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CHAPTER 9 MARKETING RESEARCH FOR ENTREPRENEURIAL VENTURES CHAPTER OUTLINE I. Marketing Research A.

Defining the purpose and objectives of the research. 1. Identify where potential customers purchase the goods or service. 2. Why do they choose to go there? 3. What is the size of the market? How much of the market can it capture? 4. How does the business compare with competitors? 5. What impact does the business promotion have on customers? 6. What types of products or services are desired by potential customers? B. Gathering secondary data. 1. Internal. 2. External. C. Gathering primary data. 1. Surveys. 2. Experimentation. D. Developing an information-gathering instrument. E. Interpreting and reporting the information. F. Marketing research questions. 1. Sales. 2. Distribution. 3. Markets. 4. Advertising. 5. Products. Inhibitors to marketing research A. Cost. 1. Expensive. 2. Affordable. B. Complexity (quantitative aspects). C. Strategic Decisions. 1. Cost. 2. Complexity. D. Irrelevancy. Developing the Market Concept A. Marketing philosophy. 1. Production-driven philosophy. 2. Sales-driven philosophy. 3. Consumer-driven philosophy. a. Competitive pressure.

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b. Entrepreneurs background. c. Short-term focus. B. Market segmentation. 1. Demographic. 2. Benefit. C. Consumer behavior. 1. Personal characteristics. 2. Psychological characteristics. 3. Five consumer classifications of goods. a. Convenience goods. b. Shopping goods. c. Specialty goods. d. Unsought goods. e. New products. IV. Marketing Stages for Growing Ventures A. Entrepreneurial marketing. B. Opportunistic marketing. C. Responsive marketing. D. Diversified marketing. Marketing Planning A. Marketing research. 1. The companys major strengths and weaknesses. 2. Market profile. 3. Current and best customers. 4. Potential customers. 5. Competition. 6. Outside factors. 7. Legal changes. B. Sales research (questions). 1. Do salespeople call on their most qualified prospects on a proper priority and time allocation basis? 2. Does the sales force contact decision makers? 3. Are territories aligned according to sales potential and salespeoples abilities? 4. Are sales calls coordinated with other selling efforts? 5. Do salespeople ask the right questions on sales calls? 6. How does the growth or decline of a customer or a prospects business affect the companys own sales? C. Marketing information system. 1. Reliability of the data. 2. Usefulness or understandability of the data. 3. Timeliness of the reporting system. 4. Relevancy of the data. 5. Cost of the system. D. Sales forecasting.

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E. Marketing plans. 1. Appraise marketing strengths and weaknesses. 2. Develop marketing objectives. 3. Develop product/service strategies. 4. Develop marketing strategies. 5. Determine pricing structure. F. Evaluation. VI. Telemarketing A. Advantages. 1. Receptiveness. 2. Impressions. 3. More presentations. 4. Unlimited geographic coverage. 5. Better time management. 6. Immediate feedback. 7. Better control. 8. Less piracy. 9. Lower salary and commissions. 10. Other lower expenses. B. Pitfalls. 1. Bad habits. 2. Dissension among employees. 3. Turnover in staff.

VII. Marketing on the Internet .A Allows firms to increase presence and brand equity. .B Cultivates new customers. .C Improves customer service. .D Allows information transfer. .E Major concerns:. .1 Limited target audience. .2 Customer resistance. VIII. Pricing Strategies A. The quality of a product in some situations is interpreted by customers by the level of the items price. B. Some customer groups shy away from purchasing a product where no printed price schedule is available. C. Most buyers expect to pay even-numbered prices for prestigious items and odd prices for commonly available goods. D. The greater the number of meaningful customer benefits that the seller can convey about a given product, generally the less will be the price resistance. Summary

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CHAPTER OBJECTIVES 1. 2. 3. 4. 5. 6. 7. 8. To review the importance of marketing research for new ventures. To present factors that inhibit the use of marketing. To examine the marketing concept: philosophy, segmentation, and consumer orientation. To establish the areas vital to marketing planning. To highlight the questions concerning hazards in marketing. To characterize the marketing stages of growing ventures. To introduce telemarketing as an emerging tool for marketing. To discuss the key features of a pricing strategy.

CHAPTER SUMMARY A market consists of a group of people who have purchasing power and unsatisfied needs. The most effective way to gather information about a market is through marketing research. The first step of this process is to define the purpose and objectives of the research. This step identifies potential customers, where they buy products, how large the market is, and what products customers need. The next step is to gather secondary data, which has already been compiled. If this is not thorough enough, then primary data are gathered by observational and questioning methods. Interpreting and reporting the information is the next task. The final step is to come up with questions dealing with markets, consumers, and products. Four major inhibitors to marketing research exist. First of all, marketing research can be very expensive to the entrepreneur. Secondly, the quantitative aspects scare off many entrepreneurs. Third, some entrepreneurs feel that marketing research is only good for making strategic decisions. Finally, some entrepreneurs feel that marketing research is irrelevant. In developing the marketing concept, there are three types of philosophies. Productiondriven philosophy has production as its main concern and sales as a secondary concern. Salesdriven philosophy concentrates on personal selling and advertising to persuade customers to buy products or services. Consumer-driven philosophy depends on research to find out about consumer wants and needs before production begins. Three major factors affect the choice of marketing philosophy. These include: competitive pressure, entrepreneurs experience, and short-term focus of sales-driven philosophy. The second factor in developing the marketing concept is market segmentation. This is the process of identifying a specific set of characteristics that differentiate one group of consumers from the rest. Two major variables in market segmentation are demographic and benefit variables. There are two types of consumer behavior that affect the marketing concept. These are personal characteristics and psychological characteristics. The five major consumer classifications are convenience goods, shopping goods, specialty goods, unsought goods, and new products. There are four distinct marketing stages in a growing venture. Entrepreneurial marketing has a strategy of developing a market niche and a goal of attaining credibility in the marketplace. Opportunistic marketing strives for market penetration in order to attain sales volume. Responsive marketing tries to develop the product market and create customer satisfaction. Diversified marketing concentrates on new business development while trying to manage the product life cycle.

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Marketing planning attempts to determine a comprehensive approach to creating new customers. The first step in marketing planning is to determine who customers are and their wants and needs through marketing research. The second step is to determine if the sales force is doing an effective job. The third step includes the compiling and organizing of data relating to cost, revenue, and profit through the use of a marketing information system. The fourth step is sales forecasting. The next step is the five-step marketing plan, and the final step is evaluation. Telemarketing is the use of the telephone in the selling of merchandise directly to consumers. This technique is quickly becoming a major marketing tool due to its low cost. It allows companies to increase potential customer sales due to more presentations. Other advantages are receptiveness, unlimited geographic coverage, and immediate feedback. The major disadvantages include poor telephone techniques, dissension in the sales staff, and rapid staff turnover. The Internet can assist a new ventures overall marketing strategy in four ways. First, the Internet allows the firm to increase its presence and brand equity in the marketplace. Second, the Internet allows the company to cultivate new customers. Third, the Internet can improve customer service by allowing customers to serve themselves. Fourth, information can be transferred in a cost efficient manner. The two major concerns of the Internet are the limited target audience and customer resistance of purchasing over the Internet. After the marketing research is done, the entrepreneur is faced with the problem of pricing the product or service. Some factors affecting pricing strategies are competitive pressure, availability of supply, changes in demand, costs of distribution, and economic conditions. Pricing procedures differ according to the nature of the venture. LECTURE NOTES MARKETING RESEARCH FOR NEW VENTURES I. II. Introduction Market is a Group of Consumers Who Have Purchasing Power and A Unsatisfied Needs Marketing Research Involves the Gathering of Information about a Particular Market Followed by Analysis of that Information A. Defining the purpose and objectives of the researchSpecific objectives should be established: 1. Identify where potential customers go to purchase the good or service in question. 2. Why do they choose to go there? 3. What is the size of the market and how much of it can the business capture? 4. How does the business compare with competitors? 5. What impact does the businesss promotion have on customers? 6. What types of products or services are desired by potential customers? B. Gathering secondary data. 1. Secondary data consist of information that has already been compiled. 2. Less expensive to gather than primary data. 3. Secondary data may be internal or external.

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a. Internal secondary data consist of information that exists within the venture such as business records. b. External secondary data are available in periodicals, trade association literature, and government publications. 4. Several problems occur due to the use of secondary data. a. Data may be dated and less useful. b. Units of measure in secondary data may not fit current problems. Gathering primary data. 1. Primary data consist of new information accumulated through observational methods and questioning methods. 2. Observational methods avoid contact with respondents and can be used economically. 3. Questioning methods involve contact with the respondents. 4. Surveys include contact by mail, telephone, and personal interviews. a. Mail surveys are often used when respondents are widely dispersed and have low response rates. b. Telephone and personal interviews involve verbal communication with respondents and provide higher response rates. c. Personal interviews are the most expensive and people are reluctant to grant them. Developing an Information-Gathering Instrument 1. The questionnaire is the basic instrument for a survey. 2. Several considerations for designing a questionnaire: a. Make each question pertain to a specific objective. b. Place simple questions first. c. Avoid leading and biased questions. d. Ask How could this question be misinterpreted? e. Give concise but complete directions. f. Use scaled questions rather than simple yes/no questions. Interpreting and reporting the information. 1. After data are accumulated, they must be organized into meaningful information. 2. Methods of summarizing and simplifying data include tables, charts, and graphs. 3. Descriptive statistics such as mean, mode, and median are also helpful. Marketing research questioning. 1. There are several areas in which research questions will be asked: a. Sales questions deal with competitors and product profitability. b. Distribution questions deal with distributors and dealers. c. Market questions deal with buying habits, tastes, and market shares of sales by products. d. Advertising questions deal with effectiveness and budget allocation. e. Product questions involve testing market acceptability and packaging effects on sales.

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Inhibitors to Marketing Research A. Cost.

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1. Marketing research can be expensive. 2. Affordable marketing techniques exist for smaller companies. B. Complexity. 1. Quantitative aspects frighten many entrepreneurs. 2. Key concern is interpretation of the data. 3. Entrepreneurs can obtain help from specialists. C. Strategic decisions. 1. Some entrepreneurs feel that only major strategic decisions need marketing research support. 2. Sales efforts could be enhanced through research results. D. Irrelevancy. 1. Some entrepreneurs believe that marketing research data either tell them what they already know or are irrelevant. 2. Data that confirm what is already known can be acted upon with more confidence. IV. Developing the Marketing Concept A. Marketing philosophy three types. 1. The production-driven philosophy places production as the main concern and sales as a secondary concern. This philosophy is something used by new ventures that produce high-tech products. 2. The sales-driven philosophy concentrates on personal selling and advertising to persuade customers to buy the companys product. This approach is taken when there is an overabundance of supply. 3. The consumer-driven philosophy relies on research to find out about consumer wants and needs before the production process begins. a. This philosophy encourages the need for marketing research in order to identify a market and target it. b. Although the consumer-driven philosophy is usually the most effective, most ventures dont use it. 4. There are three major factors that influence the choice of marketing philosophy: a. Competitive pressure, the intensity of competition, is a deciding factor in a new ventures philosophy. b. The entrepreneurs experience and abilities have an influence on philosophy choice. c. The short-term focus of the sales-driven philosophy makes it an attractive approach because of its increase in sales. B. Market segmentation the process of identifying a specific set of characteristics that differentiate one group of customers from the rest. 1. The process of segmenting the market can be critical for new ventures with very limited resources. 2. A number of variables need to be analyzed in order to identify specific market segments. 3. Two major variables include demographic and benefit variables: a. Demographic variables include age, marital status, sex, occupation, income, location, etc., and are used to determine a geographic and demographic profile of the consumers and their purchasing potential.

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b. Benefit variables identify unsatisfied needs that exist in the market and include convenience, cost, style, and trends. C. Consumer behavior. 1. Two types of consumer behavior that entrepreneurs must consider are personal characteristics and psychological characteristics. 2. The five types of consumers are innovators, early adopters, early majority, late majority, and laggards. 3. The next step is to link the characteristic makeup of potential consumers with trends in the marketplace. 4. There are five major consumer classifications of which entrepreneurs should be aware: a. Convenience goods include staple, impulse, and emergency goods which consumers want to buy but arent willing to spend time shopping. b. Shopping goods are products that consumers take time out to compare for quality and price. c. Specialty goods are those that consumers make a special effort to find and buy. d. Unsought goods are those that the consumer doesnt need or look for, such as cemetery plots. e. New products are products that are unknown due to lack of advertising or that take time to be understood. V. Marketing Stages for Growing VenturesThere Are Four Marketing Stages in a Growing Venture: A. Entrepreneurial marketing has a strategy of developing a market niche and a goal of attaining credibility in the marketplace. B. Opportunistic marketing has a strategy of market penetration in order to attain sales volume. C. Responsive marketing tries to develop the product market and create customer satisfaction. D. Diversified marketing concentrates on new business development and tries to manage the product life cycle. Marketing Planning The Process of Determining a Clear, Comprehensive Approach to the Creation of Customers. A. Marketing research is the process of determining who the customers are, what they want, and how they buy. 1. In marketing research, the following areas are of great importance: a. The companys strengths and weaknesses offer insights into profitable opportunities and possible problems and help in making decisions. b. A market profile enables a company to identify its current market and service needs. c. The identification of a companys current clients helps management find out where to allocate resources. Defining the best customers allows management to achieve a more direct segmentation of this market niche. d. Through a geographical or industry wide analysis of potential customers, a
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company increases its ability to target this group and turn potential customers into current customers. e. Identification of competition allows a company to determine the firms that are most willing to pursue the same market niche. f. Analyzing changing trends in demographics, economics, technology, cultural attitudes, and government policies that may affect customers needs. g. Keeping management aware of significant changes in government rates, standards, and tax laws. 2. The following are some useful tips regarding low-cost research: a. Devise a contest that requires customers to rate the quality of your products and have a drawing for a prize. b. Attach a questionnaire to the company catalog regarding the quality of your products or service. c. Give any customer grievances high priority and follow up with an in-depth interview. d. Develop a set of questions that can be administered over the phone asking customers to give their opinions on products and services. e. Include a questionnaire in product packages. Sales Research The following is a list of questions that need to be answered in sales research: 1. Do salespeople call on their qualified prospects? 2. Does the sales force contact decision makers? 3. Are territories assigned according to sales potential and salespeoples abilities? 4. Are sales calls coordinated with other selling efforts, trade shows, and direct mail? Marketing information system. 1. A marketing information system compiles and organizes data relating to cost, revenue, and profit from the customer base. 2. This information can be useful in monitoring the strategies, decisions, and programs concerned with marketing. 3. Key factors affecting the value of such a system include: a. Reliability of data. b. Usefulness or understanding of data. c. Timeliness of the reporting system. d. Relevancy of the data. e. Cost of the system. Sales forecasting The process of projecting future sales through historical sales figures and the application of statistical techniques. 1. The process is limited in value because it relies on historical data. 2. As a comprehensive planning process, it can be very valuable. Marketing plans order to be effective, the marketing plans should follow a fiveIn step program: 1. Appraise marketing strengths and weaknesses. 2. Develop marketing objectives along with short and intermediate-range sales goals necessary to meet these objectives. 3. Develop product/service strategies.

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4. Develop marketing strategies. 5. Determine pricing structure. F. Evaluation. 1. The final factor in the marketing planning process is evaluation. 2. Evaluation allows for flexibility and adjustment of marketing planning. VII. Telemarketing The Use of Telephone Communications to Sell Merchandise Directly to Consumers A. Advantages. 1. Firms may be able to increase potential customer sales, upgrade sales, reactivate old accounts, and support the current sales staff. 2. Some specific advantages are: a. Receptiveness. b. First impressions. c. More presentations. d. Unlimited geographic coverage. e. Better time management. f. Immediate feedback. B. Pitfalls. 1. Although there are many advantages to telemarketing, there are also some disadvantages. 2. Poor telephone techniques can undermine the telemarketing strategy. 3. Dissension between the field sales staff and the telephone sales staff can arise. 4. There is a problem of rapid turnover of telephone staff. Marketing on the Internet A. Advantages of the Internet for marketing. 1. Increases a companys presence and brand equity. 2. New customers are easily cultivated. 3. Customer service is improved. 4. Information transfer is accomplished in a cost-efficient manner. B. Limitations of Internet marketing. 1. Limited target audience. 2. Customer resistance to purchasing over the Internet. Pricing Strategies Factors Affecting Pricing Strategies A. The following factors affect entrepreneurs in the pricing of their products or services: 1. The degree of competitive pressure. 2. Availability of sufficient supply. 3. Seasonal or cyclical changes in demand. 4. The costs of distribution. 5. Economic conditions. B. Pricing procedures differ depending on the nature of the venture.

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SUGGESTED ANSWERS FOR DISCUSSION QUESTIONS (END OF CHAPTER) 1. In your own words, what is a market? How can marketing research help an entrepreneur identify a market? A market is potential customers who have purchasing power. The potential customers make up the market. An entrepreneur would not know what type of venture or area to engage in without market research. The market analysis helps tell the entrepreneur what to do. What are the five steps in the marketing research process? Briefly describe each. (1) Defining the purpose and objectives of the researchin other words, you need to define precisely the informational requirements of the decision to be made (2) Gathering secondary datathese data involve using already compiled data. The two types are internal and external (3) Gathering primary data these data involve gathering new information. The two forms are surveys and experimentation (4) Interpreting and reporting information segment deals with analyzing and this reporting useful information where it is needed (5) Marketing research questionsthe questions deal in the areas of: sales, distribution, advertising, and products Which is of greater value to the entrepreneur, primary or secondary data? Why? Secondary data are of greater value because they usually contain the information desired and are inexpensive. Identify and describe three of the primary inhibitors to marketing research. (1) Cost market research can be expensive (2) Complexity -the interpretation of the quantitative aspects of marketing research (3) Strategic decisions -cost and complexity are usually tied into major decisions (4) Irrelevancy only a certain amount of research is not useful How would an entrepreneurs new-venture strategy differ under each of the following marketing philosophies: production-driven, sales-driven, consumer-driven? (1) Production-driven is based on the belief produce efficiently and worry this (2) Sales-driven focuses on personal selling and advertising to persuade customers this to buy the companys output (3) Consumer-driven relies on research to discover consumer preferences, desires, this and needs before production actually begins In your own words, what is market segmentation? What role do demographic and benefit variables play in the segmentation process? Market segmentation is identifying the factors that classify consumer groups. Demographic factors are used to determine a geographic or demographic profile of consumers and purchasing power. Benefit variables identify the unsatisfied needs that
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exist in a market. 7. Identify and discuss three of the most important personal characteristics that help an entrepreneur identify and describe customers. Also, explain how the product life cycle will affect the purchasing behavior of these customers. Consumers are considered to fall into five categories: innovators, early adopters, early majority, late majority, and laggards. Income, education, and time orientation are important characteristics in each of these categories. For example, innovators usually have high incomes while laggards have below-average incomes. This may be why laggards dont get things as quickly. Early adopters education consists of college while the late majority have some high school. Early adopters may understand the theory of supply and demand; the late majority might not. Early majority are present-oriented, whereas laggards are tradition-oriented. Laggards dont accept new methods because they live in the past. Identify and discuss three of the psychological characteristics that help an entrepreneur identify and describe customers. Also, explain how the product life cycle will affect the purchasing behavior of these customers. Some psychological characteristics are nature or needs, perceptions, and self-concept. Early adopters purchase goods that make others notice them. The laggard purchases only the basic needs for survival. The perceptions of the early majority influence the purchase of goods that make them acceptable, where the late majority purchase products for the home. The innovators self-concept is for the elite things in life, whereas the late majority is concerned with security purchases. How does the way consumers view a ventures product or service affect strategy? For example, why would it make a difference to the entrepreneurs strategy if the consumers viewed the company as selling a convenience good as opposed to a shopping good? If consumers view a ventures product or service as quality, the consumers would likely desire the ventures product or service. On the other hand, a product of low quality would not be desired. Identify and describe four of the major forces shaping buying decisions in the new century. (1) The continuing increase in educational attainment levels means more knowledgeable, discriminatory purchasing. People are less likely to obtain something that is of a low quality. (2) Great discretionary time resulting from reduced work hours means even greater demand for leisure products, travel, and recreational services. People are living more for the joy of the present than waiting to fulfill their pleasures in the future. (3) An older, more mature population means purchase decisions will reflect greater conservatism in the search for value and for lifestyle satisfaction. Being more mature, people will not buy goods that are not beneficial.

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(4) Higher income attained by traditionally lower-paid blue-collar workers will lead to far greater experimentation in long-standing white-collar purchases such as wines, ethnic foods, and the theater. People in the lower middle class desire the finer things in life. 11. Most emerging ventures will evolve through a series of marketing stages. What are these stages? Identify and describe each. (1) Entrepreneurial marketing: strategy of developing a market (2) Opportunistic marketing: seek a way to penetrate the market (3) Responsive marketing: seek to develop the product market (4) Diversified marketing: focus on new-business development What does the entrepreneur of an emerging venture need to know about sales research and a marketing information system? An entrepreneur must understand that he needs to continually review methods employed for sales and distribution in relation to market research. He must understand that information systems can be helpful in monitoring strategies, decisions, and programs concerning marketing. For developing a marketing plan, what are the five steps that are particularly helpful? Identify and describe each. (1) Appraise marketing strengths and weaknesses, emphasizing factors that contribute to the firms competitive edge. By knowing your strengths and weaknesses, you know what to avoid and what not to avoid. (2) Develop marketing objectives along with the short-and intermediate-range sales goals necessary to meet those objectives. Setting goals will give you a measure of success. (3) Develop product/service strategies. This will determine needs and specifications. (4) Develop marketing strategies. These are needed to achieve different goals. (5) Determine pricing structure. Determine which customers will be attracted. How does telemarketing work? What are its advantages? What are its pitfalls? Why is it likely to be a major marketing tool in the new century? Telemarketing is the use of telephone communications to sell merchandise directly to customers. Some of the advantages of telemarketing are: receptiveness, impressions, more presentations, unlimited geographic coverage, better time, management, immediate feedback, better control, less piracy, lower salaries and commissions, other lower expenses. Some of the pitfalls are: poor telephone techniques can defeat the telemarketing strategy. Dissension can exist between the field sales staff and telephone sales personnel. There can be rapid turnover of the telephone sales staff. The major reason for the growth of telemarketing is that it is cost effective. Describe the benefits and concerns of marketing on the Internet. Be specific in your answer. There are four major benefits of using the Internet for marketing. They are:

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(1) (2) (3) (4)

Increased presence and brand equity for the firm. Easier cultivation of new customers. Improved customer service. More cost effective transfer of information.

The two critical concerns of marketing on the Internet are: (1) Limited target audience. (2) Customer resistance to using the Internet. 16. What are some of the major environmental factors that affect pricing strategies? What are some of the major psychological factors that affect pricing? Identify and discuss three of each. Environmental factors: (1) Degree of competitive pressure a monopoly where there is no competition, in prices are set as desired. In perfect competition, prices are set. (2) Seasonal or cyclical changes in demandsome goods are more available in certain seasons, so the price is lower. During the off-season, prices are higher because goods arent as available. (3) Cost of distribution the cost to distribute is higher, then the price of the if product or service will be a little higher to compensate for the higher distribution cost. Psychological conditions: (1) In some situations, the quality of a product is interpreted by customers by the items price level. Customers believe the higher the price the higher the quality. (2) An emphasis on the monthly cost of purchasing an expensive item often results in greater sales than an emphasis on total selling price. Items like cars or stereos, which are expensive, are easier to pay for monthly because few people have the funds to pay the total sales price. (3) The greater the number of meaningful customers benefits the seller can convey about a given product, the less will be the price resistance. The customer is more inclined to look at the benefits and ignore the costs.

TEACHING NOTES FOR END-OF-CHAPTER CASES CASE 9.1: DEALING WITH THE COMPETITION (Answers to the Questions) 1. Will the information that Roberta is seeking be of value to her in competing in this market? Why or why not? Yes, the information will be of great use because her strategy must develop a niche that will differentiate her from the competition. 2. How would your recommend Roberta put together her marketing research plan? What should be involved?

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Recommend a five-step plan that identifies the specific needs of her business. She should first define the purpose and objectives of her research, then gather secondary and primary data. After this she needs to develop an information-gathering instrument to collect the data, and finally, she should interpret and record the information and review it to determine the market she has found. The results should answer questions about sales, distribution, markets, advertising, and products. 3. How expensive will it be for Roberta to follow your recommendations for her marketing research plan? Describe any other marketing research she could undertake in the near future that would be of minimal cost. The cost of the plan I described could fit into her budget if she used sources such as her local business bureau, college or university, chamber of commerce, small-business development center, and state agencies that can provide low-cost research ideas and information about her area of business. CASE 9.2: A NEW SPIN ON MUSIC 1. Has Brian completed the proper marketing research for this potential opportunity? Why or why not? Explain. Brian has not completed the proper marketing research for this potential opportunity. He has failed to gather any secondary or primary data on the potential market. Actually he has not conducted any marketing research whatsoever. Using Table 9.2 there are a number of recommended methods of marketing research that could be recommended to Brian. More specifically the following questions (as seen in the text on page 282-285) need to be considered: Sales 1. Do you know all you need to know about your competitors sales performance by type of product and territory? 2. Do you know which accounts are profitable and how to recognize a potentially profitable one? 3. Is your sales power deployed where it can do the most good, maximizing your investment in selling costs? Distribution 1. If you are considering introducing a new product or line of products, do you know all you should about distributors and dealers attitudes toward it? 2. Are your distributors and dealers salespeople saying the right things about your products or services? 3. Has your distribution pattern changed along with the geographic shifts of your markets? Markets 1. Do you know all that would be useful about the differences in buying habits and tastes by territory and kind of product? 2. Do you have as much information as you need on brand or manufacturer loyalty and repeat purchasing in your product category? 3. Can you now plot, from period to period, your market share of sales by products?

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Advertising 1. Is your advertising reaching the right people? 2. Do you know how effective your advertising is in comparison to that of your competitors? 3. Is your budget allocated appropriately for greater profitaccording to products, territories, and market potentials? Products 1. Do you have a reliable quantitative method for testing the market acceptability of new products and product changes? 2. Do you have a reliable method for testing the effect on sales of new or changed packaging? 3. Do you know whether adding higher or lower quality levels would make new profitable markets for your products? 2. Based on the case, are there key mistakes that you would caution Brian about? Explain. Yes, Brian must be cautious in pursuing this venture for many reasons but we identify three critical ones. (1) he has failed to conduct marketing research as pointed out in question #1; (2)he has also failed to identify the market segment for which his venture would be specifically aimed; and (3) his pricing completely lacks any strategy as discussed in the chapter on page 301304. The Table 9.8, Pricing Strategy Checklist could be very helpful. 3. What specific steps would you recommend to Brian in order for him to better assess this opportunity? Brian need to conduct the basic market research expected of any new venture start up. Some of the most basic questions he needs to consider are: -Identify where potential customers go to purchase music? Specifics. -Why do they choose to go there? -What is the size of that market? How much of it can Brians business capture? -Can music be rented anywhere else? If so, how does Brians business idea compare with competitors? -Is Brians rental service even desired by potential customers? If so, how can he demonstrate that to potential investors? These questions can be handled quite easily through the process of marketing research discussed in the chapter. Brian should consider developing an information gathering instrument. The following tips would help him understand the manner in which it should be developed: -Make sure each question pertains to a specific objective in line with the purpose of Brians rental idea. -Place simple questions first and difficult-to-answer questions later in the questionnaire. Avoid leading and biased questions.

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-Ask How could this question be misinterpreted? Reword questions to reduce or eliminate the possibility they will be misunderstood. -Give concise but complete directions in the questionnaire. Succinctly explain the information desired, and route respondents around questions that may not relate to them. -When possible, use scaled questions rather than simple yes/no questions to measure intensity of an attitude or frequency of an experience. For example, instead of asking Do we have friendly sales clerks? (yes/no), ask How would you evaluate the friendliness of our sales clerks? Have respondents choose a response on a five-point scale ranging from Very unfriendly (1) to Very friendly In developing an instrument that could be distributed to the target market Brian believes will pursue online rental of music. The answers he receives will provide a far greater understanding of Brians target market and the true viability of this idea. ADDITIONAL EXPERIENTIAL EXERCISE Surveying Marketing Practices Have students go to a small business (retail, wholesale, service, manufacturing) that has 1-250 employees and survey the owner on the concepts used in the marketing practices. For example, ask the owner how he/she identifies the target market from secondary data or primary data. Then once you have the major topic, ask related questions from the chapter in the section you have decided on and continue the survey. Once you have the information from your survey, write a 2-3 page, double-spaced, typed paper on what you have learned through the survey related to the chapter. Have students compare their results.

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