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Southwestern Conquistador Beer,

Secondary Data, Measures,


Hypothesis Formulation, Chi-Square

Market Intelligence
Julie Edell Britton
Session 2
August 8, 2009

Todays Agenda

Announcements
Southwestern Conquistador Beer Case
Backward Market Research
Secondary data quality
Measure types
Hypothesis Testing and Chi-Square

Announcements
National Insurance Case for Sat. 8/22
Download National.sav from platform
SPSS on machines in MBA PC Lab and see
installation direction on the platform on how to install
on your machine
Do tutorial to familiarize with SPSS
Use handout in course pack to answer questions: 1-6
Stephen will do a tutorial on Friday, 8/21 from 1:00
-2:15 in the MBA PC Lab and be available on 8/21
from 7 9 pm in the MBA PC Lab to answer
questions
Submit slides by 8:00 am on Sat. 8/22
3

SWCB Objectives

Feasibility decisions
Problem formulation, information needs
Role of secondary data
Role of research and time budgets
Quality, cost, speed

SWCB Questions
What should Mr. Gomez do?
Consumer behavior?
What information do we need to make
decision?
Which reports allow that information to be
estimated?
What decision do these reports suggest?

SWCB Conclusions
Feasibility studies need data on: industry demand,
market share, investment, costs, margins. Break
even analysis common.
Conceptualize data before doing research
Effort at problem formulation stage reduces later
costs of doing research
Secondary data is the place to start
6

SWCB Conclusions (cont.)


Cost of information is real; research budget
typically constrained
Cheap info may not be most economical if it is
unreliable
Just because budget has funds does not mean
you should conduct extraneous research.

Todays Agenda

Announcements
Southwestern Conquistador Beer Case
Backward Market Research
Secondary data quality
Measure types
Hypothesis Testing and Chi-Square

Backward Market Research


Obvious? Psychology of why so hard to do.
Imagine the end of the process:
What will the final report look like? DUMMY TABLES
What decision alternatives might be implemented?
What analyses can support a choice between
alternatives?

Where to get the data for analysis?


Do they already exist?
If not, may need to commission a study.

Design the study (need- vs. nice-to-know)


Analyze data & make recommendation

Analysis Dummy Table

Consumers Consumers
Upbeat
Learning of
Feelings
Ad Claims

Consumers
Attitude
toward the
Ad

Consumers
Attitude
toward the
Brand

Ad A
Ad B
Ad Score = .25 UpF +.20 Claims + .15 AAd + .40 AB
Action Standard - Run the Ad with the Higher Ad Score

Research Process Fig 3-1, p.49

Marketing Planning & Info System.


Agree on Research Purpose AmEx
Research Objectives (hypotheses, bounds)
Value of Information (the clairvoyant, p. 59)
Design Research
Collect Data & Analyze
Report Results & Make Recommendations

Research Process Fig 3-1, p.49

Marketing Planning & Info System.


Agree on Research Purpose AmEx
Research Objectives (hypotheses, bounds)
Value of Information (the clairvoyant, p. 59)
Design Research
Collect Data & Analyze
Report Results & Make Recommendations

American Express Marketing Research Brief


(To Be filled out by End User)
Marketing Background - Describe the current information or
environment what are the issues that precipitated the need for the
research? What business units will be impacted?

Business Decisions - What decisions will be made and what actions will
be taken as a result of the research? (If appropriate, specify alternatives
being considered). What other data or business considerations will impact
the decision?

Information Objectives - What are the key questions (critical


information) that must be answered in order to make the decision?

Relevant Populations - Who do we need to talk to and why?


Timing - When must the research be completed to make the marketing
decision?

Budget How much money has been budgeted for this research? To

what budget line will it be charged?


Requested by ________________ Manager
Requested by ________________ Director
Requested by ________________ Vice President

American Express Marketing Research Brief


(To Be filled out by Marketing Research)
Job # __ Project Title _________ Budget Line ___ Business Unit___
Marketing Background
Business Decisions To Be Made
Research Objectives
Research Design
Action Standards
Existing Sources of Information Consulted (e.g. syndicated and/or
previous research)

Research Firm
Timing
Cost
Market Research Department Travel Cost

Approval ________________ Vice President


Approval ________________ if between $100,000 and $500,000 - Sr. VP
Approval ________________ if over $500,000 - Exec. Committee Member

American Express Marketing Research Actionability Audit


(To Be filled out by End User)

Project Name
End User Name

1.

What Decisions or Actions were taken or are planned as a result


of this research? If none, explain why.
Were any Actions Taken or are any actions being considered
that are in conflict with the research learning? If so, why?
In retrospect, is there anything that could have been done
differently to improve the actionability of the research
investment? If so, what?
Relevant Populations - Who do we need to talk to and why?

2.
3.

4.

Research Process Fig 3-1, p.49

Marketing Planning & Info System.


Agree on Research Purpose AmEx
Research Objectives (hypotheses, bounds)
Value of Information (the clairvoyant, p. 59)
Design Research
Collect Data & Analyze
Report Results & Make Recommendations

Overview of Research Design


Exploratory
Generate ideas on alternatives & criteria to
evaluate the alternatives

Descriptive
1-way: frequencies, proportions, means,
medians
2-way: correlations, crosstabs

Causal
Assess cause-effect relationships

Todays Agenda

Announcements
Southwestern Conquistador Beer Case
Backward Market Research
Secondary data quality
Measure types
Hypothesis Testing and Chi-Square

3 Key Skills
Backward market research (1, 2)
Getting data and judging its quality
Secondary data (2)
Exploratory research (3)
Descriptive research (4,5)
Causal research (6)

Analysis frameworks for classic


marketing problems (7-10)

Primary vs. Secondary Data


Primary -- collected anew for current purposes
Secondary -- exists already, was collected for
some other purpose
Finding Secondary Data Online @ Fuqua
http://library.fuqua.duke.edu

Primary vs. Secondary Data

Evaluating Sources of
Secondary Data
If you cant find the source of a number,
dont use it. Look for further data.
Always give sources when writing a report.
Applies for Focus Group write-ups too

Be skeptical.

Secondary Data: Pros & Cons


Advantages
cheap
quick
often sufficient

Disadvantages
there is a lot of data out there
numbers sometimes conflict
categories may not fit your needs

Types of Secondary Data

*IRI = Information Resources, Inc. (http://us.infores.com/)

Secondary Data Quality:


KAD p. 120 & Whats Behind the Numbers?
Data consistent with other independent sources?
What are the classifications? Do they fit needs?
When were numbers collected? Obsolete?
Who collected the numbers? Bias, resources?
Why were the data collected? Self-interest?
How were the numbers generated? Exter:
Sample size
Sampling method (Sessions 5&6)
Measure type
Causality (MBA Marketing Timing & Internship)

It is Hard to Infer Causality from


Secondary Data
Took Core
Marketing

Got Desired
Marketing
Internship

Did Not Get Desired


Marketing Internship

Term 1

76%

24%

Term 3

51%

49%

Evaluating Sources of
Secondary Data
If you cant find the source of a number,
dont use it. Look for further data.
Always give sources when writing a report.
Applies for Focus Group write-ups too

Be skeptical.

Be Skeptical
MBAs May Be A Marketing Liability
A master of Business Administration degree is not only worthless, it
can work against a marketer, according to a survey of marketing
executives from 32 consumer-products companies by consulting firm
Ken Coogan & Partners...Marketing executives from 18
underperforming companies which had sales grow 7% less than their
categories on average in the last two years ended August 2005 were
twice as likely to have been recruited out of MBA programs than
marketing executives from out-performing companies, which averaged
growth 6.2% faster than their categories over the two years.
Source: AdAge.com, March 21, 2006
Mktg. Executive
had an MBA

Mktg. Executive did not


have an MBA

Overperformers (n = 9)

55.5%

44.5%

Underperformers (n = 18)

88.9%

11.1%

Todays Agenda

Announcements
Southwestern Conquistador Beer Case
Secondary data quality
Measure types
Hypothesis Testing and Chi-Square

Measure Types
Nominal: Unordered Categories
Male=1; Female = 2;

Ordinal: Ordered Categories, intervals


cant be assumed to be equal.
I-95 is east of I-85; I-80 is north of I-40; Preference data

Interval: Equally spaced categories, 0 is


arbitrary and units arbitrary.
Fahrenheit temperature each degree is equal

Ratio: Equally spaced categories, 0 on


scale means 0 of underlying quantity.
$ , Age

Meaningful Statistics &


Permissible Transformations

The Interval/Ordinal Distinction


The mean is a meaningless statistic when a variable
is ordinal or nominal.
That is because different permissible
transformations lead to different conclusions
Example on next slide: Male and female speed to
finish quiz (lower # means faster finish)
Measure 1 implies males faster, but measure 2
implies females faster.
In contrast, median is meaningful for ordinal data,
because different permissible transformations lead to
same conclusion
Median female faster than median male in measure
1, measure 2, or any permissible transform

Means and Medians with Ordinal Data


Gender

Measure 1 Measure 2 Means

Measure 1

M=5.4 < F=5.6

Measure 2

M=65.4 > F=25.6

Medians

107

Measure 1

108

M=7 > F=5

109

Measure 2

10

110

M=107 > F=5

Ratio Scales & Index Numbers

Todays Agenda

Announcements
Southwestern Conquistador Beer Case
Backward Market Research
Secondary data quality
Measure types
Hypothesis Testing and Chi-Square

MBA Acceptance Data


A.

Raw Frequencies
Accept

Reject

140

860

1000

60

740

800

200

1600

B.

Cell Percentages
Accept

Reject

.078

.478

.556

.033

.411

.444

.111

.889

1.0

M
F

C.

Row Percentages

D.

Column Percentages
Accept

Reject

140/200
= .700
60/200
=.300
1.00

860/1600
= .538
740/1600
= .462
1.00

Rule of Thumb
If a potential causal interpretation exists, make
numbers add up to 100% at each level of the
causal factor.
Above: it is possible that gender (row) causes
or influences acceptance (column), but not that
acceptance influences gender. Hence, row
percentages (format C) would be desirable.

Hypothesis
Hypothesis: What you believe the relationship is between the
measures.
Theory
Empirical Evidence
Beliefs
Experience
Here: Believe that acceptance is related to gender
Null Hypothesis: Acceptance is not related to gender
Logic of hypothesis testing: Negative Inference
The null hypothesis will be rejected by showing that a given
observation would be quite improbable, if the hypothesis was true.
Want to see if we can reject the null.

Steps in Hypothesis Testing


1. State the hypothesis in Null and Alternative Form
Ho: There is no relationship between gender
and MBA acceptance
Ha1: Gender and Acceptance are related
(2-sided)
Ha2: Fewer Women are Accepted (1-sided)
2. Choose a test statistic
3. Construct a decision rule

Chi-Square Test
Used for nominal data, to compare the observed
frequency of responses to what would be expected
under some specific null hypothesis.
Two types of tests
Contingency (or Relationship) tests if the variables
are independent i.e., no significant relationship
exists between the two variables
Goodness of fit test Compare whether the data
sampled is proportionate to some standard

Chi-Square Test

(Oi Ei )

Ei
i 1
2

2
With (r-1)*(c-1)
degrees of freedom

number in cell i
Oi Observed number in cell i Ei Expected
under independence
i

number of cells

number of rows

number of columns

Ei = Column Proportion * Row Proportion * total number observed

MBA Acceptance Data Contingency


A.

Observed Frequencies

C.

B.

Cell Percentages

Accept

Reject

.078

.478

.556

.033

.411

.444

.111

.889

1.0

Expected Frequencies
Accept

Reject

.111*.556*1800=111

.889*.556*1800=890

.111*.444*1800= 89

.889*.444*1800=710

Chi-Square Test

(Oi Ei )

Ei
i 1
2

2
With (r-1)*(c-1)
degrees of freedom

2
=(140-111)2/111 + (860-890)2/890 + (60-89)2/89 + (740-710)2/710
= 19.30 So?
i

3. Construct a decision rule

Decision Rule
1. Significance Level -

.05

Probability of rejecting the Null Hypothesis, when it is true


2. Degrees of freedom - number of unconstrained data used in
calculating a test statistic - for Chi Square it is (r-1)*(c-1), so
here that would be 1. When the number of cells is larger, we
need a larger test statistic to reject the null.
3. Two-tailed or One-tailed test Significance tables are (unless
otherwise specified) two tailed tables. Chi-Sq is on pg 517
Ha1: Gender and Acceptance are related (2-sided) Critical Value =
3.84
Ha2: Fewer Women are Accepted (1-sided) Critical Value = 2.71

4.

Decision Rule: Reject the Ho if calculated Chi-sq value (19.3)


>
the test critical value (3.84) for Ha1 or (2.71) for Ha2

Chi-Square Table

Chi-Square Test
Used for nominal data, to compare the observed
frequency of responses to what would be expected
under some specific null hypothesis.
Two types of tests
Contingency (or Relationship) tests if the variables
are independent i.e, no significant relationship
exists
Goodness of fit test Compare whether the data
sampled is proportionate to some standard

Goodness of fit Chi-Square


Ho: Car Color Preferences have not shifted
Ha: Car color Preferences have shifted
Data
Red
680
Green 520
Black
675
White
625
Total(n) 2500

Historic Distribution Expected # = Prob*n


30%
25%
25%
20%

Do we observe what we expected?

750
625
625
500

Chi-Square Test

(Oi Ei )

Ei
i 1
2

2
With (k-1)
degrees of freedom

2
=(680-750)2/750 + (520-625)2/625 + (675-625)2/625 + (625-500)2/500
= 59.42
i

So?
3. Construct a decision rule

Decision Rule
1. Significance Level -

.05

Probability of rejecting the Null Hypothesis, when it is true


2. Degrees of freedom - number of unconstrained data used in
calculating a test statistic - for Chi Square it is (k-1), so here that
would be 3. When the number of cells is larger, we need a larger
test statistic to reject the null.
3. Two-tailed or One-tailed test Significance tables are (unless
otherwise specified) two tailed tables. Chi-Sq is on pg 517
Ha: Preference have changed (2-sided) Critical Value = 7.81

4.

Decision Rule: Reject the Ho if calculated Chi-sq value (59.42) >


the test critical value (7.81).

Chi-Square Table

Recap
Finding & Evaluating Secondary Data
Measure Types
permissible transformations
Meaningful statistics

Index #s
Crosstabs
Casting right direction
Chi-square statistic
Contingency Test
Goodness of Fit Test