Marketing Research: Applications

Assessing Market Potential: Sales Forecasting Defining market demand

Demand can be measured at several levels
Levels of Market Demand

Product Levels

Space Levels

Time Levels

Product-item Sales
Product-form Sales Product-line Sales Company Sales Industry Sales National Sales

Individual Customer Sale

Sales by territory Sales by Country Global Sales

Short-range Sales
Medium-range Sales Long-range Sales

Describing a market
Penetrated Market
Current number of users of a product or a service and the sales volume generated by them.

Source of Information: Secondary data Sample Survey

Potential market
Those people who have an interest in buying the product or the service

Available Market
Those people in the potential market having an ability to use the product/service.

Served or Target Market

The market that the firm can effectively compete in
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Predicting Future Demand

In choosing the appropriate forecasting method, the analyst must consider the following:
The data that can be used: The accuracy, currency, representativeness, representativeness and extensiveness of data must be assessed before choosing a technique. The Technique: The analyst must have adequate knowledge about the technique and its limitations; he/she must be comfortable with it. Cost: Greater accuracy involves greater cost. Cost Vs. level of accuracy demanded must be assessed before choosing the technique Time horizon: The method or technique must be the most appropriate for the period of time in question.
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Approaches to Sales Forecasting

Basic approaches to sales forecasting include:
Stage 1. Environmental forecast about consumer spending, consumer saving, interest rate. Inflation, employment, investment etc.; Stage 2. Use the above data along with industry and environmental trends to forecast sales and profits to be earned by the industry. Often, this is not possible. I those cases, this stage is skipped. Stage 3. Develop a company sales forecast using the data in 2 above and assuming a given market share.

Forecasting Sales of established products/services Two approaches with variants

Questioning people to generate primary data
Surveys of buyer intentions Sales-force opinion Expert opinion

Analyzing historical data with Secondary data

Time dependent approaches
time-series analysis,moving average,exponential smoothing, statistical demand analysis etc.

Mathematical and statistical models

linear programming, transportation algorithm, assignment models, PERT/CPM Network models, Decision Tree analysis, Inventory models, Markov Process, Queuing, Simulation etc.
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Segmentation Research I
Segment
refers to a unique group of customers or potential customers who share some common characteristics that differentiate them from others. Segmenting and choosing the optimum market is called target marketing and is a vital marketing skill.

Segmentation of the consumer market may be based on:

demographic variables geographic variables geodemographic variables psychographic variables behavior patterns
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Segmentation Research II
Geographic segments:
Based on consumers geographic location including streets, towns, cities, provinces, countries, regions, continents, trading and/or political blocks, such as AFTA, NAFTA, ASEAN etc.

Demographic segments:
based on variables such as age, sex, level of education, marital status, family lifecycle, job type and level of income etc.

Geodemographic segments:
based on variables such as house-type and locations, for example, people who live in high-rise apartment complex
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Segmentation Research III

Psychographic segments
developed on the basis of the psychological profile of people and includes variables such as attitude, lifestyle and personalities of people.

Behavioral segments
based on behavior pattern of people such as consumption behavior such as heavy user, medium user, light user etc. and on the basis of other benefit enjoyed.

Segmentation in Industrial, organizational and Business-to Business Market.

Different variables that may be used in these markets include:

Customer type
Type of product or service, standard industrial classification code may be used

Customer location Size

In terms of sales, number of staff etc.
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Product Research
Has three roles:
Idea Generation
Includes alternative specifications for product concepts utilizing end user analysis or problem analysis.

Screening: Evaluating new-product ideas

Refers to initial screening of consumer reactions to new product concepts. Not effective for products that are radically innovative and for products that require significant changes in the consumption pattern.

Consumer product/market testing

involves testing the product in the market

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STAGE I: Idea Generation

Focus groups and direct observation provide insights for product development. Secondary data, Group discussion, Brainstorming [ on a given problem] Problem Inventory Analysis -->Examining Customer complaints Attribute based customer surveys Involves listing all the product attributes and then systematically modify one or more of them to see what would improve the product. Morphological Analysis Involves identification of the relevant dimensions of the product under study and enumeration of relevant variables with each dimension identified. Imitation, Acquisition, licensing

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STAGE II: Screening

Purposes of concept testing:
Determine customer attitude towards the product concept or idea. Measure customers reaction towards the products attributes, e.g.. packaging, color, size, etc.. Predict the trial rate of the intended product Determine whether the product concept warrants further development and provide guidance on how the concept might be improved or re-defined.

Data collection methods include:

Focus group discussion Survey Research Not very easy Questions are to be formulated carefully to capture and effectively communicate the spark of an idea. Demonstration

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Typical Questions in Concept Testing

QUESTION ITEMS

TYPICAL QUESTIONS

Uniqueness of the In your opinion, how different is this product compared to concept other existing products in the market? Product attribute What do you particularly like about the shape of this product? User Would you be more likely to buy this product for yourself or as a gift for someone else? Price/Value Which of the statements shown in this card best describes Reaction how you feel about the product? (Show cards with comments expressing reactions). Place of Purchase Where would you shop for the product? Frequency of How often would you buy this product? purchase Overall impression From what you have learnt about the product, which word/phrases [show some words/phrases]best describes your reaction to this product
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STAGE III: Product/Market Testing I

Product and market testing provides a more detailed assessment of a new product's chances for success. Includes technical testing, preference and satisfaction testing, simulated test markets and test markets to evaluate potential success/failure and define important marketing elements.
Uncovers product shortcomings evaluate commercial products evaluate alternative formulations uncover the appeal of the product to various market segments gain ideas for other elements of the marketing program

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Product/Market Testing II
Technical Testing on a prototype provides information on product shelf life, product wear/tear rates, problems regarding use/consumption, potential defects, maintenance schedule Preference and satisfaction testing
reserved for the final version of the product

Simulated test marketing [laboratory test markets] provides insights to potential market response/market share
Popular models include ASSESSOR, BASES, DESIGNOR, and LITMUS
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Approaches to measure performance of the test product Three Approaches:

Testing against a standard product
Test Product --> brand leader

Horse Racing Alternative

Several test products are developed for testing against one another to determine which one attains the highest level of consumer acceptance.

Testing against a historical standard

Test product --> Performance of a successful product which may not be involved in the test. A seldom used technique.
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Product/Market Testing III: Test Marketing

Objective:
To obtain reasonable prediction for performance of a new product; To understand the contributing factors underlying a particular performance; To provide management with the opportunity to pre-test alternative marketing strategies.

Only those products, which have shown a good chance of success in the earlier concept and product development test, are subjected to test marketing.
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Typical information gathered and major design issues in test marketing

Awareness level; Purchase and repurchase rate; Users experience with the product; Users perception of the product; Users profile and lifestyles; Reasons for not using products; Market share. Design Issues:
The number of test markets to be chosen;
at least three involves cost-benefit analysis

The criteria used for selecting test markets;

a normal and not overtested market

The length of the test.

six to 12 months

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Price Research I
Generally undertaken for exploring pricing approaches for new products or services before they are launched. Involves
showing different sets of brands in the same product category to respondents at different prices and asking them which one they would buy; presenting different prices for a product/service to respondents and asking them if they would buy the product/service. The responses are then used to construct a so-called buy-response curve.

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Price Research II
Pricing research may also be conducted using consumer panels. Data obtained may be analyzed using regression analysis. Regression analysis can help in sorting out effects of price Vs other variables on quantities sold. Sample survey may also be used in price research. However, this should be used with care since obtaining a response curve using survey may be subject to error and bias. Other pricing research techniques include:
Laboratory experiments, simulated test markets using standard test market
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Promotion Research
Objective: To develop advertising appeals. Types of research generally undertaken include: Psychological or motivational studies
Generally used within the framework of individual interviews. Involves talking with people in depth about what a product or service may mean to them, what feelings are evoked by it, and discover what it symbolizes to them.

Sociological studies
Focus group studies may be undertaken to generate ideas.

Anthropological studies
A small number of people may be observed to understand how a product fits into their lives and what keep them interested in a particular brand.
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Message Research: Pre-test

Pre-test refers to the test of an ad-message before releasing the advertisement. Test techniques commonly used are:
Verbal responses involving Consumer jury method Portfolio test Qualitative research On-the air-test and Theater persuasion test Physiological responses involving
Galvanic skin responses Pupil dilation responses and Eye movement tracking

Behavioral responses involving

In-store persuasion
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Pre-test II
Consumer jury method: Uses 50 to 100 customers as jurors who are asked to rank the test advertisements in order of interest, preference or ability to influence the purchase of the product. Portfolio test:A sample of consumers are asked to look through a portfolio of 6 - 8 print advertisements within an allotted period of time. The portfolio is then taken away and the respondents are asked to recall the specifics of the ads shown. Recalls are generally unaided. The effectiveness of the test is measured by attributes such as ability to recall the contents, claim of credibility in the advertisement, general reaction, etc.
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Pre-test II
Qualitative Research: The two most widely used methods are Focus group discussions and depth interviews. Commonly used during the development stage of the advertisement. On-the-air test:The test advertisement is broadcast in a small number of test markets and selected respondents are interviewed by telephone on the following day to ascertain various aspects of the ad message.

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Pre-test III
Theater persuasion test: Involves a test group of target
customers who are invited to a small theater to view pilot episodes of some new TV programs. But before the show starts, they are presented with a list of product brands (including the brand shown on the test ad) and asked to indicate their preferred brand. It is announced that a lucky draw will be held and each winner will be awarded their preferred brand. The TV program is then shown including the test ad. At the end of the show, the viewers are once again asked to indicate their preferred brand followed by a second lucky draw. Brand preferences both before and after the show are then computed and compared.
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Pre-test - IV
Galvanic Skin Responses, pupil dilation response and eyemovement tracking method make use of different types of mechanical devices are not very popular methods.

In-store persuasion: Involves intercepting a quota sample of

shoppers [Sample X] in a retail store who are shown a stack of print advertisements including the test ad and are given a coupon booklet with discounts for several products including the product in the test ad. These shoppers are given sufficient time to look through these ads. Intercept Sample X shoppers as they leave the shop and record if they have purchased the product carried in the test ad. Calculate the purchase incidence. Repeat the same treatment to another Quota sample of shoppers [Sample Y] who are not shown the stack of ads. Calculate the purchase incidence and determine if they are significantly different from that of Sample X.
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Post-test
Most of the pre-testing techniques are applicable to post testing. Additional ones are briefly described below:

Recognition Test: Measures the incidence and intensity of reading

an advertisement. Normally involves interview with 100 to 150 qualified readers of a given issue of a magazine or periodical that carried the advertisement. Specific questions are then asked to see if they can remember the ad, its contents and the extent to which they remembered.

Recall: Respondents are not shown an advertisement in full in

advance but asked what he/she can remember about the ad.

Triple Association Test: Used for assessing respondents abilities

to associate the product category, the brand, and the copy theme. Two of these three are read or shown to a respondent who is asked to mention the third.
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Media Research I
Focuses on six aspects: 1. Media distribution
Refers to circulation of newspaper/magazine/periodicals or the number of TV/Radio ownership and Internet subscription.

2. Media audience
Number of people exposed to the ad medium in question.

3. Exposure
Number of people actually noting the advertisement; generally less than media audience.
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Media Research II
Focuses on six aspects... 4. Perception
Number of people having conscious awareness and perception of the advertisement in question. In print advertisements, perception is affected by factors such as size, color, position and language of the media. Typically, perception is less than exposure.

5. Communication
Number of people who comprehend specific things about and aspects of the advertisement. Communication lags perception.

6. Purchase
Number of people purchasing the product after seeing the advertisement.
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Newspaper as Ad Medium Major types of information needed are;

Circulation
Generally available from secondary sources in the form of audited circulation figures.

Readership
Data on readership is generally unknown and need to be gathered through sample surveys.
Often problematic because identifying the reader is not always easy.

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Television as a Medium I
Objective is to determine the TV audience. Programs watched by more people are preferred by advertisers. Methods of measurement include:

Determining the Program rating

Respondents are provided with a roster of TV programs shown during the past three days and are asked a series of questions to ascertain the programs (i) they generally watch, and (ii) the programs they have actually watched on each of the three days in question.

Telephone interviewing
Also known as coincidental telephone interview, this method involves telephone interview with a sample of respondents during the broadcasting hour.

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Television as a Medium II
Using audimeter device
Developed by A.C. Nielson Company, this is the most sophisticated method of TV audience measurement. A technical device called audimeter is attached to each of the TV sets of a panel of preselected households. The device automatically records the time when the TV set is switched on (and off), the channel watched, duration of watching; and instantly transmits the data to a central computer for processing. However, an audimeter does not record who in the household is/are watching.

Using people meter

A technical device that like audimeter, which is activated (and deactivated) by each household member pressing a button when he or she watches the program (stops watching it).

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Television as a Medium III

Diary Method A specially designed diary is given to a panel of households to record the television viewing behavior of the viewer

Radio/Cinema/Internet as media
Number of radio listeners may be measured in the same way as TV audience is measured. Simplest way to measure cinema audience is through sample survey. Internet users may also be identified using Internetbased surveys.
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