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Case 3.

The Demographic Discovery of the New Millennium

1. HMOs must first understand the wants and needs of the mature segment. Thus, using
marketing research to uncover these wants is required. Exploratory research can be used
to gain insights into the differences between the segments, which can then be tested by
descriptive research methods.

HMOs should obtain information from the mature market on their lifestyles, demographics,
attitudes towards medical care and preventative medicine, past usage of medical services
(especially in the recent past), knowledge of HMOs, and psychographics.

Differences in the health care needs of the segments can be found using a one-way
ANOVA design. Each segment can be considered a separate treatment and differences
across illnesses, accidents, size of bill, etc., can be measured. Discriminant analysis can
be used to identify the variables that best discriminate the four segments.

2. First it should be noted that the study has a limitation. The sample consisted only of
women who did not work. Thus, there were many other elderly consumers who were not
considered and the results should not be extended to all elderly consumers.

Given this limitation, the research strategy is appropriate. Clustering the respondents on
advertising items results in relatively homogeneous groups that can be interpreted as
segments of the sample. From these segments the differences in psychographics can be
assessed. Also, the factor analysis results allow us to determine a psychographic profile
of each cluster.

3. Engaged—Relatively negative attitude towards advertising, conceiving it to be biased

and untruthful at times, nevertheless, the information provided by ads is helpful. They
rely on friends more than other groups.

Autonomous—A somewhat negative attitude towards advertising, conceiving it to be

biased and untruthful at times and relatively unhelpful in providing information affecting

their purchases. They tend to be very independent in their consumption behavior, not
consulting friends.
Receptive—A relatively positive attitude towards advertising, believing that it helps them
in gathering information and basing most of their decision to buy on advertisements, not
friend’s opinions. Like the other two groups, they are also skeptical of comparative
advertising, but less so.

4. Factor 1—Fashionable; Factor 2—Traditional Mother; Factor 3—Concerned Mother;

Factor 4—Skeptics of Big Business

Note that students may label the factors differently, but they should reflect the same
general theme.

5. Discriminant analysis would be helpful in determining the factors that most influence
each of the segments and whether a significant difference exists among the groups in
terms of the factors. The factor analysis results provide no insight into these questions.

Discriminant analysis can be conducted by using the factors as the predictor variables
and the clusters as the criterion variables. This will yield discriminant functions that will
indicate which factors best discriminate between the clusters.

6. Instead of using cluster analysis, factor analysis could have been used. Factor analysis is
commonly used to elicit underlying psychological constructs based on the correlations in
the data, whereas cluster analysis groups subjects on less abstract factors based on
distance heuristics. A factor analysis of the 200 AIO items would produce X factors
representing the underlying lifestyle dimensions of the elderly ladies. Factor scores for
each subject could then be calculated and cluster analysis of the factor scores run. This
would produce Y clusters of elderly lifestyles. To relate these clusters to attitude towards
advertising, analysis of variance is used. Each of the four attitude items is used as the
dependent variable, and the Y lifestyle clusters are used as independent variables.
Differences in mean values on each attitude statement can then be assessed. Multiple
discriminant analysis can be conducted by using the factors as the predictor variables and
the clusters as the criterion variables. A similar analysis can also be run on the overall
attitude towards advertising by summing the scores for each of the four items and
repeating the analysis.