Module 2: Developing Information

Learning Outcomes

At the end of this module, you are expected to:

1. Describe the steps in marketing research.

2. Compare the advantages and disadvantages of various methods in collecting
information.

2.1. Internal Records

Most marketing managers use internal records and

reports regularly, especially for making day-to-day planning,
implementation and control decisions. Internal records
information consists of information gathered from sources
within the company to evaluate marketing performance and to
detect marketing problems and opportunities. The company’s
accounting department prepares financial statements and keeps
detailed records of sales, orders, costs and cash flows.
Manufacturing reports on production schedules, shipments and
inventories. The sales force reports on reseller reactions and
competitor activities. The customer service department provides information on customer
satisfaction or service problems. Research studies done for one department may provide
useful information for several others. Managers can use information gathered from these and
other sources within the company to evaluate performance and to detect problems and
opportunities.

Information from internal records is usually quicker and cheaper to get than
information from other sources, but it also presents some problems. Because internal
information was intended for other purposes, it may be incomplete or in the wrong form for
making marketing decisions. For example, accounting department sales and cost data used for
preparing financial statements need adapting for use in evaluating product, sales force or
channel performance. In addition, the many different areas of a large company produce great
amounts of information, and keeping track of it all is difficult. The marketing information
system must gather, organize, process and index this mountain of information so that
managers can find it easily and get it quickly.

2.2. Marketing Intelligence

Marketing intelligence is everyday information about developments in the marketing

environment that helps managers prepare and adjust marketing plans. The marketing
intelligence system determines the intelligence needed, collects it by searching the
environment and delivers it to marketing managers who need it. Marketing intelligence
comes from many sources. Much intelligence is from the company’s personnel – executives,
engineers and scientists, purchasing agents and the sales force. But company people are often
busy and fail to pass on important information. The company must ‘sell’ its people on their

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importance as intelligence gatherers, train them to spot new developments and urge them to
report intelligence back to the company.

The company must also persuade suppliers, resellers

and customers to pass along important intelligence. Some
information on competitors comes from what they say about
themselves in annual reports, speeches, press releases and
advertisements. The company can also learn about
competitors from what others say about them in business
publications and at trade shows. Or the company can watch
what competitors do – buying and analyzing competitors’
products, monitoring their sales and checking for new patents.

Companies also buy intelligence information from

outside suppliers. Dun & Bradstreet is the world’s largest
research company with branches in 40 countries. Its largest
subsidiary is Nielsen, which sells data on brand shares, retail
prices and percentages of stores stocking different brands.
Neilsen is global measurement and data analytics company that provides the most complete
and trusted view available of consumers and markets worldwide. Nielsen Philippines also
processes the market data its people collect from surveys and other market research methods
through rigorous and innovative scientific methods.

2.3. Competitor Intelligence

Marketing intelligence can work not only for but also against a company. Companies
must sometimes take steps to protect themselves from the snooping of competitors. For
example, Kellogg’s had treated the public to tours of its plants since 1906, but recently closed
its newly upgraded plant to outsiders to prevent competitors from getting intelligence on its
high-tech equipment. In Japan corporate intelligence is part of the industrial culture.
Everyone from assembly-line workers to top executives considers it their duty to filter
intelligence about the competition back to management. In its Bangkok offices one European
organization has a huge poster outside its lavatory saying: “Wash and hush up! You never
know who’s listening! Keep our secrets secret.”

Some companies set up an office to collect and circulate marketing intelligence. The
staff scan relevant publications, summarize important news and send news bulletins to
marketing managers. They develop a file of intelligence information and help managers
evaluate new information. These services greatly improve the quality of information available
to marketing managers. The methods used to gather competitive information range from the
ridiculous to the illegal. Managers routinely shred documents because wastepaper baskets can
be an information source.

Competitive marketing intelligence is the systematic monitoring, collection, and

analysis of publicly available information about consumers, competitors, and developments
in the marketplace. The goal of competitive marketing intelligence is to improve strategic
decision making by understanding the consumer environment, assessing and tracking
competitors’ actions, and providing early warnings of opportunities and threats. Marketing
intelligence techniques range from observing consumers firsthand to quizzing the company’s

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own employees, benchmarking competitors’ products, online research, and monitoring social
media buzz.

Good marketing intelligence can help marketers gain insights into how consumers
talk about and engage with their brands. Many companies send out teams of trained observers
to mix and mingle personally with customers as they use and talk about the company’s
products. Other companies—such as Dell, PepsiCo, Kraft, and MasterCard— have set up
sophisticated digital command centers that routinely monitor brand-related online consumer
and marketplace activity.

2.4. Marketing Research

In addition to marketing intelligence information about general consumer, competitor,

and marketplace happenings, marketers often need formal studies that provide customer and
market insights for specific marketing situations and decisions. For example, Starbucks wants
to know how customers would react to a new breakfast menu item. Yahoo! wants to know
how Web searchers will react to a proposed redesign of its site. Or Samsung wants to know
how many and what kinds of people will buy its next-generation, ultrathin televisions. In such
situations, managers will need marketing research.

Marketing research is the systematic design, collection, analysis, and reporting of

data relevant to a specific marketing situation facing an organization. Companies use
marketing research in a wide variety of situations. For example, marketing research gives
marketers insights into customer motivations, purchase behavior, and satisfaction. It can help
them to assess market potential and market share or measure the effectiveness of pricing,
product, distribution, and promotion activities.

Some large companies have their own research departments that work with marketing
managers on marketing research projects. In addition, these companies—like their smaller
counterparts—frequently hire outside research specialists to consult with management on
specific marketing problems and to conduct marketing research studies. Sometimes firms
simply purchase data collected by outside firms to aid in their decision making.

2.5. The Marketing Research Process

The marketing research process consists of four steps:

defining the
developing implementing interpreting
problem and
the research the research and reporting
research
plan plan the findings
objectives

a) Defining the Problem and research objectives

Marketing managers and researchers must work together closely to define the
problem and agree on research objectives. The manager best understands the decision for
which information is needed, whereas the researcher best understands marketing research and
how to obtain the information. Defining the problem and research objectives is often the

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hardest step in the research process. The manager may know that something is wrong without
knowing the specific causes.

After the problem has been defined carefully, the manager and the researcher must set
the research objectives. A marketing research project might have one of three types of
objectives. The objective of exploratory research is to gather preliminary information that
will help define the problem and suggest hypotheses. The objective of descriptive research
is to describe things, such as the market potential for a product or the demographics and
attitudes of consumers who buy the product. The objective of causal research is to test
hypotheses about cause-and-effect relationships. For example, would a 10 percent decrease in
tuition at a private college result in an enrollment increase sufficient to offset the reduced
tuition? Managers often start with exploratory research and later follow with descriptive or
causal research.

The statement of the problem and research objectives guides the entire research
process. The manager and the researcher should put the statement in writing to be certain that
they agree on the purpose and expected results of the research.

b) Developing the research plan

The second step of the marketing research process calls for determining the
information needed, developing a plan for gathering it efficiently and presenting the plan to
marketing management. The plan outlines sources of existing data and explains the specific
research approaches, contact methods, sampling plans and instruments that researchers will
use to gather new data. To design a research plan, we need to make decisions about 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 freshly gathered for a specific purpose
or for a specific research project.

Researchers usually start their investigation by examining some of the

rich variety of low-cost and readily available secondary data, to see whether
they can partly or wholly solve the problem without collecting costly primary
data.

When the needed data don’t exist or are dated, inaccurate, incomplete,
or unreliable, the researcher will need to collect primary data. Most marketing
research projects do include some primary-data collection.

 Research Approaches

Marketers collect primary data in five main ways:

Observational Researchers can gather fresh data by observing

Research the relevant actors and settings unobtrusively as they
shop or consume products. Sometimes they equip

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 consumers with pagers and instruct them to write down
what they’re doing whenever prompted, or they hold
informal interview sessions at a café or bar. Photographs
can also provide a wealth of detailed information.

A focus group is a gathering of 6 to 10 people

carefully selected by researchers based on certain
demographic, psychographic, or other considerations and
brought together to discuss various topics of interest at
length. Participants are normally paid a small sum for
attending.

Focus Group A professional research moderator provides

Research questions and probes based on the marketing managers’
discussion guide or agenda. In focus groups, moderators
try to discern consumers’ real motivations and why they
say and do certain things.

They typically record the sessions, and marketing

managers often remain behind two-way mirrors in the
next room. To allow for more in-depth discussion with
participants, focus groups are trending smaller in size.

Companies undertake surveys to assess people’s

knowledge, beliefs, preferences, and satisfaction and to
measure these magnitudes in the general population.

Many marketers are taking their surveys online

where they can easily develop, administer, and collect e-
mail and Web-based questionnaires. However, they
conduct their surveys—online, by phone, or in person—
Survey companies must feel the information they’re getting from
Research the mounds of data makes it all worthwhile.

Putting out so many surveys each month,

companies may run the risk of creating “survey burnout”
and seeing response rates plummet. Keeping a survey
short and simple and contacting customer no more than
once a month are two keys to drawing people into the
data collection effort. Offering incentives is another way
companies get consumers to respond.

Customers leave traces of their purchasing

behavior in store scanning data, catalog purchases, and
Behavioral customer databases. Marketers can learn much by
Research analyzing these data. Actual purchases reflect consumers’
preferences and often are more reliable than statements
they offer to market researchers.

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 The most scientifically valid research is
experimental research, designed to capture cause-and-
effect relationships by eliminating competing
explanations of the observed findings.

Experimental If the experiment is well designed and executed,

Research research and marketing managers can have confidence in
the conclusions. Experiments call for selecting matched
groups of subjects, subjecting them to different
treatments, controlling extraneous variables, and
checking whether observed response differences are
statistically significant

 Research Instruments

Marketing researchers have a choice of three main research

instruments in collecting primary data:

A questionnaire consists of a set of questions

presented to respondents. Because of its flexibility, it is
by far the most common instrument used to collect
primary data. Researchers need to carefully develop, test,
and debug questionnaires before administering them on a
large scale. The form, wording, and sequence of the
questions can all influence the responses.

Closed-end questions specify all the possible

Questionnaires answers and provide answers that are easier to interpret
and tabulate.

Open-end questions allow respondents to answer

in their own words and often reveal more about how
people think. They are especially useful in exploratory
research, where the researcher is looking for insight into
how people think rather than measuring how many
people think a certain way.

Qualitative research techniques are relatively

unstructured measurement approaches that permit a range
of possible responses. Their variety is limited only by the
creativity of the marketing researcher.
Qualitative
Measures Qualitative research can often be an especially
useful first step in exploring consumers’ brand and
product perceptions. It is indirect in nature, so consumers
may be less guarded and reveal more about themselves in
the process.

Technological

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 Technology has now advanced to such a degree
that marketers can use devices such as skin sensors, brain
wave scanners, and full body scanners to get consumer
responses.

Galvanometers can measure the interest or

emotions aroused by exposure to a specific ad or picture.
Devices
The tachistoscope flashes an ad to a subject with
an exposure interval that may range from less than one
hundredth of a second to several seconds. After each
exposure, the respondent describes everything he or she
recalls. Eye cameras study respondents’ eye movements
to see where their eyes land first, how long they linger on
a given item, and so on.

 Sampling Plan

After deciding on the research approach and instruments, the

marketing researcher must design a sampling plan. This calls for three
decisions:

1. Sampling unit: Whom should we survey? Once they have determined

the sampling unit, marketers must develop a sampling frame so
everyone in the target population has an equal or known chance of
being sampled.

2. Sample size: How many people should we survey? Large samples give
more reliable results, but it’s not necessary to sample the entire target
population to achieve reliable results. Samples of less than 1 percent of
a population can often provide good reliability, with a credible
sampling procedure.

3. Sampling procedure: How should we choose the respondents?

Probability sampling allows marketers to calculate confidence limits
for sampling error and makes the sample more representative.

 Contact Methods

Now the marketing researcher must decide how to contact the subjects:

Mail The mail questionnaire is one way to reach people

who would not give personal interviews or whose
responses might be biased or distorted by the
interviewers.

Mail questionnaires require simple and clearly

worded questions. Unfortunately, the response rate is

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 usually low or slow.

Telephone interviewing is a good method for

Telephone gathering information quickly; the interviewer is also able
to clarify questions if respondents do not understand
them. Interviews must be brief and not too personal.

Personal interviewing is the most versatile

method. The interviewer can ask more questions and
record additional observations about the respondent, such
as dress and body language.

At the same time, however, personal interviewing

is the most expensive method, is subject to interviewer
bias, and requires more administrative planning and
supervision.
In Person
Personal interviewing takes two forms. In
arranged interviews, marketers contact respondents for an
appointment and often offer a small payment or incentive.

In intercept interviews, researchers stop people at

a shopping mall or busy street corner and request an
interview on the spot. Intercept interviews must be quick,
and they run the risk of including nonprobability samples.

A company can embed a questionnaire on its Web

site and offer an incentive to answer it, or it can place a
Online
banner on a frequently visited site such as Yahoo!,
inviting people to answer some questions and possibly
win a prize.

Strengths and Weaknesses of Contact Methods

Mail Telephone Personal Online

Flexibility Poor Good Excellent Good

Quality of data
that can be Good Fair Excellent Good
collected

Control of
interviewer Excellent Fair Poor Fair
effects

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 Control of
Fair Excellent Good Excellent
sample

Speed of data
Poor Excellent Good Excellent
collection

Response rate Poor Poor Good Good

Cost Good Fair Poor Excellent

c) Implementing the research plan

The researcher next puts the marketing research plan into action. This involves
collecting, processing and analyzing the information. Data collection can be by the
company’s marketing research staff or, more usually, by outside firms. The company keeps
more control over the collection process and data quality by using its staff. However, outside
firms that specialize in data collection can often do the job more quickly and at lower cost.

The data collection phase of the marketing research process is generally the most
expensive and the most subject to error. The researcher should watch fieldwork closely to
make sure that the plan is implemented correctly and to guard against problems with
contacting respondents, with respondents who refuse to cooperate or who give biased or
dishonest answers, and with interviewers who make mistakes or take short cuts.

Researchers must process and analyze the collected data to isolate important
information and findings. They need to check data from questionnaires for accuracy and
completeness, and code it for computer analysis. The researchers then tabulate the results and
compute averages and other statistical measures.

d) Interpreting and reporting the findings

The researcher must now interpret the findings, draw conclusions and report them to
management. The researcher should not try to overwhelm managers with numbers and fancy
statistical techniques. Rather, the researcher should present important findings that are useful
in the important decisions faced by management.

However, interpretation should not be by the researchers alone. They are often experts
in research design and statistics, but the marketing manager knows more about the problem
and the decisions needed. In many cases, findings can be interpreted in different ways and
discussions between researchers and managers will help point to the best interpretations. The
manager will also want to check that the research project was conducted properly and that all
the necessary analysis was completed. Or, after seeing the findings, the manager may have
additional questions that can be answered from the data. Finally, the manager is the one who
must ultimately decide what action the research suggests. The researchers may even make the
data directly available to marketing managers so that they can perform new analyses and test
new relationships on their own.

Interpretation is an important phase of the marketing process. The best research is

meaningless if the manager blindly accepts wrong interpretations from the researcher.
Similarly, managers may have biased interpretations – they tend to accept research results
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that show what they expected and to reject those that they did not expect or hope for. Thus,
managers and researchers must work together closely when interpreting research results and
both share responsibility for the research process and resulting decisions.

2.6. Demand Estimation

When a company finds an attractive market, it must estimate that market’s current size and
future potential carefully. The company can lose a considerable amount of profit by overestimating or
underestimating the market.

Demand is measured and forecast on many levels. It might be measured for six different
product levels (product item, product form, product line, company sales, industry sales and total
sales), five different space levels (customer, territory, country, region, world), and three different time
levels (short range, medium range and long range). A total of 90 types of demand measurements (6 x
5 x 3).

Each demand measure serves a specific purpose. A company might forecast short-run total
demand for a product as a basis for ordering raw materials, planning production and borrowing cash.
Or it might forecast long-run regional demand for a big product line as a basis for designing a market
expansion strategy.

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