Marketing Research & Forecasting

Chapter 5

Case Study
The Situation

Coach Research Revamps Strategy

Researchs Role

Firm began by offering classically styled, highquality leather handbags. Women needed only two purses in brown or black. Mid-1990s: sales slowed. Consumer preferences changed as more women entered the workforce. Designer bags made Coachs look plain.

Method: Interviews 14,000 women annually. Watches trends for market voids. Key research findings: 1) desire for fashion pizzazz in handbags. 2) Usage voids. New products are created to fill voids (wristlets, fabric bags, Signature line, etc.). Sales and earnings grow.

Definition of Marketing Research

Marketing Research is . . . .

the process of defining a marketing problem or opportunity,

systematically collecting and analyzing information, and recommending actions to improve an organizations

marketing activities.

Limitations

Data is always out of date. Management usually wants research yesterday to make a point. Doesnt tell you what to do. Is scientific & objective (numbers). Only as good as the data gatherer & preparer. Shortcuts cut costs but add risks. Research is difficult to assess: a. lacks follow up authority b. management may not be qualified to interpret and react accordingly.

Market Research Process

Define problem and research objectives

Develop plan to collect data

Implement, collect and analyze data

Interpret and report findings

The Marketing Research Process

Marketing research:
Systematic design, collection, analysis, and reporting Data relevant to a specific marketing situation facing the organization A multi-step, purpose-driven process Measure effectiveness of marketing actions, sales potential, try to understand consumer behaviour Can be done by company personnel or contracted out to outside companies
Figure 5.2

The Marketing Research Process (continued)

Defining the problem and research objectives:

Helps to know what you are looking for! Can be the most difficult step in the process Need to distinguish between symptoms and problems
p.170

Exploratory research:

Research conducted to gather information to Help better define problems and opportunities Secondary research, focus group discussions and depth interviews are commonly used for this purpose
Figure 5.2

The Marketing Research Process (continued)

Descriptive research:

Research conducted to better describe marketing problems, situations, or markets, such as : Demographic characteristics of markets, attitudes of consumers, and market potential for a product Surveys and personal interviews are commonly used Research to test hypothesis about cause and effect relationships.
Figure 5.2

Causal research:

The Marketing Research Process (continued)

Developing the research plan:

Translating the research objectives into specific information needs Research plan presented in a written proposal for approval

Secondary data: information that already exists, having been

collected for another purpose ( see Table 5.1 p.172) Internal data, academic, and commercial sources Faster and cheaper than primary data collection, but may not be in a suitable form for decision making Helps to see what work has already been done in the area
Figure 5.2

The Marketing Information System

Assessing information needs:

Remember, the objective is to make better marketing decisions Must consider needs of all users Must balance information wants with decision making needs and feasibility (and costs) of offering it The value of information comes from its use, not its existence Internal data Marketing intelligence Marketing research

Developing information:

Developing Information

Internal data:

Information collected from different sources within the company, and stored within the organizations information system Accounting system
Operations/production

reporting system Past research studies Internal data is cheap, quick, and easy May not be in a usable form for the decision to be made May be too much information to sort through

Sales

Developing Information

Marketing intelligence:
Systematic collection and analysis of Publicly available information About competitors and market developments Proactive approach to keeping track of what is going on within the organizations marketing environment

Sources: employees, customers,

trade shows, websites, marketing communications, suppliers, resellers, professional information services, and dumpster diving

Types of Marketing Information

Internal data (inside the firm)
Financial statements, research reports files, customer letters, sales call reports, and customer lists

Secondary data Facts and Figures

Already recorded prior to the project

External data (outside the firm)

Statistics Canada reports, trade association studies, and magazines, business periodicals, and commercial reports

Data

Facts and figures pertinent to the problem

Observational data (watching people) Primary data Facts and Figures

Mechanical and electronic approaches Personal approaches

Newly collected for the project

Questionnaire data (asking people)

Idea generation through in-depth interviews and focus groups Idea evaluation through mail, telephone, and personal surveys

Market Research Process: Develop the Research Plan

Advantages of Secondary Data Less time to obtain Lower cost than primary research Alternate means of access to information Benefit from resources of others Potential Problems With Secondary Data May not be:

Relevant Accurate Current Impartial

Primary Data Sources

1.

(see p.174 Table 5.2)

Survey:
a. b. c. d. e.

Personal interview ( Molson Beer survey on Campus) Telephone Mail Focus groups, consumer panels, expert panels Internet Audit (store & warehouse) Simple, direct (via consumer panel) Contrived event Mechanical Psycho galvanometer (lie detector) Pupilometer (eye direction camera) Perceptoscope (pupil dilation) Tachistoscope

2.

Observation:
a. b.

c.
d.

3.

Experimentation:
a. b. c. d.

Pros & Cons: Surveys

1. Surveys: Low cost & quick.

Unwillingness to answer or unreliability of sample is common. Certain leading questions or poorly constructed ones may influence answers. A great deal of time is spent studying the content, and wording of questions.

Personal interview:

expensive, but high response rate. A large amount of data can be collected. projective tests can be used.

Telephone:

cheap & fast. Least amount of data collected. hours of phoning are limited.

Mail:

slow, inflexible, good control, but low response rate.

Focus groups:

panels can be local or national. They can yield info as to : who bought, or used according to age, sex, family size, income, etc.

Pros & Cons: Observation

2.

Observation:
some bias may exist on behalf of consumers who know that they are being observed or on behalf of observers who make the data fit their objectives.

Audit:

no bias (inventory turnover) made famous by A.C. Neilson.

Simple, direct:

watching the movement of people in a store. It gives us an idea for layout and design.

Contrived event:

setting up an event to find (special item on bottom shelf in far corner)

Mechanical:

cameras, audiometers, etc.

Pros & Cons: Experimentation

3. Experimentation: expensive, unnatural, unrealistic setting, but
completely objective.

Psychogalvanometer: (lie detector machine) to illicit some

response, we examine sweat on hand, body temperature, etc.

Pupilometer: (eye camera) to find out what part of advertisement

attracts the eye.

Perceptoscope: pupil dilation reveals level of boredom.

donna effect)

(ie. Atropine for the bella

Tachistoscope: measures speed at which ideas are perceived, (Ads

message clarity).

Contact Methods

(p.176 Table 5.3)

Table 6.3

Mail

Telephone

Personal

Online

Flexibility
Quantity of data collected Control of interviewer effect Control of sample Speed of data collection Response rate

Poor
Good Excellent Fair Poor Poor

Good
Fair Fair Excellent Excellent Good

Excellent
Excellent Poor Fair Good Good

Good
Good Fair Poor Excellent Good

Cost

Good

Fair

Poor

Excellent

Source: Adapted with permission from Marketing Research: Measurement and Method, 7th ed., by D.S. Tull and D.I. Hawkins, MacMillan Publishing Company, 1993

Research Features

Question & answer techniques:

Direct Open ended Comparison Rating scales Projective tests

Typical Problems in Wording Questions

PROBLEM
Leading question

SAMPLE QUESTION
Why do you like Wendys fresh meat hamburgers better than those of competitors made with frozen meat?

EXPLANATION
Consumer is led to make statement favoring Wendys hamburgers

Ambiguous question Do you eat at fast-food restaurants regularly? Yes No

Unanswerable question Two questions in one

What is meant by word regularly-once a day, once a month, or what?

Who can remember the answer? Does it matter? How do you answer if you eat Wendys hamburgers but not chili?

What was the occasion for your eating your first hamburger?
Do you eat Wendys hamburgers and chili? Yes No

Typical Problems in Wording Questions

PROBLEM
Non exhaustive question Non mutually exclusive answers

SAMPLE QUESTION
Where do you live? At home In dormitory What is your age? Under 20 20-40 40 and over

EXPLANATION
What do you check if you live in an apartment? What answer does a 40-year old check?

Reliability & Validity

Reliable: data can be replicated, and is therefore trustworthy,

dependable, and consistent.
(to footnote your reference sources.)

Valid: logically related conclusion. We must measure what we are

supposed to be measuring. (Is there a logical connectiveness with your project claims?
if A then B, therefore C may not be true.) ie

Example: a male panel is asked to judge which group is more attractive: 1. Group X [men with ties] 2. Group Z [females without ties]
Example: garlic around neck will cure your cold in 7 days; otherwise, it will take one week.

Market Research Process: Plan Primary Data Collection

Sampling Plans - three issues

What is the sampling unit? What is the sample size? What is the sampling procedure?

The Marketing Research Process (continued)

Sample:
A segment of the population selected for marketing research To represent the population as a whole Who should be surveyed? Sampling unit How many should be surveyed? Sample size How should they be chosen? Sampling procedure

Market Research Process: Types of Samples

( see p.182 Table 5.4)

Probability Samples Simple random sample

Non-probability Samples Convenience sample

Select easiest population

Known chance Equal probability

Judgement sample

Stratified random sample

Mutually exclusive groups Random sample drawn

Select for accurate response Interviewer sets number Quota Sample

Sampling

Probability sampling: (everyone has a known probability of being selected).

A.
B.

Random sampling: (every 10th name in the phone book; but not everyone
is listed or has a phone).

Stratified sampling: where every major segment of the population receives a weighted share of importance (furniture
store may be interested in 20-30 year old newly weds instead of empty nesters).

C.

Cluster (area) sampling: (random city block; then random sampling within.) Its cheap and quite good.

Non-probability sampling: (selection of people is based on researchers judgement).

A.

Quota sampling: no randomness.

(first 100 people wear eyeglasses. Very adequate for exploratory research.)

Forecasting
a. b.

Extending past behaviour Assumes that past conditions will continue unchanged into the future. Doesnt react to long run cyclical changes. Anticipating future behaviour Is much more time consuming and subjective as to which factors to consider. Initially we may develop a national economic forecast based upon (GDP, population growth, disposable income, etc.) This is then used to develop an industry sales forecast, and then a company, then a product forecast. Forecasts can be used to provide breakdowns by: 1. Geographic region 2. Product type 3. Customer type 4. Commission class, etc.

Forecasting (continued)

Single factor method: past or future estimated sales x Z factor = forecast

Multiple factor method: Same as above, only several factors are used. population x income group sought x age group sought x share of market x price of product = total sales potential

Time Series Analysis

Leading & lagging indicators ie construction starts;

business bankruptcies, etc

Economist use the above to help predict seasonal, time, and special trends or fluctuations in our economy.

Qualitative & Quantitative Methods

Quantitative methods: Time series, market test methods, consumption co-efficient, regression analysis, barometric analysis, statistical demand analysis, etc. Market-Build-up Method = potential buyers X probability of purchase. Market Rating Index (MRI) = area share of retail sales percent of nations population. (If Vancouver has 7.03% of nations sales and 5.77% of population, its MRI = 122, 7.03 5.77 = 122%) Chain-Ratio method (which is the opposite of the Market-build-up method.) Start with more general market information, and then compute more specific information.

Based on

Methods
Surveys

What people say

What people do

of buyers intentions. Composite sales force opinions. Expert opinion Test markets

What people have done

Time

series analysis Leading indicators Statistical demand analysis

Qualitative & Quantitative Methods

a.

Qualitative methods:
b.
1. 2. 3.

c.
d.

e.

Jury of executive opinion: a group of seasoned veterans give their opinions. Sales force estimates: drawbacks to this may be: high turnover of reps. (unfamiliar + unreliable) may not be familiar with economic climate changes. mistrust of such information between sales force and management. Surveys & market tests: surveys of buyers intentions (Gallup, McGraw Hill surveys.) Substitute methods: (Corollary Product Indexes) to approximate upper & lower limits especially for new products (pay T.V.) Delphi method: experts state their responses. Information is collected and feedback is given. New responses are submitted and the process is repeated. One choice finally emerges. (The Pope was chosen in this fashion.)