1. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Part 3: Target Market Selection 8.Marketing Research Decision- Support Systems, and Sales Forecasting 9.Market Segmentation, Targeting, and Positioning 10.Relationship Marketing, Customer Relationship Management (CRM), and One-to- One Marketing

2. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 8 Marketing Research, Decision-Support Systems, and Sales Forecasting

3. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-3 Chapter Objectives 1.Describe the development of the marketing research function and its major activities. 2.Explain the steps in the marketing research process 3.Distinguish between primary and secondary data and identify the sources of each type. 4.Explain the different sampling techniques used by marketing researchers. 5.Identify the methods by which marketing researchers collect primary data. 6.Explain the challenges of conducting marketing research in global markets. 7.Outline the most important uses of computer technology in marketing research. 8.Explain how the use of information technology, particularly marketing decision support systems (MDSSs), can enhance and refine market research and it’s impact on decision making. 9.Identify the major types of forecasting methods.

4. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-4 The Marketing Research Function Marketing research: the process of collecting and using information for marketing decision-making 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 © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-5 Who Conducts Marketing Research Who Conducts Marketing Research The size and organizational form of the marketing research function is typically tied to a given company’s structure Many firms depend on independent marketing research firms  Syndicated Services Organizations that regularly provide a standardized set of data to all customers

6. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-6  Full-Service Research Suppliers Organizations that contract with clients to conduct complete marketing research projects  Limited-Service Research Suppliers A marketing research firm that specializes in selected activities like:  Field or telephone interviews  Data-processing  Focus groups

7. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-7 Customer Satisfaction Measurement Programs  Procedure for measuring customer feedback against customer satisfaction goals and developing a plan of action for improvement

8. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-8 The Marketing Research Process

9. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-9 Step 1: Define the Problem Step 1: Define the Problem Avoid confusing symptoms of a problem with the problem itself The problem(s) should be agreed upon by all concerned parties 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

10. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-10 Step 2: Conduct exploratory research Step 2: Conduct exploratory research An Informal investigation seeking to discover the cause of a problem by discussing it with informed internal and external sources Company records such as sales and profit analyses Competitive data Using Internal Data  Sales records, Financial statements, and Marketing cost analyses Sales analysis

11. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-11 Step 3: Formulate a Hypothesis Step 3: 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

12. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-12 Step 4: Create a Research Design Step 4: 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

13. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-13 Step 5: Collect Data Step 5: Collect Data Secondary data is data from previously published or compiled sources (e.g. Census data)  Almost always less expensive to gather  Less time is usually necessary to locate and use it Primary data refers to data collected for the first time specifically for a marketing research study  Can provide richer, more detailed information than secondary data

14. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-14 Step 6: Interpret and Present Research Information Step 6: Interpret and Present 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

15. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-15 The Research Report and Presentation: Linking the Study and the Research User

16. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-16 Marketing Research Methods

17. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-17 Secondary Data Collection Secondary Data Collection Government Data  Nation’s most important source of marketing data  Most frequently used government statistics  Census information available at no charge  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

18. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-18 Secondary Data Collection Secondary Data Collection Private Data  Encyclopedia of Associations  Urich’s Guide to International Periodicals  Sales & Marketing Management’s Annual Survey of Media Markets  Dialog’s ABI/Inform  CompuServe’s Knowledge Index  Find/SVP’s FindEx, the Directory of Market Research Reports, Studies, and Surveys  Starch Readership Reports  A. C. Nielsen’s SalesNet

19. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-19 Secondary Data Collection 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  Caveat Emptor should guide Internet searches for secondary data

20. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-20 Sampling Techniques 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

21. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-21 Probability sample: sample that gives every member of the population a known chance of being selected  Simple random sample  Stratified sample  Cluster sample Non-probability sample: arbitrary grouping that produces data unsuited for most standard statistical tests  Convenience sample  Quota sample

22. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-22 Primary Research Techniques Primary Research Techniques 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  Interpretive Research

23. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-23 Survey Method Survey Method  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  Caller-ID

24. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-24 Survey Method Survey Method  Personal Interviews Best means for obtaining detailed information about consumers Interviewer can explain confusing or vague questions Offer Good Flexibility Mall intercepts Limitations:  Slow  Expensive

25. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-25 Survey Method Survey Method  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

26. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-26 Survey Method  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

27. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-27 Survey Method  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

28. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-28 Survey Method  Online Surveys and Other Internet-Based Methods 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 Growth of the Internet is creating a need for new research techniques to measure and capture information about website visitors

29. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-29 Survey Method  Experimental Method 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 Expensive to conduct

30. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-30 Conducting International Marketing Research Conducting International Marketing Research As corporations expand globally, they need to gather knowledge about consumers in other countries The basic steps are the same as for domestic studies, however, face some different challenges A major secondary information source is the U.S. Department of Commerce  Foreign Economic Trends and Their Implications for the United States  Overseas Business Reports

31. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-31 Interpretative Research Observes a customer or group of customers in their natural settings and then interprets their behavior based on an understanding of social and cultural characteristics of that setting Ethnographic Focuses on understanding the meaning of a product or the consumption experience in a consumer’s life Takes time and is expensive

32. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-32 Computer Technology in Marketing Research Marketing Information System (MIS) Marketing Information System (MIS) A planned, computer-based system designed to provide managers with a continuous flow of information relevant to their specific decisions and areas of responsibility

33. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-33 Marketing Decision Support System 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

34. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-34 Data Mining Data Mining The process of searching through computer files to detect patterns Focuses on identifying relationships that are not obvious to marketers 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

35. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-35 Business Intelligence Business Intelligence Process of gathering information and analyzing it to improve business strategies, tactics, and daily operations Competitive Intelligence Competitive Intelligence Form of business intelligence that focuses on finding information about competitors using published sources, interviews, observations by salespeople and suppliers in the industry, government agencies, public filings and other secondary sources including the Internet

36. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-36 Sales Forecasting Estimate of company revenue for a specified future period. Qualitative Forecasting Techniques Quantitative Forecasting Techniques

37. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-37 Qualitative Forecasting Techniques Qualitative Forecasting Techniques These techniques rely on subjective data that repots opinions rather than exact historical data.  Jury of Executive Opinion  Delphi Technique  Sales Force Composite  Survey of Buyer Intentions

38. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-38 TechniquesBenefitsLimitations Jury of executive opinion Opinions come from executives in many different departments; quick; inexpensive Managers may lack sufficient knowledge and experience to make meaningful predictions Delphi technique Group of experts can accurately predict long-term events such as technological breakthroughs Time-consuming; expensive Sales force composite Salespeople have expert customer, product, and competitor knowledge; quick; inexpensive Inaccurate forecasts may result from low estimates of salespeople concerned about their influence on quotas Survey of buyer intentions Useful in predicting short-term and intermediate sales for firms that serve only a few customers Intentions to buy may not result in actual purchases; time- consuming; expensive

39. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-39 Quantitative Forecasting Techniques Quantitative Forecasting Techniques This method uses statistical computations such as trend extensions, computer simulations, and economic models.  Market Tests  Trend Analysis  Exponential Smoothing

40. Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 8-40 TechniquesBenefitsLimitations Market test Provides realistic information on actual purchases rather than on intent to buy Alerts competition to new product plans; time- consuming; expensive Trend analysis Quick; inexpensive; effective with stable customer demand and environment Assumes the future will continue the past; ignores environmental changes Exponential smoothing Same benefits as trend analysis, but emphasizes more recent data Same limitations as trend analysis, but not as severe due to emphasis on recent data