel, prices, convenience of location, layout of store, credit and billing policies. The respondents should be asked to rate the importance of each factor as it influences their store selection.
Component 2 (consumer evaluation of the stores)
The researcher identified nine department stores as competitors to Sears based on discussions with management. The respondents should be asked to evaluate Sears and its nine competitors on the eight choice criteria factors. 
Specification of the information needed could be determined focusing on each component of the problem, analytical framework and models, research questions, and hypotheses.

25. Components of an Approach
Department Store Project
Component 3 (consumer patronage of stores)
16 different product categories were selected, including women's dresses, women's sportswear, lingerie and body fashion, junior merchandise, men's apparel, cosmetics, jewelry, shoes, sheets and towels, furniture and bedding, and draperies. The respondents should be asked whether they shop at each of the 10 stores for each of the 16 product categories.
Component 4 (market shares of the stores)
No additional information needs to be obtained from the respondents.
Component 5 (consumer characteristics)
Information should be obtained on the standard demographic characteristics and the psychographic characteristics of store loyalty, credit use, appearance consciousness, and combining shopping with eating.
Lingerie = Women’s underwear and nightclothes or sleepwear designed to be visually or sexually alluring.
Drapery = piece of heavy fabric uses as curtain.

28. Example: Defining the problem and Developing an Approach
to the Problem
The case of United Airline

29. At United, Food Is Uniting the Airline with Travelers
United Airlines, as other major airlines, had to deal with passenger loyalty
management decision problem: how to attract more and more loyal passengers.
The broad marketing research problem: to identify the factors that influence loyalty of airline travelers.

30. At United, Food Is Uniting the Airline with Travelers
The basic answer is to improve service. Exploratory research, theoretical framework, and empirical evidence revealed that the consumers’ choice of an airline is influenced by: safety, price of the ticket, frequent-flyer program, convenience of scheduling, and brand name.

31. At United, Food Is Uniting the Airline with Travelers
A graphical model stipulated that consumers evaluate competing airlines based on factors of the choice criteria to select a preferred airline. The problem was that major airlines were quite similar on these factors. Indeed, "airlines offer the same schedules, the same service, and the same fares.” Consequently, United Airlines had to find a way to differentiate itself. Food turned out to be the solution.

32. At United, Food Is Uniting the Airline with Travelers
Secondary data, like the J. D Power & Associates' survey on "current and future trends in the airline food industry," indicated that "food service is a major contributor to customers’ loyalty." This survey also emphasized the importance of food brands.

33. The following research questions and hypotheses may be posed.
At United, Food Is Uniting the Airline with Travelers
The airline's Marketing survey told United Airlines that "customers wanted more varied and up-to-date food.”
The following research questions and hypotheses may be posed.
RQ1 How important is food for airline customers?
H1: Food is an important factor for airline travelers.
H2: Travelers value branded food.
H3: Travelers prefer larger food portions, but with consistent quality.
H4: Travelers prefer exotic food (unusual food).

34. At United, Food Is Uniting the Airline with Travelers
Characteristics that influence the research design included the identification of competing airlines (Delta, American, etc.), factors of the choice criteria (already identified), measurement of airline travel, and loyalty.

35. At United, Food Is Uniting the Airline with Travelers
This kind of research helped United Airlines define their marketing research problem and develop the approach. Focus groups and surveys were conducted to check customers' perceptions of food in United Airlines' aircraft.
The results provided support for all the hypotheses (H1 to H4). United Airlines then made a few changes: new "culinary menus," larger portions of food, new coffee, and branded products (e.g., Godiva chocolates). This resulted in better service, increasing customer satisfaction and fostering loyalty.
Culinary = relating to kitchen or cookery.

36. Questions for Revision
Why is it important, as a first step in undertaking marketing research, to define the marketing research problem appropriately? (slide 9)
Mention , with an example, 2 differences between management decision problem and marketing research problem. (slide 13)
Explain, with an example, the relationship between management decision problem and marketing research problem. (slide 14)
What are the most common forms of the analytical models that are used when conducting research. (slide 21)