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Lexicon of

Management Information for Marketing Decisions

Economy is the energy of all people in motion with one serving the other without
superiority and subordination.

Markets are people and markets live in the minds of People.

By Anone

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Contents Page No
Definition 3
Classification of Marketing Research 4
Details of Problem Solving Research 5
Marketing Research Process 6
Role of Marketing Research in Marketing Decision Making 8
Decision to conduct marketing Research 10
Defining a marketing research problem and developing an 12
approach
Environment context of the problem 14
Management Decision Problem & Marketing Research 16
Problem
Defining the Marketing Research Problem 17
Components of the Approach 20
Research Design 23
Comparison of Research Designs 25
Potential Sources of Error 29
Flow chart of Errors 30
Marketing Research Proposal 31
Example of Data from Syndicated Firms 33
Exploratory Research Design 34
Advertising Evaluation 36
Media Panels 37
Types of Marketing Research & Degree of Problem 38
Definition
Data Types in Marketing Research Process 39
Criteria for Evaluating Secondary Data 40
Overview of Syndicated Services 41
Primary Research Process 43
Focus Group Vs Depth Interviews 45
Projective Techniques 46
Descriptive Research Design 49
Causal Research Design 52
Classification of Experimental Designs 59
Sampling 64
Sampling Process & Numericals 76
Measurement & Scaling 81
Value of information

Creativity and Common Sense Command a premium in the Marketing Research


1) Definition

AMA ( American Marketing Association ) defines

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Marketing Research is the function which links consumers, customers, public to the marketer
through the information used to identify and define marketing opportunities and problems ,
generate , refine and evaluate marketing actions; monitor marketing performance and improve
understanding of marketing as a process.

2)Marketing Research specifies the information required to address these issues ,designs the
method for collecting information, manages and implements the data collection process, analyzes
the results and communicates the findings and their implications.

3)Marketing Research is the systematic and objective identification ,collection, analysis,


dissemination and use of information for the purpose of decision making related to identification
and solution of problems and opportunities in marketing.

Classification of Marketing Research

Organizations engage in marketing research for 2 reasons


1) to identify problems
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2) to solve marketing problems

so we have problem identification research


problem solving research

Problem identification research : identify problems that are not on the surface ,but likely to arise
in the future.

Examples : market potential, market share, brand or company image,


Market characteristics, sales analysis, short range forecasting,
Long range forecasting and business trends research.

A survey of companies conducting market research –


97% for market potential, market share & market characteristics research

90% problem identification research. This type of research provides information about the
marketing environment and helps diagnose a problem.

Eg : declining market potential indicates that the firm is likely to have a problem achieving its
growth targets.

Once problem is identified – problem solving research is undertaken to arrive at a solution.


Details of Problem solving research
Segmentation Research
Determine basis of segmentation
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Establish market potential and responsiveness for various segments
Select target markets and create lifestyle profiles, demography, media and product image
characteristics.
Product Research
Test concept
Optimal product design
Package tests
Product modification
Brand positioning and repositioning
Test marketing
Control store tests.
Pricing Research
Importance of price in brand selection
Pricing policies
Product line pricing
Price elasticity of demand
Response to price changes
Promotional Research
Optimal promotional budget
Sales promotion relationship
Optimal promotional mix
Copy decisions
Media decisions
Creative advertising testing
Claim substantiation
Evaluation of advertising effectiveness
Distribution Research
Type of distribution ,Attitudes of channel members, Intensity of wholesale and retail coverage
Channel margins , Location of retail and wholesale outlets
The marketing Research Process
Consists of 6 steps
1) Problem definition

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Researcher should take into account
The purpose of the study
Relevant background information
The information needed & how it will be used in decision making.

This would further involve discussion with the decision makers, interviews with
Industry experts , analysis of secondary data and perhaps some qualitative research such as
focus groups.

Once the problem has been precisely defined the research can be designed and conducted
properly.

2) Development of approach to the problem

Includes formulating of an objective or theoretical framework, analytical models, research


questions, hypothesis and identifying the information needed. This process is guided by
discussions with management and industry experts, analysis of secondary data, qualitative
research, pragmatic considerations

3) Research Design Formulation

A research design is a framework or blueprint for conducting the marketing research project . It
details the procedures necessary for obtaining the required information and its purpose is to
design a study that will test the hypotheses of interest , determine possible answers to the
research questions and provide the information needed for decision making.
Conducting exploratory research ,
Precisely defining the variables
Designing the appropriate scales to measure them are also part of the research design

The issue of how the data should be obtained from the respondents ( by conducting a survey or
an experiment) must be addressed. It is also necessary to design a questionnaire and sampling
plan to select respondents for the study.

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Formulating the research design involves the following steps:
1) definition of the information needed
2) secondary data analysis
3) qualitative research
4) methods of collecting quantitative data( survey, observation, and experimentation)
5) measurement and scaling procedures
6) questionnaire design
7) Sampling process and sample size
8) Plan of data analysis

4) Field work or Data Collection


Data collection involves a field force or staff that operates either in the field , as in the case of
personal interviewing inhome , mall intercepting or computer assisted personal interviewing )
from an office by telephone or computer assisted telephone interviewing ,Through mail
traditional mail and mail panel surveys with pre recruited households) or electronically( email
or
internet) . Proper selection, training, supervision, and evaluation of the field force help minimize
data collection errors.
5) Data preparation and analysis
Data preparation includes the editing , coding , transcription and verification of data. Each
observation ,questionnaire is inspected or edited and if necessary corrected .
6) Report Preparation and Presentation
The entire project should be documented in a written report that addresses the specific research
questions identified ; describes the approach, the research design, data collection and data
analysis procedures adopted and presents the results and the major findings. The findings should
be presented in a comprehensible format so that management can readily use them in the
decision making process.
In addition an oral presentation should be made to management using tables, figures, and graphs
to enhance clarity and impact
The role of marketing research in marketing decision making.
Can be understood with the help of a basic marketing paradigm

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Customer Groups
Consumers
Employees
Shareholders
Suppliers

Controllable marketing Uncontrollable


variables environmental factors
Product Economy
Pricing Technology
Marketing Research Competion
Promotion
Distribution Laws & Regulations
Social & cultural factors
Political factors

Assessing Marketing
Providing
Information Decision
Information
needs Making

Marketing Managers

Market Segmentation
Target Market Selection
Marketing Programs
Performance Control

The emphasis in marketing is on the identification and satisfaction of customer needs. In order to
determine customer needs and to implement marketing strategies and programs aimed at
satisfying those needs, marketing managers need information. They need information about
customers , competitors , and other forces in the marketplace.
As firms have become national and international , more need for market research and
information on distant markets has increased.
As consumers have become more affluent and sophisticated, marketing managers need better
information on how they will respond to products and other marketing offerings.
As competition has become more intense , managers need information on the effectiveness of
their marketing tools.
As environment changes more rapidly , marketing managers need more timely information.

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The task of marketing research is to assess the information needs and provide management with
relevant , accurate , reliable , valid , current and actionable information.

Today’s competitive marketing environment and the ever increasing costs attributed to poor
decision making require marketing research to provide sound information. Sound decisions are
not based on gut feeling, intuition or even pure judgment.

Marketing Research & Competitive Intelligence


Competitive intelligence is a crucial part of the emerging knowledge economy.
By analyzing rivals moves CI allows companies to anticipate market developments rather than
merely react to them.

Although marketing research plays a central role in the collection, analysis and dissemination of
CI information . CI has evolved into a discipline of its own. The society of competitive
Intelligence professionals ( SCIP) consists of members conducting CI for large and small
Companies providing management with early warning of changes in the competitive landscape.

Decision to conduct Market Research


Decision to conduct market research is not automatic.
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This decision is guided by a number of considerations

1) Cost versus the benefits


2) The resources available to conduct the research
3) The resources available to implement the research findings
4) Management attitude towards research

Marketing research should be conducted when the expected value of information it generates
exceeds the costs of conducting the marketing research project. Formal procedures are available
for quantifying the expected value as well as the costs of a marketing research project.

Reasons for not conducting research

1) it is better not to conduct a research than undertake one in which the integrity of research is
compromised because of lack of resources.
2) a firm a lack resources to implement the recommendations arising from the findings of
marketing research.
3) If management does not have positive attitude towards research , then is is likely the project
will gather dust after the project is conducted.

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Marketing Research Industry Org chart of VNU

Executive Board

Corporate Staff

Marketing Media Measurement &


Executive Board
Information Information

Research Suppliers

External – Marketing
Internal
Research Industry

Full Service Limited Service

Field
Syndicated Services
Services

Coding &
Standardized Data Entry
Services

Customized Analytical
Services

Internet Data Analysis


Services
Branded
Products

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Executive Board

Corporate Staff

Marketing Media Measurement &


Executive Board
Information Information

Research Suppliers

External – Marketing
Internal
Research Industry

Full Service Limited Service

Field
Syndicated Services
Services

Coding &
Standardized Data Entry
Services

Customized Analytical
Services

Internet Data Analysis


Services
Branded
Products

External Suppliers : Outside firms hired to supply marketing research data


Full Service Suppliers : Offer entire range of marketing research services from problem
definition , approach development, questionnaire design, sampling data collection, data analysis
and interpretation , to report preparation and presentation.
Syndicated Services : collect information of known commercial value that they provide to
multiple clients on a subscription basis. Surveys , panels , scanners , and audits are the main
means by which these data are collected.
Chapter 2 :

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Defining a market research problem & Developing an Approach

Of all the tasks in a marketing research project, none is more vital to the ultimate fulfillment of a
client’s needs than a proper definition of the research problem .

In adequate problem definition is a leading cause of failure of marketing research projects.

Tasks
Involved

Discussions Interviews Secondary Qualitative


with Decision with Experts Data Analysis Research
Makers

Environment Context of the Problem

Step 1 : Problem Defination

Management Decision Problem

Marketing Research Problem

Step 2 : Approach to the Problem

Analytical Specification
Objective
Model ,Verbal Research Of
Theoritical Hypothesis
, Graphical Questions Information
Foundations Needed
mathematical

Step 3 : Research Design

i) Discussion with Decision Makers : extremely important to interact with the


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Key decision makers
The DM needs to understand the capabilities & limitations of the Research
Research provides information relevant to management decisions ,but it cannot provide solutions
Because solutions require managerial judgement.
The researcher also needs to understand the nature of the decision that manager’s face & what
they hope to learn from the research

The researcher should treat the underlying causes not merely address the symptoms.

ii) Interview with industry Experts : individuals have knowledge of the firms can help formulate
the marketing research problem , for products of technical nature
iii) Secondary Data Analysis : Secondary data is economical and quick source of the
background information .
Analysis of the secondary data is essential in the marketing problem research
iv) Qualitative Research : If all the above are not enough to define the research
problem then Qualitative research is undertaken to understand the problem.
It is unstructured , exploratory in nature , based on small samples & may use techniques such as
Focus Groups , word associations (asking respondents to indicate their first response to word
Stimulus), pilot surveys , case studies etc. Research is not conducted in a formal way but it can
provide valuable insights into the problem.

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Environment context of the problem
To understand the background of a marketing research problem , the researcher must understand
the client’s firm and industry.
Factors that have impact on the definition of the marketing research problem.
Eg :
past information : forecasts & trends with respect to sales , market share, profitability ,technology,
population , demographics, & lifestyle can help researcher understand the underlying marketing
research problem.

forecasts pertaining to the industry and the firm , resources and constraints of the firm, objectives of
the decision maker , buyer behavior, legal environment, economic environment, and marketing ,
technological skills of the firm .

Resources & Constraints : To formulate and scope a marketing Research problem it is necessary to
take into consideration both money and research skills and other constraints such as cost & time.

Objectives : Decisions are made to accomplish objectives.


The formulation of the management decision problem must be based on clear understanding of two
types of objectives
1) the organizational objectives ( the goals of the organization )
2) the personal objectives of the decision maker.
The researcher needs skills to extract the objectives of the management.
Buyer Behavior : It is the central component of the environmental context. In most marketing
decisions , the problem can ultimately be traced to predicting the response of buyers to specific
actions by the marketer. An understanding of the underlying buyer behavior can provide valuable
insights into the problem.

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Factors ( Buyer Behavior)
• The number and geographical location of the buyers and non buyers
• Demographic and psychological characteristics
• Product consumption habits and the consumption of related problem categories
• Media consumption behavior and response to promotions
• Price Sensitivity
• Retail outlets patronized
• Buyer preferences

Legal Environment :

Public policies, laws, government agencies and pressure groups that influence and regulate various
organizations and individuals in society. Important areas of laws include patents , trademarks,
royalties, trade agreements, taxes and tariffs.
Federal laws have an impact on each element of the marketing mix
Laws have been passed to regulate specific industries
The legal environment can have an important bearing on the definition of the marketing research
problem.

Economic Environment :
Comprises of purchasing power, gross income , disposable income, discretionary income , prices ,
savings , credit availability and general economic conditions.
The general state of economy ( rapid growth , slow growth , recession or stagflation) influences the
willingness of consumers and businesses to take on credit and spend on big –ticket items. Thus the
economic environment can have important implications for marketing research problems.

Marketing & Technological Skills :


Many of the factors to be considered in the environmental context of the problem can be researched
via the internet.
After gaining and adequate understanding of the environmental context of the problem , the
researcher can define the management decision problem and the marketing research problem.

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Management Decision Problem & Marketing Research Problem
The management decision problem asks what the DM needs to do , whereas the marketing research
problem asks what information is needed and how it can best be obtained.

The management decision problem is action oriented


The marketing research problem is information oriented
The management decision problem focuses on symptoms , the marketing research problem focuses
on underlying causes.

Defining The Problem


DM : we have seen a decline in the patronage of our store
R : How do you know that ?
DM : it is reflected in our sales and market share
R : What about Competition
DM : Better on some competition on some factors , worse on others
R : How do the customers view your store
DM : I think most of them view it positively although we have weak areas

Marketing Research Problem


Management Decision Problem
1) Asks what information is
1) Asks what the decision maker
needed and how it should be
needs to do
obtained
2) Action Oriented
2) Information Oriented
3) Focuses on symptoms
3) Focuses on underlying causes

Management Decision Problem


What should be done to improve the patronage of Sears ?

Marketing Research Problem


Determine the relative strengths and weaknesses of sears vis a vis other major
competitors with respect to factors that influence store patronage

Marketing Research problem


Management Decision Problem 1) To determine consumer preferences
1) Should a new product be and purchase intentions for the
introduced proposed new product
2) Should the advertising 2) To determine the effectiveness of
campaign be changed the current advertising campaign

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Defining The Marketing Research Problem
The general rule to be followed in defining the marketing research problem is that the
definition should
1) allow the researcher to obtain all the information needed to address the
management decision problem
2) guide the researcher in proceeding with the project .
Researchers make two common errors in problem definition :
1) Research problem is defined too broadly ( 1st type of Error)
A broad definition does not provide clear guidelines for the subsequent steps involved in the project.
eg: i) develop a marketing strategy for the brand
ii) improve the competitive position of the firm
iii) improve the company’s image
All the above defined research problems are not specific enough to suggest an approach to the
problem or a research design.

2) The marketing research problem is defined too narrowly.(2nd Type of Error)


This can prevent the researcher in addressing some important components of the
Management Decision problem
Eg : i) decrease the price of the firms brand to match the competitors price cut
ii) maintain price but increase advertising heavily
The likelihood of committing either type of error in problem definition can be reduced by
stating the marketing research problem in broad , general terms and identifying its specific
components.

Example : In a project conducted for a major consumer products firm, the management problem
was how to respond to a price cut initiated by a competitor.
The alternative courses of action initially identified by the firm’s research staff were
1) decrease the price of the firm’s brand to match the competitor’s price cut
2) maintain price but increase advertising heavily
3) decrease the price somewhat, without matching the competitor’s price ,and
moderately increasing advertising.

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None of the above alternatives seemed promising

When outside marketing research experts were brought in , the problem was redefined as improving
the market share and profitability of the product line.
Qualitative research indicated that in blind tests consumers could not differentiate products offered
under different brand names.
Further more consumers relied on price as an indicator of product quality .
These findings led to a creative alternative: increase the price of the existing brand and introduce
two new brands – one priced to match the competitor and the other priced to undercut it. This
strategy was implemented leading to an increase in market share and profitability.

The likelihood of committing either type of error in problem definition can be reduced by stating the
marketing research problem in broad, general terms and identifying its specific components.

The broad statement provides perspective on the problem and acts as a safeguard against
committing the second type of error .
The specific components focus key aspects of the problem and provide clear guidelines on how to
proceed further , thereby reducing the likelihood of the first type of error.

Management
Research
Problem

Broad
Statement

Specific
components

Component 1 Component 2 Component 3

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Examples of problem research for Sears :
i) what criteria do households use when selecting department stores ?
ii) How do households evaluate sears and competing stores in terms of the
Choice criteria identified in question 1 ?
iii) Which stores are patronized when shopping for specific product categories ?
iv) What is the market share of Sears and its competitors for specific product categories ?
v) What is the demographic and psychographic profile of the customers of Sears ?
Does It differ from the profile of customers of competing stores ?
vi) Can store patronage and preference be explained in terms of store evaluation and
customer characteristics ?

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Components of the approach
While developing the approach, we must not lose sight of the goal – the outputs . The outputs of the
research development process should include the following components : objective/ theoretical
framework , analytical models, research questions, hypothesis and specification of information
needed.
Objective/Theoretical framework :

It is gathered by compiling relevant findings from secondary sources . The researcher can rely on
the theory; to determine which variables should be investigated.
Further more theoretical considerations provide information on how the variables should be
operational zed and measured as well as how the research design and sample should be selected.
After all theories have been formulated after several experimentations and observations .
However applying theory to the research problem requires lot’s of creativity.
A theory may not specify adequately how its abstract constructs ( variables) can be embodied in a
real world phenomenon. Moreover theories are incomplete.
They deal with only a subset of variables that exist in the real world.
Hence the researcher must also identify and examine other non theoretical variables.

Analytical Model : a set of variables & their interrelationships designed to represent in whole or in
part some real system or process .
In verbal models : the variables and their relationships are stated in prose form. Such models may
be mere restatements of the main tenets of a theory.
Graphical models :are visual. They are used to isolate variables and to suggest directions of
relationships but are not designed to provide numerical results. They are logical preliminary steps to
developing mathematical models.

Model building : the consumer experiences the stores and evaluates the stores in terms of factors
comprising the choice criteria. If preference is strong enough , the consumer will patronize the store.

Verbal model : A consumer first becomes aware of a department store . That person then gains an
understanding of the store by evaluating the store in terms of the factors comprising the choice

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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 model :

Patronage

Preference

Understanding : Evaluation

Awareness

Mathematical Model :
n
y = a0 + ∑ ai xi
i=1
where y = degree of preference

a0 xi=model parameters to be estimated statistically


xi=store patronage factors that constitute the choice criteria.

The phenomenon of store patronage stated verbally is represented for clarity through a
figure(graphical model)and is put in equation form (mathematical model) for ease of statistical
estimation and testing. Graphical models are particularly helpful in conceptualizing an approach to
the problem.
In Harley Davidson example , the underlying theory was that brand loyalty is the result of positive
beliefs, attitude ,affect and experience with the brand. This theory may be represented by the
following graphical model.

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Beliefs Attitudes Experim
entation/ Repeat/
Loyalty
Purchase Evaluati Purchase
on

Affect

Research Questions :

Research questions (RQs )are refined statements of the specific components of the problem. Although
the components of the problem define the problem in specific terms, further detail may be needed to
develop an approach.
RQs ask what specific information is required with respect to the problem components.

The formulation of the research questions should be guided not only by the problem definition but
also by the theoretical framework and the analytical model adopted.
Hypothesis : A hypothesis is an unproven statement or proposition about a factor or phenomenon
that is of interest to the researcher.
Components of the
Marketing Research
Objective
Problem /theoretical
framework

Research Questions Analytical


Model

Hypothesis

Example :
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.

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Research Design : It is a framework or blueprint for conducting the marketing research project. It
details the procedures necessary for obtaining the information needed to structure or solve
marketing research problems.
A good research design will ensure that the marketing research project is conducted effectively and
efficiently.

Research
Design

Exploratory Research Conclusive Research


Design Design

Descriptive Causal
Research Research

Cross sectional Longitudinal


Design Design

Single Cross-sectional Multiple Cross- sectional


Design Design

Exploratory Research : To provide insights into and an understanding of the problem confronting
the researcher. It is used when you must define the problem more precisely, identify relevant courses
of action, or gain additional insights before an approach can be developed.

Insights gained from exploratory research might be verified or quantified by conclusive research as
in the opening example.

Conclusive research : It is typically more formal and structured than exploratory research. It is
based on large , representative samples and the data obtained are subjected to quantitative analysis.
The findings from this research are considered to be conclusive in nature that they are used as input
into managerial decision making. ( however from the philosophy of science nothing can be proven
and nothing is conclusive )

Exploratory Conclusive

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Objective To provide insights and understanding To test specific hypothesis and
examine relationships
Characteristics Information needed is only defined Information needed is clearly defined.
loosely. Research process is flexible Research process is formal and
and unstructured. Sample is small and structured. Sample is large and
non representative. Analysis of representative . Data analysis is
primary data is qualitative quantitative.
Findings/Results: Tentative Conclusive
Outcome: Generally followed by further Findings used as input into decision
exploratory or conclusive research making

Comparison of Basic Research Designs


Exploratory Descriptive Causal
Objective Discover ideas & Insights Describe market Determine cause and
characteristics or effect relationships
functions
Characteristic Flexible , versatile, Often Marked by prior Manipulation of one or
the front end of total formulation of specific more independent
research design hypothesis variables. Control of
other meditating
variables
Methods Expert surveys, Pilot Secondary data( analyzed Experiments
surveys, Secondary quantitatively)
data(analyzed Surveys, Panels,
qualitatively) Observational and other
Qualitative research data

Eg for Descriptive Research : Describe the characteristics of relevant groups , such as consumers,
sales people , organizations , market areas. “ profile of heavy users of prestigious department stores
like Saks Fifth Avenue , Neiman Marcus “ , determining perception of product characteristics,
degree to which marketing variables are associated, “ to what extent is shopping at department
stores related to eating out ?
Cross sectional Designs : Most frequently used descriptive design in marketing research . Involve
the collection of information from any given sample of population elements only once. Can be single
cross sectional or multiple cross sectional.
Single Cross Sectional Design : Only one sample of respondents is drawn from the target
population and information is obtained from the sample only once. Also called as sample survey
research design.

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Multiple cross sectional Design : There are two or more samples of respondents and information
from each sample is obtained only once.
Often information from different samples is obtained at different times over long intervals. Multiple
cross sectional designs allow comparisons at the aggregate level but not at the individual respondent
level. Because a different sample is taken each time a survey is conducted , there is no way to
compare the measures on an individual respondent across surveys . One type of multiple cross-
sectional design of special interest is cohort analysis.

Cohort Analysis : Consists of series of surveys conducted at appropriate time intervals , where the
cohort serves as the basic unit of analysis.
A Cohort is a group of respondents who experience the same event within the same time interval.
The term cohort analysis refers to any study in which there are measures of some characteristics of
one or more cohorts at two or more points in time.
Examples : Used to predict changes in voter opinions during a political campaign.
Cohort is a group of persons with common statistical characteristic
For example the age cohort of people between 8 and 19 years old was selected and their soft drink
consumption was examined every 10 years for 30 years.

In other words , every 10 years a different sample of respondents was drawn from the population of
those who were then between 8 and 19 years old. This sample was drawn independently of any
previous sample drawn in this study from the population of 8 to 19 years old.
Obviously people who were selected once were unlikely to be included again in the same
age cohort(8 to 19 years old ) as these people would be much older at the time of subsequent
sampling. This study showed that the cohort had increased consumption of soft drinks over time.

Longitudinal Designs : In longitudinal designs a fixed sample of population elements is measured


repeatedly on the same variables.
A longitudinal design differs from a cross sectional design in that the sample or samples remain the
same over time.
Longitudinal data enables researchers to examine changes in the behavior of individual units and to
link behavioral changes to marketing variables , such as changes in advertising , packaging, pricing
and distribution.
In other words the same people are studied over time and the same variables are measured
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The term panel is used interchangeably with the term longitudinal design. A panel consists of a
sample of respondents , generally households that have agreed to provide information at specified
intervals over an extended period .
Syndicated firms maintain panels and panel members are compensated for their participation with
gifts , coupons ,information or cash.
Longitudinal Design Cross Sectional Design
Gives snapshot of the variables of interest at a Provides a series of pictures that gives an in
single point in time depth view of the situation and the changes that
take place over time
How did the American people rate the How did the American people change their view
performance of George Bush immediately after of bush’s performance during the war in
the war in Afghanistan Afghanistan.

Advantages & Disadvantages of Longitudinal and Cross Sectional Designs


Evaluation Criteria Longitudinal Design Cross Sectional Design
Detecting change - +
Large amount of data - +
collection
Accuracy - +
Representative + -
Sampling
Response Bias + -

+ : indicates relative advantage over the other


- : indicates relative disadvantage

Causal Research :

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To obtain evidence of cause and effect (causal) relationships . Marketing managers continually make
decisions based on assumed causal relationships. These assumptions may not be justifiable and the
validity of the causal relationships should be examined via formal research.

Eg : The common assumption that a decrease in price will lead to increased sales and market share
does not hold in certain competitive environments.
Causal research are appropriate for the following purposes
1) to understand which variables are the cause(independent variables) and which variables are
the effect ( dependent variables) of a phenomenon
2) To determine the nature of the relationship between the causal variables and the effect to be
predicted.
Like descriptive research causal research requires a planned and structured design.

Although descriptive research can determine the degree of association between variables, it is not
appropriate for examining causal relationships. Such an examination requires a controlled
environment. A relatively controlled environment is one in which the other variables that may effect
the dependent variable are controlled or checked as much as possible. The effect of this manipulation
on one or more dependent variables is then measured to infer causality.

The main method of causal research is experimentation

Potential Sources of ERROR

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 28


Several potential sources of error can affect a research design. A good research design attempts to
control the various sources of error.

The total error is the variation between the true mean value in the population of the variable of
interest and the observed mean value obtained in the marketing research project.

Eg : avg annual income of target population from census records is $75,871


Marketing research project estimates it as $67,157
Total error is composed of random sampling error and non sampling error

Random sampling Error : Occurs because the particular sample selected is an imperfect
representation of the population of interest. It is the variation between the true mean of the
population and the true mean for the original sample.

Non Sampling Error: Can be attributed to sources other than sampling and they may be random or
non random . They result from a variety of reasons , including errors in problem definition,
approach, scales , questionnaire design, interviewing methods, data preparation and analysis.

Example : researcher designs a poor questionnaire which contains several questions that lead the
respondents to give biased answers. Non sampling errors consist of non response errors and
response errors.

Flow Chart of Errors

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 29


Total Error

Random Non Sampling


sampling error Error

Response Non Response


Error Error

Researcher Error Interviewer Error Respondent Errors

*Surrogate * Respondent *Inability Error


Information Error Selection Error *Unwillingness
*Measurement Error * Questionnaire Error Error
*Population Definition * Recording Error
Error * Cheating Error
*Sampling Frame
Error
*Data Analysis Error

Non Response Error : When some of the respondents included in the sample do not respond
Response Error : When respondents give inaccurate answers or their answers are misrecorded
or misanalyzed.
Surrogate information error : Variation between the information needed for the marketing research
problem and the information sought by the researcher
Measurement Error : Variation between the information sought and the information generated by
the measurement process employed by the researcher. Eg : While seeking to measure consumer
preferences, the researcher employs a scale that measures perceptions than the preferences.
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 30
Population Definition Error : Variation between the actual population relevant to the problem at
hand and the population as defined by the researcher.

Sampling frame error : Variation between the population defined by the researcher and the
population as implied by the sampling frame(list) used.
Eg : the telephone directory used to generate a list of telephone numbers does not accurately
represent the population of potential consumers because of unlisted, disconnected and new numbers
in service.
Data Analysis Error : Errors that occur while raw data from questionnaires are being transformed
into research findings. Eg : in appropriate statistical procedure.
Respondent Selection Error : When interviewers select respondents other than those specified by
the sampling design or in a manner inconsistent with the sampling design.
Questioning Error : Errors made in asking questions of the respondents or in not probing when
more information is needed.
Recording Error : Errors in hearing, interpreting and recording the answers given by the
respondents
Cheating Error : when the interviewer fabricates answers to part or all of the interview.
Inability Error : Respondents inability to provide accurate answers, due to unfamiliarity, fatigue,
boredom, faulty recall , question format, question content, other factors.
Unwillingness Error : Respondents unwillingness to provide accurate information. Respondents may
intentionally misreport their answers because of a desire to provide socially acceptable answers ,
avoid embarrassment or please the interviewer. For example a respondent intentionally misreports
reading the Time magazine to impress the interviewer.
Non Sampling Error is likely to be more problematic than sampling Error.
After the research design , appropriately controlling the total error has been specified , the
budgeting & Scheduling decisions can be made.
Budgeting and scheduling the project : Ensures that the marketing research project is completed
with in the available resources – financial , time , personnel .
One can use CPM( Critical Path Method) or PERT( Program Evaluation & Review Technique)
, GERT ( graphical evaluation & review technique)

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 31


Marketing Research Proposal :
After the research design is formulated , budgeting & scheduling is accomplished , a written
research proposal is made.
The proposal contains the essence of the project and serves as a contract between the researcher and
management. Covers all the phases of the marketing research process .
Describes the Research Problem , The approach , the research design , and how the data will be
analyzed collected and reported. Gives cost estimate and time schedule for completing the project.
The elements of the research Proposal :
1) Executive Summary : The proposal should begin with a summary of the major points from
each of the other sections, presenting an overview of the entire proposal.
2) Background : The background to the problem , including the environmental context
should be discussed.
3) Problem Definition / Objectives of the Research : Normally a statement of the problem ,
including the specific components, should be presented. If the problem statement has not been
developed , the objectives of the marketing research project should be clearly specified.
4) Approach to the Problem : A review of the relevant academic and trade literature should be
presented, along with some kind of an analytical model. If research questions and hypothesis
have been identified , then these should be included in the proposal.
5) Research Design : The research design adopted, whether exploratory, descriptive or causal
should be specified. Information should be provided on the following components :
i) kind of information to be obtained
ii) method of administering the questionnaire(mail, telephone, personal, electronic
interviews)
iii) Scaling techniques
iv) Nature of the questionnaire (type of questions asked, length. Average interviewing
time
v) Sampling plan and sample size
6) Field Work & Data Collection : The proposal should discuss how the data will be collected

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 32


and who will collect it . If the field work is to be subcontracted to another supplier and this
should be stated. Control mechanisms to ensure the quality of data collected should be
described.
7) Data Analysis : The kind of data analysis that will be conducted ( simple cross tabulations,
Univariate analysis , multivariate analysis ) and how the results will be interpreted should be
described.
8) Reporting : The proposal should specify whether intermediate reports will be presented and
at what stages , what will be the form of the final report, and whether a formal presentation
of the results will be made.
9) Cost & Time : The cost of the project and a time schedule , broken down by phases should be
presented . A CPM or PERT chart might be included. In large projects a payment schedule is
also worked out in advance.
10) Appendices : Any statistical or other information that is of interest only to a few people
should be contained in appendices.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 33


Example of Data Available from Syndicated Firms

1) Demographic Data
• Identification(name,address,telephone)
• Sex
• Marital status
• Names of family members
• Age
• Income
• Occupation
• Number of children present
• Home ownership
• Length of residence
• Number and make of cars owned
2) Psychographic Lifestyle Data
• Interest in golf
• Interest in snow skiing, book reading , running, bicycling, pets, fishing, electronics
Cable television.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 34


Exploratory Research Design : Secondary Data

Secondary Data

Internal External

Requires further
Ready to use Published Materials
Processing

Computerized
Data Bases

Syndicated Services

Published External Secondary Data :

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 35


Published
Secondary Data

General Business
Government Sources
Sources

Guides Census Data

Other Government
Directories
Publications

Indexes

Statistical Data

Syndicated Sources of Secondary Data :


Syndicated sources are companies that collect and sell common pools of data of know commercial
value designed to serve information needs shared by a number of clients. These data are not
collected for the purpose of marketing research problems specific to individual clients , but the data
and reports supplied to client companies can be personalized to fit particular needs .
For example reports could be organized on the basis of the clients sales territories or product lines.
Using Syndicated services is frequently less expensive than collecting primary data.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 36


Unit of
Measurement

Households/
Institutions
Consumers

Electronic
Industrial
Surveys Panels Scanner Retailers Wholesalers
Firms
Services

Psychographi Volume
Direct
c& Purchase Media Tracking
Inquiries
Lifestyles Data

Scanner Clipping
General
Panels Services

Scanner
Advertising Panels Corporate
Evaluation With Cable Reports
TV

Advertising Evaluation :
Aim : to assess the effectiveness of advertising using print and broadcast media
Tools : MIRS ( Magazine Impact Research Service ) Gallup & Robinson
Process : ads are tested using an at home in magazine context among widely dispersed samples, the
system offers standardized measures with flexible design options.
Test ads may appear in the magazine or are inserted as tip-ins.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 37


It provides strong, validated measures of recall, persuasion, and ad reaction with responsive
scheduling.

TV Advertising : Method 1) Recruited audience method ( respondents are recruited and brought to
a central viewing facility , such as theater or mobile viewing laboratory , the respondents view the
commercials and provide data regarding knowledge, attitudes, and preferences related to the
product being advertised and the commercial itself)
Method 2) In home viewing method ( consumers evaluate commercials at home in
their normal viewing environment). New commercials can be pre tested at the network level or in
local markets distributed via VCR cassettes. A survey of viewers is then conducted to assess the
effectiveness of the commercials)

Surveys : Properly analyzed survey data can be manipulated in many ways so that the researcher
can look at intergroup differences , examine the effects of independent variables such as age or
income or even predict future behavior.

Psychographics & Lifestyles : Psychographics refer to the psychological profiles of individuals


and to psychologically based measures of lifestyle. Lifestyles refer to the distinctive modes of living
of a society or some of its segments. The measures are referred to as activities , interests & opinions
or simply AIO’s.

Media Panels : Electronic devices automatically record viewing behavior, thus supplementing a
diary or an online panel.
Company : Nielsen Media National Ratings service.
System : Electronic measurement system called the Nielsen People Meter.
The meters are placed in a sample of 5000 households (13,000) persons in the US randomly selected
and recruited by Nielsen Media so as to be representative of the population.
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 38
The Meter measures two things . 1) what program or channel is being tuned in
2) who is watching
The information is also disaggregated by 10 demographic and socioeconomic characteristics such as
household income , education of head of house, occupation of head of house, household size , age of
children, age of woman and geographic location. This is useful for firms in selecting specific TV
programs on which to air their commercials.

Purchase Panels : Respondents record their purchases of a variety of different products , as in the
NPD Panel. Eg : forecasting sales , estimating market shares, assessing brand loyalty , brand
switching behavior, establishing profiles of specific user groups, measuring promotional
effectiveness, and conducting controlled store tests.

Advantages : Panels provide longitudinal data ( data can be obtained from same respondents
repeatedly)
Disadvantages : Lack of representative ness, maturation and response biases.

Volume tracking Data : info on purchases by brand, size, price, flavor or formulation based on
sales data collected from the check out scanner tapes.
Electronic Scanner Services : Scanner data reflect some of the latest technological developments in
the marketing research industry. Scanner data are collected by passing merchandise over a laser
scanner, which optically reads the bar coded description( the universal product code ) printed on the
product. Being used by Reliance Fresh.
Advanced use of scanning : Scanner panels with cable TV. Eg : Tata Sky

Types of Marketing Research and Degree of Problem Definition


Exploratory Research Descriptive Research Causal Research
(Unaware of the problem ) (Aware of the Problem) (Problem Clearly Defined)
Possible Situation

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 39


Our’s sales are decreasing “What kind of people are “Will buyers purchase more
and we don’t know why buying our product? Who of our products in a new
buys our competitor’s package”
product?”
Would people be interested What features do buyer “which of the two
in our new product idea? prefer in our product? advertising campaigns is
more effective

Exploratory Research Design : Qualitative Research


Primary Data : Qualitative Versus Quantitative Research
Qualitative Research : Provides insights and understanding of the problem setting .
Quantitative Research : Seeks to quantify the data and typically applies some form of statistical
analysis.
Whenever a new marketing research problem is being addressed ,quantitative research must be
Marketing
Research
preceded by appropriate Dataresearch.
qualitative

Secondary Data Primary Data

Quantitative
Qualitative Data
Data

Research
Descriptive
Procedures

Direct InDirect
Survey
Nondisguised Disguised

Projective Observational &


Focus Group
Techniques Other Data

Depth Association
Data Types in Marketing Research Process : Causal
Interviews Technique

Completion Experimental
Technique Data

Construction
Technique
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 40
Expressive
Technique
Criteria for Evaluating Secondary Data
Criteria for Evaluating Secondary Data
Criteria Issues Remarks
Specifications/ Data should be reliable,
Methodology Data Collecting methods valid and generalizable to
the problem at hand
Response Rate
Quality of data
Sampling Technique

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 41


Sample Size
Questionnaire Design
Field work
Data Analysis

Error /
Accuracy Examine errors in : Assess accuracy by
Approach, research design comparing data from
Sampling, data collection different sources
data analysis, reporting

Currency Time lag between collection Census data are


and publication , frequency periodically updated by
of updates syndicated firms

Objective The objective will


determine the relevance
Why were the data collected of the data

Nature Definition of key variables


Reconfigure the data to
units of measurement
increase their usefulness
categories used if possible
Relationships examined

Expertise,
Dependability credibility,reputation Data should be obtained
from an original rather
trustworthiness of data than an acquired source

Overview of Syndicated Services


Type Characteristics Advantages Disadvantages Uses
Most flexible ways
Surveys conducted at Interviewers errors,
of obtaining data;
regular intervals Respondent errors Market segmentation
information on
Surveys underlying advertising theme
motives selection
advertising
effectiveness

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 42


Households provide
specific information Lack of
regularly over an representativeness
extended period of Record purchase ; response bias;
time behaviors can be maturation Forecasting Sales
respondents asked to linked to the
record specific demographic /
behaviors as they psychographic market share &
Purchase occur characteristics trends
Panels
establishing
consumer profiles
brand loyalty &
switching
evaluating test
markets
advertising
distribution

Electronic devices
automatically
Media
recording behavior,
Panels
supplemented by a Same as Same as purchase Establishing
diary purchase panel panel advertising rates
selecting media
program or air time
establishing viewer
profiles

Household purchases Data reflect actual


recorded through purchases; timely
electronic scanners in data, less Data may not be
supermarkets expensive representative Price tracking
Scanner errors in recording
Volume purchases modeling
Tracking
Data difficult to link
purchases to
elemets of
marketing mix effectiveness of in
other than price store modeling

Scanner panels of
households that Data reflect actual Data may not be Promotional mix
subscribe to cable TV purchases; representative analysis
Scanner
Panels Quality of data is
with Cable sample control limited copy testing
TV ability to link panel
datato household
characteristics new product testing
positioning

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 43


Coverage may be
Verification of product incomplete;
movement by Relatively precise matching of data
examining physical information at the on competitive Measurement of
Audit records of performing retail and activity may be consumer sales and
Services inventory analysis wholesale levels difficult market share
competitive activity
analyzing distribution
patterns
tracking of new
products

Data banks on
industrial
establishments Important source Data are lacking in Determining market
Industrial created through direct of information in terms of content potential by
Product inquiries of companies industrial firms quality and quality geographic area
Syndicate particularly useful
d Services in initial phases of defining sales
clipping services projects territories
allocating advertising
corporate reports budget

Primary Research Process

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 44


Primary Research

Quantitative Data Qualitative Data

Experiments Focus groups


Surveys

Personal interview Individual depth


Mechanical interviews
(intercepts)
observation
Mail
In-house, self- Human
administered observation
Telephone, fax, e-
Simulation
mail, Web
Case studies

Variations in Focus Groups


Two way focus group : this allows one target group to listen to and learn from a related group. In
one application physicians viewed a focus group of arthritis patients discussing the treatment they
desired . A focus group of these physicians was then held to determine their reactions.
Dual moderator group : This is a focus group interview conducted by two moderators. One
moderator is responsible for the smooth flow of the session, and the other ensures that specific issues
are discussed.
Dueling moderator Group : Two moderator groups taking opposite positions on the issues to be
discussed. This allows the researcher to explore both sides of controversial issues.
Respondent moderator group: In this type of focus group, the moderator asks selected participants
to play the role of moderator temporarily to improve group dynamics.
Client participant groups :Client personnel are identified and made part of the discussion group.
Their primary role is to offer clarifications that will make the group process more effective.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 45


Mini Groups : These groups consist of a moderator and only 4 or 5 respondents. They are used when
the issues of interest require more extensive probing than is possible in the standard group of 8 to 12.
Telession Groups :Focus group sessions by phone using the conference call technique.
Online focus groups are an emerging form of focus groups .
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Depth Interviews : Like focus groups it is an unstructured and direct way of obtaining information,
but unlike focus groups depth interviews are conducted on a one to one basis. The respondent is
probed by a highly skilled interviewer to uncover underlying motivations , beliefs , attitudes and
feelings on a topic.
Duration of depth interview : 30 mins to more than 1 hour.
Techniques in Depth interviews :
1) Laddering Technique : The line of questioning proceeds from product characteristics to user
characteristics. This allows the researcher to tap into the consumer’s network of meanings. It
Provides a way to probe into the consumers deep underlying psychological and emotional
reasons that affect their purchasing decision.
Eg : when researcher wants to find out why a person buys a product apart from quality and
low price . to find out the in depth underlying motivators a laddering technique should be
used. ( color , taste, brand , price size) The underlying motivators are found by climbing the
ladder to the real reasons for purchasing the products.
2) Hidden issue Questioning : The focus is on not socially shared values but rather on personal
“sore spots” not on general lifestyles but on deeply felt personal concerns.
3) Symbolic Analysis : Attempts to analyze the symbolic meaning of objects by comparing them
With their opposites.To learn what something is , the researcher attempts to learn what it is
not. The logical opposites of a product that are investigated are : non usage of the product,
attributes of an imaginary “ non product” and opposite types of products. The three
techniques are illustrated with the following examples.

Focus Group Versus Depth Interviews

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 46


Focu
s Depth
Characteristic
Grou Interview
p s
Group Synergy and dynamics + -
Peer Pressure/ group influence - +
Client involvement + -
Generation of innovative ideas + -
In depth probing of individuals - +
Uncovering hidden motives - +
Discussion of sensitive topics - +
Interviewing respondents who are competitors - +
Interviewing respondents who are
professionals - +
Scheduling of respondents - +
Amount of information + -
Bias in moderation and interpretation + -
Cost per respondent + -
A " +" indicates a relative advantage over the other procedure , -
indicates relative disadvantage

Application of Depth Interviews :


The use of depth interview is for exploratory research to gain insights and understanding .
1)Probing of respondent( automobile purchase)
2)Discussion of confidential, sensitive or embarrassing topics (personal finances,loose dentures)
3)Situations where strong social norms exist and the respondent may be easily swayed by group
response( attitude of college students towards sports)
4)Detailed understanding of complicated behavior (department store shopping)
5)Interviews with professional people( industrial marketing research)
6)Interviews with competitors who are unlikely to reveal the information in a group setting
( travel agents perception of airline package travel programs)
7)Situations where the product consumption experience is sensory in nature , affecting mood states
and emotions( perfumes , bath soap)

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 47


Projective Techniques : Both Focus groups and depth interviews are direct approaches in which the
true purpose of the research is disclosed to the respondents .
Projective techniques attempt to disguise the purpose of the research.
A projective technique is an unstructured , indirect form of questioning that encourages respondents
to project their underlying motivations, beliefs, attitudes or feelings regarding the issues of concern.
The respondents are asked to interpret the behavior of others rather than describe their own
behavior. In interpreting the behavior of others , respondents indirectly project their own
motivations, beliefs , attitudes or feelings into the situation. Thus respondents attitudes are
uncovered by analyzing their responses to scenarios that are deliberately unstructured , vague and
ambiguous.
The more ambiguous the situation , the more respondents project their emotions, needs, motives ,
attitudes and values as demonstrated by work in clinical psychology on which projective techniques
are based. In psychology these techniques are classified as association, completion , construction
and expressive.
Association Techniques : An individual is presented with a stimulus and asked to respond with the
first thing that comes to mind.
Word association : In word association respondents are presented with a list of words one at a time
and asked to respond to each with the first word that comes to mind.
The underlying assumption of this technique is that association allows respondents to reveal their
inner feelings about the topic of interest.
Responses are analyzed by calculating
1) the frequency with which any word is given as a response
2) the amount of time that elapses before a response is given
3) the number of respondents who do not respond at all to test a word within a reasonable period of
time. those who do not respond at all are judged to have an emotional involvement so high that it
blocks a response. It is often possible to classify the associations as favorable , unfavorable or
neutral. An individuals pattern of responses and the details of the response are used to determine
the person’s underlying attitudes or feelings on the topic of interest .

Completion Techniques : The respondent is asked to complete an incomplete stimulus situation.


Common completion techniques in marketing research are sentence completion and story
completion.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 48


Sentence Completion : It is similar to word association . Respondents are given incomplete
sentence and asked to complete them. Generally the first word that comes to their mind.
Story Completion : Respondents are given part of a story- enough to direct attention to a particular
topic but not to hint at the ending. They are required to to give the conclusion in their own words.
The respondents completion of this story will reveal their underlying feelings and emotions .

Construction Techniques :
Are closely related to completion techniques. Require the respondent to construct a response in the
form of a story , dialogue or description. The researcher provides less initial structure to the
respondent than in a completion technique. The two main construction techniques are

1) Picture response : The roots can be traced to the (TAT : Thematic Apperception Test) The
respondent is exposed to pictures of persons or objects that are clearly depicted and others that
relatively vague. The respondent is asked to tell stories about these pictures . The interpretation
gives indications of the individual’s personality. The individual may be characterized as
impulsive, creative , unimaginative and so on. The name thematic is used because of the themes
are elicited based on the subject’s perceptual interpretation( apperception) of pictures.
2) Cartoons : Cartoon characters are shown in a specific situation related to the problem. The
respondents are asked to indicate what one cartoon character might say in response to the
comments of another character. The response indicates the respondents feelings, beliefs and
attitudes toward the situation.

Expressive Techniques : Respondents are presented with a verbal or visual situation and asked to
relate the feelings and attitudes of other people to the situation. The respondents express not their
own feelings or attitudes but those of others. The two main expressive techniques are role playing
and third – person technique.
Role Playing : In role playing respondents are asked to play the role or assume the behavior of
someone else. The researcher assumes that the respondents will project their own feelings into the
role. These can then be uncovered by analyzing the responses.
Third –Person Technique: The respondent is presented with a verbal or visual situation and asked
to relate the beliefs and attitudes of a third person rather than directly expressing personal beliefs
and attitudes. Again the researcher will assume that the respondent is revealing personal beliefs and
attitudes while describing the reactions of a third party.
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 49
Application of Projective Techniques :
Word association is commonly used to test brand names and to measure attitudes about particular
products , brands packages or advertisements.
The usefulness of Projective Techniques is enhanced when the following guidelines are observed.
1) Projected technique should be used because the required information cannot be accurately
obtained by direct methods.
2) For exploratory research to gain initial insights and understanding
3) Given their complexity , projective techniques cannot be used naively.

A comparison of Focus Group , Depth Interviews & Projective Techniques


Criteria Focus group Depth Interviews Projective Techniques
Degree of Structure Relatively high Relatively medium Relatively low
Probing of individual respondents Low High Medium
Relatively
moderator bias medium Relatively high Low to high
interpretation bias Relatively Low Relatively medium Relatively high
uncovering subconscious information Low Medium to high High
discovering innovative information High Medium Low to high
obtaining sensitive information Low Medium Gigh
involve unusual behavior /questioning No To limited extent Yes
overall usefulness Highly useful Useful Somewhat useful

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 50


Descriptive Research Design :
The key to good descriptive research is knowing exactly what you want to measure and selecting
a survey method in which every respondent is willing to co operate and capable of giving you
complete information efficiently.
Survey & Observation

Survey
Methods

Telephone Personal Mail Electronic


Interviewin Interviewin Interviewin Interviewin
g g g g

Computer Mall Computer Mail


Traditional In- Home Mail E-mail internet
Assisted Intercept Assisted Panel

Computer Assisted Telephone Interviewing : ( CATI) : uses a computerized questionnaire


administered to respondents over the telephone.
Observation Methods :

Observation
Methods

Personal Mechanical Content Trace


Audit
Observation Observation Analysis Analysis

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 51


Recording the behavioral patterns of people , objects and events in a systematic manner to obtain
information about a phenomenon of interest. The observer does not question or communicate
with the people being observed. Observational methods may be structured or unstructured ,
direct or indirect.
Structured : The researcher specifies in detail what is to be observed and how the measurements
are to be recorded.
Unstructured : The observer monitors all aspects of the phenomenon that seem relevant to the
problem at hand for eg : observing children playing with toys at hand.
Disguised : The respondents are unaware of that they are being observed.
Undisguised: the respondents are aware that they are under observation .
Mechanical Observation : use of cameras. UPC system( Universal Product code). The barcode
recording of the purchases in reliance etc.
Audit : The researcher collects data by examining physical records or performing inventory
analysis.
Content Analysis : The phenomenon to be observed is communication rather than behavior or
physical objects. It is defined as objective ,systematic, and quantitative description of the
manifest content of a communication. It includes observation as well as analysis. The unit of
analysis may be words ( different words or types of words in the message), characters(individuals
or objects), themes (propositions), space and time measures(length , duration of the message) or
topics(subject of the message).
Eg : observing and analyzing the content or message of advertisements, newspapers articles,
television and radio programs and the like.
Trace Analysis : An observation method that can be inexpensive if used creatively is trace
analysis. In trace analysis , data collection is based on physical traces or evidence of past
behavior. These traces may be left intentionally or unintentionally by the respondents.
Eg : Store charge card slips are traces shoppers leave behind , which can be analyzed to
examine their store credit usage behavior.
Applications :
1) The selective erosion of tiles in a museum indexed by the replacement rate was used to
determine the relative popularity of exhibits.
2) The number of different fingerprints on a page was used to guage the readership of various
advertisements in a magazine

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 52


3) The position of the radio dials in cars brought in for service was used to estimate share of
listening audience of various radio stations. Advertisers used the estimates to decide on
which stations to advertise.
4) The age and condition of cars in a parking lot were used to assess the affluence of customers.
5) The magazines people donated to charity were used to determine people’s favorite
magazines.
6) Internet visitors leave traces that can be analyzed to examine browsing and usage behavior
by using cookies.

Criteria Personal Mechanical Audit Content Analysis Trace


Observatio Observatio Analysis
n n
Degree of
structure Low Low to high High High Medium
Degree of
disguise Medium Low to high Low High High
Ability to
observe in
natural setting High Low to high High Medium Low
Observation
bias High Low Low Medium Medium
Low to
Analysis Bias High Medium Low Low Medium
General Most Can be Expensiv Limited to Method of
Remarks Flexible intrusive e communications last resort
Comparison of Observation & Survey methods : Only 1 % of marketing research projects rely
solely on observational methods to obtain primary data. This implies that observational methods
have some major disadvantages as compared to survey methods.
Relative advantages of observational methods :
1) Permit measurement of actual behavior rather than reports of intended or preferred behavior
2) No reporting bias and potential bias caused by the interviewer and the interviewing process
is eliminated or reduced.
Certain types of data can be collected only by observation.
i) behavior patterns that respondent is unaware of or is unable to communicate.
Eg : information on baby’s toys is best obtained by observing babies at play since they are
unable to express themselves.
Disadvantages of observational methods :

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 53


1)Reasons for the observed behavior may not be determined because little is known about the
underlying motives, beliefs , attitudes , preferences .
Eg : people buying a brand of cereal may not like it themselves.
2)Selective perception : ( bias in the researchers perception) can bias the data.
Observation has the potential to provide valuable information when properly used.
Other Methods : ( for Descriptive research design)
Mystery Shopping : Trained observers pose as customers and shop at company or competitor owned
stores to collect data about customer – employee interaction and other marketing variables such as
prices, displays, layout . The mystery shoppers question the store employees , mentally take note of
the answers and observe the variables of interest.

Causal Research Design :


The relationship between cause and effect tends to be probabilistic. We can never prove
causality(i.e demonstrate it conclusively ); we can only infer a cause and effect relationship.

Conditions for causality :


Ordinary meaning Scientific meaning
X is the only cause of Y x is only one of a number
of possible causes of Y.
X must always lead to Y The occurrence of X
(X is deterministic cause of makes the occurrence of Y
Y) more probable.(X is a
probabilistic cause of Y)
We can never prove that X
is a cause of Y . At best we
It is possible to prove that X can infer that X is a cause
is a cause of Y of Y

1)Concomitant variation : is the extent to which a cause X and an effect Y occur together or vary
together in the way predicted by the hypothesis under consideration. Evidence pertaining to
concomitant variation can be obtained in a qualitative or quantitative manner.
Eg : in the qualitative case the management believes that sales are highly dependant upon the quality
of in store service. This hypothesis could be examined by assessing concomitant variation.
Causal factor X : Instore service
Effect Factor Y : Sales
2)Time order occurrence of variables : The causing event must occur either before or
simultaneously with the effect; it cannot occur afterwards.

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By definition : an effect cannot be produced by an event that occurs after the effect has taken place.
It is possible for each event in a relationship to be both a cause and an effect of the other event.
In other words a variable can be both a cause and effect in the same causal relationship.
3) Absence of other possible causal factors : The absence of other possible causal factors means
that the factor on variable being investigated should be only possible causal explanation.
Eg: instore service may be a cause of sales if we can be sure that changes in all the other factors
affecting sales such as pricing , advertising level of distribution, product quality , competition and so
on were held constant or otherwise controlled.

Definitions and concepts :


Independent variables : They are variables or alternatives that are manipulated ( i.e levels of these
variables are changed by the researcher) and whose effects are measured and compared. These
variables are known as treatments , may include price levels, package designs, and advertising
themes.
Test units : are individuals, organizations, or other entities whose response to the independent
variables or treatments is being examined , may include consumers, stores , geographic means.
Dependent variables : Are the variables that measure the effect of the independent variables on the
test units. These variables may include sales, profits and market shares.
Extraneous Variables : are all variables other than the independent variables that affect the
response of test units. These variables can confound the dependent variable measures in a way that
weakens or invalidates the results of the experiment.
Eg : store size, store location, and competitive effort.
Experiment : An experiment is formed when the researcher manipulates one or more independent
variables and measures their effect on one or more dependent variables, while controlling for the
effect of extraneous variables.
Experimental Design : is a set of procedures specifying
1) test units and how these units are to be divided into homogenous subsamples
2) what independent variables or treatments are to be manipulated
3) what dependent variables are to be measured
4) how the extraneous variables are to be controlled
Definition of Symbols :
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X = the exposure of a group to an independent variable , treatment, or event, the effects of which
are to be determined
O= the process of observation or measurement of the dependent variable on the test units or group
of units
R=the random assignment of test units or groups to separate treatments.
Conventions :
• movement from left to right indicates movement through time
• horizontal alignment of symbols implies that all those symbols refer to a specific treatment
group
• vertical alignment of symbols implies that those symbols refer to activities or events that
occur simultaneously.
Eg :
X O1 O2
Means that a given group of test units was exposed to the treatment variable (X) and the response
was measured at two different points in time O1 & O1.
R X1 O1
R X2 O2
Means that two groups of test units were randomly assigned to two different treatment groups at
the same time and the dependent variable was measured in the two groups simultaneously.

Validity in Experimentation :
When conducting an experiment , a researcher has two goals.
1) draw valid conclusions about the effects of independent variables on the study group
2) make valid generalizations to a larger population of interest.
The first goal concerns internal validity and the second goal concerns external validity.

Internal Validity : Whether the manipulation of the independent variables or treatments actually
caused the observed effects on the dependent variables . if the observed effects are influenced or
confounded by extraneous variables , it is difficult to draw valid inferences about the causal
relationship between the independent and dependent variables.
External Validity :refers to whether the cause and effect relationships found in the experiment can
be generalized. Can the results be generalized beyond the experimental situation and if so to what

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populations , settings, times, independent variables and dependent variables can the results be
projected.
Threats to external validity arise when the specific set of experimental conditions does not
realistically take into account the interactions of other relevant variables in the real world.

To control for extraneous variables , a researcher may conduct an experiment in an artificial


environment. This enhances internal validity, but it may limit the generalizability of the results
thereby reducing external validity.

Extraneous Variables :
History
Refers to specific events that are external to the experiment but occur at the same time as the
experiment. These events may effect the dependent variable.
Eg : O1 X1 O2
O1 , O2 : measure of sales of a department store chain in a specific region and X1 represents a new
promotional campaign. Sales before and after the campaign.
The difference O2 – O1 is the treatment effect is the treatment effect. If there was no difference
between O2 and O1 then can we conclude that the promotional campaign was ineffective?
The promotional campaign is not the only possible explanation of the difference between O2 and
O1 . The campaign might be effective what if the general economic conditions declined during the
experiment.
The greater the time interval between observations, the greater the possibility that history will
confound an experiment of this type.

Maturation : Maturation (MA) is similar to history except that it refers to changes in the test units
themselves. The changes are caused by impact of the independent variables or treatments occur with
the passage of time.
In an experiment involving people , maturation takes place as people become older , more
experienced , tired , bored or uninterested . Tracking and market studies that span several months
are vulnerable to maturation , because it is difficult to know how respondents are changing over
time.

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Testing Effects : Are caused by the process of experimentation. Typically these are the effects on the
experiment of taking a measure on the dependent variable before and after the presentation of the
treatment.
Two kinds of testing effects .
1) Main testing 2) Interactive testing effect (IT)
The main testing effect (MT) occurs when a prior observation affects a latter observation.
Eg : Experiment to measure the effect of advertising on attitudes toward a certain brand. The
respondents are given a pretreatment questionnaire measuring background information and attitude
toward the brand. They are then exposed to the test commercial embedded in an appropriate
program. After viewing the commercial the respondents again answer a questionnaire measuring
among other things , attitude towards the brand . Suppose there is no difference between the Pre and
Post treatment attitudes. Can we conclude that the commercial was in effective.
Alternative explanation is that the respondent tried to maintain consistency between their pre and
post treatment variables. As a result of the main testing effect , post treatment attitudes were
influenced more by pretreatment attitudes than by the treatment itself.

The main testing effect may also be reactive , causing the respondents to change their attitudes
simply because these attitudes have been measured.

In the interactive testing effect( IT) a prior measurement affects the test unit’s response to the
independent variable. Continuing with our advertising experiment when people are asked to indicate
their attitudes toward a brand, they become aware of that brand. They are sensitized to that brand
and become more likely to pay attention to the test commercial than people who were not included in
the experiment.
The measured effects are then not generalizable to the population : therefore the interactive testing
effects influence the experiment’s external validity.
Instrumentation : Refers to the changes in the measuring instrument , in the observers or in the
scores themselves. Sometimes measuring instruments are modified during the course of an
experiment. In the advertising experiment this could lead to variations in the responses obtained.
Eg : experiment in which dollar sales are being measured before and after exposure to an in-store
display (treatment). If there is a non experimental price change between O1 and O2 , this results in a
change in instrumentation because dollar sales will be measured using different unit prices.
In this case the treatment effect ( O2 – O1) could be attributed to a change in instrumentation.
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Statistical Regression : effects occur when test units with extreme scores move closer to the average
score during the course of the experiment. In the advertising experiment suppose that some
respondents had either a very favorable or very unfavorable attitudes. On post treatment
measurement , their attitudes might have moved toward the average because people’s attitudes
change continuously . People with extreme attitudes have more room for change, so variation is
more likely. This has a confounding effect on the experimental results, because the observed
effect( change in attitude) may be attributable to statistical regression rather than to the
treatment( test commercial).

Selection Bias : Refer to the improper assignment of test units to treatment conditions. This bias
occurs when selection or assignment of test units results in treatment groups that differ on the
dependent variable before the exposure to treatment condition. If test units self select their own
groups or are assigned to groups on the basis of the researchers judgment , selection bias is possible.
Eg: merchandising experiment in which two different merchandising displays (old and new) are
assigned to different department stores . the stores vary on the key characteristic called store size.
Store size is likely to affect sales regardless of which merchandising display was assigned to a store.
Mortality : Refers to the loss of test units while the experiment is in progress. This happens for many
reasons , such as test units refusing to continue in the experiment. Mortality confounds results
because it is difficult to determine if the lost test units would respond in the same manner to the
treatment as those that remain .
Eg : merchandising display experiment. Suppose during the course of the experiment , three stores in
the new display treatment condition drop out. The researcher could not determine whether the
average sales for the new display stores would have been higher or lower if these three stores had
continued in the experiment.

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Controlling Extraneous Variables : They pose a serious threat to the internal and external validity
of an experiment. Unless they are controlled for they affect the dependant variable and thus
confound the results. They can be controlled by 4 ways .
1) Randomization : Involves randomly assigning test units to experimental groups by using
random numbers . Treatment conditions are also randomly assigned to experimental groups.
But randomization may not be useful for small sample sizes.
2) Matching : Involves comparing test units on a set of key background variables before
assigning them to the treatment conditions. In the merchandising display experiment stores
could be matched on the basis of annual sales, size or location. The one store from each
matched pair would be assigned to each experimental group. Matching has two drawbacks .
First test units can be matched on only a few characteristics , so the test units may be similar
on the variables selected but unequal on others. Second if the matched characteristics are
irrelevant to the dependent variable , then the matching effort has been futile.
3) Statistical Control: Involves measuring the extraneous variables and adjusting for their
effects through statistical analysis .
Eg : relationship between purchase of fashion clothing and education , controlling for the
effect of income. Advanced statistical procedures such as analysis of covariance (ANCOVA)
the effects of the extraneous variables on the dependent variable are removed by an
adjustment of the dependent variable’s mean value within each treatment condition.
4) Design Control : Involves the use of experiments designed to control specific extraneous
Variables .

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Classification of Experimental Designs

Experimen
tal
Designs

Pre True Quasi


Experimen Experimen Experimen Statistical
tal tal tal

Pretest-
Multiple
One Shot Posttest Time Randomize Latin
Time Factorial
case Study Control Series d Blocks Square
Series
Group

Post test
One Group
only
Pretest -
Control
Posttest
Group

Solomon
Static
Four -
Group
Group

Symbolic
Experiment Advantag
Representati Description Disadvantages Case study example
s es
on

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One shot case study for
measuring the effectiveness of a
test commercial for a department
store Sears is as follows. A
telephone interview is conducted
for respondents who have
Known as after watched a test commercial(X) on
only design . A sears , the previous night. The
single group of The danger of dependent variables (Os) are
test units is drawing valid unaided and aided recall. First
exposed to a conclusions . It unaided recall is measured by
treatment X and does not provide asking the respondents whether
One shot then a single the basis of they recall seeing a commercial
X O1
case study measurement on comparing the for a department store, if recall is
the dependent level of O1 to done further information about
variable is taken what would the same is solicited regarding
( O1). There is happen when X the commercial content . If the
no random was Absent.The respondents do not recall the
selection of test level of O1 might test commercial aided recall is
units. The test It is more be effected by done by the question" do you
units are appropriat many extraneous recall the seeing a commercial
selected e for variables on Sears last night" . The results
arbitarily by the explorator including history, of aided and unaided recall are
researcher or by y than for maturation, compared to norm scores to
self selection conclusive selection and develop an index for interpreting
1 procedures. research mortality. the scores.

Symbolic
Experimen
Representat Description Disadvantages Case study example
ts
ion
A group of test
units is measured
twice. There is no
control group. First
a pre treatment Example of sears again :
measure is taken Respondents are recruited to
(O1), then the central theatre locations in
group is exposed to different test cities. At the central
one Group the treatment (X). location, respondents are first
Pretest- Finally a post administered a personal interview
Post Test treatment measure The treatment to measure , among other things
Design is taken ( O2). effect is computed attitudes towards the store ,
History , as O2 - O1, but the Sears (O1). Then they watch a
maturation, validity of this TV Program , the respondents
testing , conclusion is are again administered a
instrumentation,sel questionable personal interview to measure
ection, mortality because attitudes towards the store
and regression extreneous Sears(O2). The effectiveness of
could possibly be variables are the test commercial is measured
2 O1 X O2 present. largely uncontrolled as O2- O1.

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Symbolic
Experimen
Representat Description Disadvantages Case study example
ts
ion
3 Static EG: X O1 Two group The measured Eg for Sear's store : Two groups
Group CG: O2 experimental difference O1-O2 of respondents would be recruited
Design design. One group can be attributed to on the basis of convenience .
called the at least two Only the experimental group
experimental group extraneous would be exposed to the TV
EG, is exposed to variables(seletion program containing the test
the treatment and and mortality) . ( Sears) commercial. Then
the other called the Also because the attitudes toward Sear's store of
control group (CG) test units are not both the experimental and control
is not. randomly assigned group respondents would be
Measurements on the two groups(EG measured. The effectiveness of
both groups are and CG ) may differ the test commercial would be
made only after the before the measured as O1- O2
treatment, and test treatment and
units are not selection bias may
assigned at be present. There
random. The also can be
control group is mortality effects
sometimes defined because more test
as the group that units may withdraw
receives the from the
current level of experimental group
marketing activity , than from the
rather than a group control group. This
that receives no would happen if the
treatment at all. treatment was
The control group unpleasant.
is defined this way
because it is
difficult to reduce
current marketing
activities , such as

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advertising and
personal selling to
zero.

Experimen
ts

True The distinguishing feature of the true experimental desings as compared to pre experimental
Experimen designs is randomization. In true experimental designs , the researcher randomly assigns test
tal units to experimental groups and treatments to experimental groups. True experimental
Designs designs include the pretest - post test control group design, the post test only control group
4 design

Symbolic
Experiments
Representation

Test units are randomly assigned to either the experimental or the


control group and a pretreatment measure is taken on each group.
Only the experimental group is exposed to the treatment but the
Post Test posttest measures are taken on both groups. The treatment
Only effect (TE ) is measured as ( O2 - O1 ) - (O4 - O3). This design
EG : R O1 X O2
5 Control controls for most extraneous variables . Selection bias is eliminated by
CG : R O3 O4
Group randomization. The other
Design extraneous effects are controlled as follows.
O2-O1 = TE + H + MA + MT + IT+ I + SR+ MO
O4- O3= H + MA+MT+I + SR+ MO = EV(extraneous variables ).
The experimental result is obtained by
( O2 - O1) - ( O4- O3) = TE + IT

Experiments

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The researcher can control when measurements are taken and on whom they are taken.
Secon the researcher lacks control over the scheduling of the treatments and also is
unable to expose test units to the treatments randomly. Quasi experimental designs are
Quasi
useful because they can be used in cases when true experimentation cannot and because
Experimenta
they are quicker and less expensive. Full experimental control is lacking and the
l Designs
researcher must take into account the specific variables that are not controlled. Popular
forms of quasi experimental designs are time series and multimple time series
6 designs.

Symbolic
Experiments Representatio Description Disadvantages Case study example
n

The effectiveness of a test


commercial ( X ) may be
Involves a series examined by broadcasting
of periodic the commercial a
measurements predetermined number of
on the times and examining the
dependent data from a preexisting test
variable for a panel. Although the
group of test marketer can control the
O1 O2 O3 units. The a major disadvantage scheduling of the test
Time Series
O4 O5 O6 O7 treatment is then is the failure to commercial, it is uncertain
Designs
O8 O9 O10 administered by control history. when or whether the panel
the researcher Another limitation is members are exposed to it.
or occurs that the experiment The panel members
naturally. After may be effected by purchases before during,
the treatment the interactive testing and after the campaign are
periodic effect, because examined to determine
measurements multiple whether the test
are continued to mesurements are commercial has a short
determine the being made on the -term effect , a long term
7 treatment effect. test units. effect or no effect.

Experiments Symbolic Representation Description Case study example

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Similar to time
series design
except that
another group The test commercial
of test units is would be shown in
added to serve only a few of the test
Multiple as a control cities. Panel
EG : O1 O2 O3 O4 O5 X O6 O7 O8 O9 O10
Time Series CG : O 11 O12 O13 O14 O15 O 16 O17 O18 O19 O20 group . If a members in these
Designs control group is cities would comprise
selected the experimental
carefully this group. Panel
design can be members in cities
an where the
improvement commercial was not
over the simple shown would
time series constitute the control
8 experiment. group.

Statistical Designs
Sno Description Example

It is useful when there is only one major external variable such as sales ,store
size, or income of the respondent that might influence the dependent variable.
The test units are blocked or grouped on the basis of the external variable.
The researcher must be able to identify and measure the blocking variable.
Randomized block designs are more useful than completely random designs,
their main limitation is that the researcher can control only one external
Randomized block variable. when more than one variable must be controlled the researcher must
1 design use latin square design

allows the researcher to statistically control two non interacting external


variables as well as to manipulate the independent variable. Each external or
Latin square blocking variable is divided into equal number of blocks or levels. The
2 Design independent variable is also divided into the same number of levels.

used to measure the effects of two or more independent variables at various


levels. Unlike the randomized block design and the latin square design ,
factorial designs allow for interactions between variables. An interation is said
to take place when the simultaneous effect of two or more variables is
different from the sum of their separate effects. eg : an individual's favorite
drink might be coffee and favorite temperature level might be cold but this
3 Factorial Design individual might not prefer cold coffee leading to an interaction.

For more indepth information of the above topics you can refer to N. K Malhotra

Sampling - Design & Procedures

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The formulation of Research design is the third step of marketing research process. At this stage the
information needed to address the marketing research problem has been identified and the nature of
the research design ( exploratory , descriptive or causal ) has been determined.

Further Scaling & measurement process has been specified and the questionnaire designed .

The next step is to design a suitable sampling procedure.

Basic questions for sampling design .

1) should a sample be taken


2) if so what process should be followed
3) what kind of sample should be taken
4) how large should it be
5) what can be done to control and adjust for non response error

Sampling process

Target Population : Collection of elements or objects that possess the information sought by the
researcher and about which inferences are to be made. The target population must be defined
precisely.

Element : The object about which or from which the information is desired , the element is usually a
respondent .

Sampling Unit : It is an element or a unit containing the element , that is available for selection at
some stage of the sampling process .

Flow chart of Sampling Process .

Define the target population

Determine the sampling frame

Select a sampling technique


Determine the sample size
Execute the sampling process

Example for Target Population : The target population for the department store project was defined
as follows.

Elements : Male or Female head of the household responsible for most of the shopping at
department stores
Sampling units : Households
Here Sampling unit and population element are different.

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Example for Defining Target Population ?

Consider a marketing research project assessing consumer response to a new brand of men’s
cologne. Who should be included in the target population ? Men 17 or older ? should females be
included , because some women buy colognes for their husbands ? these and similar questions must
be resolved before the target population can be approximately defined ?

Sampling Frame :
It is a representation of the elements of the target population . It consists of a list or a set of
directions for identifying the target population .

Examples :
Telephone book
A city directory
Map

Sampling Technique :
It involves several decisions of a broader nature . The researcher must decide whether to use a
Bayesian or traditional sampling approach, to sample with or without replacement , and to use non
probability or probability sampling.

Bayesian Approach : The elements are selected sequentially. After each element is added to the
sample, the data are collected, sample statistics computed and sampling costs determined.

Sampling with Replacement : An element is selected from the sampling frame and appropriate data
are obtained . Then the element is placed back in the sampling frame. As a result , it is possible for
an element to be included in the sample more than once.

Sampling without Replacement : Once an element is selected for inclusion in the sample , it is
removed from the sampling frame and therefore cannot be selected again.

The most important decision about the choice of sampling technique is whether to use probability or
non probability sampling.

Sample Size : Refers to the number of elements to be included in the study . Determining the sample
size is complex and involves several qualitative and quantitative considerations.

Conditions for precision or accurate information .


1) Larger Samples
2) The standard deviation of the mean is inversely proportional to the square root of the sample
size.

The nature of research also has an impact on the sample size .

1) Exploratory Research Design : Sample size is typically small.


2) Conclusive or descriptive research design : Sample size is large

Sample Sizes used in Marketing Research .


Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 68
Type of Study Minimum Size Typical Range
Problem identification research 500 1000 to 2000
( eg : market potential )
Problem Solving Research 200 300 to 500
(eg : pricing )
Product Tests 200 300 to 500
Test – marketing Studies 200 300 to 500
TV/radio/print advertising 150 200 to 300
( per commercial or ad test )
Test-market audits 10 stores 10 – 20 stores
Focus group 2 groups 6 to 15 groups

Finally the sample size should be guided by a consideration of the resource constraints.
In any marketing research project, money and time are limited . Other constraints include the
availability of qualified personnel for the data collection.

Executing the Sampling Process

Execution of the sampling process requires a detailed specification of how the sampling design
decisions with respect to the population , sampling frame, sampling unit, sampling technique and
sample size are to be implemented .

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Classification of Sampling Techniques .
Non probability sampling relies on the personal judgment of the researcher rather than chance to
select sample elements. The researcher can arbitrarily or consciously decide what elements to
include in the sample.
Non probability samples may yield good estimates of the population characteristics. However they
do not allow for objective evaluation of the precision of the sample results.

Sampling Techniques

Non Probability Probability

Convenience Simple Random


Sampling Sampling

Judgmental Systematic
Sampling Sampling

Quota Stratified
Sampling Sampling

Snowball Proportionate
Sampling

Disproportionate

Cluster
Sampling

Other Sampling
Techniques

In probability sampling , sampling units are selected by chance. It is possible to pre specify every
potential sample of a given size that could be drawn from the population as well as the probability of
selecting each sample.
Every potential sample need not have the same probability of selection, but it is possible to specify
the probability of selecting any particular sample of a given size. Confidence intervals which contain
the true population value with a given level of certainty can be calculated .

Probability sampling techniques are classified as follows.


1) element versus cluster sampling
2) equal unit probability versus unequal probabilities
3) unstratified versus stratified selection
4) random versus systematic selection

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5) single stage versus multistage techniques
Non Probability Sampling Techniques :
Convenience Sampling : Attempts to obtain a sample of convenient elements. The selection of
sampling units is left primarily to the interviewer. Often respondents are selected because they
happen to be in the right place at the right time.

Eg : 1)use of students , members or social organizations


2)mall intercept interviews without qualifying the respondents
3)people on streets

It is the lest expensive and least time consuming of all sampling techniques

Judgemental Sampling : it is a form of convenience sampling in which the population elements are
selected based on the judgement of the researcher. The researcher exercising judgement or expertise
chooses the elements to be included in the sample , because he or she believes that they are
respresentative of the population of interest or are otherwise appropriate.

Eg : 1)test markets selected to determine the potential of a new product


2)department stores selected to test a new merchandising display screen
It is low cost , convenient and quick but it does not allow direct generalizations to a specific
population , usually because the population is not defined explicitly. Judgemental sampling is
subjective and its value depends entirely on the researcher’s judgement , expertise and creativity. It
may be useful if broad population inferences are not required .

Quota Sampling : Two stage restricted judgmental sampling .

The first stage consists of developing control categories , or quotas of population elements

To develop these quotas , the researcher lists relevant control characteristics and determines the
distribution of these characteristics in the target population. . The relevant control characteristics
which may include sex, age and race are identified on the basis of judgement .

Often the quotas are assigned so that the proportion of the sample elements possessing the control
characteristics is the same as the proportion of population elements with these characteristics.

Snowball Sampling : An initial group of respondents is selected , usually at random. After being
interviewed these respondents are asked to identify others who belong to the target population of
interest.

Major objective of snowball sampling is to estimate characteristics that are rare in the population.

Eg : users of particular government or social services such as food stamps, whose names cannot be
revealed,

Special census groups such as widowed males under 35.


Used in industrial buyer –seller research to identify buyer seller pairs.

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Major disadvantage is that it substantially increases the likelihood of locating the desired
characteristic in the population. It also results in relatively low sampling variance and costs.

Graphical Illustration of Non Probability Sampling Techniques :

1) Convenience Sampling

A B C D E
1 6 11 16 21
2 7 12 17 22
3 8 13 18 23
4 9 14 19 24
5 10 15 20 25

Group D happens to assemble at a convenient time and place. So all the elements in this group
are selected . The resulting sample consists of elements 16,17,18,19 and 20 . No elements are
selected from groups A, B, C and E.

2) Judgmental Sampling

A B C D E
1 6 11 16 21
2 7 12 17 22
3 8 13 18 23
4 9 14 19 24
5 10 15 20 25
The researcher considers groups B , C and E to be typical and convenient. Within each of
these groups one or two elements are selected based on typicality and convenience. The
resulting sample consists of elements 8,10,11,13 and 24. Note that no elements are selected
from groups A and D.

3) Quota Sampling

A B C D E
1 6 11 16 21
2 7 12 17 22
3 8 13 18 23
4 9 14 19 24
5 10 15 20 25

A quota of one element from each group, A to E is imposed. Within each group, one element
is selected based on judgement or convenience. The resulting sample consists of elements 3, 6,
13,20 and 22. One element is selected from each column or group.

4) Snowball sampling

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A B C D E
1 6 11 16 21
2 7 12 17 22
3 8 13 18 23
4 9 14 19 24
5 10 15 20 25
Elements 2 and 9 are selected randomly from groups A & B. Element 2 refers elements 12 and 13.
Element 9 refers element 18. The resulting sample consists of elements 2, 9,12, 13 and 18. Note
that no element is selected from group E.

Probability Sampling Techniques :

1) Simple Random Sampling


Each element in the population has a known and equal and equal probability of being the
sample actually selected. This implies that every element is selected independently of every
other element. The sample is drawn by a random procedure from a sampling frame.

Eg : lottery system .
The researcher first compiles a sampling frame in which each element is assigned a unique
identification number.

2) Systematic Sampling :
In systematic sampling , the sample is chosen by selecting a random starting point and then
picking every ith element in succession from the sampling frame.

The sampling interval i is determined by dividing the population size N by the sample size
n and rounding to the nearest integer.

Population = 10,000 elements


Sample desired = 1000
Sampling interval I = 100
A random number between 1 and 100 is selected . If for example this number is 23 , the
sample consists of elements 23, 123,223,323,423,523 and so on.
It is similar to simple random sampling in that each population element has a known and
equal probability of selection.
It is different from SRS in that only the permissible samples of size n that can be drawn have
a known and equal probability of being selected.
For systematic sampling the researcher assumes that the population elements are ordered in
some respect.
It is less costly and easier than SRS because random selection is done only once.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 73


3) Stratified Sampling : It is a two step process in which the population is partitioned into sub
populations or strata. The strata should be mutually exclusive and collectively exhaustive in
that every population element should be assigned to one and only one stratum and no
population elements should be omitted.

Next elements are selected from each stratum by a random procedure usually SRS.
Technically only SRS should be employed in selecting the elements from each stratum.
In practice sometimes systematic sampling and other probability sampling procedures are
employed.

It differs from quota sampling in that the sample elements are selected probabilistically
rather than based on convenience or judgement.

Major objective of stratified sampling is to increase precision without increasing cost.

4) Cluster Sampling.

The target population is first divided into mutually exclusive and collectively exhaustive sub
populations or clusters.

Then a random sample of clusters is selected , based on a probability sampling technique such as

SRS.
For each selected cluster , either all the elements are included in the sample or a sample of
elements is drawn probabilistically.

If all elements in each selected cluster are included in the sample, the procedure is called one
stage cluster sampling.
If a sample of elements is drawn probabilistically from each selected cluster, the procedure is
two stage cluster sampling.

Two stage cluster sampling can be either simple two stage cluster sampling involving SRS or
probability proportionate to size (PPS) sampling.

Cluster Sampling

One Stage Two Stage Multistage


Sampling Sampling Sampling

Probability
Simple Cluster
Proportionate
Sampling
To size sampling

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Distinction between cluster sampling and stratified sampling

Cluster Sampling Stratified sampling


Only a sample of subpopulations (clusters ) is all the subpopulations( strata) are selected for
chosen further sampling
Objective is to increase sampling efficiency by Objective is to increase precision
decreasing costs
Form of cluster sampling is area sampling. Stratified sampling is used when the researcher is
Only one level of sampling for selecting the basic particularly interested in certain specific categories
elements , the design is called single stage area within the total population . The population is
sampling. divided into strata on the basis of recognizable or
If two or more levels of sampling take place the measurable characteristics of its members . eg : age,
design is called two or multi stage area sampling income , education etc. The total sample then is
composed of members from each strata so that the
stratified sample is really a combination of the
number of smaller samples.
The various units comprising the population are The use of stratified samples will lead to more
grouped in clusters and the sample selection is accurate results only if the strata selected are
made in such a way that each cluster has a known logically related to the data sought.
chance of being selected.
A cluster sample is useful in two situations Proportionate stratified sampling wherein the no of
i) when there is incomplete data on the items in each stratum is proportionate to their
composition of the population number in the population .
ii)when it is desirable to save time and costs by Disproportionate sampling wherein a proportionate
limiting the study to specific geographical areas sampling would cause the occurrence of very little
data . Eg : study is to be conducted about the
characteristics of car owners with the type of car
being owned the basis for stratification. So if a
proportionate sampling is used very little data about
Chevrolet (2) and Toyota ( 3) might be obtained. So
now a smaller number of maruti , ambassador and
fiat owners would be included in the sample than
their number in the universe warrants.
Major disadvantage is that cluster sampling leads
to a substantial loss in precision , since units
within each cluster tend to be rather
heterogeneous

In probability proportionate to size sampling , the clusters are sampled with probability
proportional to size. The size of cluster is defined in terms of the number of sampling units within
that cluster.

So in first stage large clusters are more likely to be included than small clusters.
In second stage the probability of selecting a sampling unit in a selected cluster varies inversely with
the size of the cluster.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 75


Thus the probability that nay particular sampling unit will be included in the sample is equal for all
units, because the unequal first stage probabilities are balanced by the unequal second stage
probabilities.
Strength and weakness of basic Sampling Techniques
Technique Strengths Weaknesses
Non Probability Sampling
Selection bias, sample not
representative , not
Least expensive, least time recommended for descriptive or
Convenience sampling consuming , most convenient causal research
Low cost, convenient , not time Does not allow generalization,
Judgmental sampling consuming subjective
Sample can be controlled for Selection bias, no assurance of
Quota Sampling certain characteristics representativeness
Can estimate rare
Snowball Sampling characteristics Time consuming
Probability Sampling
Difficult to construct sampling
frame, expensive , lower
Simple random sampling Easily understood, results precision, no assurance of
(SRS) projectable representative ness
Can increase
representativeness, easier to
implement than SRS, sampling can decrease
Systematic Sampling frame not necessary representativeness
Difficult to select relevant
stratification variables, nof
Includes all important sub feasible to stratify on many
Stratified Sampling populations , precision variables, expensive
Easy to implement, cost Imprecise, difficult to compute
Cluster sampling effective and interpret results

Other probability sampling techniques.


i) Sequential sampling : The population elements are sampled sequentially, data collection and
analysis are done at each stage and a decision is made as to whether addional population elements
should be sampled. Sequential sampling has been used to determine preferences for two competing
alternatives.
Eg : to establish the price differential between a standard model and a deluxe model of a consumer
durable.
In one study respondents were asked which of two alternatives they preferred , and sampling was
terminated when sufficient evidence was accumulated to validate a preference.
ii) Double Sampling : Also called two phase sampling, certain population elements are sampled
twice. In the first phase a sample is selected and some information is collected from all the elements
in the sample. In the second phase a sub sample is drawn from the original sample and additional
information is obtained from the elements in the sub sample.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 76


It is useful when no sampling frame is readily available for selecting final sampling units but when
the elements of the frame are known to be contained within a broader sampling frame,

Choosing NonProbability Versus Probability Sampling


Non Probability Probability
Factors Sampling Sampling
Nature of Research Exploratory Conclusive
Relative Magnitude of
sampling and non Nonsampling errors Sampling errors
sampling errors are larger are larger
Variability in the Heterogenous
population Homogenous ( Low) ( high)
Statistical considerations Unfavorable Favorable
Operational
Considerations Favorable Unfavorable

Internet Sampling

Internet
Sampling

Online Intercept Recruited Other


Sampling Online Sampling Techniques

Non Random Random Panel Non Panel

Recruited Opt- in Opt – in List


Panels Panels Rentals

Definitions & Symbols

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 77


Confidence intervals and other statistical concepts that play a central role in sample size
determination are defined in the following list.

Parameter : It is a summary description of a fixed characteristic or measure of the target


population. A parameter denotes the true value that would be obtained if a census rather than a
sample were undertaken.

Symbols for population and sample statistics


Variable Population Sample
Mean μ X—
Proportion p
Variance σ 2
s2
Standard Deviation σ s
Size N n

Standard Error of the mean σX— Sx_


Standard error of the
proportion σp Sp
Standardized variate(Z) (X -μ)/ σ (X-X—)/S
Coefficient of Variation "(C )
" σ/μ S/X—

Statistic : is a summary description of a characteristic or measure of the sample. The sample statistic
is used as an estimate of the population parameter

Finite Population Correction : The finite population correction (FPC) is a correction for
overestimation of the variance of a population parameter, for example a mean or proportion when
the sample size is 10 % or more of the population size.

Precision Level : When estimating a population parameter by using a sample statistic, the precision
level is the desired size of the estimating interval. This is the maximums permissible difference
between the sample statistic and the population parameter.

Confidence Interval : The confidence interval is the range into which the true population parameter
will fall, assuming a given level of confidence.

Confidence Level : The confidence level is the probability that a confidence interval will include the
population parameter.

Sampling Process

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1) How population is defined .

It is the specific group of people, firms, conditions , activities which form the pivotal point of
research project.
For developing a sample it becomes the primary duty of the researcher to define the population from
which to draw the sample.

What is the population for your project ?

2) Sampling frame
Developing a sampling frame.
A sampling frame may be defined as the listing of the general components of the individual units
that comprise the defined population.

Eg : a fertilizer manufacturing company wants to test its fertilizer efficiency with regard to crop
yields.

The sample units here can include fields.


The sampling frame would be the set of coordinates used for selecting various agricultural fields.

3) Sampling methods .

Whether probability or non probability sampling.


i) Probability sampling if sampling error is to be estimated.
ii) Non Probability sampling if the research is required to defend the randomness in the
selection of sample units.
iii)it is better to use non probability sampling when a frame does not exist nor one can be
developed .
iv)non probability sampling should be used if the researcher has limited knowledge about the
statistical aspects of sampling.

4) Selecting Sample size


Trade off between cost and sampling error , larger sample keeps error small but increases sampling
cost. So how to select the correct sample size.

Probability Sampling :
Degree of precision , knowledge of standard error and confidence intervals.

Non Probability Sampling :


The central limit theorem or the principle of normal distribution is not applicable in the case of non
probability sampling. It is the researchers intuition and judgment which makes the decision about the
size of the sample.

The size of the sample in Non Probability sampling is generally 1/10th of the population size.

Sampling Metrics
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 79
Standard Errors of Mean & Proportion

i) Sampling of variables involves a numerical value such as average height, weight , expenditure
here we estimate the standard error of the mean. Sigma x bar
ii) Sampling of proportions is expressed in dichotomous terms.
Eg : good or bad, heavy or light , high or low here standard error of the proportion is calculated.

Estimating standard error of the mean:


The following formula is used :

Sx bar = (s/ sqrt (n)) * (sqrt((N-n)/N))

S x bar = standard error of the mean using sample data


S = standard deviation derived from the sample.
n = sample size
N = Population Size
Example : We are studying the spending habits of college students on entertainment. If there is a
population of 6000 students and we take a sample of 500 students, we find that the average student
spends Rs 100 per month on entertainment, This figure of Rs 100 is taken as an average for all 6000
students population . But is this assumption valid ? suppose if we take another sample of 500 students
and survey them would it be valid . The results would actually be different .
It is all because of sampling error ?
Now Average spending is 100 .
Standard deviations is say Rs 15

Estimate the standard error of the mean S x bar.


= 15/sqrt(500) * Sqrt((600 – 500)/6000)
= 0.64

The formula for constructing a confidence interval is :

X bar + - 1.96(S xbar) = 95 percent confidence interval

X bar + - 2.57(S x bar) = 99 percent confidence interval

X bar = sample mean

S xbar = standard error of the mean of the sample.

Substituting the sample data at 95 % confidence interval


Xbar + - 1.96 (S xbar) = 95 % confidence interval
(Rs 100 ) +- 1.96 ( Rs 0.64)
(Rs 100) +- 1.26
Rs 98.74 – Rs 101.26

This means that if a large number of probability samples ( size 500 ) were taken from the particular
city college student body, 95 % of these samples would contain the actual mean of the universe
within an interval of +- 1.96 standard errors of their mean values.
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 80
This is want the 95 % confidence interval of Rs 98.74 to Rs 101.26 mean. It is assumed that this
sample with a mean of Rs 100 is among those 95 percent.

99% interval is derived as


Xbar + - 2.57 ( Sx bar) = 99 %
Rs 100 +- 2.57(0.64)
Rs 100 +- 1.64
Rs 98.36 – Rs 101.64

What does this 99 % mean. It means that if a large number of samples ( size 500) are taken from the
student body, 99% of these would contain the actual mean of the universe within an interval +- 2.57
of standard errors of their mean value.

So at 95% confidence interval


6000 * Rs 98.74 – 6000 * Rs 101.26
Rs 592.440 – Rs 607.560

Standard error of proportion :

The formula for computing the standard error of proportion is

Sp = Sqrt ((( P.q)/n )*( (N-n)/N)))

Sp = standard error of the proportion


P = proportion of sample possessing a certain attribute.

q or (1-p) = proportion of sample not having that attribute.

Example : A study of 5000 students was conducted by taking a sample of 400 students. It was
regarding the students attitudes towards a company’s products. It was found that 88 % of the students
(22% ), had favorable attitudes toward the company’s products while 312 students (78 %) held
unfavorable ones. Based on this information, what would be the 95 % confidence interval depicting
the attitude of the entire student body toward company’s products?

Standard error of the proportion is computed as follows

Sp = Sqrt((P.q)/n * (N-n)/N))

Sp = Sqrt((22.78/400 ) *(5000 – 400)/5000))


= 4.29 * 0.92
= 1.99 %
Now the formula for 95 % confidence interval when attributes are involved is
P =- 1.96(Sp)
= 22 % + - 1.96(1.99 %)
= 22% + - 3.9 %
= 18.1 % - 25.9 %
Based on this 18 to 26 % confidence interval we can say that only 12 % to 26 % of the college
students have a favorable attitude towards the company’s products.
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 81
Using standard error of the mean to determine the sample size

S xbar = s/ Sqrt(n)

Squaring both sides


Sx bar square = s square / n

n = S 2 / S xbar 2

Example : Colgate Palmolive India Ltd wants to know how much does a male student spend
annually on toothpastes. They selected Punjab agricultural university , ludhiana as population and
took sample for the study . Assume that there were 18,000 students of which 8,300 were males. The
company wants to be reasonably confident that the amount obtained will be within +- Rs 2 of the
average male students real expenditure. How large a sample will be needed to achieve this precision.
The researcher is fairly confident that the range of annual expenditures for toothpastes by male
students at Punjab agricultural university is from Rs 0 to Rs 80.

Using the above formula

n = S 2/ S xbar 2

n= S 2 / Sx 2
n=(Rs 80 / 6) 2 / Sx 2
= (Rs 13.5 ) 2 / Sx 2

Here we divided S / 6 because in a normally distributed set of values , the range encompasses
approximately three standard deviations . Thus 80 / 6 gives a reasonable estimate of 1 standard
deviation.

The result is total estimated range/ 6 = estimated S

At 95 % confidence interval involves 1.96 Sx . in our example that means 1.96 Sx = +- Rs 2

Sx bar = Rs 2/ 1.96 = Rs 1.02

Substituting this value in original formula , we get

n= (Rs 13.50) 2 / Rs 1.02 2


= 182.25/ 1.04 = 175

Thus to be 95 % confident and the sample mean within +- Rs 2 of the population mean a sample of
175 male students must be contacted.

If colgate Palmolive needs greater precision, that is a smaller interval of +- Re 1 requires a sample of
701 students as under

1.96 Sx = Re1
So Sx = 0.51
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 82
n=(Rs 13.5)2 / 0.51 2 = 182.25 / 0.26 = 701
Now small change in precision sought ( + - Re 1 vs +- 2 ) requires almost 4 fold increase in the
size of the sample needed.

Now small change in precision size i.e if the n value generated by the above procedure i.e is
more than 5 % of the population ( n / N > 5% ) the sample size should be revised downward .
The downward revision would take the following form.

n alpha = n / 1 + n / N where n alpha = adjusted sample.

Now in the above example sample size was 175, this is only 2 % of the total population of 8300
students , so no downward adjustment is needed.

In case 701 is the sample size ( 8.5 % of the population ) downward adjustment is needed.

n alpha = 701 / 1 + 701 / 8300


= 646

Sample size in case of attributes

Measurement & Scaling

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Fundamentals & Comparative Scaling

Measurement : Assigning numbers or other symbols to characteristics of objects according to


certain prespecified rules.

Scaling : Creation of a continuum upon which measured objects are located.

What do we Measure ?
• Perceptions, attitudes, preferences or any relevant characteristics.

• Characteristics of the Objects

Numbers in Marketing Research

• Numbers facilitate statistical analysis of resulting of data.

• Communication of Measurement rules & results.

Specification of Rules
• Important aspect of measurement : Measurement Process must be Isomorphic. Isomorphic
means – one to one correspondence between the numbers and the characteristics being
measured.

Scaling Example
• Consider a scale from 1 to 100 for locating consumers according to the characteristic
“ attitude toward department Stores”
Each respondent is assigned a number from 1 to 100
1 = extremely unfavorable
100 = extremely favorable

Measurement & Scaling


• Measurement is the actual assignment of a number from 1 to 100 to each respondent.

• Scaling is the process of placing the respondents on a continuum with respect to their
attitude towards an object or process

Primary Scales of Measurement


• Nominal Scale ; Ordinal Scale ; Interval Scale ; Ratio Scale

Examples
• Nominal Scale - Numbers assigned to Runners

• Ordinal Scale - Rank order of winners

• Interval Scale - Performance rating on a 0- to 10 Scale

• Ratio Scale - Time to Finish in Seconds

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 84


Primary Scales of Measurement
Scale Basic Common Marketing Permissible Statistics
Characteristics Examples Examples Descriptive Inferential
Nominal Numbers Social Brand Numbers, Percentages,mode Chi Square ,
Identify & Security Nos Store types , Sex Binomial
classify Objects Numbering of classification
Football
Players
Ordinal Numbers Quality Preference Percentile, median Rank-order
indicate the rankings, rankings, market correlation ,
relative rankings of position, Friedman ANOVA
positions of the teams in a Social class
objects but not tournament
the magnitude
of differences
between them
Interval Differences Temperature Attitudes, Range, mean, Product-moment
between objects (Fahrenheit, opinions, index standard deviation correlations, t- tests,
can be centigrade) numbers ANOVA,
compared; zero regression,
point is arbitary factor analysis
Ratio Zero point is Length , Age, income, Geometric mean, Coefficient of
fixed; ratios of weight costs, sales, harmonic mean variation
scale values market shares
can be
computed

Examples in Marketing Research


• Nominal Scale – Identifying respondents, brands, attributes, stores, & other objects.

• Ordinal Scale - Rank order of winners

• Interval Scale - Performance rating on a


0- to 10 Scale

• Ratio Scale - Time to Finish in Seconds


*************************************************
• Nominal Scale – Identifying respondents, brands, attributes, stores, & other objects.

• Ordinal Scale - Rank order of winners

• Interval Scale - Performance rating on a


0- to 10 Scale

• Ratio Scale - Time to Finish in Seconds

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 85


• Nominal Scale – The numbers in a nominal scale do not reflect the amount of the
characteristic possessed by the objects.

A high social security number does not imply that the person is in some way superior to those with
lower social security number.

Example :
Project : Department Store
Numbers 1 to 10 were assigned to the stores. Number 9 was assigned to Sears
This does not imply that Sears was inferior or superior to others.

But it is meaningful to say that 75 % of respondents patronized store 9.

• Ordinal Scale – Numbers are assigned to objects to indicate the relative extent to which the
objects possess some characteristic.
• Indicates relative position,not the magnitude of differences between the objects.
• The object ranked first has more characteristic as compared to the object ranked second.

Examples
Quality rankings, rankings of teams in a tournament, socioeconomic class & occupational status.
**************************
Interval Scale

Used to measure relative attitudes, opinions, perceptions, and preferences

• Interval Scale – Numerically equal distances on the scale represent equal values in the
characteristic being measured.

• Contains all the information of an ordinal scale, but it also allows you to compare the
differences between objects.

Positive linear transformation of the form

y =a+bx will preserve the properties of the scale.


x = original scale value ,y=transformed value
b is the positive constant, a is any constant.

Two interval scales that rate objects A,B,C,D as 1,2,3 & 4 or as 22,24,26 & 28 are equivalent.

• Interval Scale – Numerically equal distances on the scale represent equal values in the
characteristic being measured.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 86


Scaling
• Contains all the information of an ordinal scale, but it also allows you to compare the
Techniques
differences between objects.

Positive linear transformation of the form


Non
Comparative
y =a+bx will preserve the properties of the scale.
Comparative
Scales
x = original scale value ,y=transformed value Scales

b is the positive constant, a is any constant.


Q-Sort& Continuous Itemized
Paired Two interval scales that rate objects
Constant
A,B,C,D as 1,2,3 &other
4 or as 22,24,26 & 28 are equivalent.
Rank Order Rating Rating
Comparison Sum
procedures Scales Scales
Example : Temperature Scale

Attitudinal data obtained from rating scales are often treated as interval data.

Primary Scales of Measurement

Nominal Scale Ordinal Scale Interval Scale Ratio Scale


(Preference Ratings)
No Store Preference 1 to 7 11 to 17 $ spent last Se
Rankings 3 months Dif
1 Parisian 7 79 5 15 0
2 Macy’s 2 25 7 17 200
3 K mart 8 82 4 14 0
4 Kohl’s 3 30 6 16 100 S
5 JC Penny 1 10 7 17 250
6 Neiman- 5 53 5 15 35
Marcus
7 Marshal's 9 95 4 14 0
Scaling
8 Sak’s 6 61 5
Techniques
15 100
Fifth
Avenue
9 Sears 4 45 6 16 0
10 Wal-Mart 10 115 2 12 10
Non
Comparative
Comparative
Scales
Scales

Comparison of Scaling Techniques Q-Sort& Continuous Itemized


Paired Constant
Rank Order other Rating Rating
Comparison Sum
procedures Scales Scales

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Semantic
Likert Stapel
Differential
Scaling Techniques

• Comparative Scales – Involve the direct comparison of stimulus objects.

Example respondents may be asked whether they prefer coke or Pepsi.

Comparative scales must be interpreted in relative terms and have only ordinal or rank order
properties.
Tend to reduce the halo or carryover effects from one judgment to another.
To compare RC Cola to coke and pepsi the researcher would have to do a new study.

Non Comparative Scales : Monadic or metric scales each object is scaled independently or the
others in the stimulus set.

Example : Respondents might be asked to evaluate coke on a 1-6 preference scale( 1= not at all
preferred , 6= greatly preferred)

Paired Comparison

• Respondent is presented with two objects and asked to select one according to some
criterion.
• The data obtained are ordinal in nature.
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 88
• Used frequently when stimulus objects are physical products.

We are going to present you with 10 pairs of shampoo brands, for each pair
, please indicate which one of the two brands of shampoo in the pair you
would prefer for personal use
Clinic Head & Shoulders Sunsilk
Clinic 1 0 1

Head & Shoulders 0 1 1

Sunsilk 1 0 1
Number of times 2 1 3
preferred

Rank Order Scaling

Respondents are presented with several objects simultaneously and asked to order or rank them
according to some criterion.

Brand Rank Order


1. Crest
2. Colgate
3. Aim
4. Gleem
5. Close up
6. pepsodent

Constant Sum Scaling


In constant sum scaling , respondents allocate a constant sum of units such as points , dollars ,
chips among a set of stimulus objects with respect to some criterion.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 89


Below are the attributes of eight toilet soaps. Please allocate 100 points among the attributes , so
that your allocation reflects the relative importance you attach to each attribute.

Allows for fine discrimination among stimulus objects without requiring too much time.

It has two primary disadvantages. Respondents may allocate more or fewer units than those
specified.

For example a respondent may allocate more or fewer units than those specified

Average response of three segments


Attribute Segment 1 Segment 2 Segment 3
Mildness 8 17 4

Lather 53 12 6
Packaging 15 9 10
Moisturizing 13 19 12
Sum

Q Sort & other Procedures

Qsort Scaling was developed to discriminate quickly among a


relatively large number of objects.
This technique uses a rank order procedure in which objects are
sorted into piles based on similarity with respect to some criterion.
Respondents are given 100 attitude statements on individual cards
and asked to place them into 11 piles, ranging from “ most higly
agreed with “ to “ least highly agreed with “
The number of objects to be sorted should not be less than 60 nor
more than 140;
60 to 90 objects is a reasonable range.

Magnitude estimation : Numbers are assigned to objects such


that ratios between the assigned numbers reflect ratios on the
specified criterion.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 90


Example : respondents may be asked to indicate whether they
agree or disagree with each series of statements measuring attitude
towards department stores.
Non Comparative Scaling Techniques
Scale Basic Examples Advantages Disadvantages
Characteristic
Continuous Place a mark Reaction to TV Easy to construct Scoring can be
rating scale on a continuous commercials cumbersome unless
line computerized
Itemized rating
scales
Likert Scale Degree of Measurement Easy to construct More time
agreement on of ,administer , and consuming
1(strongly attitudes understand
disagree) to
5(strongly
agree) scale
Semantic Seven point Brand product versatile Controversy as to
Differential scale with and company whether the data are
bipolar labels images interval
Stapel scale Unipolar ten- Measurement Easy to construct; Confusing and
point scale, -5 of attitudes and administered over difficult to apply
to + 5 without images telephone
a neutral
point(zero)

Continuous rating scale : also called as graphic rating scale, respondents rate the
objects by placing a mark at the appropriate position on a line that runs from one
extreme of the criterion variable to the other.

How would you rate Sears as a department store

Version 1
Probably the worst _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Probably the best
Once the respondent has provided the ratings, the researcher divides the line
into as many categories as desired and assigns scores based on the
categories into which the ratings fall.

Probably the worst _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Probably the best


0 10 20 30 40 50 60 70 80 90 100

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 91


Itemized rating scale :
The respondents are provided with a scale that has a number or brief description associated with
each
category. The categories are ordered in terms of scale position and the respondents are required to
select
the specified category that best describes the object being rated.

Likert scale : Rensis likert .

Requires respondents to indicate a degree of agreement or disagreement with each of a series of


statements
about the stimulus objects.
Each scale item has 5 response categories , ranging from “ strongly disagree” to “ strongly agree “.

Example :
Different opinions about sears store
1 = strongly disagree
2 = disagree
3 = neither agree nor disagree
4 = agree
5 = strongly agree

Semantic Differential Scale :


It is a 7 point rating scale with end points associated with bipolar labels that have semantic
meaning. In a typical application, respondents rate objects on a number of itemized, 7 point
rating scales bounded at each end by one of two bipolar adjectives such as cold and warm.

Sears is
Powerful _:_:_:_:_:_:X-:_:_:Weak
Unrealible_:_:_::_:_:_:_:_:_X:_:_:Reliable

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Stapel scale : Jan Stapel
Unipolar rating scale with 10 categories numbered from -5 to +5 without
neutral point(zero). This scale is usually represented vertically .
Respondents are asked to indicate how accurately or inaccurately each term
describes the object by selecting an appropriate numerical response category.

Example
Select a + number for the phrases you think describe the store accurately.
The more accurately you thing the phrase describes the larger the + number you should choose
Select a - number for phrases you think do not describe it accurately. The less accurately you think
the phrase describes the larger the – number u should choose
Form Sears High Quality Poor Service
+5 +5 -1 -1
+4 +4 -3 -2

High Quality Poor Service


-1 -1
-2 X -2
-3 -3
-4 -4

The staple scale can be administered over the telephone.

Major decisions the researcher must take while constructing the scales.
1. Number of scale categories to use
2. Balanced versus unbalanced scale
3. Odd or even number of categories
4. Forced versus non forced choice
5. The nature and degree of the verbal description
6. The physical form of the scale

Number of Scale Categories : Two conflicting considerations are involved in deciding the
number of scale categories. The greater the number of scale categories , the finer the
discrimination among stimulus objects that is possible. On the other hand respondents
cannot handle more than a few categories.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 93


Balanced versus unbalanced scale: The number of favorable and unfavorable categories
are equal; in an unbalanced scale they are unequal.
Eg :
Balanced Scale Unbalanced Scale
Jovan Musk for men is Jovan Musk for men is
Extremely good Extremely good
Very good Very good
Good Good
Bad Somewhat Good
Very Bad Bad
Extremely bad Very Bad

The scale should be balanced in order to obtain objective data


If the distribution of responses is likely to be skewed , either positively or negatively ,an
unbalanced scale with more categories in the direction of skewness may be appropriate.
an unbalanced scale is used the nature and degree of unbalance in the scale should be taken
into account in data analysis.

Odd or Even Number of Categories


With an odd number of categories the middle scale position is generally designated as neutral or
impartial. The presence , position and labeling of a neutral category can have a significant
influence on the response. The likert scale is a balanced rating scale with an odd number of
categories and a neutral point. The decision to use an odd or even number of categories depends
on
whether some of the respondents may be neutral on the response being measured. If a neutral or
indifferent response is possible from at least some of the respondents , an odd number or
categories
should be used. If on the other hand the researcher wants to force a response or believes that no
neutral or indifferent response exists, a rating scale with an even number of categories should be
used.

Forced versus Nonforced Scales : On forced rating scales, the respondents are forced to express

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 94


an opinion because a “ no opinion “ option is not provided. In such a case respondents without an
opinion may mark the middle scale position. If a sufficient proportion of the respondents do not have
opinions on the topic, marking the middle position will distort measures of central tendency and
variance. In situations where the respondents are expected to have no opinion , as opposed to
simply being reluctant to disclose it , the accuracy of data may be improved by a no forced scale
that includes a “ no opinion “ category.

Nature & Degree of Verbal Description : The nature and degree of verbal description associated
with scale categories varies considerably and can have an effect on the responses. Scale categories
may have verbal numerical or even pictorial descriptions. Furthermore the researcher must decide
whether to label every scale category, some scale categories or only extreme scale categories.
Labeling can be done to reduce the scale ambiguity. The category description should be located as
close to the response categories as possible.

Physical Form or Configuration : A number of options are available with respect to scale form or
configuration. Scales can be presented vertically or horizontally . Categories can be expressed by
boxes, discrete lines, or units on a continuum and may not have numbers assigned to them. If
numerical values are used , they may be positive , negative or both.
Two unique rating scale configurations used in marketing research are
1) thermometer scale : the higher the temperature the more favorable the evaluation
2) smiling face scale : happier faces indicate more favorable evaluations.

Summary of Itemized Rating Scale Decisions


1 Number of categories Although there is no single , optimal number, traditional guidelines
suggest that there should be between five and nine categories
2 Balanced versus the scale should be balanced to obtain objective data
unbalanced
3 Odd or even number of if a neutral or indifferent scale response is possible from at least some
categories of the respondents, an odd number of categories should be used
4 Forced versus nonforced In situations where the respondents are expected to have no opinion ,
the accuracy of data may be improved by a nonforced scale.
5 Verbal description an argument can be made for labeling all or many scale categories.
The category descriptions should be located as close to the response
categories as possible
6 Physical Form A number of options should be tried and the best one selected

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 95


Some commonly used scales in marketing :
Construct Scale Descriptors
neither bad very
1 Attitude very bad bad nor good good good

Not at all Not Very


2 Importance important Important Neutral Important Important
neither
dissatisfied
Very nor very
3 Satisfaction dissatisfied dissatisfied satisfied satisfied satisfied
might nor
definitely probably might not probably definitely
4 Purchase Intent will not buy will buy will buy will buy
purchase very
5 Frequency never rarely sometimes often often

Multi – item Scales

Develop a Theory

Generate an initial pool of items: theory ,secondary data and qualitative


research

Select a reduced set of items based on qualitative judgment

Collect data from a large pretest sample

Perform statistical analysis

Develop a purified scale

Collect more data from a different sample

Evaluate scale reliability , validity and generalizability

Prepare the final scale

Scale Evaluation :
A measurement is a number that reflects some characteristic of an object. A measurement is
Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 96
not true value of the characteristic of interest but rather an observation of it.

Scale
Evaluation

Generalizabili
Reliability Validity
ty

Alternative Internal
Test/ Retest Content Criterion Construct
Forms Consistency

Convergent

Discriminant

Nomological

Measurement Accuracy : A measurement is not a true characteristic of interest but rather an


observation of it. Measurement error results in the measurement or observed score being different
from the true score of the characteristic being measured . The true score model provides a
framework for understanding the accuracy of measurement .
Xo = Xt + Xs + Xr
Xo = the observed score or measurement
Xt = the true score of the characteristic

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 97


Xr= random error.

Sampling Process
1) How population is defined .

It is the specific group of people, firms, conditions , activities which form the pivotal point of
research project.
For developing a sample it becomes the primary duty of the researcher to define the population from
which to draw the sample.

What is the population for your project ?

2) Sampling frame
Developing a sampling frame.
A sampling frame may be defined as the listing of the general components of the individual units that
comprise the defined population.

Eg : a fertilizer manufacturing company wants to test its fertilizer efficiency with regard to crop
yields.

The sample units here can include fields.


The sampling frame would be the set of coordinates used for selecting various agricultural fields.

3) Sampling methods .

Whether probability or non probability sampling.


i) Probability sampling if sampling error is to be estimated.
ii) Non Probability sampling if the research is required to defend the randomness in the
selection of sample units.
iii)it is better to use non probability sampling when a frame does not exist nor one can be
developed .
iv)non probability sampling should be used if the researcher has limited knowledge about the
statistical aspects of sampling.

4) Selecting Sample size


Trade off between cost and sampling error , larger sample keeps error small but increases sampling
cost. So how to select the correct sample size.

Probability Sampling :
Degree of precision , knowledge of standard error and confidence intervals.

Non Probability Sampling :

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The central limit theorem or the principle of normal distribution is not applicable in the case of non
probability sampling. It is the researchers intuition and judgment which makes the decision about the
size of the sample.

The size of the sample in Non Probability sampling is generally 1/10th of the population size.

Sampling Metrics

Standard Errors of Mean & Proportion

i) Sampling of variables involves a numerical value such as average height, weight , expenditure
here we estimate the standard error of the mean. Sigma x bar
ii) Sampling of proportions is expressed in dichotomous terms.
Eg : good or bad, heavy or light , high or low here standard error of the proportion is calculated.

Estimating standard error of the mean:


The following formula is used :

Sx bar = (s/ sqrt (n)) * (sqrt((N-n)/N))

S x bar = standard error of the mean using sample data


S = standard deviation derived from the sample.
n = sample size
N = Population Size
Example : We are studying the spending habits of college students on entertainment. If there is a
population of 6000 students and we take a sample of 500 students, we find that the average student
spends Rs 100 per month on entertainment, This figure of Rs 100 is taken as an average for all 6000
students population . But is this assumption valid ? suppose if we take another sample of 500
students and survey them would it be valid . The results would actually be different .
It is all because of sampling error ?
Now Average spending is 100 .
Standard deviations is say Rs 15

Estimate the standard error of the mean S x bar.


= 15/sqrt(500) * Sqrt((600 – 500)/6000)
= 0.64

The formula for constructing a confidence interval is :

X bar + - 1.96(S xbar) = 95 percent confidence interval

X bar + - 2.57(S x bar) = 99 percent confidence interval

X bar = sample mean


Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 99
S xbar = standard error of the mean of the sample.

Substituting the sample data at 95 % confidence interval


Xbar + - 1.96 (S xbar) = 95 % confidence interval
(Rs 100 ) +- 1.96 ( Rs 0.64)
(Rs 100) +- 1.26
Rs 98.74 – Rs 101.26

This means that if a large number of probability samples ( size 500 ) were taken from the particular
city college student body, 95 % of these samples would contain the actual mean of the universe
within an interval of +- 1.96 standard errors of their mean values.
This is want the 95 % confidence interval of Rs 98.74 to Rs 101.26 mean. It is assumed that this
sample with a mean of Rs 100 is among those 95 percent.

99% interval is derived as


Xbar + - 2.57 ( Sx bar) = 99 %
Rs 100 +- 2.57(0.64)
Rs 100 +- 1.64
Rs 98.36 – Rs 101.64

What does this 99 % mean. It means that if a large number of samples ( size 500) are taken from the
student body, 99% of these would contain the actual mean of the universe within an interval +- 2.57
of standard errors of their mean value.

So at 95% confidence interval


6000 * Rs 98.74 – 6000 * Rs 101.26
Rs 592.440 – Rs 607.560

Standard error of proportion :

The formula for computing the standard error of proportion is

Sp = Sqrt ((( P.q)/n )*( (N-n)/N)))

Sp = standard error of the proportion


P = proportion of sample possessing a certain attribute.

q or (1-p) = proportion of sample not having that attribute.

Example : A study of 5000 students was conducted by taking a sample of 400 students. It was
regarding the students attitudes towards a company’s products. It was found that 88 % of the
students (22% ), had favorable attitudes toward the company’s products while 312 students (78 %)
held unfavorable ones. Based on this information, what would be the 95 % confidence interval
depicting the attitude of the entire student body toward company’s products?

Standard error of the proportion is computed as follows

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 100


Sp = Sqrt((P.q)/n * (N-n)/N))

Sp = Sqrt((22.78/400 ) *(5000 – 400)/5000))


= 4.29 * 0.92
= 1.99 %
Now the formula for 95 % confidence interval when attributes are involved is
P =- 1.96(Sp)
= 22 % + - 1.96(1.99 %)
= 22% + - 3.9 %
= 18.1 % - 25.9 %
Based on this 18 to 26 % confidence interval we can say that only 12 % to 26 % of the college
students have a favorable attitude towards the company’s products.

Using standard error of the mean to determine the sample size

S xbar = s/ Sqrt(n)

Squaring both sides


Sx bar square = s square / n

n = S 2 / S xbar 2

Example : Colgate Palmolive India Ltd wants to know how much does a male student spend
annually on toothpastes. They selected Punjab agricultural university , ludhiana as population and
took sample for the study . Assume that there were 18,000 students of which 8,300 were males. The
company wants to be reasonably confident that the amount obtained will be within +- Rs 2 of the
average male students real expenditure. How large a sample will be needed to achieve this precision.
The researcher is fairly confident that the range of annual expenditures for toothpastes by male
students at Punjab agricultural university is from Rs 0 to Rs 80.

Using the above formula

n = S 2/ S xbar 2

n= S 2 / Sx 2
n=(Rs 80 / 6) 2 / Sx 2
= (Rs 13.5 ) 2 / Sx 2

Here we divided S / 6 because in a normally distributed set of values , the range encompasses
approximately three standard deviations . Thus 80 / 6 gives a reasonable estimate of 1 standard
deviation.

The result is total estimated range/ 6 = estimated S

At 95 % confidence interval involves 1.96 Sx . in our example that means 1.96 Sx = +- Rs 2

Sx bar = Rs 2/ 1.96 = Rs 1.02

Substituting this value in original formula , we get


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n= (Rs 13.50) 2 / Rs 1.02 2
= 182.25/ 1.04 = 175

Thus to be 95 % confident and the sample mean within +- Rs 2 of the population mean a sample of
175 male students must be contacted.

If colgate Palmolive needs greater precision, that is a smaller interval of +- Re 1 requires a sample
of 701 students as under

1.96 Sx = Re1
So Sx = 0.51

n=(Rs 13.5)2 / 0.51 2 = 182.25 / 0.26 = 701


Now small change in precision sought ( + - Re 1 vs +- 2 ) requires almost 4 fold increase in the size
of the sample needed.

Now small change in precision size i.e if the n value generated by the above procedure i.e is more
than 5 % of the population ( n / N > 5% ) the sample size should be revised downward . The
downward revision would take the following form.

n alpha = n / 1 + n / N where n alpha = adjusted sample.

Now in the above example sample size was 175, this is only 2 % of the total population of 8300
students , so no downward adjustment is needed.

In case 701 is the sample size ( 8.5 % of the population ) downward adjustment is needed.

n alpha = 701 / 1 + 701 / 8300


= 646

Sample size in case of attributes

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1) ABC so is a leading firm of dry cleaners with branches in delhi and the large towns in western U.P
. The company has been thinking of setting up a new shop in agra which already has four other dry
cleaning shops, one of which is a branch of a national company at par with the ABC. ABC is
concerned about the reaction of customers and potential customers to the opening of its branch in
Agra, and is of the opinion that one of the three possibilities can take place

i) increased market share


ii) no change in the present operations
iii) reduced market share.
The company assigns a value to each of these outcomes.

Outcome Value in Rs Outcome Probability


(lakhs)
Increased Share 3 Increased Share 0.2
No Change 1 No Change 0.5
Reduced Share -2 Reduced Share 0.3

Probabilities assigned to the outcomes after discussion’s with the managers .

The expected monetary value can be calculated as follows

EMV ( Expected monetary Value ) = ( Rx 3,00,00 x 0.2 ) +


( Rs 1,00,000 X 0.5 ) + ( Rs -2,00,000 X 0.3)
= Rs 60,000 + Rs 50,000 – Rs 60,000
= Rs 50,000
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2) ABC co whose major competitor is XYZ co, has to decide whether or not to introduce a new
product. Although completely reliable information regarding XYZ’s plans is not available , the
marketing manager of ABC has assumed certain probabilities on the basis of past experience. He has
prepared the following conditional pay off ?
XYZ Company Strategy
Probability C1 = 0.6 C2 = 0.4
Rs (Million) Rs (Million)
Strategy S1 6 10
S2 4 15

C1 : indicates that XYZ co introduces new product


C2 : indicates that XYZ co does not introduce new product

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S1 Indicates that ABC decides to introduce new product
S2 indicates that ABC decides not to introduce new product

The question is : what is the expected value of perfect information ?


We first calculate the EMV of the two strategies :
EMV of the two strategies :
EMV of S1 = (6x 0.6) + (10 X 0.4 )
= 3.6 + 4
= Rs 7.6 million

EMV of S2 = (4 X 0.6) +(15X 0.4)


= 2 .4 + 6
= Rs 8.4 Million
On the basis of these calculations, ABC should choose strategy S2, which is the optimal strategy.
From the pay off matrix given above , it is possible to calculate a tentative value for perfect
information. Assume that the ABC co is considering approaching a consultancy firm to provide
additional information relating to XYZ’s plans .

IT should be noted that ABC cannot pay any arbitary amount demanded by this consultancy firm. It
should therefore fix up an upper limit beyond which it would like to pay. How is this limit
determined ?

Assume that ABC Co is fully acquainted with the plans of its competitior XYZ co . In such a case
ABC will choose S1 and gain a payoff of Rs 6 million when XYZ introduces a new product. This is
because S2 will yield only Rx 4 million. Likewise , ABC will choose S2 and gain a pay-off of
Rx 15 million when it is certain that XYZ will not introduce a new product. This is because s1 will
yield only Rx 10 million.
Now from the information given above , it is known that XYZ will choose C1 during 60 percent of
the time and C2 during 40 percent of the time . In view of this , the expected monetary value under
certainty will be as follows :
EMV ( C ) = (6 x 0.6 ) + ( 15 X 0.4 )
= 3.6 + 6
= Rs 9.6 million
Now the expected monetary value of perfect information is to be determined . This is the difference
between the expected monetary value under certainty and expected monetary value of the optimal
strategy calculated under conditions of uncertainity (i.e) EMV ( UC) . Thus the expected monetary
value of perfect information is :

EMVPI = EMV( C ) - EMV(UC)


= Rs ( 9.6 – 8.4 ) million
= Rs 1.2 million
3)A marketing manager of a soft drink manufacturing company is seriously considering whether to
undertake a special promotion . The two options before him are
i) Run a special promotion.
ii)Do not run a special promotion.
The following table gives the probabilities assigned by the marketing manager to the three possible
outcomes Viz . very favourable consumer’s reaction , favourable consumer’s reaction and
unfavourable consumer’s reaction.

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 104


Possible consumer Alternative courses of action Probabilities of
Reaction Consumer Reactions
A1 Rs A2 Rs
Very favourable 1,00,00,000 0 0.7
Favourable 10,00,000 0 0.1
Unfavourable -50,00,000 0 0.2

Calculate the Expected monetary value of perfect information ?

Source : N. K Malhotra Reproduced by : Premchandrahas Sastry 105