Chapter Objectives

1. Marketing Research and Sales Forecasting CHAPTER8 Chapter Objectives Describe the development of the marketing research function and its major activities. Explain the steps in the marketing research process. Distinguish between primary and secondary data and identify the sources of each type. Explain the different sampling techniques used by marketing researchers. Identify the methods by which marketing researchers collect primary data. Explain the challenges of conducting marketing research in global markets. Outline the most important uses of computer technology in marketing research. Identify the major types of forecasting methods. 4 6 1 5 7 2 3 8

2. • Marketing research Process of collecting and using information for marketing decision making. • Marketers use data from a variety of sources to understand customers, target customer segments, and develop long-term customer relationships. • Research is the primary source of information used to make effective marketing decisions.

3. THE MARKETING RESEARCH FUNCTION • Research is central to understanding effective customer satisfaction and customer relationship programs. DEVELOPMENT OF THE MARKETING RESEARCH FUNCTION • First organized marketing research conducted in 1879 by N.W. Ayer. • Second milestone was founding by Charles C. Parlin in 1911 of the nation’s first commercial research department at Curtis Publishing, publisher of The Saturday Evening Post. • Counted Campbell’s Soup cans in the garbage in selected Philadelphia neighborhoods to persuade that company to advertise with the publication. • Research methods grew more sophisticated in the 1930s with better sampling techniques and greater accuracy. • Computer technology has significantly advanced market research.

4. WHO CONDUCTS MARKETING RESEARCH? • Size and form of research often tied to corporate structure. • Many firms outsource research needs. • Major U.S. marketing research firms include ACNielsenand Arbitron. Syndicated Services • Organizations that regularly provide a standardized set of data to all customers. Full-Service Research Suppliers • Firm that conducts complete marketing research projects. Limited-Service Research Suppliers • Firm that specializes in a limited number of activities, such as conducting field interviews or performing data processing.

5. CUSTOMER SATISFACTION MEASUREMENT PROGRAMS • Firms often focus on tracking satisfaction levels of current customers. • Also analyze partial or complete dissatisfaction to identify problem areas that need attention. • Organizations may outsource these studies or conduct them themselves. • Example: Environmental Protection Agency has posted a customer satisfaction questionnaire on its Web site.

6. THE MARKETING RESEARCH PROCESS • Usually follows a six-step process. DEFINE THE PROBLEM • Well-defined problems are half-solved. • Avoid confusing symptoms with problem itself. • Loss of market share is a symptom; reason for the loss is the problem. • Evaluate firm’s marketing mix and possible changes to the marketing environment.

7. CONDUCT EXPLORATORY RESEARCH • Exploratory research Process of discussing a marketing problem with informed sources both within and outside the firm and examining information from secondary sources. Using Internal Data • Research from customer surveys and demographic data. • Sales analysis can compare expected sales with actual sales and be analyzed in a variety of ways, such as by customer type, sales method, and others. • Accounting data provides information about financial issues. • Marketing cost analysis evaluates expenses for a variety of costs.

8. FORMULATE A HYPOTHESIS • A tentative explanation for some specific event. • Sets the stage for more in-depth research. CREATE A RESEARCH DESIGN • A master plan or model for conducting research. • Must ensure it will measure what researchers intend to measure. COLLECT DATA • Secondary data Previously published information. • Primary data Information collected specifically for the investigation at hand. • Primary costs more to gather but can be much more valuable.

9. INTERPRET AND PRESENT RESEARCH INFORMATION • Present in a format that allows managers to make effective judgments. • Researchers and end users must collaborate to ensure effectiveness of research. • Reports must be clear and concise. • Must explain technical terminology.

10. MARKETING RESEARCH METHODS SECONDARY DATA COLLECTION • Secondary data comes from many sources. • Can be internal data or external data. Government Data • Nation’s most important source of marketing data. • U.S. Census provides data about very small segments, as few as 1,500 people. • TIGER system overlays topographic features—such as railroads, highways, and rivers—with census data such as household income. • State and city governments also provide valuable data.

11. Private Data • Variety of sources: • Trade associations. • Business and trade magazines. • Information gathered from scanning technology. • Increasing use of radio-frequency identification for inventory control. Online Sources of Secondary Data • Online databases. • Research aggregators acquire, catalog, reformat, segment, and resell premium research reports. • Examples: Datamonitor and eMarketer. • Internet discussion groups, chat rooms, and newsgroups.

12. SAMPLING TECHNIQUES • Sampling Process of selecting survey respondents or research participants. • Population—total group of people a researcher wants to study. • Researchers rarely sample the entire population. • Probability sample Sample that gives every member of the population a chance of being selected. • Simple random sample—every member of relevant group has equal opportunity to be sampled. • Stratified sample—randomly selected subsamples of different groups are represented in the total sample. • Cluster sample—researchers select subgroups from which they sample. • Nonprobability sample Sample that involves personal judgment somewhere in the process.

13. PRIMARY RESEARCH METHODS • Choice of method depends on the issues under study and the decisions marketers need to make.

14. Observation Method • Researchers view the overt actions of subjects being studied. • Example: Counting the number of cars that pass by a potential restaurant location. • Use increasingly sophisticated ways of tracking behavior. • Electronic devices that measure media consumption. • In response to digital video recording, Nielsen Media Research has changed the way it reports television viewership. • Videotaping consumers is gaining acceptance. Interpretive Research • Interpretive research Observational research method developed by social anthropologists in which customers are observed in their natural setting and their behavior is interpreted based on an understanding of social and cultural characteristics; also known as ethnography, or “going native.”

15. SURVEY METHOD • Researchers must ask questions to get information on attitudes, motives, and opinions. Telephone Interviews • Quick and inexpensive way of getting a small quantity of relatively impersonal information. • Many people refuse to take part or are reluctant to give personal information over the phone. • Not a viable option in international markets where phone usage is rare. Personal Interviews • Allow researchers to obtain detailed information and ask follow-up questions. • May use mall intercepts, interviews conducted in shopping malls.

16. Focus Groups • Focus group Simultaneous personal interview of a small group of individuals, which relies on group discussion about a certain topic. • Encourage general discussion of a selected topic. • Valuable for exploratory research, such as new product development. • Drawback is potential lack of honesty due to peer pressure. • Researchers are experimenting with online focus groups. Mail Surveys • Cost-effective means that allows respondents anonymity. • Response rates typically lower than for personal interviews and are time-consuming. • May be subject to bias through self-selection.

17. Fax Surveys • Limited household use makes getting a good sample difficult. • Federal junk fax law limits fax transmissions for commercial purposes. Online Surveys and Other Internet-Based Methods • Allows researchers to speed the survey process, increase sample sizes, ignore geographic boundaries, and dramatically reduce costs. • Marketers are experimenting with Web questionnaires and electronic bulletin boards. • No standard has developed for measuring Web use. • Some software can monitor a user’s viewing habits and display targeted banner ads.

18. Experimental Method • Least used method. • Controlled experiment—a scientific investigation in which a researcher controls or manipulates a test group and compares the results with those of a control group. • Most common use is for test marketing—introducing a new product in a specific area and then observing its degree of success. • Can be expensive and allow competitors to learn about new products quickly. • Alternatives include computer modeling software, regional product launches, and limiting product to a single retail outlet to allow for careful evaluation.

19. CONDUCTING INTERNATIONAL MARKETING RESEARCH • Follow same basic steps as for domestic marketing research. • U.S. Department of Commerce offers reports and guides about almost every country in the world. • Export America and Overseas Business Reports. • Researchers must be aware of cultural and legal environments. • May have to adapt research methods to local conditions. • Example: Focus groups may be difficult to organize in countries where violence and kidnapping are common.

20. INTERPRETIVE RESEARCH • Provides insight into consumer behavior and the ways consumers interact with brands. • Researcher spends time studying the culture, called ethnographic research. • Focus is on understanding the meaning of the product or consumption in the consumer’s life. • Cost is higher than other forms of research. • Captures what consumers actually do, not just what they say they do.

21. COMPUTER TECHNOLOGY INMARKETING RESEARCH MARKETING INFORMATION SYSTEMS (MIS) • A planned, computer-based system designed to provide decision makers with a continuous flow of information relevant to their areas of responsibility. • Well-constructed MIS is the company’s nerve center because it continually monitors marketing environment and provides instantaneous information. MARKETING DECISION SUPPORT SYSTEMS (MDSSs) • Marketing decision support system (MDSS) Marketing information system component that links a decision maker with relevant databases and analysis tools. • Develops raw data into information useful for decision making.

22. DATA MINING • The process of searching through computerized data files to detect patterns. • Focuses on identifying relationships that are not obvious to marketers. • Efficient way to sort through huge amounts of data and make sense of it. • Example: NACCO Industries uses data mining to scan warranty claims for common problems. BUSINESS INTELLIGENCE • Process of gathering information and analyzing it to improve business strategy, tactics, and daily operations. COMPETITIVE INTELLIGENCE • A form of business intelligence that focuses on finding information about competitors using published sources, interviews, observations by salespeople and suppliers in the industry, and other sources.

23. SALES FORECASTING • Sales forecast Estimate of a firm’s revenue for a specified time period. QUALITATIVE FORECASTINGTECHNIQUES Jury of Executive Opinion • Combines and averages the outlooks of top executives from such areas as marketing, finance, production, and purchasing. Delphi Technique • Solicits opinions from several people, but it also gathers input from experts outside the firm rather than relying completely on company executives.

24. Sales Force Composite • Develops forecasts based on the belief that organization members closest to the marketplaceoffer the best insights concerning short-term future sales. • Typically works from the bottom up. Survey of Buyer Intentions • Gathers input through mail-in questionnaires, online feedback, telephone polls, and personal interviews to determine the purchasing intentions of a representative group of present and potential customers.

25. QUANTITATIVE FORECASTING TECHNIQUES Test Markets • Gauges consumer responses to a new product under actual marketplace conditions. • Allows researchers to evaluate the effects of different prices, alternative promotional strategies, and other marketing mix variations. Trend Analysis • Develops forecasts for future sales by analyzing the historical relationship between sales and time. Exponential Smoothing • Sophisticated method of trend analysis that weighs each year’s sales data, giving greater weight to results from the most recent years.