3 “Witenes nuee “f Seer ao kel atn Ae Duis a exe ek tc ‘QUESTIONS: Biren} rec tenesei Perse Meet measuring marketing productivity? Reon ee Peta sa) marketing expenditures: Beira iene uaa ect horas CenteCHAPTER 4 CONDUCTING MARKETING ; RESEARCH AND FORECASTING DEMAND Thee eka rn eve Were wsii earn tate) in icona acer DORE rie cke keto des eiieb aan teeCetserrs ete cia Uren cts clse bance let caida cian eens skear ale Peislee sl oacianes ee les) Puneiie eee ences need timely, accurate, and actionable Information on consumers, Coulee puch uot ie ie aula gat cheers ac -a3| eas Ble tactical decisions in the short run and strategic decisions in the Enel eyerne een ibe ehts be Mtncee stelle Wen Weueul eee) wore coi lett Mas Jaunch or spur the growth of a brand, Blige eee User ere ealese ene iE areer vectra mente ts centre enna eereter Reverie cicmamonee rir eodernmraumt= lore err aU lero ior er a tence eer eo) eer oc se ieee ae eee et cae tne ane cae plete with clothing, shoes, and accessories. The chain boasts an average of cover $500 per square foot in annual revenue, double the U.S. mall average. Ty ae Ey OOEI nex Pola pep) OOO es Erpeeren maui ac meio cee oat mmmanere! on nee ene Meee eter te lion kids and their households by inviting customers to Teale! ‘ABulé-ABear Wortshop customer evi the ste, 101102 PART 2. > CAPTURING MARKETING INSIGHTS By including a barcode inside the beer, the company can reunite the owner with the bear if t gets lost. The database allows Build-A-Bear to contact customers by surface and e-mail with aift certificates, promotions, and party reminders.! ee Caco NM Ra np cet We also consider how marketers can develop effective metrics for measuring Gea cue) ett Nisa De eee eC at) Preset The Marketing Research System Marketing managers often commission formal masketing studies of specific problems and ‘opportunities. They may request a market survey, a product-preference test, a sales forecast by region, or an advertising evaluation Its the ob of the marketing researcher to produce insight, into thecustomers atitudes and buying behavior We define marketing esearch as the sysem- ati design, collection, analysis and reporting of data and findings relevant oa specitic market- Ingsituation facing the company. Marketingresearch is now about a 165 billion industry glob- ally, according toFSOMAR, theWorld Associationof Opinion and Market Research Prof ‘A companiy can obtain matketing esearch in a number of ways. Most large have their own marketing research departments, which often play crucial roies within the organization? PROCTER & GAMBLE 6s large market esearch function sealed Consumer & Market Knowledge (CMI) ts goa it bring consumer insight to decison making at alleveb. Decicated CM groups work for PG busiessesarcund the werd, incuting Glotal Business Unts (G3Us), which focus on long-term brand equity and iniative development, and Narket ‘evelopment Crgrizators (MDOs}, which focusconozal market experts and etal panersips. There also ret tal smaller centalzed corporate CMK group wich, in prtership with the ine businesses, focuses on thee ids of work: (1) proprietary research mehods development, (2 expet aplication of, and cross-busness learning ‘fom, coe research competencies, and (3) shared serves and intasructre. CMK leverages Waitoral esearch ‘bascs such as brad tracking CK aso nds, inves, oF co-deelps leacng-ege research approaches Sich as ‘xperionial eansumer contacts, prepietary modeling methods, and scerario-lanning or knowledge syihesis ‘events, OMK professionals connect marke insights fom al these sources fo shape company strategies and dec- ‘Sor, They influence day to-day opeatoral choices, such as whch frodut formulations are launched aswell as | ng-trm pan, suc as whic corprate cqusions betraune out he pacuct porto. Yet, marketing research is not limited to large companies with big budgets and marketing research departments. At much smaller companies. marketing research is often carried out byeveryone in the company—and by customers, too, [- KARMALOOP.COM Karmaloop il itself as an online urban boutique, and it has built ts reputation as atop shop for Fashionistas because ofits relentless tracking of trendsetters. The five-year-old Boston conipany has made streetwear fash fiona science by keeping tabs on young tastemakes’ buying habits. In adtion to its crew of 15 moonighting artists, Us, ad designe, Karmaleop recruits street team members to feret out new tends and to spread the ‘word about Karmaloop brands. The street teams, which now boast 3,000 reps, pass out fers and stickers at | nightcluts, concerts, ang'on the tee, but aso report on what they see at events, inthe way of tends.?CONDUCTING MARKETING RESEARCH AND FORECASTING DEMAND CHAPTER 4 Companies normally budget marketing research at 1 t0 2 percent of company sales. A large percentage of that is spent on the services of oulside firms. Marketing research firms fall into three categories: 1, Syndicated-service research firms These firms gather consumer and trade informa- tion, which they sell for « fee. Examples: Nielsen Media Resoarch, SAMI/Burke. 2. Custom marketing research firms ~ These firms are hired to carry out specific projects. ‘They design the study and report the findings. 8. Specialty-line marketing research firms These firms provide specialized research sor- vices. The best example isthe field-service firm, which sells field interviewing services to other firms. Small companies can hire the services of a marketing research firm or conduct research incteative and affordable ways, such as 1. Engaging students or professors to design and carry out projects ~ One Boston University MBA project helped American Express develop a successful advertising cam- paign geared toward young professionals. The cost: $15,000. 2, Using the Internet - A company can collect considerable information at very little cost by examining competitors’ Web sites, monitoringchat rooms, and accessing pub- lished data, 3. Checking out rivals ~ Many small companies routinely visit theit competitors. Tom Coohill, a chef who owns two Atlanta restaurants, gives managers a food allowance to dine out and bring back ideas. Atlanta jeweler Frank Maier Jr, who often visits out-of- town rivals, spotted and copied a dramatic way of lighting displays.* Most companies, such as Fuji Photo Film, use a combination of marketing research resources to study their industries, competitors, audieces, and channel strategies: FUJI PHOTO FILM Ate highest evel, Fujrelies on data from marke esearch syndzate NDP Group to stdy the market or prod ets ranging from digital cameras to in jet photo paper. Fuji also does custom research witha variety of reszarch partes nd itconcucts intrral research for projets requiring quck information, such as changes to package design. Regardess of how the marketing research data ee callected, it sa tp prot for Fuji, which as had to adapt its im and digital imaging products toa rapaly changing marketplace. It you con't have mar- ‘atresearch fo hel you figure out what is ctanging ard vita the future wil be, you wl be loft behind,” cays y's director of category management and trade marketing The Marketing Research Process Elective marketing research involves the six steps shown in Figure 4.1. We will illustrate these steps with the following situation: American Airlines (AA) is constantly looking for new ways to serve its passengers; it ‘wos one of the first companies to install phone handsets. Now't is reviewing many new ideas, especially to cates to its first-class passengers on very long flights, many ‘of whom are businesspeople whose high-priced tickets pay most of the freight. “Among these ideas are: (1) to supply an Internet connection with limited access to Web pages and e-mail messaging; (2) to offer24 channels of satellite cable TV; and (3) to offer a 50-CD audio system that lets each passenger create a customized play list of music and moviesto enjoy during the fight. The marketing research manager \was assigned to investigate how first-class passengers would rate these services and how much extra they would be willing to pay ita charge was made. He was askec to focus specifically on the Intemet connection. One estimate says that airlines might realize revenues of $70 billion over the nest decade from in-flight Internet access, if enough first-class passengers would be willing to pay $25 for it. AA could thus recover its costs in a reasonable tine. Making the connection available would cost the airline $90,000 per plane® Define be problem andresearh ofectve oem Develop the feseueh pan | Cote te snort, — ‘Anaie be intarmaton |ric.a1| The Marketing Research Pro 103104 Part 2 CAPTURING MARKETING INS! Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives Marketing management must be careful not to define the problem too broadly or too nar- rowly for the marketing researcher. A marketing manager who insirucis the marketin researcher to “Find out everything you can about first-class air travelers’ needs," will collect alot of unnecessary information. One who says, “Find out if enough passengers aboard a 18747 flying direct between Chicago and Tokyo would be willing to pay $25 for an Internet connection so that American Airlines would break even in one Year on the cost of offering this service.” is taking too narrow a view of the problem. The marketing researcher might ven raise this question: “Why does the Internet connection have to be priced at $25 as ‘opposed t0 $19, $59, orsome other price? Why does American have o break even on the cost ofthe service, especially ifit attracts new users to AA? In discussing the problem, American's managers discover another issue. Ifthe new ser- se were successful, how fast could other aitlines copy it? Airline marketing research replete with examples of new services that have been so quickly copied by competitors that no aitline has gained a sustainable competitive advantage. How important isit to be first, ‘and how long could the lead be sustained? ‘The marketing manager and marketing researcher agreed to define the problem as follows “Will offering an in-flight Internet service ereate enough incremental preference and profit for American Airlines o justify its cost against other possible investments American might make? To help in designing theresearch, management should firstspell outthe decisions it mightface and then work backward, Suppose management spells out these decisions: (1) Should American offeran Internet connection? (2) Ifs0, should theservice be offered to first-class only, or include business class, and possibly economy class? (3) What price(s) should be charged? {4 On what types of planesand lenggis of tips should it be offered? Now management and marketing researchers are ready to set spe tives: (1) What types of first-class passengers would respond most to using an in-fight Internet service? (2) How many first-class passengers are likely to use the Internet service at different price levels? (3) How many extra first-class passengers might choose American is new service? (4) How much long-term goodwill will this service add to American Airlines image? (5) How important is Internet service to first-class passengers rel uz other services such asa power plug. orenhanced entertainment? Not all research projects can be this specific. Some research is exploratory—its goal is to shed lighton the real navuve ofthe problem and to suggest possible solutions or new ideas. Some research is descriptire—it seeks to ascertain certain magnitudes, such as how many First-class passengers would purchase in-fight Internet service at $25. Some research is causal—its purpose is 0 testa cause-and-effect relation Step 2: Develop the Research Plan The second stage of marketing research calls for developing the most efficient plan for gath- ering the needed information, The marketing manager needs to know the cost of the research plan before approving’. Suppose the company made a prior estimate that launch, ing the in-flight Internet service would yield a long-term profit of $50,000. The manager believes that doing the research would lead to an improved pricing and promotional plan and profit of $90,000. In this case. the manager should be willing to spend up. ‘$40,000 on this research. ITihe research would cost more than $40,000, itis not worth doing.” Designing a research plan calls for decisions on the data sources, research approaches, research instruments, sampling plan, and contact methods, DATA SOURCES ‘The researcher can gather secondary data, primary data, or both. Secondary data are data that were collected for another purpose and already exist somewhere. Primary data are data freshiy gathered fora specific purpose or fora specific research projec. Researchers usstally start their investigation by examining some of the tich variey of secondary data to see whether the problem can be party or wholly solved without col- lecting costly primary data. Secondary data provide a starting point and offer the advan. tages of low cost and ready availability When the needed data do not exist oF are dated, inaccurate, incomplete, or unreliable, the researcher will have to collect primary data ‘Most marketing research projects involve some primary-data collection. The normal pro-CONDUCTING MARKETING RESEARCH AND FORECASTING DEMAND © CHAPTER 4 — 105 cedure is to interview some people individu aly or in groups, to get a sense of how people feel about the topic in question, and then develop a formal research instrument, debug itand carry it into the field, SEARCH APPROACHES Primary data can bp collecied in five main ways: through obser- ‘ation, focus groups, surveys, behavioral dats, and experiments, Observational Research Fresh dua can be gathered by observing the relevant actors and settings.* Consumers ean be unob- tnusively observed as they shop or as they con- sume products. Ogilvy & Mathers Discovery Group creates documentary-style videos by sending researchers into consumers’ homes ‘vith handheld video cameras. Hours of footage axe edited t0 a 30-minute “highlight reel” which the group uses to analyze consumer behavior Other researchers equip consumers with pagers and instruct them to write down what they are ‘doing whenever prompted, or hold more infor- inal interview sessions at a café or bar. The American Ailines researchors might meander ‘wound first-class lounges to hear how travelers talk about the different carriers and their features. They can fly on competitors’ planes to observe in-flight service. Focus Group Research A focusgroupis agathering ofsix toten people who are carefully selected based on certain demographic, psychographic, or other considera tons and brought together to discuss at length various topics of interest. Participants are rommnlly paid a small sum for attending. A professional research moderator provides que’ tonsand probes based on a discussion guide or agenda prepared by the responsible mar- Jeting managers to ensure that the right material gets covered, ‘Moderators attempt to track down potentially useful insights as they try to discern the tral motivations of consumers and why they are saying and doing certain things. The ses Sons are typically recorded in some fashion, and marketing managers often ren tehind two-way mitrors in the nest room. In the American Airlines research, the modera- tor might start with a broad question, such as, “How do you feel about first-class air travel?” Questions then mave 1o how people view the different airlines, diferent existing services, different proposed services, and specifically, Internet service. Although focus- soup research has been shown to be a useful exploratory step, researchers must avoid seneralizing the reported feelings of the focus-group participants to the whole market, lcause the sample size is 100 small and the sample fs noc drawn randomly. "Marketing Insight: Conducting Informative Focus Groups” has some practieal tips to improve the «ality of focus groups. Survey Research Companies undertace surveys to lesen about peoples knowl edge, beliefs, preferences, and satisfaction, and to measure these magnitudes in the gen «ral population. A company such as American Aislines might prepare its own survey ‘osirament 10 gather the information it needs, or it might add questions 10 an omnibus survey that earvies the questions of several companies, at a much lower cost. It can also yut the questions to an ongoing consumer panel run by itself or another company. Itmay é0.amallincercept study by having researchers approach people in a shopping mall and 2sk them questions. Behavioral Data Customers leave traces of their purchasing behavior in store ng data, catalog purchases, and customer databases. Much can be learned by analyz~ ing these data, Customers’ actual purchases reflect preferences and often ave more reliable ‘hanstatements they offer to market researchers. People may report preferences for popular brands, and yet the data show them actually buying other brands. For example, grocery108 PART 2 CAPTURING MARKETING INSIGHTS MARKETING INSIGHT CONDUCTING INFORMATIVE FOCUS GROUPS Focus groups alin matheters fo observe how end why consumers ccept or reject concep, leas, o any spec non The bey to sing feeus groups suocessully isto Aste, Is cial to eliminate biases as much as possibe. though many useful insights can emerge from Hhoughuls ron focus groups, Here can be questions 2 tote ality, especaly in today’ marking enaronent Some researcers belie that coisumers tave been so bon taréed with as, they wncensciously (or perhaps cnicly) parrot tack wha ey have lead heard as compared to what they irk. There is abo alvays a concen that parcranls ate jst yng to raintain te se-image and public persona or tave a reed to iden ty withthe ober members ofthe gtoup.Partipants may nt 9 willog to admin pulic—or may nt even recogiza—teir bahar jor pattems and motvatons. There is also alas he “oud” ‘obler—hen en highly opinionated person dons ou the rest ofthe goup. tm be experse torecrit quale’ subjects ($3,000 tb $5,000 per greup), but geting he rant paticpant is crucial ve when multe gous ae ave, itmaybe dict 0 gen- tralae the results toa troader population. For example, within the Unite Stats, ocus-r0up tnings on vary tem gion fo regen. One fir specatang in ocis-roup research claimed nat the best ‘ty to conduct focus groups was Ninneagos ezause& could get a fay wel- educated same ot peop who were honest and tthcon ‘ng aout ther opnions. Many marketers interpe! focus gcups cae {ulin New Yok and other northeastem ties because he pele in ‘nese areas tend 10 be Nghiy cca and genealy co nt repr that they tke much. Too ofen, managers become comfortable wt a par ticular foros group format ant apply it genealy and atomic to rer) crcunstante, Europeans typically need more time than ‘metcan marketers are sua wiling 0 Gre—a fous gaup tere ral tas less than teo hous andoften mor han fut. Partipants must ee a relaxed a5 possbie ard fel a stong chligation o“speak he ruth” Pyscal suroundngs can be crc, Researchers atone aency knew they had a prlem ven att ‘ke out betnen paricipats aon o thet Sessons. As ove exe: uve noe, "we wondered wy pple ainays Seemed grumpy ard ‘egalne—peofle were resistant to any idea we sowed them,” The ‘problem was thereon tse cramped, sting fabddig: “twas a ‘Goss elveen ahespill oon afd apoice interrogation eon," To fie ‘he probe, he agen eave the rom a maleoee. Otter frms ae alapiing tne wok of he roam fo ft the Meee oF the topie—Ike ‘siting te reomto ok ikea playroom whe speaing to cite. ‘Athcugh many ts are substiuting servation researc tr Focus groups, ethnographic research canbe expensive and ty: Researchers have 1 be hight sie, prtzpants hae bbe a te level and rowids of data have to be analze. Te deaty of oeus ‘ous, 2 one marketing exec noe, is hat “ts sil he mos. ‘crstettectne, quiches, dist way to getintamatin in rapid time ‘1 at idea." In analyzing the ros and cons, Wharton Americus eed mht hare saidit best “A focus group tke a chain sav. you know what you're doin, i's very use and effective. I you ‘on’, yeu cout lose a ind” Sources: Surah Stason, ‘Ho Focus Gros Ca GoAsta Ades Doct 5, 19, po. 4-6; ete Kast. sins and Fang Si” Boson Glee. us 21.200, p.C1-C2: Les Kavinn, “Eno ak Nese, Aut 1,197, p. 489. Linda The “Evry owe You Make Fast Gary, 2004 0p 73-75:Aison Qin Welnt “Te Now Scnceo Foes Grup Arca Denaraice Mich 2013: 29-23; Deis ok, “Out Fees Groups Markt Reseach 5:10, 2 Senex 200 1; Corsi ark Loss of son; Focus Goins Fale Cone Toy, Cet ton” Marg Hows, Septenoe 19, 203,940. shopping data show that high-income people do not nevessatily buy the more expensive brands, co i low-income people buy some expensive brands. Clearly, American Alrines can lear many useful things about its passengers by analyzing dicket purchase records Experimental Research ‘The most scientifically valid research is experimen- tal esearch. The purpose of experimental esearchis to capture cause-and-effect rlationshis by eliminating.competingexplanations of the observed findings. To the extent thatthe design and execution of the experiment eliminate alternative hypotheses that might explain the results, research and marketing managers can have confidence in the conclusions. Experiments call for selecting matched groups of subjects, subjecting them to different weatments, controlling extraneous variables, and checking whether observed response dt ferences are statistically significant, To the extent that extraneous factors are eliminated ot controlled, the observed effects can be related (o the variations in the treatments. American Airlines might incroduce inflight [ncemer service on one of ts regula lights from. Chicago to Tokyo. IC migh charge $25 ane week and charge only S15 the next week. I the plane car ried approximately the same number of first-class passengers cach week and the particular weeks made no difference, any significant difference iu the numberof cals made coud be related to the different prices charged. The experimental design could be elaborated by ty- ingother prices and including other air routes.CONDUCTING MARKETING RESEARCH AND FORECASTING DEMAND MARKETING MEMO | 1. Ensure that quostions are without bias, Do not load tho fesponitent into an ensues 2. Make the questions as simple as possible. Qvestons that CHAPTER 4 QUESTIONNAIRE DOS AND DON'TS 8, Avoid hypothotica! quastons. ti iti oorower questions out imaginary situations. Answers cannot necessary be tusted, 107 ideas oF two uestions in one will contuse $. Bo not use words thet could be misheard. Tis is espciahy impvtant nthe interview is administered over te telephone. | 3. Make the questions spect Sometmes itis adisabe toads “What ' our opin of secs” cod yd testing tt not memory cues. For example, iis good practice w besperitic win __‘@Cessary relevant anewors, | ti prods 40, Desensitze questions by using response bands. Fr quot- 4. Avoid jargon or shorthand Av ab pon, anys, and tons that ask pele ther age or comparies Meir employe | ina notin evra we tno, is Hest io ofer range o response bands. 5. Steer clear of sophisticated or uncommon words, Ony vse 11- Ensure tha fixed responses do not overtep, Cateyories | wards a cammn speech \sedin ied reponse questions soul be sequel and not 6. Avoid ambiguous words. Words such as “usually” or ‘tre “ere ¢ pent harem spectc mening. 12, Alow for “other in fixed response questions. Prete nswers should alyays alow fora response otter than those 7. Avoid questions with # negative in them. vs deter tosay "Do you ever... ?"than “De you never..." Source: Adgtsron Pa Haque and Ptr Jackson, Maret Research: A Gude o Panis, Methoxog, and Euan and: Konan ate. 199. Se abo, ans Boungaer ant den Bonde! €.M. Sooniama, Response Sys n Marketing Rosen: & Cross ttioalInesinnton” Jour of arsingfeseren ay 200: 1-16 | ACH INSTRUMENTS. Marketing rsearchershave choice of three main research instru- n collecting primary data: questionnaires, qualitative measures, and mechanical devices Questionnaires Aquestionnaireconsisis ofa set of questions presented to respon: dents, Because of its flexibility, the questionnaire is by far the most common instrument used tncollect primary data. Questionnaires need to be carefully developed, tested, and debugged tefore they are administered on a large scale. In preparing a questionnaire, the researcher carelully chooses the questions and theie form, wording, and seqstence. The form af the ques- tion can influence the response. Marketing researchers distinguish between closed-end and open-end questions. Closed-end questions specify all the possible answers and provide answers that are easier to interpret and tabulate, Open-end questions allow respondents to answer in their awn words and often reveal more about how people think. They are especially asefil in exploratory research, where the researcher is looking for insigh« into how people think rather than measuring how many people think a certain way. Table 4.1 provides exam. sles f both types of questions; and see “Marketing Memo: Questionnaire Dos and Don's” Qualitative Measures Some marketers prefer more qualitative methods for auging consumer opinion because consumer actions do net always match theiranswers to survey questions. Qualitative research recimiques ate relatively unstructured measurement approaches that permit a range of possible responses, and they are a ereative means of ascertaining consumer perceptions that may otherwise be cificult to uncover. The range of possible qualitative research techniques is limited only by the creativity of the marketing researcher, Here are seven techniques employed by design firm IDEO for understanding the customer experiences? 8 Shadowing—observing people using products, shopping, going to hospitals, aking the tran, using their cell phones ® Behavior mapping photographing people room, over two or three days. © Consumer journey—keeping track of al the interactions consumer has with a product, setvice, oF space. hin a space, such as a hospital waiting