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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.
II.
III.
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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.
V.
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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.
IX.
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.
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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C.
D.
E.
F.
III.
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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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.
VI.
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B.
C.
D.
E.
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 ResearchThe 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 forecastingThe 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 plansIn order to be effective, the marketing plans should follow a fivestep 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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VIII.
IX.
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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.
2.
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 datathese data involve gathering new information. The two
forms are surveys and experimentation
(4) Interpreting and reporting informationthis segment deals with analyzing and
reporting useful information where it is needed
(5) Marketing research questionsthe questions deal in the areas of: sales, distribution,
advertising, and products
3.
4.
5.
How would an entrepreneurs new-venture strategy differ under each of the following
marketing philosophies: production-driven, sales-driven, consumer-driven?
(1) Production-driventhis is based on the belief produce efficiently and worry
(2) Sales-driventhis focuses on personal selling and advertising to persuade customers
to buy the companys output
(3) Consumer-driventhis relies on research to discover consumer preferences, desires,
and needs before production actually begins
6.
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
2006 South-Western. All rights reserved.
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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.
8.
9.
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.
10.
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
12.
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.
13.
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.
14.
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.
15.
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)
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 pressurein a monopoly where there is no competition,
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 distributionif the cost to distribute is higher, then the price of the
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.
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?
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.