Aaker Marketing Research, Tenth Edition International DAAakerVKumarGSDay Solution Manual

Aaker Marketing Research, Tenth Edition International By D.A.Aaker.V.Kumar.G.S.Day

Email: Richard@qwconsultancy.com

SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER ONE A DECISION-MAKING PERSPECTIVE ON MARKETING INTELLIGENCE Outline of the Chapter • • • • • ▪ ▪ ▪ ▪ ▪ ▪ ▪

Understand the concept of Business Intelligence.

Understand the need and use of marketing intelligence within an organization.

Comprehend how marketing intelligence fits into the bigger scheme of the marketing environment.

Explain the role of marketing intelligence in decision making.

Discuss the factors that affect marketing intelligence decisions.

Understand the implication of ethical issues in gathering marketing intelligence.

Understand the need for and use of Marketing Research.

Comprehend how Marketing Research fits into the bigger schema of marketing environment.

The role of Marketing Research in Decision Making.

Discuss the factors that affect Marketing Research.

Understand the implications of ethical issues in conducting Marketing Research.

Introduce International Marketing Research.

Teaching Suggestions This chapter will be discussed in the context of the introductory session to the course. This section comprises new material on emerging trends in marketing related to Business Intelligence and Marketing Intelligence. The scope of this session will be largely dictated by the type of students, their previous marketing courses and the length of the course. However, it is always useful to put the marketing research course into context by discussing its relationship to other marketing courses and defining the nature and scope of the marketing research process.

In addition, it could be a good beginning to use Figure 1-1 below to highlight the increasing importance of concepts such as Business Intelligence and Marketing Intelligence. It is important to explicitly introduce students to the hierarchical relationships of these new concepts and emphasize the relationships between Business Intelligence and Marketing Intelligence and that between Marketing Intelligence, Marketing Research and Database Marketing. This can also be used to provide a rationale for the course objectives, structure and project assignments. After this introduction, there are several alternative directions an instructor may wish to pursue.

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Figure 1-1: Typical areas under the umbrella of Business Intelligence

Business Intelligence

Financial Intelligence

Management Intelligence

Marketing Intelligence

....................

Customer Relationship Marketing/ Database Marketing

Marketing Research

Primary Sources

Accounting Intelligence

Secondary Sources

Standardized Sources

Provide data on

Prospects

Customers

Competition

Products/Markets

Some Guidelines Based on the new material added in the 10th edition of this text book, it may be useful for instructors to begin this course by highlighting the changes that emerging information technology (IT) solutions have brought in to the marketing field. It may be highlighted to students that organizations are often not aware that valuable information may lie hidden across disparate databases of their enterprise. Latest IT tools and technologies enable businesses to analyze, synthesize and collate key information pertaining to their business, market and customers. Such tools help organizations to create a structure to the information being collected by the organization, identify the critical information that impact the business, monitor changes and respond to situations with appropriate strategies.

Instructors should highlight the emergence of concepts such as Business Intelligence, Marketing Intelligence which help to gain a granular focus on important parameters that affect business performance.

Students should be enlightened with the emerging need for organizations to identify individual customer preferences, spending habits etc., which would help organizations to more accurately position their products and services and realize enhanced customer satisfaction and profitability. Discussions on the examples provided on Erlanger (Ky.) Police Department and Mozilla Firefox would be relevant at this point.

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Before delving further into marketing research, instructors should adequately refer to Figure 1-1 to ensure that the students understand the definition, scope and benefits of concepts such as Business Intelligence, Marketing Intelligence and Database Marketing. It is also important to emphasize the hierarchical relationships between the above concepts with marketing research.

For those instructors who wish to draw the distinction between public versus private sector applications of marketing research, they can begin with the American Marketing Association’s definition of marketing research and discuss how marketing research can aid decision making in both the private and public sector research applications.

For those instructors who wish to give more emphasis to the marketing planning process Table 2-1 will be an ideal starting point. The revenues of the top 25 firms in the US marketing research industry exceeded $21 billion in 2008, with a growth of 1.6% over 2007. It is worth noting that more than half of the revenues are estimated to come from foreign operations.

It is important that students understand two fundamental points which will be emphasized in subsequent chapters. These concepts should be established early in the course. The first is that research plays a continuous and cumulative role in the development of any marketing strategy. This can be illustrated by reviewing how research supports marketing decisions. The second is that research is a tool and like any tool, it can be misused. This can be illustrated by discussing ethical research and the barriers to effective research utilization.

Some instructors prefer to begin their course with a motivating case that illustrates the facets and issues that will be covered. The Clover Valley Dairy case at the end of Part I is well suited to this purpose. A further advantage to using this case early in the course is that it provides a useful context for subsequent discussions of the value of research information.

Questions and Problems 1.

In the chapter introduction, we note that the purpose of this chapter is to illustrate the role that marketing research should play in any organization: That basic research questions are shared by all organizations that need to understand and react to market requirements. This point can be reinforced with the aid of this question. Perhaps the best way to use the question is to divide the class into small groups, assign each group to one organization, and give them fifteen or twenty minutes in class to develop the possible uses of marketing research. Then each group is given a few minutes to make a presentation to the other groups. To clarify what is required of the groups it is useful to take one organization and discuss it in depth before giving them the assignment. A good example is Sears Roebuck which is reported to have conducted over 1,000 marketing research studies in 1988. These studies included: (a) surveys of consumer satisfaction and dissatisfaction, and complaints (b) store location analyses (i.e., assessing market potentials for new stores or expansion of present stores) (c) surveys of customer buying patterns to measure Sears competitive position in each region and product group (d) experiments to evaluate alternative pricing levels (e) analysis of product movement data to estimate acceptance of new fashion item products (f) new product concept and market testing (g) studies of the effectiveness of media advertising (television and local print advertising)

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(h) testing alternative formats and layouts for catalogs, as well as evaluating different catalog distribution methods (i) studies of the effectiveness of media advertising (television and local print advertising) (j) life style research to help anticipate changing product requirements These are only illustrative, but help to reveal the scope and excitement of marketing research. In the context of this equation, the instructor may also ask how can the organization make decisions in this area without marketing research. Sears Roebuck established Indiana University’s school of Business’s center for Education and Research in Retailing in the mid 1990s. It sponsors research projects in retailing.

2.

Students should understand how marketing research is able to make a contribution to clarifying and resolving issues and choosing between the decision alternatives present in each stage of the Marketing Planning Process. (a) Situation analysis. This involves understanding how the organization fits into its market environment. Both primary and secondary information can be used to identify the threats and opportunities facing an organization. These include socio economic trends, data available from the Census, industry information, research on why customers buy or use the organization’s product or service and/or competitive offerings, sales force input on the competition or channel concerns and trade association data. (b) Strategy development. This involves combining external marketing research with internal organizational objectives. Selection of a served market should reflect what market the business is well positioned to serve. Insights into this question can be obtained by conducting customer research and analyzing competitive strengths and weaknesses in product offerings, distribution channels, customer loyalty and so on. Research can help select the market segment served by revealing gaps between customer preferences and competitive offerings. Marketing Research in Action 1-2 is a good example of how a consumer packaged goods (CPG) company studied consumer trends to launch bottled water. (c) Marketing program development. This involves using marketing research to support specific management decisions. The decisions listed in Table 1-2 could be supported by research as follows: (i) Segmentation decisions. A bank could gain insights by conducting a survey of all retail bank customers in the area being served by the bank. Information on banking patterns, benefits sought, satisfaction with present branch and classification information could be obtained to address this need. (ii) Product features decisions. These often involve trade-offs between price and type of features. Also, there are many possible combinations of features. Useful in this context are surveys of customer preferences for combinations of features. (iii) Distribution decisions. Useful information on the appropriate type of retailer can be obtained from industry trade association statistics on trends in the type of retailers. Is one type replacing another? (iv) Choice of advertising appeal. The choice is often made on the basis of the results or a more or less realistic experiment comparing the ability of alternative appeals to change attitudes or influence behavior. (v) Personnel selling decisions. Usually high potential customer types for a particular product can be described using socioeconomic and demographic data available from the Census.

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The relationship between product usage and these variables may be obtained from a survey of present and prospective customers. (vi) Price decisions. The type of trade-off analysis used to identify product features can also be used to choose among alternative price levels for particular sets of product features. (d) Implementation. This involves controlling the marketing program: analyzing actual sales results with marketing objectives to determine product/service acceptance on a variety of dimensions including price, advertising, product/service feature, etc. In addition, the sales force can provide valuable input in the reaction of retailers or distribution to the new product or service.

3.

Ethical problems that marketing researchers face in designing and conducting field studies stem from the potential to abuse the rights of respondents. Marketing Research in Action 1-5 discusses the code of ethics of the Marketing Research Association. Students should be encouraged to read the code in order to be able to appreciate the importance and relevance of ethics in marketing research. Some issues that would present the conscientious researcher (and this should be all researchers) with an ethical dilemma are: •

Deciding how much to reveal to respondents about the research without jeopardizing the research objectives. This could become pertinent in product testing in which the research wants to judge product acceptance by conducting simulated product tests in which the identical product, except for variations in characteristics such as color that have no influence on product quality, is tried by the respondent;

•

The coding of respondent answers for subsequent analysis vs. promising respondents’ anonymity;

•

The trade-off between gaining respondent cooperation and the unethical deception involved in not revealing the true duration of a lengthy interview;

•

Misleading respondents and ignoring a respondent’s rights to informed consent by withholding information on the purpose and sponsorships of the interview in order to ensure respondents answers remain unbiased;

•

Unethically ignoring respondents rights by misrepresenting compensation, costs or benefits associated with participation, or not mentioning to a respondent that a follow up interview will be made in order to gain cooperation.

4.

Much marketing research information is used directly to formulate and evaluate strategic alternatives at the business level, and evaluate new opportunities at the corporate level. By having marketing research report to a senior planning executive, the resulting research is more likely to be responsive to strategic requirements and take a long-term perspective. Obviously, this arrangement does not provide adequately for short-term information requirements, such as territorial sales analyses or advertising campaign evaluations. Thus, it is desirable to have a separate group at a lower executive level in the organization with responsibility for these requirements.

5.

Virtually all research users will at some time use the services of outside research specialists. This will be discussed further in Chapter 3. Some factors affecting the choice of whether a firm will contract out a research study or do it themselves are: the skill or experience level of internal personnel, the time constraint of the projects, the confidentiality of the projects, the facilities required to conduct the research, the intended use of research results and the cost of using internal vs. external researchers.

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Marketing research directed toward strategy development answers three critical questions: what business should we be in? How will we compete? What are the objectives for the business?

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Programs embrace specific tasks, such as developing a new product or launching a new advertising campaign. An action program usually focuses on a single objective in support of one element of the overall business strategy. This is where the bulk of ongoing marketing research is directed.

7.

a. Factors that influence marketing research decisions: relevance, type and nature of information sought, timing, availability of resources, and cost-benefit analysis. b. A marketing research company should avoid ethical issues: violating client confidentiality, improper execution of research. c. Generally, the factors that influence a manager’s decision to use research information are: research quality, conformity to prior expectation, clarity of presentation, political acceptability within the firm, challenge to the status quo.

8. The equipment has been made and the target market determined, so marketing research for program development is needed here. Marketing research should be used to help make decisions in the following areas: segmentation, product, distribution, advertising and promotion, personal selling, price, branding, customer satisfaction and relationships with customers / potential customers.

9. From the sponsor’s point of view, it depends on the purpose for which the research was initiated. If the purpose of the research is unethical, for instance, publishing false or highly exaggerated advertisements, a written code of ethics cannot stop the sponsor. Sponsors could also use research to get a foot in the door of prospective customers and then use the opportunity to launch a sales pitch.

From the supplier’s point of view, the information collected while conducting research is confidential. However, in some instances they could be tempted to use that to their own benefit. It may also not be possible for all individuals to overcome their personal biases while conducting research and this could have an impact on the results.

Supplementary Exercise: Coke’s Brand Loyalty Lessons* The instructor who wants to discuss the potentials and limitations of marketing research will find the following background information useful to share with the class.

Marketers battling to keep competitors from capturing customers complain that there just doesn’t seem to be as much loyalty around as there used to be. Yet when Coca-Cola Co. dared to tamper with a 99-year old formula to bring out a “new” Coke, outraged U.S. consumers quickly forced the red-faced company to bring back the old brand. Coke’s abrupt about-face, front-paged and prime-timed, raises questions about brand loyalty that every marketer has to ponder: how companies get it, how they keep it, and which products inspire such fierce loyalty that they’re best left old and unimproved.

Brand loyalty is an exclusive quality: that certain something that makes a consumer keep buying over and over again. It begins with the customer’s preference for a product on the basis of objective reasons— the drink is sweeter, the paper tower more absorbent. The brand name is the customer’s guarantee that he will get what he expects. However, when a branded product has been around a long time and is heavily advertised, it can accrete emotional freight: it can be come part of a person’s self-image or summon fond memories of days gone by.

The sense of emotional attachment was palpable among consumers who for years had agreed with Coca-Cola that “Coke is it.” They wanted the Real Thing they had grow up with and in some cases grown old with. They inundated Coca-Cola’s Atlanta headquarters with protests (“Dear Chief DoDo: What ignoramus decided to change the formula of Coke?”). In Seattle strident loyalists calling themselves Old Coke Drinkers of America laid plans to file a class action suit against Coca-Cola. The searched out shop owners, vending machines owners, and others who claimed that the company’s formula change had cost them business. When June sales didn’t pick up as the company had expected, bottlers too demanded old Coke’s return-fast.

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Coke thought it had moved cautiously in deciding to retire the old formula. The company spent about $4 million to taste-test the new pop on nearly 200,000 customers. The tests took many forms. Some were blind tests without the emotion laden brand name attached to them. Others posed questions such as: What if this were a new Coke taste?” But Coca-Cola never disclosed that the product it was testing would replace the old favorite entirely.

So, while it learned that more people liked the new, sweeter formula than the old, it failed to gauge how people would react once they learned that old Coke was being replaced. Dennis Rosen, who teaches marketing at Indiana University’s Graduate School of Business thinks Coca-Cola unwittingly ran afoul of too many fond memories. “Tastes tests,” he says, “don’t take into account people’s childhoods. Now that consumers are drinking out of cans labeled new Coke, naturally there is an emotional backlash.”

When the new Coke hit the shelves in the U.S., in April, consumers felt that the company had broken the first promise of branding; that what you get today will be what you got yesterday. “All of the time and money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to original Coca-Cola,” says Donald R. Keough, Coke’s president and chief operating officer. He adds, “Some critic will say Coca-Cola made a marketing mistake. Some cynic will say that we planned the whole thing (for the publicity value). The truth is we are not that dumb and we are not that smart.”

Many marketing experts are sympathetic with Coke’s giant miscalculation. “All research on brand loyalty is flawed,” says John O’Toole, chairman of the Chicago based advertising agency, Foote, Cone and Bedding, “because you can’t get at people’s private motivations. In any kind of interview or questionnaire, they want to seem sensible and prudent. They aren’t going to tell you how they feel.” In Coca-Cola’s case, consumer’s feelings were not only unfathomable but fickle too. The company’s research after the new formula hit the supermarket shelves showed a curious turn-around. Before May 30, 53% of shoppers said they liked new Coke, the rest said they didn’t. In June the vote began to change, with more than half of all the people surveyed saying they didn’t care for the new Coke. Says a Coke spokesman: “We had taken away more than the product Coca-Cola. We had taken away a little part of them and their past. They said, “You had no right to do that. Bring it back.” By the time the company decided it had erred in changing the formula, only 30% of the 900 consumers surveyed every week answered that they liked the new Coke.

With the old formula reintroduced as Coca-Cola Classic, complete with old-fashioned script logo, shoppers will now find six kinds of Coke on U.S. supermarket shelves—new, classic, caffeine-free, diet, diet caffeine-free, and cherry. One more variety, the New York Daily News noted, and Coca-Cola “will have seven up.” Softdrink experts believe that the welter of Cokes will give the company a tough time keeping a dear identity in shoppers’ minds. Some Coke executives are said to share that fear, although Chief Executive Roberto C. Goinzueta called the line-up a “megabrand” and a marketing plus.

He might be right. Other products come in a variety of forms with no evident consumer befuddlement; Marlboro comes to mind, with its king-size and longs and low-tar lights in boxes and soft packs. Goinzueta believes his megabrand gives the company an edge in supermarkets, where he who grabs the most shelf space wins. Wall Street seemed to share his confidence: stock priced jumped $5.50, closing at $73.75 a share.

Some consumers are quite capable of a kind of purchasing polygamy: they can be, and often are, faithful to more than one brand at a time. The phenomenon, known as brand-cluster loyalty, has long been common in the soft drink aisle, and Coke in all its multiple guises is in the same brand cluster with Pepsi and all its variations, “in lots of stores, Coke and Pepsi are on special during alternate weeks,” says Allen Rosenshine, president of the ad agency BBDO International, so, a lot of people switch back and forth regularly-even though they buy only Coke and Pepsi, and wouldn’t buy any other colas,” Pepsi executives, who have been crowing over Coke’s embarrassment—Pepsi Cola USA President Enrico calls the new Coke “the Edsel of the 1980’s”—might pause to consider that Coca-Cola now has more entries in that cola cluster.

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For companies intent on changing a product without stirring up the natives, brand-loyalty pundits offer some advice First, some products are safer to change than others. Brand loyalties seem to be most intense with products that are ingested or dose to the skin; a study by the Ogilvy and Mather ad agency found that men care about brand name on their underwear than on their ties. The more closely a brand is bound to a person’s image of himself, the more likely he will be to resist any change in it. This might be called the “I use this, this is me” principle, and it applies to things like cigarettes, perfume, and beer, all personal items that their users associate with particular ideas about status or even personality. It’s not for nothing that Marlboro is the U.S. market leader in the high-loyalty cigarette category: the macho image of the Marlboro Man speaks volumes about how certain smokers see themselves.

Another high-loyalty market leader is Budweiser. “Anheuser-Busch would drop dead before they’d put ‘new and improved’ on that product,” says Charlotte Beers, chief executive of the Chicago ad agency, Tatham-Laird and Kudner. “Tradition is a big part of its appeal.” Having the biggest market share, as Marlboro and Bud do, is helpful in establishing brand loyalty, simply because many people are most comfortable buying something that a lot of other people buy. But less ubiquitous products still attract ferocious loyalty. Asks Beers, “Can you imagine a new and improved Chanel No. 5?”

In their quest to make sense of the emotional side of brand loyalty, some marketers have devised quasiscientific measurement systems. One of these is a model, in the form of a grid, that Foote, Cone and Belding uses to pinpoint how emotionally involved a customer is likely to be with a given purchase. The higher the level of involvement, the stronger the brand loyalty—and the more hazardous it is to trumpet a big change in the product. At one end of the scale are products like hair coloring, where involvement is high partly because of the elements of risk: you’d best get it right the first time, or buy lots of hats!

According to John O’Toole of Foote, Cone and Belding, consumer’s loyalty to Clairol, A Foote Cone client, is “amazingly high.”

At the other extreme, in this model, are products like cat litter, paper towels, and clothes pins, which are designed to get boring tasks done as inexpensively as possible. With these humdrum products, most consumers switch back and forth between brands with abandon, picking up whatever’s on sale—although some will pay for quality when they come across a brand that they believe does the job better than any other. In any research designed to measure loyalty, cautions Morgan Hunter, vice chairman of Marketing Corp. of America, a Westport, Connecticut marketing firm, it is important not to confuse a stated preference with what consumers actually do when they’re in the store. They may not actually buy the brand they say they prefer if it costs too much more.

Marketers agree that food products, especially those that have been around a long time, are among the riskiest to “improve,” as Coca-Cola discovered the hard way. “You can make small improvements, but watch out,” says Charlotte Beers. “Velveeta cheese, for example, has a distinct taste, but more than that, it is a part of childhood for a lot of people—the way it stirs and mixes and melts. It would be very risky to change any of that.” If you must alter a product that reminds consumers of their childhood days, brandloyalty experts say, change it without a lot of hoopla.

Whether Coca-Cola could have gotten away with changing quietly is unknown. It might have succeeded had the change been less noticeable, as it was in Canada. When new Coke was introduced in Canada, shipments of concentrate reportedly jumped 42% in the first seven weeks over the year-earlier period. A Coke spokesman also notes that Canadians have less emotional attachment to Coke. Much of Coca-Cola’s U.S. advertising has been steeped in Americana.

Over the past few years, marketers have worried that generic and other bargain products were making brand loyalty a thing of the past among increasingly savvy and recession-weary consumers. An annual study by the ad agency Needham, Harper and Steers asks 4,000 heads of households, half of them men and half women, whether they agree with the statement: “I try to stick to well-known brand names.” The percentage who answer “yes” had dropped from 77% in 1975 to 61% this year. Coke’s debacle has shown decisively that, for some products at least, consumers would still rather fight than switch.

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Teaching Notes for Cases

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Case 1-1 PRE-TEEN MARKET – THE RIGHT PLACE TO BE IN FOR CELL PHONE PROVIDERS? This case presents a chance to discuss marketing opportunities and ethical dilemmas in marketing.

Teaching objectives: 1. Allow students to see the need for marketing research, analyze marketing opportunities that arise, and make relevant business decisions.

2. Provide students the chance to consider ethical issues in marketing and incorporate ethical considerations into the decision making process.

3. Offer the instructor a springboard for a general discussion about marketing intelligence and ethics.

Study questions: 1.

Do you think pre-teens offer good market potential for cell phone companies?

Answering this question actually addresses the situation analysis mentioned in the chapter. Generally, three major issues should be analyzed during situation analysis, which include market environment, market characteristics, and consumer behavior. Some suggestions particularly relevant to this case are: Market environment: a. Technologies: Firefly’s product offers relatively simple features for use and safety, such as no numerical keypad, and incoming calls screening. Are these in sync with consumer demand and needs? b. Disposable income: It is important to determine whether the current offering package price of $199 is economically relevant to the target market. c. Social trends: Firefly should determine whether there is a growing need in the market for communication between parents and their pre-teen children and among children, and what drives this trend. d. Political and regulatory: It is necessary to identify regulations, if any, that govern the sale and use of cell phones by pre-teens as well as understand and appreciate the concern of stakeholders, such as schools and parents, about their children’s’ use of cell phones in order to incorporate relevant features into the product design.

Market characteristics: a. Market size, potential and growth rate: These are very important issues that any company must consider before launching a new product. Details pertaining to these issues are not provided in this case, but the fact that food companies and retailers have targeted pre-teen market proves that this is potentially a valid market.

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b. Competition: Several companies were mentioned as Firefly’s competitors. Among these were wireless carriers who offer family plans, pre-teen phone specialist (Wherify), and well recognized names in the pre-teen market such as Mattel Inc. with Barbie products. c. Competitive products: Some products were believed to be offered at a lower price, such as family plans offered at steep discounts, others were offered with special features, such as GPS locator which enables parents to track their children.

Consumer behavior: a. Customer identity and why these customers buy a product: Obviously parents buy cell phones for their children mostly to maintain regular communication with them. b. Who buys: Although ultimate customers are pre-teens, most often parents are the buyers. So the product should satisfy the different needs of both the pre-teens and their parents.

2. While designing products for this market, what are the issues faced by the service providers?

The product in this case, cell phone, requires special attention in terms of ethics because it targets pre-teens who are usually not in a position to make their own decisions and also prone to misuse the service if not monitored in some way. The product thus comes under scrutiny by three different bodies: parents, schools and the government. During product design, the manufacturer has to consider concerns raised by all these three bodies including possible product misuse, unnecessary investment, children’s’ tendency to lose their belongings, and even any bans of cell phones in classrooms. Manufacturers and service providers can familiarize themselves with all these issues through the appropriate use of market research techniques like focus groups and surveys in order to address them adequately.

Case 1-2 BEST BUY ON A SEGMENTATION SPREE This case illustrates the importance of marketing intelligence in making business decisions particularly with regard to market segmentation and marketing program development. The focus of this case is on Best Buy’s segmentation of customers into high value (“angels”) and low value customers (“devils”) in order to apply the best marketing strategy for each category. By treating customers differently based on their value and behavior, Best Buy could maximize high value customers’ contribution, avoid unprofitable ones, lower cost and improve profits.

Teaching objectives

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1. Allow students to appreciate the business decisions behind the optimal allocation of marketing resources among a company’s vast array of customers 2. Provide an insight into how companies make use of customer data for segmentation and profiling of customers, determining potential value of each segment, and how the companies tailor their marketing strategy based on marketing intelligence.

Study Questions: 1

What benefits can Best Buy hope to gain from its customer segmentation tactics?

Out of the million visitors each year to Best Buy Co.’s stores, nearly 20 percent are considered undesirable and therefore Best Buy wants to avoid these customers. Customer segmentation based on purchase behavior and who are thereby of value to the company enables Best Buy Co. to work out appropriate marketing strategies to deal with each segment. Specifically, each store maintains stocks that fit with its local demographics. It lures high spenders by stocking more merchandise, offers the right products to the relevant segments (e.g. pricey home-theatre systems to upper income people), and offers more service options to appropriate segments. To keep the undesirables away, the company cuts back on promotions, enforces a re-stocking fee of 15 percent of the purchase price, resells returned items over the Internet, etc. These strategies help improve revenue, and thereby profit, while reducing cost. Early results indicate that pilot stores (those applying the stated segmentation scheme) performed far better than conventional ones (those not applying the segmentation scheme), therefore Best Buy Co. intends to introduce the model in other stores.

Question 2: Do you think Best Buy is making adequate use of marketing intelligence practices for its business decisions?

Marketing intelligence is applied to various areas including product decisions, customer segmentation decisions, branding and pricing decisions, keeping shareholders happy, market estimation, competitive benchmarking, and distribution. The case mentions Best Buy Co.’s use of marketing intelligence for product decisions and customer segmentation purposes, with remarkable success. Best Buy Co. can further extend its use of marketing intelligence for optimizing marketing resource allocation through customer lifetime value calculations and marketing mix modeling.

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Case 1-3 ETHICAL DILEMMAS IN MARKETING RESEARCH Six brief descriptions of ethical dilemmas that can arise in a marketing research setting are presented. In all the descriptions the student is asked to look at the situation from the viewpoint of the market researcher. Most of the problems deal either with the interaction between the researcher and subject or between the researcher and client; these dilemmas usually generate a spirited, open discussion of ethical issues.

Teaching Objectives 1. Allow students to see the need for ethical judgments in marketing research and for the development of ethical criteria.

2. Provide a means for students to see that there are different interpretations of "ethics".

3. Offer the instructor a springboard for a discussion of ethics in marketing in general and in marketing research in particular.

Study Question Assume you are the executive mentioned in each of these dilemmas. What action would you take? (Write out your answer beforehand and be prepared to justify your course of action in class.)

Analysis 1. Fictitious Market Research Agent. This problem raises issues about the researchersubject interaction. In such cases, a useful question is how would the subject react if he or she knew the truth? Some students approve this action because the deception appears harmless. These students argue that most people know that organizations can and do hire market research organizations to hide the source and ask why should a company have to spend extra money to hire an outside firm to achieve this goal. On the other hand, more students usually will not use a fictitious name, noting that the executive director only suggests the practice. Would this compromise the data? One possible solution would have interviewers not mention the name of any organization to a respondent unless asked. ___________ The note was prepared by C. Weinberg (Copyright 1987).

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If asked, the interviewers could be instructed to respond that they cannot provide an answer until the end of the interview, to prevent this knowledge from influencing responses. (This solution implies that competing products also appear on the form, to avoid unintentional indications of the study's sponsor.) In this case, would the interviewer allow the respondent to withdraw his or her answers from the study at the end?

2. Omit Data. This problem focuses on the researcher-client interaction. In these types of dilemmas, some classifying variables are: (a) whether the person is employed by the user or supplier of information; (b) who asks for the deception; (c) whether the deception asked for is passive or active. Of course, the issue often turns on whether the researcher perceives a deception to have occurred. Another issue, if the researcher refuses to comply, is how vigorously should he or she act to make the request for deception known.

Students frequently raise questions pertaining to circumstances surrounding the request to omit relevant data: •

How seriously mis-marketed is the product?

•

Does the product management team know or suspect that the product was mismarketed before the research was conducted?

•

Do others in the organization know or suspect?

•

What action will the product management team take with respect to the research firm if the finding is included in the final report?

Can the research firm tolerate the loss of this account? Many conclude that answers to these questions are largely irrelevant because to omit the data violates their own ethics, and, in the long run, is a disservice to the client.

Those who argue for excluding the data suggest that the purpose of the market research was not to evaluate the program but to help the product management team.

Because release of the data will not aid the team members who are aware of the results, not complying will serve only to undermine those for whom the researcher is working. How likely is the research firm to obtain another contract with this company if the request is not complied with? This is to take a somewhat pragmatic definition of ethics.

3. Biased Questionnaire. Students may propose several actions: a. Accede to the client’s request. b. Explain to the client that biased data will result but then proceed as requested.

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c. Accede to the request but strongly qualify results in the final report. d. Refuse to proceed with the study. e. Take some other action.

The instructor might develop this list of potential actions and take a vote before directly discussing this dilemma. Few students elect to run the study as directed. The class discussion can get exciting when students commit themselves on various choices of b, c, and d as the "to get along you have to go along" group voting for b does battle with the "pride before price" group voting for d. It is useful to ask students how they can retain ethical values espoused in class when they enter the "real world" and must face financial and other pressures.

4. Jury Research. Most students would conduct the research reasoning that any defendant is presumed innocent until proven guilty. Often they rationalize that "If I don't perform the research, someone else will" and that "The prosecution has the same option open to it as does the defense." Still, the result is a jury biased on socioeconomic characteristics and other attitudes.

The instructor can use the class discussion about this dilemma to point out that ethical issues are often not about marketing per se but about how marketing is used.

5. Misleading Advertising. Students quite easily conclude that the problem describes an ethical issue that occurs when the advertising agent knows of the misuse and is not an issue in marketing research but in advertising,. Thus, the research director has a responsibility to see that both the advertising agency and marketing management of the chemical company are formally informed of the misuse. Most students stop here, feeling that their ethical responsibilities are discharged. However, some would hold for disclosure to the press or a regulatory agency if these first efforts fail, an action somewhat akin to the plot of "The China Syndrome". An interesting discussion can result.

6. First day in Summer Internship. While this dilemma can raise a number of issues (e.g., what does information disclosure mean, what information is disclosed and what information is withheld) the main function is to reveal student research practices about corporations. One approach is to ask whether students think such practices are common and to engage in discussion into whether this practice is ethical or not. Then, ask the students what they think are other ethically questionable practices corporations may perform.

With regard to the dilemma itself, a first issue is how do the students verify what information has to be disclosed when collecting information? Can the information be collected without raising the identity of the caller? What are the legal repercussions for the caller, the supervisor and the company?

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Commentary Ethical concerns may shift over time as a result of societal and industry changes. A recent study of marketing researchers and executives asked them for their reactions to several ethical scenarios in a replication of an earlier study from 19701. The three scenarios listed in Figure 2-1, although worded differently, revolve around the same ethical issues as those mentioned in Questions 1, and 2 (and to a lesser extent 5). The instructor can use these excerpts from the study to indicate shifting ethical concerns in industry and compare them to the class opinions about the same ethical issues.

The instructor may wish to make the following comments when discussing the results of the ethical judgments made by marketing professionals shown in Figure 2-1.

Items 1 and 3 above show a shift in ethical concerns in different directions over the past twenty years. The shift in item 1 may reflect that marketing professionals have got more sensitized to ethical issues and are less likely to condone research practices such as use of a fictitious company name as the study sponsor. The shift in item 3 may reflect that societal concerns with minority-related issues have been superseded by other social problems such as AIDS and illegal drug usage. Misrepresentation of facts in item 2 seems to be an ethical issue overwhelmingly disapproved of by respondents in other studies.

The numbers in the table also indicate good levels of agreement between the opinions of marketing researchers and educators.

__________________________ 1 . Ishmael P. Akaah and Edward A. Riordan, judgments of Marketing Professionals About Ethical Issues in Marketing Research: A Replication and Extension", Journal of Marketing Research, 26 (February 1989), 112-120.

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Figure 2-1 Judgments of Marketing Professionals About Ethical Issues in Marketing Research PERCENTAGE OF DISAPPROVALS Marketing Researchers 1970 1989 Shady Study (n=259) (n=205)

Marketing Executives 1970 1989 Shady Study (n=142) (n=215)

1. "In another study concerning consumers' magazine reading habits, the Marketing Director decided to contact a sample of consumers using the fictitious company’s name, Media Research Institute.

This successfully camouflaged the identity of X company as the sponsor of the study."

13

30b

16

30c

2. "In the trial run of a major presentation to the Board of Directors, the marketing vice president deliberately distorted some recent research findings.

After some thought the Marketing Research Director decided to ignore the matter since the vice president obviously knew what he was doing."

87

88

86

89

51

26b

3. 'The National Marketing Advisory Council 39 20b (formed of top marketing executives and marketing educators to advise the Commerce Department) has a taskforce studying inner-city prices. The head of this study group recently called to ask if they could have a copy of a recent X company study which showed that appliance prices are significantly higher within the inner-city than in suburban areas. Since X company sells appliances to these inner-city merchants, the Marketing Research Director felt compelled to refuse the request." __________________ b Difference between 1989 and 1970 study is significant at .001 level.

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c

Difference between 1989 and 1970 study is significant at .01 level.

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SECTION II TEACHING NOTES FOR CHAPTERS

CHAPTER TWO MARKETING RESEARCH IN PRACTICE Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪

Discuss briefly the practice of marketing research Expose the students to the concept of information Systems and Decision Support Systems Explain Marketing Decision Support Systems Introduce the various suppliers of marketing research information and the types of services offered by them Briefly talk about the criteria to be used for selecting among suppliers Introduce the career options available in the marketing research industry

Teaching Suggestions The chapter provides an overview of the practice of the marketing research. The students should be clear about the three categories of marketing research: programmatic, selective, and evaluative.

The need to properly analyze information from the marketing decision support system (MDSS) is illustrated in the chapter by the discussion of the Alpha and Delta brand shares. Students could be asked to examine Figures 2-3 and 2-4 and pose other questions the managers have asked about these sales trends.

For those instructors who wish to give more emphasis to private sector applications, a useful departure point is the structure of the marketing research industry which appears in Figure 2-7. The industry is more than $21 billion in revenue in 2008 and continues to grow. It is worth noting that most of this growth is occurring because of greater acceptance of research in the industrial products and service sectors rather than from consumer goods companies.

Questions and Problems l.a. It is important to understand what an information system is. An information system is a continuing or interactive structure of people, structures and procedures designed to sort, analyze, evaluate and distribute pertinent, timely and accurate information to decision makers. An information system is concerned with managing the flow of data from different projects and secondary sources and the dissemination of usable information for use by the appropriate managers. An information system would require databases to organize and store the information and a decision support system (DSS) to retrieve data, transform the data to information for use by the managers. Data, as such, is not of use to the manager; it is the data transformed to information that provides the manager with a meaningful framework to evaluate decision alternatives and thereby make decisions.

1.b. Marketers need to develop a good marketing information system in order to aid their decision making process.

Marketing information is of three types: recurring information that is obtained on a day to day basis, nonrecurring information obtained infrequently, and market intelligence information relevant to devising the future strategy of the company. Let us illustrate this with an example. Assume that the marketing manager of a well known automobile lubricant wishes to expand into a newer market for his or her range of engine lubricants. The market potential can be calculated by obtaining data on monthly car sales from the government sources and the number of vehicles in the geographic area which can be obtained from the trade journals and government sources, a recurring type of information. The market share of the competitors can be calculated by information from trade organizations. Information pertaining to the competitors' activities in the market and impending product launches by the competition, are relevant to the manager to make strategic plans for his product launch. The manager could decide to carry out a market survey to identify the consumers' buying habits and motives, which would be a one time information to assist the manager in decision making.

1

2.

Databases organize and store information that can be retrieved. A decision support system allows the manager to retrieve information from the database by interactive means and also provides a modeling function to help make sense of the retrieved information. Imagine the position of a marketing manager of a consumer durable sold nationwide. Data comes to his desk in various levels of detail and aggregation: factory shipments; dealer distribution lists; industry sales reports; sales reports from internal sales people; consumer panel data; scanner data, etc. Added to this is the different reporting periods, incompatible computer software and all the associated problems. There is a virtual data explosion at the manager's desk. Owing to paucity of time and energy to pore over this pile of data, managers seek decision relevant information. A Marketing decision support system (MDSS) is used to provide managers with the required information that is both accessible and comprehensible.

The MDSS should be interactive and user friendly and the interaction process should be simple and direct. The MDSS should be able to provide the manager with various output options depending upon his need. The system should also assist the managers in discovering new trends.

3a. The research problem is unique to the particular company. Consequently, the company needs customized services from the market research firm. If the company in question is small and does not possess its own market research wing, it has to look outside for the supplier of research services. The decision to zero in on a particular supplier should be made after considerable thought and after making sure that all the following issues have been addressed. (i)

A search for all the companies with acknowledged expertise in this type of study.

(ii) A selection of a small number of bidders on the basis of references from previous clients and recommendations from colleagues. (iii) Personal interviews with the project coordinator, asking for proof of similar work. (iv) A check of the references of the supplier with attention given to the creativity in dealing with problems, the quality and adequacy of their resources. (v) Final selection of the supplier based on the price, comments from references and on the basis supplier's understanding of the problem.

of

the

b.

It is important to make sure that the research firm has sufficient experience in the type of study and is familiar with the various markets of Europe. In case the research firm is not European, it should also be made sure, that the external supplier has a strong base in Europe and also has enough resources to undertake such a European based study. The manager should go through all of the above mentioned steps before deciding on the research firm for his study in Europe.

4.

a.Comparison of brand performance in the pizza industry shows that there are tremendous growth opportunities. b.Automobile industry relies on reports about new sources of power to automobiles as it plays a very important role in the future strategy of business. c. The growth of information technology industry is heavily dependent on research and development capabilities.

Reports about spending in this area will have strategic importance for competitors in this industry.

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Case 3-1 A VIDEOCART TEST FOR BESTWAY STORES Introduction This case illustrates the need to think through the questions that arise at each step of the research process. The decision in the case is not whether Bestway Stores should let IRI conduct the VideOcart test; but rather what type of research study would provide Bestway with the necessary information to decide whether to put VideOcarts in all their stores if the 3-store test is conducted. The case can also be tied into a discussion of the types of marketing data available from retail outlets, which is covered in Chapter 5.

Teaching Suggestions The stated assignment for the Bestway marketing research manager is to design a study to assess the desirability of deploying the new VideOcart technology in all of their stores once the test is completed. This research study would presumably be conducted in conjunction with whatever research studies IRI will be doing during the VideOcart test.

There is not enough information in the case for the students to actually design a research study for this project. Instead the focus of the assignment should be to allow students to think through the research issues involved and to suggest some possible research studies that Bestway could implement.

The Assignment The steps involved in the research process outlined in the text can be used to understand the research needs of the Bestway marketing research manager. These steps will help the students to organize their own thinking about the research issues in the case, and give them valuable practice in applying the process.

Step One Why should we do research?

The primary—and stated—purpose of any research study that is proposed is to provide the management team with information that will help them decide whether to eventually put VideOcarts in all their stores.

Supporting research purposes could include any or all of the following: *determine whether the VideOcarts will attract new customers to the store (this requires some assumptions about exclusivity of VideOcarts in geographic areas: Will all chains be able to get them or just selected chains)? *determine whether the VideOcarts can be used to increase the volume of customer purchases.

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*Similarly, can users of VideOcarts be persuaded to buy higher profit margin items?

Will the adoption of VideOcarts improve the attitudes of shoppers toward Bestway stores on key attributes that are known to influence store choice (e.g., quality, selection, friendliness of staff, relative prices etc.).

Of course, IRI will also be conducting research that attempts to answer some of these questions. However, the store chain would be in a much better position to interpret the relevance of the IRI findings to their chain if they have done their own studies. With their own studies they are also in a stronger bargaining position when it comes to negotiating royalties and other concessions. Finally, they should undertake studies to help them get the most benefit from this promotional medium, if they choose to eventually provide VideOcarts in their stores.

Step Two: What research should be done?

Appropriate research objectives that are consistent with the above purposes are: a. To determine the impact of VideOcart usage in dollar volume, and profitability of products purchased. b. To measure consumer attitudes toward Bestway stores as a result of the adoption of VideOcarts. c. To obtain specific reactions of shoppers to the VideOcarts: usage of display features, liking versus disliking, intentions to use in the future, etc. d. To learn how to get the most benefit from VideOcarts, by identifying potential problems (such as breakage or errors in programming) that need to be solved, and features that customers especially like.

To clarify these objectives it would be a good idea for the research manager to conduct focus groups with local shoppers. These group interviews could be used to get initial reactions to the concept even before it is tried in a store, and especially to identify possible negative reactions (i.e., will it interfere with the shopping, consume extra time, make it difficult to concentrate because of the distraction, etc).

Step Three: is it worth doing the research?

This will ultimately depend on how extensive the research is, how long it lasts (perhaps a year is longer than is necessary), and whether IRI can be persuaded to defray some of the expenses of the research in return for access to the results. Another costsaving device is to ask several noncompeting chains whether they would be willing to share the cost of a study.

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Step Four: How should the research be designed to achieve the research objectives?

A good teaching strategy at this point is to have the students suggest all the possible ways that data could be collected, and then evaluate each possible approach according to (a) fit with research purpose (i.e., will the study yield useful insights?) (b) technical feasibility, and (c) cost to perform the study. It will not be possible to conduct a full evaluation, but the discussion will give students a good idea of the range of possibilities and critical trade-offs that a marketing researcher must learn to make and justify to senior management.

Among the possible research designs that could be considered, the following should be discussed: *an intercept survey, so called because the interviewer intercepts shoppers departing the store and asks a series of questions about their experience, what they liked and disliked, and how it influenced their attitudes toward the store. *a telephone survey, based on a sample defined by the license plates of shoppers who had used the VideOcart in the store. This is less obvious, and may produce more valid responses since neither the sponsor nor the true purpose of the survey has to be revealed. *unobtrusive measures, based on in-store observation: do customers choose VideOcarts over the other carts? Do customers pay attention to the ads or ignore them, etc.? *sales and monitoring of the pattern of activity in stores offering the VideOcart versus a matched sample of stores (i.e., in similar areas, etc.) that use the regular carts. Ideally, this could be done in stores equipped with checkout scanners, to obtain accurate data from shoppers who actually used VideOcart. A key question is whether they actually bought more of the advertised items.

In addition to these studies the marketing research should make arrangements to monitor breakage rates, malfunction rates and theft rates because these factors could significantly influence both usage and perceptions. Similarly, it would be necessary to closely tabulate the hidden costs, such as employee time required to recharge the carts.

This case offers rich opportunities for students to learn about innovative practices in marketing (which should spark a lively discussion on its own) as well as beginning to appreciate the challenges of doing relevant research in an uncertain environment.

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Case 3-2 SPERRY/MACLENNAN ARCHITECTS AND PLANNERS* Synopsis In August of 1988 Mitch Brooks a junior partner and director of Sperry/MacLennan (S/M), a Dartmouth N.S. architectural practice specializing in recreational facilities, is in the process of developing a plan to export his company’s services. He intends to present the plan to the other directors at their meeting the first week of October. The regional market for architectural services is showing some signs of slowing and S/M realizes that it must seek new markets. S/M looks to have a very good opportunity in the New England market with all of its small universities and colleges. After a decade of cutbacks on spending corporate donations and alumni contributions, support for U.S. universities has never been so strong and many campuses have sports facilities which are outdated and have been poorly maintained. However, Mitch Brooks is not sure that the New England market is the best. A seminar on exporting that he attended last week indicated that the most geographically close market or even the most psychically close one may not be the best choice for long-run profit maximization and/or market share.

Purpose The case is positioned as one teaching the importance of appropriate market selection in the choice of a first market for a service company wishing to go International. There are two main strategies in going international for professional service firms such as S/M—export and joint venture. For a company like S/M with its limited financial capability the choice of first market is critical as it may be its only market; the choice of entry method will be dictated by the regulatory climate of the market chosen and the financial and managerial capability of the firm.

Use of the Case There are two ways to approach this case.

Provide student with the case and their local library facilities and see if they are able to use the library to answer the questions provided. Class discussion begins with each small group presenting their ideas in response to each question. One group might act as the Sperry/MacLennan Board of Directors to assess each groups contribution. The class concludes with the instructor providing the "framework for market selection". or* * •

* This note has been prepared by Dr. Mary R. Brooks of Dalhousie University to accompany the case of the same name. The assistance of the Secretary of Sate Canadian Studies Program in developing the case is gratefully acknowledged.

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2. The previous class ends with the instructor presenting the "framework for market selection" followed by students working on the case for discussion in the next class.

The second approach works well if time is limited but if more than one class is devoted to the topic the first enables the instructor to use two cases—Sperry MacLennan has an introduction and then a follow-up case in which the problem focuses on implementation rather than the current focus which is upon first-cut selection.

Using the framework for market selection helps provide a theoretical model for selection decisions within the export market. Market information gathering must first be focused through an assessment of the firm’s unique competencies and then the development of appropriate criteria to narrow worldwide options to a manageable number of markets for further evaluation. Final market decisions are made based upon the requirements of the appropriate market entry choice dictated in part by the market characteristics and in part by the capabilities of the firm. The process of market selection is more dynamic than iterative but using this iterative approach demonstrates to the students the need to set criteria for choice.

Framework for Market Selection Discussion of Case 1. What types of information will Brooks need to collect before he can even begin to assess the New England market? Develop a series of questions you feel are critical to this assessment.

The process of selecting an export market for either a product or service begins with self-examination. This gives rise to the following possible results: Strengths?

• unique competence (west coast competitor only) • string of design awards to "market" competence as the buyer does not have ability to see/experience a physical product in advance • past experience with joint ventures (so could export or joint venture to “distribute” service)

Weaknesses?

• industry subject to extreme volatility

•

•

Copyright © 1990 Mary R. Brooks

5

• low profitability of company means financial capability does not exist for long-term market commitment if progress in getting established is slow • late entry into CADD limits technical capability for the US market - they will need to get CADD well established first • would expansion drain company of technical capability and expertise? For the export entry option personnel would need to be relocated to the new market, whereas with joint venture option the expertise can be used to develop the design with production/working drawings done by the joint venture partner retaining technical competence with S/M Opportunities

• further penetration of Canadian market (have they fully exploited opportunities domestically?)

• New England?

• Europe?

Threats:

• loss of technical competence to the joint venture partner who then becomes partner • financial capability means failed effort may bankrupt firm

Once the analysis of the firm has been undertaken, students should be ready to develop the broad set of questions needed for market assessment. Be wary of the tendencies of students to make assumptions about the US market being similar to the Canadian market. In answer to this question they may come up with the following possible questions that will need to be addressed before students can move to establishing criteria, which is the focus of the second question at the end of the case: • What makes for a successful market? Size in terms of population? Affluence? Age of population (baby boomers with children who use recreational facilities because of health trend)?

• What are the regulations affecting architects in other markets?

• Is advertising an important factor in the sales of architectural services in nonCanadian markets?

2. What selection criteria do you believe are relevant to the assessment of any alternative markets? What preliminary market parameters are relevant to the evaluation of S/M s global options?

Some basic criteria which students might use to eliminate potential markets are:

6

Climate—S/M designs are climate-specific. For example, their expertise eliminates markets in tropical countries.

Affluent society— The designs are for the “premium” end of the market. Students must develop inclusion criteria such as a sense of a minimum acceptable GNP or other income measure (in the case of a dual economy).

Architectural regulations—A number of markets may be eliminated because professional practice regulations prevent both joint venture and export opportunities..

Other criteria suggested by the students may include: • • • • •

market size (regional population, population growth, housing starts) other demographics (age of population and the percentage of baby boomers the heaviest users of municipal recreational facilities) for the university facility target: enrollment levels funding sources age of existing facilities) sports trends in the region (badminton squash, hockey as part of the facility) architectural regulations and building requirements.

The point of the exercise is to encourage students to think about appropriate evaluative criteria e.g: a market with at least the size and population of Atlantic Canada; a market with a similar or faster growth rate; proportionately more baby boomers. Doing this will enable students to assess and eliminate some potential explanatory factors. If the decision is made that a high service export strategy is appropriate, the possibility exists that the most important factors are the number of hours flying or flight connections to the target market.

3. Assuming that S/M decides on the New England market what information will be needed to implement an entry strategy?

Whether S/M enters via export or joint venture, they will need to know which architects licensed in the New England area have recreational facility expertise (they may be potential partners or possible competitors). They will clearly need to know the local building code and professional practice regulations. They will need to collect a greater amount of information on their target customer, much of which may be accomplished with the judicious use of the trade commissioner service and the consulate in Boston.

They will need to identify municipalities as well as universities in the region and the state of their existing facilities at these institutions.

Epilogue Sperry/MacLennan decided that it was important to increase their CADD capabilities to a competitive standard before entering the U.S. market and focused their energies on this during the fall of 1988. S/M concluded that they should enter the US. via a joint venture given their previous experience with this approach and their limited financial capability

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and market knowledge. A joint venture would enable S/M to retain technical control over their expertise and prevent diffusion of their special knowledge in the recreational field.

8

In order to learn about exporting, Mitch Brooks took advantage of the New Exporters to Borders Staff program and visited the Boston market, (this program was offered by the Department of External Affairs now External Affairs and International Trade Canada).

He found that a second visit would be necessary to collect all the information the company would need for planning purposes. In spite of their support for the Canadian US. Free Trade Agreement, the American Institute of Architects refused to work towards reciprocal professional licensing between Canada and the United States until the various Canadian provinces reduced the barriers preventing architects from easily practicing in other provinces. This action confirmed the company's choice as now the New England market could best be developed by joint venture.

In the latter part of 1988 a German Investment group approached S/M to design a large thelassotherapy (salt water) spa on the Blandford peninsula on the south shore of Nova Scotia. The project was of sufficient size that with a number of other projects on the boards the company felt that need for export work was no longer as acute and decided to postpone its entry into the international market.

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Case 3-3 PHILIP MORRIS ENTERS TURKEY (Discussed online at www.wiley.com/college/aaker) 1. The annual average per adult (15+) consumption of cigarettes in Turkey during 199092 was 2,100. According to a 1993 survey smoking prevalence among males was 58% and was 13% among females. Compared to 1980-82 the consumption of cigarettes in Turkey has decreased. The annual average per adult consumption of cigarettes in Turkey during 1980-82 was 2,250. The consumption has however increased at a rate of 4.76% since 1992 until 1998.

The type of information required for Philip Morris to improve market share in Turkey include demographic breakdown of cigarette consumption patterns in Turkey, average price acceptable for foreign brand cigarettes in Turkey, and the acceptable nicotine/tar levels for consumers in Turkey. Pricing, and brand image are the main factors that will increase sales for Philip Morris. It can also increase market share by developing an efficient distribution system which serves two purposes: makes the product easily available and increases the brand image of Marlboro.

2. Marketing and distribution strategies have to be designed specific to the country in which the product is being launched. Philip Morris can gain tremendously by investing heavily in advertising and improving brand image. It can sponsor events that attract the young generation. Every store in the country should have racks for cigarettes painted in the “red and white” color of Marlboro.

In order to execute these strategies Philip Morris needs information about what events are its potential customers most likely to attend, what promotional events would attract them and whether the cowboy image of Marlboro has the same meaning in Turkey as in the U.S. In order to obtain this information, Philip Morris can adopt a variety of techniques such as focus groups, surveys, or observational studies. Given, that consumers in Turkey are not used to answering survey questions, focus groups or observational studies of existing consumers would be the best option.

3. It is not ethical for Philip Morris to covertly alter the taste of its cigarettes over a period if time. Philip Morris needs to announce that it will bring a taste change whenever it plans to do so.

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SECTION II TEACHING NOTES FOR CHAPTERS

CHAPTER THREE THE MARKETING RESEARCH PROCESS Outline of the Chapter ▪ ▪ ▪ ▪ ▪

Be familiar with the various stages of the marketing research process Highlight the importance of problem/opportunity identification stage of the research process Understand the issues related to hypotheses development Explain the concept of “Value of information,” and its role in deciding when marketing research is beneficial Introduce the international marketing research process

Teaching Suggestions The principal objectives of the session dealing with this chapter should be to ensure that the students: a)

appreciate that marketing research involves a sequence of activities, each compatible with the preceding stages

b) can clearly differentiate between a research purpose and the research objectives, and c)

understand the concept of value of information

The second objective is the most difficult to achieve. Students can intuitively grasp the notion that the research purpose reflects the manager/user perspective while the research objectives are used by the researcher to guide all subsequent research designs. The problem is that they have difficulty putting the distinction into practice. One approach to this problem is to put a specific research purpose on the blackboard and have the students develop the relevant research objectives. For example, suppose the research purpose were to determine how quickly an integrated oil company should switch to self-service gasoline stations. The appropriate research objectives, which specify the information that is needed, can be based on the following hypotheses concerning the rate of motorist acceptance.

1.

Motorists prefer self-service because they are unhappy with reliance on attendants, and the level of service they receive, and appreciate the time savings gained by not having to wait for an attendant.

2.

Preference for self-service further depends on the perceived price-spread between full-service and selfservice (further, the perceived and actual price spreads might be quite different).

3.

The more self-service stations there are in operation in an area the greater the acceptance.

4.

Different segments have different levels of preference for self-service.

5.

Those who prefer full-service lack confidence in their ability to maintain their car, and rely on the garage attendant to point out and rectify problems.

6.

Competitive gasoline companies rate of switching to self-service will depend on the savings inherent in trading large corner sites for smaller sites, and reduced staffing problems.

1

The instructor should be careful to point out what constitutes a hypothesis. A useful further step is to translate the research objectives into specific information requirements. For example, the last objective listed above is to determine the plans of competitors based on their past conversion performance and present willingness to maintain costly full-service stations. The objective can lead to a useful discussion of how to collect the appropriate information.

Some instructors may want to spend more time on the value of research information issue. We have not dealt with this issue in depth in this chapter for two reasons: (1) Bayesian analysis is seldom used by marketing researchers in a formal sense, although the logic framework offers strong conceptual guidance, and (2) different students have widely differing backgrounds in the subject. In our view a course in marketing research is not the place to introduce students to the intricacies of this subject, especially since it would make little contribution to subsequent chapters. This is certainly an arguable position, so we encourage those with a different perspective to introduce supplementary material at this point. The Clover Valley Dairy case is a good vehicle for such a discussion.

Questions and Problems 1.

This question is designed to give students practice at generating research questions and hypotheses linked to a research purpose. The student should be able to explain how the research question, it answered, will help make the decision. For the stated purpose of deciding whether there is a reasonable chance of winning the following are possible questions: Research Question 1. Are democratic voters satisfied with Gov. Brown?

1.

Hypothesis There is dissatisfaction (over 60% are dissatisfied).

2. On what issues is Gov. Brown vulnerable?

2.

Not vulnerable in income taxes and transportation. Is vulnerable on property tax and business policy.

3. What are the key issues?

3. At least one issue that Brown is vulnerable on is regarded as important.

The student should be pushed to make the question and hypothesis as specific as possible. Notice the specification of democratic voters in question I and the “over 60%” phrase in hypothesis 1. It is possible to include another purpose relating to the nature of the campaign to run.

2.

This question simply requires a classification of the questions implied in the four examples into purposes or objectives.

3.

This is a good example of the need to have clearly defined hypotheses before proceeding with the research design. The purpose of the research is evidently to find meaningful segmentation variables that can be used to pick targets for marketing efforts. Ownership and use of garage is clearly one of the variables that distinguishes heavy from light buyers and users of automobile polishes. The problem is that it may be acting as a proxy for other variables. That is, people who don't have garages may polish their cars more frequently because: (a) the finish of the car weathers more quickly because of the constant exposure to the environment (b) they have older cars with finishes which fade more quickly (c) they are more likely to be “do-it-yourselfers” either because of inclination or lack of money (d) they live in older areas where the houses were not built with garages

2

(e) they live near factories or smelters which emit substances which corrode automobile finishes, or live near the shore and are exposed to salt water, and people in these areas are less likely to have a garage attached to their house

Only in the case of hypothesis (a) being true is access to a garage going to be a useful segmentation variable. If the other hypotheses are also found to be true, the implications for segmentation strategies are quite different, for most of them imply that the availability of a garage is not the real reason for the amount of polishing.

4.

Two further research objectives that could be considered for the HMO study are: (a) to learn about the competitive environment; including the profiles of Blue Cross and competing HMO members and levels of dissatisfaction with the existing plans to provide a basis for determining where a new HMO would most likely draw subscribers (b) to understand the family decision process that leads to a decision to choose a health plan. That is, how was the current plan selected in particular; what sources of information and influence were important?

5.

The purpose of this research probably relates to providing input into the company's marketing of stoves and refrigerators for 1992. Other purposes might be to aid sales or manufacturing forecasts.

If the research purpose were marketing oriented then the research approach would involve asking potential customers what colored appliances they would like to have. If the research purpose were sales or manufacturing oriented then customers might be asked to rank existing appliance colors in order of preference.

6.

This question is really a part of the Smith Clothing case sequence. The research purpose is whether to alter the product line carried or more fundamentally to change the target segment and the image of the store. The research questions are given in the Smith Clothing (A) case: (a) which women's clothing stores compete with Smiths? (b) what is the image of Smith's and how does this image compare with that of its competitors? (c) who is the Smith customer and how does she differ from that of Smith's competitors?

Other research questions could easily be considered such as: (a) would the younger buyer be attracted if the line would change? (c) would the current customers reduce their loyalty if the product line changed? If so, to what store would they go? (c) where does the younger buyer now shop? What attracts them to those stores?

7.

Students should understand the purpose of an information system and the two components (data banks and a decision support system) that make up an information system. In the Agree Shampoo example mentioned in Chapter One, there were a number of projects providing data into the new product launch ranging from consumer focus groups to test marketing. The information system would have to be capable of organizing the input from these research projects plus product sales and inventory levels into a usable form.

3

The roles of an information system for Avon Products and Johnson Wax would differ based on differences in product line range, new product development, channels of distribution. Also, the information system at Avon would be used differently than it would be at Johnson Wax Company.

8.

If the loss were $1 million, the potential savings from knowing the outcome would be $1 million.

Thus, EVPI = ($1 million)(0.4) = $400,000 If the loss were $10 million, the product would not be introduced. Thus, the potential savings from knowing the outcome would be $4 million and the EVPI = ($4 million)(0.6) = $2.4 million.

If the failure probability were .2 the decision would be to introduce even if the loss were $10 million.

Thus, the EVPI = (Potential Loss)(0.2) = (-2.5)(0.2) = -$500,000 if the loss would be $2.5 million.

The EVPI is the savings expected from knowing the outcome with certainty. The savings, of course, is zero when the known outcome would not affect the decision, it is thus the value at the “wrong” outcome times its prior probability.

9.

(a) Pv(Neg F): .9 and Pv(PosF): .1 Pv(Pos) = (.8) (.6) + (.1) (.4) = .52 Pv(neg) = (.2)(.6) + (.9) (.4) = .48 Pv(SPos) = (.8)(.6) = .923 Pv(SNeg) = (.2)(.6) = .25 .52 .48

.

Pv(FPos) = (.1)(.4) = .077 Pv(FNeg) = ( 9)( 4) = .75 .52 .48 Under Pos test EV of “introduce” is ($4 million)(0.923) + (-$2.5 million)(O.077) = 3.692 million - .192 million = 3.692 million - .192 million = $3.5 million Under a Neg test of “introduce” is ($4 million)(0.25) + (-$2.5 million) (0.75) = I million - 1.875 million = -.875 million Thus the “do not introduce” value of zero would apply.

The EV of the concept test would then be ($3.5 million)(0.52) + ($0) (0.48) = $1.82 million The value of research information = 1.82 million - 1.42 million = $400,000

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(b) Pv(PosS) = .7 Pv(NegS) = .3 Pv(Pos) = (.7)(.6) + (.4)(.4) = .58 Pv(Neg) = (.3)(.6) + (.6)(.4) = .42 Pv(SPos) = (.7)(.6) =.724 Pv(SNeg) = (.3)(.6) =.429 .58 .42 Pv(FPos) = (.4)(.4) =.276 Pv(FNeg) = (.6)(.4) =.591 .58 .42

Under a Pos test EV of “introduce” is: ($4 million)(0.724) + ($2.5)(0.276) = 2.896 million -.69 million = $2.206 million Under a Neg test EV of “introduce” is: 1.716 million 1.716 million - 1.428 million = .289 million The EV then is ($2.206 million)(.58) + (.289 million)(.42) = 1.279 million + .121 million = $1.400 million Thus, there is no value to the concept test. (c) Pv(PosS) = .9 Pv(NegS) = .1 Pv(NegF) = .9 Pv(PosF) = .1 Pv(Pos) = (.9)(.6) + (.1)(.4) = .58 Pv(Neg) = (.1)(.6) + (.9)(.4) = .42 Pv(SPos) = (.9)(.6) =.93 Pv(SNeg) = (.1)(.6) =.143 .58 .42 Pv(FPos) = (.1)(.4) =.07 Pv(FNeg) = (.9)(.4) = .857 .58 .42 Under a Pos test EV of “introduce” is: ($4 million)(0.93) + (-$2.5 million)(0.7) = 3.72 million -.175 million = 3.545 million Under a Neg test EV of “introduce” is: ) ($4 million)(.l43) + (-$2.5 million)(.857) = .572 million - 2.143 million = - 1.57 million Thus, the “do not introduce” option would be selected.

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The EV of a concept test is: (3.545 million)(.58) + (0)(.42) = 2.056 million

The value of research information would be: 2.056 million - 1.4 million = .656 million.

10a. ExoArt Inc wishes to expand its marketing activities to the foreign markets. When a firm launches into an international market, it needs some information to make its decisions. The aim of the foreign market opportunity analysis is not to collect an exhaustive and detailed analysis of the world but to gather information that would aid the top management in decision making. The objective is to help the management to narrow down the possibilities for international marketing activities. b.

ExoArt, a manufacturer of exotic jewelry should do a ‘foreign market opportunity analysis’ to aid in the management's decision making. The questions that are to be asked depends upon the goals and objectives of ExoArt, the production capacity that can be shipped abroad and a host of other factors. It should be made clear to the students that there are no clear cut questions to be asked and the questions depend upon the firm’s objectives.

For instance, let us assume that ExoArt specializes in the jewelry that are not so common, premium priced and sells in the local markets through selective distribution channels and wishes to position itself the same way in the foreign markets. The researcher might decide to ask the following questions: Which are the foreign markets that warrant detailed investigation?

What are the major economic, political, legal and other environmental issues in these countries?

Do opportunities exist for ExoArt products in these countries?

What is the market potential in each of these countries?

What should be the mode of entry in these markets?

What is the nature of competition in these markets?

What are the strategies to cater to these markets?

ExoArt might decide to look at Europe, South-East Asia and the Middle East for their preliminary consideration. ExoArt might decide to employ some basic criteria (viz) Gross National Product of the countries in these regions, the political structure, the legal structure, whether profits can be repatriated back to the US etc., to arrive at a list of possible countries. The market potential in each of the countries is calculated and the nature of competition ascertained. The market conditions in each of the countries is studied. This gives the management a narrow list of countries with their salient features and aids in objective decision making and the list of countries to be entered into is arrived at.

c.

The most probable cause of failure for businesses is the Self-Reference Criterion (SRC) adopted by researchers in defining the problem in a foreign country. SRC implies that the environmental variables found in the researcher's home country is applied to the foreign market in consideration. For example, if ExoArt assumes that the consumer tastes in exotic jewelry in Great Britain is the same as those in the US, it is known as employing a Self-Reference criterion. This assumption may or may not be true. If the consumer tastes do vary in this product category, then ExoArt would make a serious error if it ships the same designs that it markets in the US to Britain. The error could prove costly and there may never be a chance again for ExoArt to cater to the same market.

lla. It should be emphasized that the basic functions of marketing research and the various stages the research process does not differ between the domestic and international research.

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b.

The international marketing research process is more complex than that of a domestic research process because of the presence of varied, diverse environments around the world. Let us illustrate this with an example. Assume that a watch manufacturer from the US wishes to expand his or her market to Germany, France and Italy in Europe. The firm cannot assume that the designs in the US will be totally accepted by the countries in consideration. In order to ascertain the consumer tastes, buying motives and habits, the firm has to conduct marketing research studies in those three countries. For one, the languages in these three countries are different and hence makes communicating in English difficult.

Similarly, the cultural and the environmental context will be totally different and hence it will not be a surprise if the researcher comes up with three different findings in these countries. It is this diversity in environments that make international marketing research process much more complicated than domestic research.

12a.Research Purpose: To identify the reasons for low sales, plaguing Crystal-Clear Lens, Inc., the mail order contact lens company. b.

The research purpose comprises a shared understanding between the decision maker and the researcher of the following: (i) Problems or opportunities to be studied * Anticipated problems or opportunities * Scope of the problems (ii) Decision alternatives to be evaluated * Alternatives being studied? * Criteria for choosing among alternatives * Timing and importance of the decision (iii) Users of the research results * Decision makers The research objective is a statement of what information is needed. The research purpose is framed in such a way that the research purpose is satisfied. The research objective has three components: (i) Research question: Specifies the information needed by the decision maker (ii) Hypotheses Development: Alternative answers to a research question (iii) Scope of research Research Purpose: To identify the reasons for low sales, plaguing Crystal-Clear Lens, Inc., the mail order contact lens company.

Research Objective: To identify the behavior characteristics of the consumer that makes them prefer retail optical outlets to Crystal-Clear Lens, Inc.

c.

Research questions: * What is the risk perception of the average consumer when he buys contact lenses? * What is the effect of coupons in the retail optical outlets ? * Do the retail optical outlets have an in-house optometrist who checks the eye? * Is ‘trial’ important in case of buying contact lenses?

7

Teaching Notes for Cases Case 4-1 R.J. REYNOLDS TOBACCO CO. Background

R.J. Reynolds Tobacco Co. (Reynolds) embarked on a study to determine the appeal of a new brand. The brand was to be named Dakota. With its “western” image it was designed to challenge market leader Marlboro head-on.

In test marketing Dakota, Reynolds also changed the packaging. They developed a new packaging concept which they termed the slide-box. The slide-box opens and closes similarly to a match box. This concept was test marketed with the new Dakota brand as an alternative to both the old soft pack and the newer and more popular crush-proof box.

Test marketing results were very encouraging. The slide-box had an edge over the crushproof box. Reynolds management was very encouraged, and they decided to move early to capitalize on this new finding by applying the new packaging concept to their existing brands. The idea was to expand market share by luring smokers to their product lines with this new package. There were questions left yet unanswered, but management committed to new equipment quickly to compensate for the long order lead time. They expected favorable resolution of remaining issues while awaiting arrival of the equipment.

Additional market testing was designed and implemented. The testing included a randomly selected sample of adult smokers and specifically selected brand smokers. They were asked to evaluate the three types of packaging and the appropriateness of each type of packaging to various brands. The results were not as favorable as anticipated. The market testing results indicated that the slide-box did not have an advantage over the crush-proof box.

Analysis The results of the two testing efforts were different because Reynolds' initial market testing did not clearly establish preference for the slide-box. The testing, in fact, established favorable results for Dakota in slide-boxes. Dakota was a new brand. In their subsequent testing with regard to perceptions of slide-box users, the results indicated that potential slidebox users would be individuals who seek change and new experiences. By pairing a new brand with the test of the slide-box, the favorable respondents were disproportionately represented by people who seek change and new experiences already. The results omitted the disposition toward the slide-box of those who would not change brands. It was incorrect to assume that such a proportion of the universe of smokers in general would favor the slidebox over the crush-proof box.

1

Problem Statement Capital investment was made assuming the packaging equipment could be utilized for multiple brands. We see the problem as twofold. Firstly, this decision was based on exploratory research specific to Dakota and its packaging and was incorrectly extrapolated across all brands. Secondly, a more in depth causal study was necessary to provide quantifiable evidence as to Dakota's competitive positioning relative to other brands.

Alternatives 1.

Cancel the new equipment order and suffer the consequences but cut off future losses.

Dakota can still be introduced in existing packaging.

2.

Cancel the equipment and undertake a more in depth study to determine if a demand exists for slide-box packaging for Dakota and among other brands. No product introductions should be made at this time.

3.

Cancel the equipment order and undertake further research on consumer preferences towards Dakota versus other brands on taste, price, packaging and image.

4.

Let the equipment order stand and undertake further research on Dakota. The packaging equipment would be used to introduce Vantage in a slide-box as Vantage smokers and slide-box users share many similar characteristics.

5.

Let the new equipment order stand and introduce Dakota in the slide-box packaging as planned.

6.

Let the new equipment order stand and introduce all brands in slide-box package as an alternative to current packaging.

Assumptions 1.

The packaging equipment that was ordered is of a specialized nature not adaptable for any other use and its cost is for a material amount. Therefore, liquidated damages associated with order cancellation equals cost of taking delivery. Taking delivery will have the advantage of yielding at least some investment recovery.

2.

The slide-box increases the appeal of at least one R.J. Reynolds brand.

2

Recommendations We believe that Reynolds should follow the action recommended in alternative 4. This is a low risk proposition to broaden the appeal of the Vantage brand. Market research demonstrated an appeal among present Vantage users for the slide-box packaging. This allows the company to capitalize on its investment in the equipment and introduce the innovative slide-box packaging on a product with proven demand. We believe that more in depth research is necessary to establish potential demand for the Dakota brand prior to taking the increased risk of introducing a new brand to the marketplace.

3

Case 4-2 CALIFORNIA FOODS CORPORATION Introduction/Problem Statement

California Foods Corporation (CFC)) experienced a significant drop in grape juice sales by almost 30% in the Puerto Rican market in 1989. Concerned with this decline, CFC commissioned a consumer “awareness, image, and attitude” study in early 1990 to learn more about the juice and beverage consumption habits of the Puerto Rican population.

The company retained a local Puerto Rican consulting firm to conduct marketing research consisting of personal interviews with 200 local consumers who had used CFC grape juice products. However, the consulting firm gathered mainly “qualitative” data which provided only clues for the sales decline. To a large extent, the research failed to provide valuable “quantitative” evidence which might have better revealed the cause for the decline, and offered potential solutions to increase sales.

Problem with the CFC Study Interview survey questions were mainly qualitative. For example, respondents were asked whether they use “more or less” of the product. Quantitative responses, such as “1-2 serving per week” would have provided more information.

The research was poorly documented. A small survey size of 200 was selected, but there is no evidence of how the participants were chosen or whether they represented a random sampling. In addition, no profile of the respondents, which could have provided valuable demographic data, was collected.

Data tables were not broken out into useful categories for analysis and cross-correlation.

CFC products were sometimes split out, sometimes lumped all together. Juices needed to be identified and broken out by brand. Orange juice was sometimes lumped-in with other citrus juices. Juices should have been properly divided into categories of fresh-squeezed, bottled or canned, frozen concentrate, and powdered. Other beverages such as milk, coffee, bottled water, and alcoholic beverages should also have been included.

Does “citrus juice” in Table 1 include orange juice? If so, then the negative trend in shipments may contradict the large increase in orange juice consumption. Such limitations in the data prevented beverage usage (as in Table 2) from being properly correlated to market shipments (in Table 1).

In Table 3, the “other” category reason for not buying grape juice is relative high. The study should have followed-up and investigated what “other” meant.

The consulting firm phrased their interview questions in a manner open to misinterpretation, e.g. “Why aren’t you using more CFC grape juice?” Respondents may have been suspicious or simply too eager to please, leading to biased answers.

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The research did not explore underlying reasons for the sales decline. The study did not address important marketing conditions such as competitor advertising or sales promotions, availability and placement of the product in stores, changing consumer habits or values, or economic and technical advances.

Alternatives 1. Do no additional research.

Pros:

No additional expense or time required.

Cons: Not enough data currently exists to provide an accurate, informed decision as to how to counter the sales decline.

2. Collect and analyze secondary research. * Competitive analysis of the grape juice market. * Puerto Rican social, economic, and lifestyle trend studies. * Demographic information.

Pros: Inexpensive and relatively easy to obtain, if available. Should help to determine who are the buyers and consumers. May uncover underlying events such as economic downturns, population changes, technology advances, etc.

Cons: Don’t know what exists. Search can be time-consuming. Data may not be broken out into useful categories. Cannot guarantee accuracy of secondary data.

3. Conduct personal survey with an improved questionnaire employing more quantitative oriented questions, and using a larger sample size. Screen and document the respondents.

Questions should address types of beverages used and frequency of consumption (number of weekly servings). Use a 5-point rating system to determine relative importance of cost, taste, nutrition, etc. on beverage selection.

Pros: Provides accurate, less subjective quantitative data with which to make informed decisions. Should accurately pinpoint reasons for grape juice decline. May reveal solutions. Can determine whether brand or product switching is occurring.

Cons: Somewhat time consuming and costly. Still subject to second guessing.

Interviews must be done properly to prevent misinterpretation and bias. Since Puerto Ricans view grape juice as healthy, they may want to “believe” they drink more than they actually do.

4. Conduct field study to observe consumer buying habits in representative store locations.

Pros

Observe competitive packaging, advertising, shelf space and placement. Very accurate if done in representative stores. Collect customer profiles and buying behavior. Opportunity to experiment and vary conditions in order to test potential solutions.

Cons: Time consuming and very costly. Selected stores may not provide a representative picture.

5

Assumptions Table 1 upper “fruit juice” category represents bottled and canned ready-to-drink forms.

Table 1 “fruit drinks” include both powdered and ready-to-drink forms.

Table 2 “previous users” were actually previous CFC users.

In Table 3, “other” was a real survey response, versus a lumping together of insignificant responses. * Frozen concentrated drinks are cheaper than bottled/canned drinks as in the United States. * No major economic upheaval or technological change (home refrigeration, improved water filtration, etc.) occurred. * CFC wants any additional research performed in a timely (within 6 months) and economical fashion. * * * *

Recommendations The original research provided some important information which will help in the design of any further study.

For instance, according to Table 4, product acceptance remained stable from 1985 to 1990. Interview results also indicate that orange juice consumption had increased tremendously since 1988. In fact, practically everyone interviewed used orange juice. The original research points to an increase in the consumption of orange juice as the primary reason for the decline in sales of CFC grape juice. However, the research failed to uncover the underlying reasons for this increase; was it price, taste, health concerns, advertising promotions? Also, the evidence is mostly qualitative and open to question.

Other factors such as relative price, brand switching, or changing consumer habits could not be ruled out as contributors. Here, the research data was inconclusive .

Therefore, we recommend additional research be conducted. Secondary data should be collected and analyzed. This data should include Puerto Rican economic and social trends.

Especially valuable, if it exists, will be competitor data. This may indicate marketing situations, such as advertising and sales promotions of competitor products, which might have led to CFC sales losses.

Next, an improved survey should be conducted. A larger sample size will be used, and non-grape juice users will be included. Questions will be non-threatening, and asked in quantitative terms. An example: How much of the following beverages did you (your family) consume in the past 30 days? Less than 2 servings, 3-5 servings, etc. Juice categories would be separated into fresh, frozen concentrate, and bottled/canned. Additional beverages types would be included, and respondents would have to specify what “other” refers to.

Finally, if time and funding exists, a field study will be conducted at specified stores. The study will first examine store conditions such as shelf space and placement of CFC grape juice, as well as in-store promotions and relative pricing. The study will then observe consumer buying behavior, and document demographic information. Also, if permission is

6

granted, the study would alter store conditions such as product placement and observe the effects.

With this plan, we feel that we could irrefutably determine the cause for CFC’s decline in grape juice sates and determine a course of future action.

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SECTION II TEACHING NOTES FOR CHAPTERS

CHAPTER FOUR RESEARCH DESIGN AND IMPLEMENTATION

Outline of the Chapter • • • • • • •

Understand the definition and purpose of research design Be familiar with the different types of research designs Identify the appropriate data collection method for a given research design Describe and briefly discuss the various sources of errors in a design Get introduced to the concepts of budgeting and scheduling a project Describe the elements of a research proposal Get introduced to the issues in international marketing research design

Teaching Suggestions This chapter provides a vehicle for achieving the following objectives: 1.

Further clarifying the nature of the research purpose and objectives (discussed in Chapter 3), by distinguishing them from the subsequent research design steps.

2.

Emphasize the need for research designs which are internally consistent (all the pieces fit together) and consistent with the research objective.

3.

Distinguish the 3 basic types of research designs in the minds of the students.

4.

The instructor may wish to use this chapter to discuss detailed aspects of marketing research department organization.

There are a variety of ways to achieve these objectives. The questions for discussion and cases offer useful vehicles. The course project should be reviewed within this context. If the project is limited to the design, as described in the introduction, then it is important to review progress and get the students to appreciate the magnitude of the task ahead. Finally, a variety of studies can be briefly described with the students being queried as to the type of research design. The following is an illustration of the kind of vignette that can be used (it comes from a speech by Emmanuel Demby reported in the January 12, 1979 Marketing News): “Let's take the case of Davis and Geck. Davis and Geck is a leading manufacturer of surgical sutures.

To help the company reach brand decision makers, it published a magazine for surgeons. We were asked to do a study to see if readership of the magazine affected the surgeon's image of Davis and Geck, and to see if this raised image also resulted in more frequent specification of Davis and Geck sutures,” he said.

“Based on previous research we had done in the medical area—and our hunch—we felt that while it might be desirable to improve Davis and Geck's image among surgeons, this improvement might not be sufficient to improve Davis & Geck's share of market.

“Therefore we devised a simple, but radical experiment. In anterooms of operating theaters, we posted interviewers. As surgeons came out of operating rooms, their uniforms still stained with the fresh blood of patients, the interviewers posed simple queries, among which was one critical question:

1

“Doctor, what brand suture did you use?

“The most often-given answer was: “I don't know. Ask the operating rooms’ supervisor.’

“That answer told us the market target for any suture efforts to improve market share had to be operating room supervisors. No doubt it was important to keep propagandizing surgeons, but share of market depended on the attitude and behavior of the operating room supervisors.” Demby said.

Questions and Problems 1.

A research design is a detailed blueprint for the conduct of the research study. The process of design involves ensuring that the elements of the design fit together. Given this definition, it is not possible to conduct a research study without some kind of design. Granted the design may be very tentative and subject to change, as is the case with exploratory research, but nonetheless the researcher must have some plan of approach to the topic. This may be as rudimentary as saying, “I should visit the following kinds of people and ask the following questions.” The more thought that is given prior to the interview the more likely the exploratory research will be productive. Similarly, a research study which is limited to interrogating an internal information system must be guided by specific questions and relationships that are relevant in light of the research objectives.

2.

Exploratory, descriptive and causal research designs differ with respect to: (a) the specificity of the hypotheses, (b) the amount of structure in the data collection instrument, (c) the extent of intervention by the researcher in ongoing events. For example, a test market involves a deliberate marketing action initiated in order to learn about market response to a new concept, product etc., and (d) the appropriate research methods.

At this point, it is useful to ask why a survey cannot yield an unambiguous causal inference, even when there is a strong association between two variables. First it is difficult to assess the time sequence of events. Second, there may be competing explanations for the relationship which cannot be distinguished from the survey results.

The relative importance of each type of research design (approach) at each phase of the marketing program development process can be assessed from the following grid (the more stars in the cell, the more important the research approach to that phase): Exploratory Descriptive Causal Environmental surveillance

***

****

Problem or opportunity definition

**

****

Identification and assessment of alternatives

**

****

Testing and refining

***

**

Performance monitoring and evaluation

***

***

2

3.

The alternative research approaches that could be considered for the HMO, are mail, personal or telephone interviews. Each has strengths and weaknesses in this situation, as noted in the text. It is useful to get the students to enumerate these strengths and weaknesses, as a basis for understanding why a leave-behind, pick-up approach using a self-administered questionnaire was chosen in this situation. The determining factor, which ultimately made this approach feasible, was the availability of an up-to-date list of faculty and students to serve as a sampling frame. Other research approaches are possible, such as intercept interviews on campus, or group meetings with faculty and staff, but their shortcomings should be evident.

4.

The purpose of an exploratory study in this situation would be to generate hypotheses as to specific consequences of the proposed inventory control procedure that would either enhance or detract from the manufacturers present relationships with industrial supply houses. The first step is to learn what kinds of problems exist in the present relationship (with emphasis on ordering, supplying, receiving and billing activities). A review of salesmen's call reports, plus meetings and visits with salesmen and informal discussions with industrial supply houses—including those who do not presently handle the company's line of products - should be sufficient to assess the current situation. To explore the problems and opportunities that will derive from the new control system the following could be done: (a) the industrial supply houses could be asked about their experience with other suppliers who have introduced similar inventory control systems and (b) equipment/systems suppliers could be asked about applications problems, barriers to acceptance and ways to surmount them that they have learned in other situations.

5.

There is an implied causal hypothesis here: that receipt of food stamps leads to an increase in the total food budget of the amount of the stamps. The competing hypothesis is that the total food budget remains the same and the cash freed up from the food budget is used for other expenditures. Thus it is not sufficient to conduct a descriptive study in which the food expenditure patterns and family budgets of food stamp recipients are compared to non-food stamp recipients (if indeed it would be possible to obtain accurate income on such sensitive topics from low income households). Instead a causal study which traces the effect of receipt of good stamps on individual budgets would be more appropriate.

The problem with such a longitudinal study is the control of competing explanations for the observed changes in food expenditure patterns.

6.

The implied purpose of the research is to learn why certain geographic areas have below average penetration in order to decide what action to take to improve the penetration. The relevant research objectives are to: (I) describe the non-cable TV user in low penetration areas, and (2) test specific hypotheses (listed in Chapter 3) as to the reasons why people in the area do not have cable TV. A number of problems must over come before the objectives can be achieved. First, it is not a question of how many individuals want or do not want Cable TV but how many households want the service, because the service is available to everyone in the household or family. Second, the records of the cable company are limited to the names and addresses of subscribers, but not the telephone number.

Further, the telephone exchanges do not correspond to the area to be studied, and are usually much broader. On the other hand, because the research is confined to a small geographic area, a personal interview with multiple call-backs is economically feasible.

The instructor may wish to have the class develop specific questions to test each of the hypotheses.

The attached questionnaire was developed by the student project group which dealt with the problem, and illustrates one way to proceed.

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SUPPLEMENT TO QUESTION 6 K-T RESEARCH GROUP QUESTIONNAIRE FOR ROGERS CABLE TV Interviewers Name: _____________ Date: __________ Respondents Address: ___________ Time: __________ _______________ _______________

Good evening. I am conducting a study on behalf of K-T Research Group. I would like very much to ask you some questions regarding your television reception and viewing habits. May I talk to you for a few minutes? (If no, try to make a future appointment.)

Ql

How long have you lived at this address?

1

Q2a

Do you plan to move in the near future?

Q2b

(If yes)

Q3a

Do you own a television set?

(If no - terminate interview.)

Q3b

How many TV sets do you own?

(Specify)

1 2 3

Q4

Of the Televisions sets which you you own, how many are Currently being used?

(Specify)

1

When?

Yes No

1 2

(Specify)

3

Yes No

4

Q5.

Q9a

Do you use ( if cable, terminate Interview)

Q6.

Overall, how would you rate the quality of your TV reception with (antenna, rabbit ears, other) ?

Q8.

Which channels do you receive?

Q7

How many channels do you get?

I am trying to get an idea of how well these channels came in this area. Which ones would you say came in so strongly that you never or very seldom have any trouble receiving them?

(Specify)

an outside antenna cable television rabbit ears other/don’t know (specify)

1 2 3 4

Excellent Good Acceptable Not Acceptable Very Poor

1 2 3 4 5

Channel 2 4 5 7 9 11

l 2 3 4 5 6

17

7

19

8

25

9

29

10

1

Other (specify)

11

Channel 2 4 5 7 9 11 17 19 25 29 Other (specify)

l 2 3 4 5 6 7 8 9 10 5 11

Q9b.

Q-9c

Come in strongly enough that you have some problem with them, but not very often.

Channel 2 4 5 7 9 11 17 19 25 29 Other (specify)

l 2 3 4 5 6 7 8 9 10 11

Come in so poorly that you usually or always have trouble a TV show on that station?

6

Q10

How often do you see programs listed or hear or see programs advertised that you would like to watch, but are unable to get on your TV set ?

Qll

How long have you been using?

Q12

What did you use before ... an antenna ... rabbit ears ... other (if cable go to Q-13b)

Q13a Have you ever had cable TV? (if no go to b14)

Q13b

Often Occasionally Seldom Never Don't read TV listings

Antenna Cable Rabbit Ears Other

Antenna Cable Rabbit Ears Other

1 2 3 4 5

Channel 2 4 5 7 9 11 17 19 25 29 Other (specify)

1 2 3 4

l 2 3 4 5 6 7 8 9 10 11

1 2 3 4

Yes No

1 2

Which Cable Company served you then and where did you live?

7

Q14 Why do you not have cable TV now? (do not read list unless respondent

is unable to reply)

Q15

Q16

What do you think is the monthly average for Cable TV in this area?

Cable actually cost $6.00 per month With it, you get clear uninterrupted TV reception on 12 channels; strong uninterrupted FM reception; and local community programs. Do you think that's good value for the money?

Q17a

Since you moved in, have you ever been visited by a Cable TV sales representative? (if yes, ask 17b) Q17b How often? About when was the last time?

Q18

Do you know the name of the Cable TV company of this area?

Q19a

Do you rent or own this dwelling?

(If they own, ask Q19b, if they rent, ask Q19c).

Q19b

Do you rent any rooms to tenants and if so how many?

Q19c

Does the owner live here as well, and are there any other tenants?

Cost of Cable TV Reception no better w/ cable Billing problems w/ Cable Co.

1 2 3

(Specify)

1

(Specify)

2

Poor customer service/repair Ordered it—no one installed it No one ever asked Didn’t know who to contact Never thought about it

4 5 6 7 8

(Specify)

1

Yes No Don’t know

12 2 3

Yes No

1 2

(Specify) (Specify)

1 2

(Specify)

1

Own No

1 2

Yes Number No

3 4 5

Yes No Yes No

6 7 8

8

7a. Smith Computers Inc., need help in the development of marketing program. Marketing program could embrace specific tasks. An actionable marketing program usually focuses on a single objective in support of one element of the overall business strategy. As discussed earlier in Chapter 1, marketing research could contribute to a large extent to arriving at the right marketing mix decisions.

The students should be encouraged to look at this problem from various angles and come out with their prescription of a research type. Explained below is one way of looking at this problem. In our case, Smith Computers are already in the business of personal computing, with their distribution channels in place. However, they are looking at a new product launch. Smith Computers Inc. are looking at a sustainable competitive advantage by differentiating themselves by marketing low cost, superior technology product as compared to their competitors.

The research purpose for Smith Computers Inc. would be to achieve a particular market share within a specified time period for their new product. The research objective would be to identify the target segment(s) that would be receptive to possessing a low cost, high quality, superior machine. For instance, should the company look at corporate clients or should they look at customers purchasing material for their personal use. If it is corporate clients, are we looking at targeting to larger firms or medium sized firms or smaller firms? What are the requirements of each of these?. In this case, the purpose of the purpose of the research is to provide a snapshot of a particular aspect of the marketing environment. The research needed by Smith Computers is conclusive research of a descriptive type. A description of the most favorable segment is required. On the basis of the information acquired by the marketing research firm, the company can design the marketing program to target the desired market. b.

The usefulness of a research project depends on the overall quality of the research designed and the data collected and analyzed based on the design. Several types of error could occur and cause problems in achieving an accurate methodology. * Design errors: if the research design has an ill defined problem or research problem, or does not identify precisely the information requirements, it could lead to an imprecise measurement.

Researcher induced errors like a faulty sample selection, or wrong population specification or use of a wrong sampling frame can lead to errors. * Response and Non response errors: Improper field work activities like improper selection of interviewers could lead to errors. Also incomplete responses or failure to contact all members can lead to errors that can distort the final findings. * Measurement and analysis errors: Ambiguous or poor experimental designs can result in responses that are imprecise. Similarly, errors can occur during the process of transforming raw data from questionnaires into findings.

c.

A research proposal is a plan for conducting and controlling a research project. A research proposal serves various purposes. Administratively, it is the basis for the written agreement between the manager and the researcher, as well as a record of what was agreed. Also, a proposal could be used by the firms to compare among competing suppliers and select the research firm that demonstrates the researcher's grasp of the problem and ability to conduct the research.

Scott Peters' content outline for a research proposal for Smith Computers inc., should be on the following lines.

Executive Summary: A brief overview of the contents of the proposal should be given so that reading the summary gives a fair idea of the research proposal. An executive summary is a very important part as it is often the only part read by the top management who have the pressures of time.

Purpose of the survey and scope: The purpose of the survey in our case is to achieve a particular market share in a specified time period for the new product of Smith computers. The parameters that will or may limit the study should also be laid out.

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Objectives and approach: The research objective, in our case the identification of target market segments should be clearly identified. The research approach should highlight the aspects of research that might be elements of a contract. The justification of the methods and limitations chosen relative to the alternatives are to be discussed. All the other details pertaining to the research approach should be confined to the appendix.

Time and Cost estimates: All the financial aspects like fees, payment installments, treatment of contingencies and schedule for the submission and presentation of the research study are to be discussed. d.

Peters should keep in mind that issues and problems concerning the conduct of International marketing research are different as compared to domestic marketing research. The critical issues that Scott Peters must consider while designing an international marketing research study are: Determining information requirements: Scott Peters should help Smith computers in choosing the countries which are to be targeted (market selection) and the mode of entry decision(s) which fall under the ambit of strategic decisions. These decisions are usually made at the corporate headquarters.

The tactical decisions will pertain to the implementation of the marketing program designed for a particular market. Such decisions are taken at the subsidiary level. It is obvious that the information requirements are totally different for the two types of decision making. This should be borne in mind while designing an international research design.

Determining the unit of analysis: While conducting the research study, the unit of analysis has to be determined to avoid confusion. Should be the level of analysis be at a global level, regional level, local level is to be identified before embarking on a research project.

Construct Equivalence: Peters should take care that owing to socioeconomic, cultural, political differences the perspective of the researcher and the subjects belonging to a different country may be different. Therefore, the researcher should see to it that he understands the subjects' perspectives. For example, a personal computer is relatively inexpensive and widely used in the US whereas the same product is only used by the affluent and elite in developing countries. Therefore, the product has to be defined differently in the developing world.

Measurement and Sample equivalence: Peters should keep in mind that the methods and procedures used to collect data in different countries are similar. Similarly the samples to be used in various countries are to be identical. For instance, if Peters was to draw upon a sample of the purchase decision making authorities in various firms, in some countries, purchasing manager could make the decision to buy computers, in other countries, owing to the nature of the product, the decision could be made by the top management themselves. If Peters draws upon a sample of purchase managers in all countries, then his design will be flawed. Therefore, it is important to maintain measurement and sample equivalence to arrive at the right findings.

8.

Domestic research companies can be bogged down by the Self-reference criterion. Also, they may not possess the requisite international experience to conduct international research. It is difficult to find domestic marketing research companies that are dedicated and an expert in conducting international research. Also, the limited manpower and financial resources of the domestic companies may prevent them from doing an effective international study.

9a. In planning for a research project, decisions regarding the allocations of time, money and human resources are important. Budgeting enables a company to use the resources effectively and efficiently.

A cost benefit analysis gives the management a preliminary idea regarding the worth of a marketing project. By comparing the expected research information with its anticipated costs, the management can decide whether a particular project is worth conducting or not. If the costs, in terms of both money and time, exceed the value of information then the company would do well to shelve the project.

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However, if the perceived value of information exceed costs, then the company would proceed to the blueprint stage. b.

The two approaches to budgeting for a market research project are: Estimating the dollar costs associated with each activity: This is the approach used when the project is unusual or expensive.

Determining the costs through use of standard estimates: The number of hours for each task is determined and the total costs ascertained by the use of standard hourly estimates. This approach is typically used for routine marketing research projects or when the researcher has considerable knowledge of research activity costs.

10. Since Sugarland Creamery already has a distribution network in place and the decision is whether or not to introduce a new flavor, they could conduct an exploratory research. The hypothesis is that this flavor will be appreciated by the premium market segment.

The research purpose is to determine if the hypothesis is valid.

Samples of research questions that need to be answered are as follows. a) Who comprises the premium market ? b) Which are the retail outlets frequented most by premium segment ? c) What is the price that customers will be willing to pay for the new flavor ? d) How should the flavor be positioned ? (What is the attitude of the target segment towards this flavor ?)

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Teaching Notes for Cases Case 5-1 BARKLEY FOODS (A) Introduction

This case can be used in several ways. At one level it can be used to illustrate the array of secondary sources that are available to a marketing manager at short notice. This can be done either by having the students simply search for library sources, or by conducting a full search of an on-line retrieval system.

This case can also be used as the basis for a discussion of the strategic role of marketing research. An interesting specific question is why marketing is not normally involved in acquisition investigations.

Teaching Suggestions 1. What secondary sources would be useful?

Trade magazines are probably the best single type of secondary source in situations such as the one presented in this case. The most helpful trade magazines covering the food industry are: • Quick Frozen Foods (QFF) • Frozen Food Age (FFA) • Processed Prepared Foods • Progressive Grocer (PG) • Supermarket Business • Chain Store Age (CSA) • Advertising Age (AA) Trade magazines provide: • Commentary of their expert observers of the industry, including their own editors and writers and competitor executives. For example, - QFF (January 1983) reported that Campbell’s Soup predicted that the ethnic business will be worth S7.8 billion within six years.

- PG (January 1984) reported that a Super Value CEO thought that firms have failed to communicate to shoppers the quality, value, and convenience of certain products.

• Reports of statistics collected by others such as syndicated services (i.e., SAMI).

- AA (May 3, 1984) reported a Nielsen survey of 1,300 stores that new supermarkets are allocating 8.2% of floor space to frozen foods instead of the 5.2% all-store average.

- QFF (November 1984) reported a SAMI report that indicated the premium category of frozen foods increased in dollar value by 45% from July 1983 to July 1984.

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• Reports of government statistics - FFA (October 1984) analyzed demographic trends, such as the growing number of working women and working mothers.

• Reports of surveys they have conducted - A CSA survey (CSA February 1983) found that in 1982 over 1,200 new items per year were fighting for retail freezer shelf space.

- QFF does an annual survey which provides breakdowns of sales and growth rates for the industry and various components.

• Reports of market research conducted by competitors - QFF (April 1984) reported that Benihana’s found a big crossover between “Lean Cuisine” customers and Benihana’s because people perceive Oriental food to be light in calories.

• Reports of surveys by other industry observers - QFF reported a survey of the economics of frozen food departments undertaken in 1984 by the Food Marketing Institute. It found trends toward a rapid expansion in the number of frozen food products and shifts to premium items expansion in the number of frozen food products and shifts to premium items.

In addition to trade magazines, here are the following types of information sources to consider: -

Census data surveyed in the Appendix to Chapter 4, provides information to analyze demographic trends. Of interest are trends with respect to income, working women, single households, and age profiles.

-

Other surveys done by industry observers which may not be published in trade magazines or for which more detail is needed. For example, SRI did a study in 1980 on “Social Trends and Food Retailing” that might be obtained.

-

An interesting and readily available source of market information is found in annual reports of competitors and retailers.

Many articles can now be accessed using on-line retrieval systems. If resources permit it will be Informative to have printed out several references to articles on the frozen food industry or complete texts of articles. These can be used to demonstrate the availability of information in computer data bases.

2. The Library Exercise It is very useful to get the students into the library. A brief discussion in which students describe their information piece and how it was located will be interesting to the class.

2

3. Other Approaches It will be useful to spend some time talking to people who are knowledgeable about the industry, such as retail executives specializing in frozen foods and suppliers to competitors. At the outset of the process, they can provide tips as to information sources.

Near the end, they can help confirm or disconfirm hypotheses.

3

Case 5-2 DELL ENTERS LATIN AMERICA ( Discussed online at www.wiley.com/college/aaker) 1) The issues concerning the Latin American market that Dell should address before it enters into Brazil include the differences in culture of the consumers in Brazil compared to the consumers in the U.S. . While Latin American consumers are similar in a many aspects to their U.S. counterparts, companies entering Latin America still need to be careful about cultural nuances that are unique to Latin America. For example, Argentina, Brazil and Chile all share a common European history in terms of history, religion, culture and people. In fact, people of these countries look up to Europe while inhabitants in Mexico and Central America tend to get influenced by the consumer culture in United States. Dell, needs to place a lot of importance into this particular issue when entering Brazil.

Most of the Latin American countries use Spanish as the predominant language, except for Brazil. In order to conduct market research in Brazil, it is necessary for the translator or speaker to be aware of the nuances that exist within its regions. The different dialects, word usage and idiosyncrasies would be aspects to concentrate on.

Dell also needs to be careful in estimating the income levels of consumers in Latin America. The different methodologies between countries often lead to speculation regarding the kind of income being measured. As household incomes are being tabulated across the countries it is still rather difficult to measure the purchasing power level of consumers in Latin American countries. While the Gross Domestic Product or the Gross National Product reflect the kind of spending and personal income allocation, they do not adequately measure the spending pattern of an individual consumer. The actual number of consumers who have income which they are willing to spend on foreign products is much lower than expected. Regarding Brazil in particular, the tremendous problems with inflation have reduced the purchasing power by about 50% among the working and lower middle classes and caused a major polarization of income.

Most business in Brazil is operated via an agent or distributor. This is partly explained by the market tendencies with which they are familiar, such as inflationary tendencies. This type of business is contradictory to Dell’s traditional methods of conducting business (direct to consumer marketing). The direct marketing industry is growing rapidly in Latin America, at a rate of 40-50%, and this is attributed mainly to the privatization of businesses in the continent. The business-business marketing is similar 4

to that in the United States where business marketing occupies close to half of the overall direct marketing efforts.

2) The information needed to address the issues concerning the Latin American consumers include: knowledge about the culture and practices of each Latin American country; the method used to calculate the income levels in each country; the development of direct marketing activities in each Latin American country.

The above information can be gathered from various sources such as: the US Department of Commerce-Overseas business reports; market research reports by USDOC; research reports on Latin American countries conducted by private marketing research firms; US government publications, such as the World Fact Book by the CIA; local newspapers and magazines in the respective countries.

3) Dell should build a fully-fledged production facility in Brazil as this helps it operate businesses according to its traditional model. It can phase out its entry into Brazil over a period of five years, using this time to develop and train a local sales force that will follow the company’s model of selling directly to businesses and consumers. Given the growth rate of direct marketing activities in Latin America, Dell can be successfully use its US model of operations provided it developed a local sales force that is aware of the preferences and culture of the Latin American consumers.

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Case 5-3 EDDIE BAUER: STRATEGIZE WITH SECONDARY MARKETING DATA Instructions This case demonstrates the use of secondary marketing research data in marketing strategy formulation and store location selection.

Case Objectives: 1. To show students an example of how to apply secondary marketing data to solve business problems in an industrial marketing setting.

2. To let students study how to collect and analyze secondary data to solve business problems.

Answer Key to Case Questions: 1. Demographic and geographic information other than basic census data that Eddie Bauer should collect when selecting store locations. Understanding the demographics of the market is essential knowledge for business success. However, a full national census is only conducted once every ten years, by the U.S. Bureau of the Census, the primary source for demographics.

To study store location, Eddie Bauer business managers need local area demographics that allow them to accurately evaluate current and future demographic profiles of potential markets and geographic information by Zip Code. Begin with a complete examination of both the customer base and market. The goal is to identify the highest value customer segments and the best new sales opportunities.

After determining their target market area, Eddie Bauer should identify specific ZIP Codes for store locations, based on total dollars spent.

Gentle Rain needs to evaluate these locations for potential profitability.

Then Eddie Bauer will be able to develop a highly effective strategy to: • • • •

target the most profitable customer segments grow these into long-term customer relationships turn potential opportunities into profit measure, evaluate, and fine-tune performance of marketing plans

6

2. To study the competitive environment such as existing stores and competitors when selecting the store locations, Business managers in Eddie Bauer should consider collecting and studying information in the following areas: • • • • •

a list of markets under consideration locations of competitors sales performance of competitors in those locations marketing activities of competitors customer profile of competitors

3. In order to serve its customers in better ways, Eddie Bauer managers need to conduct marketing research to profile its shoppers in different geographic locations and to identify shared characteristics of customers who frequent Eddie Bauer vs. its main competitors within various locations.

Business managers in Eddie Bauer should use customer and sales data to reveal valuable insights about both including: • • • • •

specific product usage channel preferences media usage lifestyle and other consumer behaviors life cycle data

4. Students needs to decide the appropriateness of different kinds of Claritas’ products for various information of interest.

Claritas' information resources can be divided into several categories: •

Business.

•

Consumer – Claritas’ consumer spending databases are the best way to track how America spends its money. Segment markets by age, income, lifestyle and product preferences. Use this information to target audience's revenue potential.

•

Demographic - Drawing from such featured sources-like Pop-Facts®, Workplace Population and the Census-Claritas covers every market and geographic level to produce the most accurate demographics available.

•

Geographic - From big city to small neighborhood, Claritas has all types and levels of geography in maps. Available geographic data include cable, Census, electric, gas, landmarks, media, postal, street intersections, telecommunications, telephone service and TIGER® streets.

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SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER FIVE SECONDARY SOURCES OF MARKETING DATA Outline of the Chapter ▪ ▪ ▪ ▪ ▪

Define and introduce the various secondary data sources Discuss the uses, benefits and limitations of secondary data To describe the various sources and forms of secondary data To provide a brief overview of the sources of secondary data used in international marketing research To help the student get a feel for the applications of secondary data in domestic and international marketing research

Teaching Suggestions In one important sense this chapter and the next one represent a transition, from the introductory planning and design issues, to the specific activities of collecting and interpreting data. The objectives for this chapter should be: a)

Introduce students to the wealth of available data so they can see the necessity of beginning any research study with the pursuit of readily available secondary data

b) To understand how secondary data can be used to provide answers to marketing questions c)

To introduce students to the NAICS system that has replaced the old SIC system

c)

To recognize the limitations of secondary data

Of course, these skills will be enhanced in subsequent chapters which discuss the collection of primary data. Knowledge of the difficulties of collecting data in general will give a further appreciation of the deficiencies of secondary data. In general, the rule for using secondary data should be: don’t ignore it, but don’t rely on it completely.

In addition to the questions for discussion, some useful devices for achieving the objectives of this chapter are to introduce to the students, the new North American Industry Classification System (NAICS) highlight its benefits and to briefly refer to the problems of the old SIC system. A brief FAQ on the NAICS is provided in the next page for instructor’s review. Using the team projects as a vehicle to familiarize students with the new NAIC system, instructors could provide the Web addresses under the “Resources to Students” section of the FAQ and set them the goal of obtaining information about the differences between the SIC and NAIC systems. The project and subsequent discussions should focus on the benefits provided by the new system when compared to the old. Providing the Web addresses from the FAQ to the students helps them to easily identify sources of secondary data. This works well as the student teams are usually just beginning this stage.

Of particular importance is Figure 5-1, which is an excellent resource for understanding the process of secondary data collection. It is also important to understand the importance, benefits, sources, and applications of secondary data research. In light of the current advances in technology applications in the area of marketing research, the need for discussing computer retrievable databases becomes important. The instructor may also wish to discuss census data (Figure 5-3 explains the geographic subdivisions of a MSA)

1

Since the SIC information replaced by the NAICS data in this edition of the text book, instructors may want to focus their discussions more on the coding structure, applications, and benefits of the new NAICS rather than the old SIC system. However, in order that the students appreciate the true benefits of the NAICS, the instructor may still want to discuss the problems of the SIC system and highlight how NAICS solves the same. As part of the class preparations, it is recommended that the instructors visit the Web sites provided in the FAQ and identify a couple of examples that highlight the problems of the SIC system and the solutions provided by the NAIC system. The instructor may quote the weaknesses mentioned below and compare it with the NAICS. The instructor may want to spend quite a bit of time on the strengths and weaknesses of SIC data.

Some of the more obvious weaknesses stem from the fact that establishments are allocated to 4, 5, 6 or 7 digit categories based on their major activity or primary product. This rule creates problems when, as is often the case, an establishment has multiple activities or products. Further, the most readily available data is at the 4-digit level which encompasses some very broad industry categories, i.e., SIC 3312 is blast furnaces, steel works, and rolling mills. Other problems are the slowness of the revisions to categories, the delays in reporting and the reliance on supply factors for defining the categories. Usually a market defined according to similarity of supply is smaller than one that encompasses all the ways a customer can satisfy a need.

NAICS AND SIC The North American Industry Classification System (NAICS) has now officially replaced the U.S. Standard Industrial Classification (SIC) system. The NAICS provides a consistent system for economic analysis across the three North American Free Trade Agreement partners – Canada, Mexico and the United States.

The system was developed by the U.S., Canada, and Mexico to provide comparable statistics across the three countries. For the first time, government and business analysts will be able to directly compare industrial production statistics collected and published in the three North American Free Trade Agreement countries. NAICS also provides for increased comparability with the International Standard Industrial Classification System (ISIC, Revision 3), developed and maintained by the United Nations.

The 2002 edition includes substantial changes in the construction and wholesale trade classifications, and modifies a number of retail classifications. NAICS also reflects, in a much more explicit way, the enormous changes in technology and in the growth and diversification of services that have marked recent decades.

A key feature of NAICS is the revisions of the information sector. A few of the new and important industries created in this section include: internet service providers and web search portals, and internet publishing and broadcasting. Also included in the information sector are electronic shopping and electronic auctions.

NAICS provides a consistent framework for the collection, analysis and dissemination of industrial statistics used by: • • • •

Government policy analysts Academics and researchers Business community Public

NAICS will be reviewed every 5 years so that classifications and information keep up with the changing economy.

2

NAICS FAQ Q.1 - What is SIC? The Standard Industrial Classification (SIC) system is a series of number codes that attempts to classify all business establishments by the types of products or services they make available.

Establishments engaged in the same activity, whatever their size or type of ownership, are assigned the same SIC code: these definitions are important for standardization.

The SIC codes were developed to facilitate the collection, tabulation, and analysis of data and to promote comparability in statistical analyses.

Q.2 - What is NAICS? Beginning in 1997, the SIC will be replaced by the North American Industry Classification System (NAICS). This six digit code is a major revision that not only provides for newer industries, but also reorganizes the categories on a production/process-oriented basis (SIC used a mixture of productionbased and market-based categories).

Q.3 - Who developed the NAICS? he new NAICS system was developed jointly by the U.S. Census Bureau in cooperation with the U. S. Economic Classification Policy Committee, Statistics Canada and Mexico's Institutio Nacional de Estadistica, Geografia e Informatics. This new, uniform, industry-wide classification system has been designed as the index for statistical reporting of all economic activities of the U.S., Canada, and Mexico.

Q.4 - What are the features of NAICS? A summary of NAICS features include • Common code between U.S., Mexico, and Canada • Compatible with 2-digit level of ISIC of the United Nations • More industries and distinctions • Emerging high-tech industries and service industries included • New Information Industry • New 6-digit codes instead of 4-digit as in SIC Q.5 - What is the hierarchical structure of NAICS? The NAICS hierarchical structure is: XX Industry Sector (anticipating up to 20 industries) XXX Industry Sub-sector XXXX Industry Group XXXXX Industry XXXXXX U.S. (Canadian, or Mexican) National Industry Q.6 - Why use NAICS and SIC? Although the purpose behind the creation of the NAICS classification system is specifically for governmental regulations and census reports, this system can be implemented in any business to classify customers and enable users to gain a clear perspective on target markets. This is one of the most common uses of the NAICS and SIC in the general market.

3

For example, if your business sold equipment specific to dry cleaners it would be valuable to have a list of all the dry cleaners locally or nationally. To do this, you would look up the NAICS code specific to dry cleaners in a NAICS database (such as the NAICS to SIC InfoBase), then using a business database (such as PhoneDisc) you would obtain a list of all companies based on that code.

Whether it's statistical analysis, market research, or sales leads, NAICS and SIC codes provide a valuable tool to get the information needed to succeed.

Q.7 - Who uses NAICS and SIC? The following are just a few examples of who uses the NAICS: • • • • • • • • • • • • • • • • • • • •

State and Federal agencies Census Bureau, for economic census reports Attorneys for filing required government documents Mailing list publishers for classification Banks for evaluating loan applications Marketing agencies/departments for targeted marketing Market researchers Insurance companies for accessing risks Job service agencies for assisting applicants seeking employment City planning and zoning boards for monitoring compliance with zoning requirements Environmental protection agencies for monitoring emissions Power and utility companies for projecting usage needs Publishers for soliciting advertisers based on classified readership Trade associations Business, for sorting non-statistical articles and reports on industry and products Economists Planners Statisticians Database producers for searching by industry Many others

Q.8 - Where do I find NAICS lists and database products? www.naics.com Q.9 – Are there any free versions of the NAICS to SIC cross-reference tables?

Yes, please check the in the following Web site. http://www.naics.com/files/naic2sic.htm Resources to Students: http://www.census.gov/epcd/www/naics.html http://www.census.gov/epcd/www/naicstab.htm http://www.naics.com/ http://naics-codes-to-sic-codes.com/downloads/ http://www.naics.com/files/naic2sic.htm http://store.yahoo.com/naics/ http://www.siccode.com http://www.sba.gov/size/SIC2NAICSmain.html http://listsareus.com/business-sic-codes-u.htm http://www.sic-naics-codes.com/

4

The instructor may also wish to discuss to sources of secondary data in international marketing research. The problems encountered in secondary data collection in the international context, data comparability, and applications are areas that could be discussed in this section.

Questions and Problems 1.

A variety of useful secondary data is available to someone deciding where to locate a store to sell personal computers and software. From studies by manufacturers and distributors, it should be possible to determine the trading area and the profile of the target market (this will depend on some extent on whether the store is selling primarily to large commercial users). The next step is to identify and locate the potential competitors in the broad geographic area. Here the Yellow Pages can be very helpful. As this is a rapidly changing field, new entrants will also need to be identified. Supplier salespeople are a good source. The location should be as far away from competitors as possible and convenient to large concentrations of buyers. The latter assessment can be aided with Census data on manufacturing and service establishments in census enumeration areas, coupled with a directory of local businesses. A service like PRISM could be used to identify zip code areas with reasonable concentrations of customers in the target category.

While the logic is the same when locating a convenience copying center, the analysis should take into account the difference in shopping behavior - and especially the need to build repeat business by catering to a few users groups or businesses. The profile of the target markets will be different, for example, small businesses and universities and colleges are attractive markets. It should also be desirable to have data on traffic, density and movement which could be provided by the local planning authority or urban transit agency.

2.

The first question is, what kinds of secondary data should be available for the market area of each proposed location? Because of the split in the type of patrons, relevant data for the area would include: a)

Buying power as a function of disposable income and population

b) Mix of apartment versus single home dwellers in the population c)

Economic health of the area, including plans for expansion or contraction of the area, and post sensitivity to economic downturns

d) Building activity, encompassing renovation and extensions as well as new home or office building

3.

e)

Competitive presence, performance (i.e. ability to satisfy present needs of area) and future plans

f)

Traffic counts and likely changes in road networks that would affect traffic passing near the proposed site.

Industry associations are one method of obtaining direct data. There are consulting firms such as Frost and Sullivan and Predicasts who conduct industry studies for clients. These types of firms can be contacted for industry information.

In order to answer this question, students will either have to contact firms in each of the six industries and ask for the names of the industry associations or go to the library. The associations for each industry can then be ranked by the students in terms of their usefulness for providing secondary industry data. Students might also be asked to contact several industry associations to see the type of secondary data that is available.

4.

Data on beer consumption can be obtained-through a combination of government services, industry associations and by contacting firms in the industry. The difference between per capita consumption in a particular state or province versus the country as a whole may be explained by demographic variables.

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5a. Since Educational Edge is a small company with limited resources, assessing market potential through a marketing research study is out of question. Also the product is a not an innovative product and hence there should be no dearth of secondary data. Secondary data are data collected by persons or agencies for purposes other than the solution of the problem at hand. The examination of the secondary data may provide enough information to actually resolve the problem investigated. Therefore, it is better for Educational Edge to go in for secondary data to assess the market potential for the erasable transparencies. In case any new idea is generated, this may be tested later through primary research.

The bulk users of erasable transparencies would be in Schools, Universities and Corporations. While schools and universities will use the transparencies for teaching and presenting purposes, the corporations will tend to use transparencies predominantly for presentation purposes. Educational Edge will be interested in obtaining a list of educational institutions and corporations so that it can devise a strategic plan and decide on the market segments.

Educational Edge can obtain the relevant information about educational institutions from government published sources. The number of teachers in any geographic segment can be obtained from the census data. Using both rule of the thumb and experts’ advice, the number of transparencies per teacher for a time period is calculated, multiplied by the total number of teachers and hence the potential in the educational sector for a time period is calculated. These figures can be cross-checked using alternate methods. Educational Edge can identify a competitor and arrive at the competitor’s sales from their annual report. Using the competitor’s market share, the market potential can be calculated. Also, trade association journals can give an idea of the major players, their share, market growth rate and market potential. Similarly, US Census data of manufacturers could give SIC related data for Educational Edge to assess the industrial market potential. b.

Market segmentation is required by businesses seeking to improve their marketing efforts. Effective segmentation demands that firms group their customers into relatively homogeneous groups.

Educational Edge can use the North American Industrial Classification System (NAICS) and the Dun’s market identifiers (DMI) to segment its industrial market.

c.

By using secondary data, Educational Edge can initiate savings in cost, effort and time. In this case, it would neither be physically nor financially possible for Educational Edge to conduct primary research to obtain this data. The limitations are that the information received from published sources could have become dated and hence problems of fit could arise. Also, the accuracy of data and its error bounds are not known. There is a possibility that some assumptions may have to be made when the data is used for purposes of calculation.

6a. Howard Enterprises should opt for secondary data to select countries that merit in-depth investigation.

This is because Howard is a small company with limited resources and a marketing research study would cost money. Also, primary data collection, in the international context, is time consuming.

Alternatively, secondary data is relatively inexpensive and can be used to arrive at interesting propositions that can be later tested through primary research. Secondary data sources can help Howard to assess market opportunities in countries of which it has little knowledge.

For the initial part of identifying the countries, a wide variety of secondary data sources can be used.

These range from sources that provide general economic, social and demographic data for almost all the countries in the world. For preliminary screening of countries, Howard could use macroeconomic data, from various sources such as the United Nations and World Bank. Similarly, Howard could also look at industry specific data for market opportunity and analysis. Also, sources specific to individual countries or product markets should be looked into. For instance, if Howard feels that there is ample potential for lamps in the United Kingdom, it could consult the International marketing handbook, published by the US department of Commerce which provides profiles and special information about doing business in the UK. Also, the UK consulate trade office will be in a position to explain more about the investment opportunities. Howard should also consult private published sources to obtain industry relevant information.

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b.

Howard should keep in mind that data acquired from secondary sources in the international context has two major limitations: comparability and accuracy of the data.

Various sources report different values for the same indicators due to alternate definitions used for the indicators in those countries. For instance, a huge corporation in Nepal will be taken as a medium sized company in Australia. Hence the comparison of statistics creates a big problem in the international context. Also, the accuracy of the data is highly variable between countries.

7. From the EIS Industrial Plants or EIS Manufacturing Establishments obtain information about any one industry by selecting the NAICS code for that industry. EIS provides information on the value of the shipments, share of the market estimates and other information about organizations.

Another way to obtain the same information is to collect the sales figures for the brands in this product category from the retail stores. Because only a select number of retail stores will be contacted and the sales for the product will be extrapolated from this, this can give a different sales estimate.

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Teaching Notes for Cases Case 6-1 PROMOTION OF ROCKET SOUP

It is easy to see that weeks 5, 12, 23, 36 and 37 were important sales weeks for Rocket.

Additionally, weeks 2, 8 and 31 were important sales weeks for the competition. The impact of these weeks and nearby weeks were illustrated by changes in total category volume, total category dollar spending, Rocket’s and competitors volume, and sales in the weeks following high volume movement. It also appears that promotions work quite well, and there is high demand elasticity. Consumers aren’t brand loyal and see many substitutes. However, it appears that price wars are damaging, and don’t produce the desired effects for the soup makers.

Week 2 In week 2 it can be inferred that one or more of Rocket’s competitors held promotional activities, since Rocket’s price was $ 1.11 a can and the category price in week 2 was $.68 a can (category dollars/category volume). This resulted in Rocket’s share to drop from 5.1% to 2.4%. Total category volume increased by 139% to 14,288 cans ( 1 4, 288- 5984)/5 984), and category dollars increased to $ 9780. Rocket’ s volume did increase by 12.7%, but this is a slight increase compared to its competitors’ volume, which increased by 146%. Sales in weeks 3 and 4 were fairly stable, as it appears that neither Rocket nor its competitors entered into any sizable promotional activities.

Week 5 In week 5, it appears that Rocket lowered its price $.16 to $.63 a unit and enjoyed a 389% increase in sales volume, along with a 57.4% gain of the market. Its average competitor’s price was $.83 in week 5, and their volume dropped by 31 % to 3269. Total category volume and spending increased relatively slightly at 36% and 23% respectively, which leads to the conclusion that Rocket was the only supplier engaged in vast promotional activity. Sales in the weeks between 5 and 8 went back to normal, with Rocket’s share of the market coming down to its usual 8% to 10%. There was no real significant change in category dollars or volume, and there was little promotional activity initiated by Rocket or its competitors.

Week 8 In week 8, Rocket’s share of the market dropped all the way to 4.5%, which had to be due to vast promotional activities partaken by one or (probably) more of its competitors. Their competitors’ volume rose by 115% to 11,066, while Rocket’s volume only increased by 15% to 513. Rocket’s price was $.98 a unit, while its competitors’ average price was $.72. Total category volume and spending increased by 107% and 77%, respectively. Between weeks 8 and 12, no substantial activity took place with prices, Rocket’s volume, total volume, and category spending remaining fairly consistent.

Week 12 In week 12, Rocket launched a promotional blitz. First of all, the price was lowered to $.04.

Rocket’s volume increased 2482%, from 624 units the previous week to 16,113 units, and its market share grew to 82.1%. Meanwhile, the competitive volume dropped 20% to 3520 units.

Total category volume increase to 19,633 units, but this was solely because of Rocket’s

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gains. Total category dollars actually declined to $3982, which is mostly due to Rocket sales at $.04. There must have been many in-store giveaways of rocket soup, weeks 12 through 22, market share for Rocket was quite volatile, as Rocket and its competitors engaged in price promotions. Rocket’s revenues fluctuated greatly during this period, as did the total category dollars.

Weeks 22 and 23 During week 22, it appears that Rocket engaged in store promotions for its soup. Its market share increased to 63.7% while its price ($.96) was not the cause of this. Rocket’s volume increased over 1300% to 5319 units, while its competitors’ volume dropped 13% to 3033 units. Total category volume and spending increased during week 22, but Rocket was the main beneficiary.

During week 23, its competitors recovered by increasing volume to 4806 units, while Rocket’s volume was cut by more than 50% to 2280 units. Rocket’s revenues fell by more than 67% from week 22, and its market share decreased 32.2% to 5311. This would imply that many soup manufacturers (Rocket included) intentionally or unintentionally engaged in price-warfare. In the weeks between 23 and 31 the price warfare seemed to continue. Market shares for Rocket (and others) were volatile.

Week 31 In week 31, competitive volume reached its all time study high, at 14,642 units, while Rocket’s volume remained fairly constant from the week before, at 957 units. Rocket’s share was a paltry 6.1 %, even though its price was fairly cheap {by its own standards), at $.74 a unit. Category dollars only increased by 39%. What this implies is that one or more of Rocket’s competitors had promotional blitzes.

In the weeks between 31 and 36, there continued to be great volatility in market share for Rocket (dropping from 20% down to 3.9% then up to 7.1 %). Rocket volume and competitive volume went in opposite ends from each other, and this along with price changes and changes in category dollars, implies that there were disjointed promotional activities that occurred, and perhaps many of these were done solely by individual stores.

Week 36 and 37 In week 36, Rocket lowered its price 32% to 74 cents a unit. This helped it to gain back a huge market share of 47.5% and increase its volume 10-fold and its revenues 7-fold .

Competitive volume decreased 10% to 4550 units, while category volume and dollars increased to 8672 units and $7699, respectively. The increases were mostly absorbed by Rocket.

In week 37, Rocket again lowered its price, this time all the way to $.49, which caused a furthering of the same movements from week 36. Rocket increased volume to a staggering 9190 units, while its revenues increased to $4466. Total category and dollars were also up, to 13,165 units and $8694, respectively. Rocket’s market share lifted off and reached 69.2% Rockets competitors did not fare as well, as competitive volume decreased again to 4057 units, a 20% decline from week 35.

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In the weeks that followed, Rocket’s competitors rebounded and gained 91.2% of the market, while Rocket settled back to 8.8%. Category dollars and volume went back to familiar territory, and all in all, the market finally seemed to return to a state of normlity .

Since the price for this promotion is zero, the sensitivity of sales volume to price is not known. Also the existence of additional requirements for the receipt of the free soup (purchase of $ 10 of other goods) means the volume of soup demanded at a price of $0.00 is not known either. Knowledge of the demand curve is not increased by the promotion in week 12 and Rocket won’t have any additional valid information regarding incremental value as a result of price changes.

Since the receipt of “free soup” does not depend on the consumers normal cycle of purchasing soup (they will store the soup until needed or wanted), this can be considered to be borrowed from future sales. It will not only be borrowed from future Rocket sales but also from other brand’s sales also. The degree of borrowing from Rocket’s future sales will not be known and will make the impact of the promotion hard to assess. It will also impact sales for the next 40 + days.

As the graph indicates, there is a strong inverse relationship between the price of Rocket soup and its corresponding volume sales. However, there is some elasticity differences between price increases and decreases.

Based on the data given, we project that if Rocket reduces its price by ten percent, volume sales will increase by approximately 28 percent. Correspondingly, if Rocket soup increases its price by 10 percent, expected volume sales are expected to decrease by approximately 22 percent.

In comparing the display only response to the non-promotional response, there are several similarities and differences. Both types of responses show an inverse relationship between price and volume; overall, the lower the price, the higher the volume. Occasionally, in both the display only and the non-promotional responses, this inverse relationship is very weak, and the volume does not significantly increase when the price is lowered.

The difference between the display only and non-promotional responses to price is the strength of their inverse relationships between price and volume. When the price is over $1, the non-promotional volume is greatly reduced. The display only response, however, supports a higher volume at prices over $1. For example, when the price is over $1, the display only volume is never below .36. On the other hand, the non-promotional volume is never over .29. The inverse relationship between price and volume with display only is stronger, however, when the price is lowered substantially. The display only response is greater that the non-promotional response when the price is lowered. In both scenarios, when the price is $.69, the volume increases. However, with the display the volume is approximately 30% higher at this price than without promotion.

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Case 6-2 KERRY GOLD PRODUCTS, INC. Teaching Suggestions

This case can be used to either: (1) briefly illustrate the depth of supermarket scanner data obtained from a typical application to a repeat purchased grocery product, or (2) serve as the basis for a more thorough analysis of the margarine market using the wealth of data available in the case. The latter is a more revealing use of the case for one only appreciates the richness of the data, and the possibilities for new insights into market behavior, after massaging the data in a variety of ways. In this respect, the case is deceptive for a creative student with a calculator can develop a number of analyses.

The following questions have been found to be useful for focusing on a thorough analysis of the data: (a)

How would you describe the behavior of consumers in the margarine market?

(b)

What effect does promotional activity have on competitive position in the margarine market?

(c)

How would you describe the Kerry Gold strategy? What is your evaluation of this strategy?

(d)

Does scanner data provide significant new insights beyond store audit data and periodic controlled experiments?

Consumer Behavior in the Margarine Market Here the students should be asked to combine their personal experience with repeat purchased products with the scanner data to draw some preliminary conclusions about consumer behavior.

• A dominant feature of this market is repeat purchase behavior. However, the inter-purchase time is evidently highly variable in view of the evidence of household inventory building during periods of low promotional prices. For example, compare average weekly volume during April (a high promotion period) versus July (a low promotions period). While there is some seasonal effect, it is striking that average weekly volume in July is only 58% of the volume in April.

• The market is highly competitive, with four brands struggling to maintain their position. No doubt these problems are exacerbated by the lack of loyalty, plus a possible threat of de-authorization of one of the brands because the chain may not want to carry four brands of a relatively undifferentiated product.

• The chain store probably uses this product category as a traffic builder, by featuring it weekly in newspaper inserts.

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Effects of Promotional Activity The most useful data come from the figure showing the first 18 weeks of a 52-week analysis. It will be seen that when Kerry Gold reduced its price from $0.58 to $0.38, sales did not double or triple but were 26 to 32 times the pre-promotional level. One wonders whether this surge in volume was attenuated by out-of-stock problems. Here the scanner data needs to be supplemented with audit data. Brand B promotions were more modest, with reductions of 10 to 15 percent and these resulted in sales increases of 3 to 8 times the pre-promotional level. This data assumes even more importance when we look at the results as a whole, summarized over the year. In general, it appears that Kerry Gold bought share in the first half of the year, and Brand B followed suit in the second half, with no discernible effect on the basic consumer franchise as measured during the weeks in which no brands ran promotions.

This interpretation should be qualified by the possibility that heavy inventory building may have kept a large “deal prime” segment out of the market for a long period. This could be tested by looking for shares and volume patterns during the remainder of the year, if there were longer period when no deals were available.

Kerry Gold Strategy The strategy of this brand is clearly revealed by the following table that shows the number of weeks each brand was sold at the major price points: Price Point

Kerry Gold Brand

Brand B

Brand C

Brand D

$0.58

14 weeks

7 weeks

9 weeks

2 weeks

$0.54

6 weeks

$0.49 or $0.50

5 weeks

7 weeks

$0.44

1 week

2 weeks

4 week

______

1 week

_______

18 weeks

18 weeks

18 weeks

18 weeks

$0.38

10 weeks 4 weeks

Also instructive is the finding that 93 percent of the volume of this brand was sold at 38 cents. As a consequence, no other brand exhibits the large swings in weekly volume. One wonders whether the product manager knows how much volume moves at very low deal prices. In any event, the strategy as it is executed, is to buy share. Because no other brands typically meet this price, either the profitability is poor or Kerry Gold is the lowest cost producer. It is unlikely that the brand is spending anything on franchise building advertising or promotions.

There are two possible reasons why Kerry Gold spends the bulk of their promotion funds in the first half of the year. Either it is poor budgeting or poor sales for a control, or the brand is trying to look good in the first half to maintain their shelf position during the second half.

A more sensible (i.e., profitable) option would be to emulate Brand B or C and offer more frequent promotions that are less costly. A serious question could also be raised about

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the evident decision to emphasize price promotions, which has resulted in a weak consumer franchise.

The Value of Scanner Data Once product managers are exposed to the level of detail provided by scanner services, they are unlikely to be satisfied with regular audit data. Indeed, a bimonthly aggregation of sales data would have completely obscured the volume of sales in this chain that is attributable to deals. Certainly, with a bigger data base, it should be possible to formulate reasonable models about the joint effect of weekly absolute price level, and the competitive price spread for that week on brand sales volume. A useful project would be to have students specify such a regression model for each of the brands. This model could be used to design alternative promotional strategies, which could subsequently be tested within a supermarket chain offering scanner data.

The major limitations are that scanner data does not provide information on stockouts, or consumer inventory building—which implicates the interpretation of the results—and is not presently adequate for measuring market share because of limited coverage of sales area.

Some of these problems can be resolved with special studies.

Over the long run, the possibilities are impressive, as the following excerpt from an analysis of scanner data by a British author (Derek Bloom in the June 1980, Journal of Advertising Research) suggests.

Future Developments The Behavior Scan installation may seem futuristic to a British audience, but such facilities will be widely used in America within the next couple of years for test marketing and advertising research. By the mid-1980s scanner-store panels could be taking over as the usual form of retail auditing in the United States for product groups whose sales are not importantly shared by specialist stores. It will be possible to track very small markets and to change item specification retrospectively. We may envisage the following developments toward the end of the decade: (1) Data will automatically be transmitted by telephone line to the computers analyzing the figures, and onto the clients, so that they will be available on a basis according to the clients’ needs: four weekly, weekly, daily, or even hourly. It will be truly continuous data. The collection of in-store information about promotions, stockouts, facings and so forth will become a normal part of stores’ own requirements and will itself be incorporated in the data bank.

(2) Instead of predetermined standard regions, users will be able to specify their own area requirements in relation to sales regions, climatic regions, or income characteristics.

They will also be able to pick out experimental design-based groupings of towns or districts for tests.

(3) Eventually, it will not be necessary to equip panel households with special identity cards because of the growth of the “cashless society,” which will make the use of

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credit cards normal in supermarkets, especially in scanner stores. Panel sizes could be much larger in consequence and conditioning effects reduced still further.

SAMI envisages a “wide variety of report formats including an on-line capability to query and apply mathematical models to data received from thousands of stores. Using robust data, manufacturers will be able to analyze such detailed information as brand performance in stores stocking their product where a two-color store flyer is present supported by an endaisle display. While fragments of information of this type are available today in hard copy formats, extensive data from many, many stores will be accessible via CRTSs in the future” Partner, 1979).

Though developments in Britain will come on faster than in the United States for a variety of reasons, no doubt Britain shall still be trailing by the end of the decade in the installation and exploitation of scanners. The timetable that seems probable is as follows: 1980-1982: experiments by retailers and by market research companies 1983-1986: widespread scanner installation and development of specialist research facilities concentrating on in-store activity 1987-1989: scanners normal in all but small supermarkets, though still rare in independents; retail auditing of supermarkets’ sales based on scanners; scanner-store consumer panels introduced Since in my view advertisers will rapidly discover that scanner data are superior to that which they have received hitherto, conventional auditing methods will wane in popularity. In addition to their timeliness for marketing action, scanner data will provide real price-point information on stock availability. Scanner data will miss door-to-door sales, sales through market stalls and small convenience stores, but for the bulk of the market the information will be outstanding.

It will have to be borne in mind that the people best placed to exploit the sudden increase in knowledge about sales and their correlates are the retailers themselves. We can expect them to develop much more powerful analytic methods for determining what brands and sizes they should stock, and to forecast the effects of pricing policy on customer flow, sales and profits. The scanner will not only change methods for the measurement of markets and marketing activity (and probably change the conclusions that are drawn as well) but it will also change markets themselves.

One major prospective problem both in the United Kingdom and in America is that of data indigestion: the sheer quantity of information that will become available will simply not be capable of being inspected visually in detail, or comprehended if it is. The alternatives open to users will be either to rest content with highly summarized reports, so losing most of the benefits that scanner data could provide, or to supplement them by making use of terminal-based analysis facilities on a large scale. Even so, understanding the findings, and therefore determining what action is possible and desirable, will be hampered until the research community has developed norms and models that can make sense of the new kind of information that increasingly will be available.

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Case 6-3 PARADISE FOODS Introduction

This case is an interesting example of the pitfalls of having access to mountains of market research data. Supermarket scanners, electronic test market facilities and computer-based marketing models are the new power tools of the packaged goods industry. Services such as InfoScan and BehaviourScan produce product data that are vastly richer than those available 10 years ago. Thus, obtaining data is easy, it’s much more difficult to interpret the data with the necessary sophistication and caution. The experience of Bill Horton points out at least three ingredients that are essential to making a sound decision in a case like the Sweet Dream launch: (1) objectivity; (2) the perspective that comes from having wrestled with many previous launches; (3) experience in applying complex research and analytical methods.

Teaching Suggestions The two assignment questions given at the end of the case are designed to get the students thinking about whether or not the marketing research techniques used by Paradise Foods were appropriate and effective. These can provide a starting point for a class discussion about the benefits and drawbacks of standardized marketing data to supplement the material covered in the textbook.

A secondary teaching point can be made about new product launches. Bob Murphy, Bill Horton’s boss, summed up the Paradise philosophy on new products when he said, “You know how this company works. We don’t hold the withdrawal of a new product against the manager if withdrawal is the right decision.” Students could be asked to comment on this statement. While it sounds generous, a company that excuses new product failures because withdrawal is the right decision, is sending out a message that it is not serious about new products. In some companies, aborting product launches is always the right decision. In the highly charged and political atmosphere of the Paradise Dessert group, people like Barbara (who see another employee’s success as a threat to their own career) can easily sabotage even the most promising new product. When you add Bob Murphy to the team, an executive committed to upholding she staffs quo, the deck is stacked even further against the launch.

Assignment Questions 1. Issues that were overlooked in evaluating Sweet Dream.

Bill Horton has collected a considerable amount of data to support the launch of Sweet Dream. Indeed, he seems to have too much data in terms of how he has packaged it for the marketing committee. We can only speculate about what Bill chose to include in his 40-page report and 30-page appendix, but he failed to persuade a group of managers skeptical of computer printouts in the first place. 

Grateful acknowledgment is given to Jerry Della Femina, William H. Moult and John M. Keenan for their commentaries on the Paradise Foods case found in the Harvard Business Review (September-October, 1988), which provided the basis for this case solution.

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The issues Bill Horton overlooked in evaluating Sweet Dream fall into two categories.

The first is organizational and the second is research related. On the organizational side, the structure of the Paradise Dessert group is not uncommon. There is a division between new and established products. Established products are what generate current profits and cash flows. In a company like Paradise Foods, they are also the products run by the most senior managers in the group. This type of structure encourages biases that Bill should have considered. The new data Bill generated after the committee rejected the Sweet Dream launch was used to attack LaTreat. Bill’s analysis of the product’s faltering franchise seems persuasive, but confronting Barbara directly demonstrates little political insight. Bill doesn’t understand the culture at Paradise Foods nor does he seem to understand that launch decisions at most companies are made on more than just the black-and-white realities of market tests.

This lack of political understanding is also evident in the type of research Bill collected.

In all his months of research, Bill never addressed explicitly the one issue that most worried the marketing committee: the cannibalization of LaTreat. The BehaviourScan data suggests that the two products compete with one another. However, the products are very different: one is a frozen novelty on a stick and the other is a cookie-layered ice cream sandwich.

Perhaps Sweet Dream has certain characteristics, taste, texture, calorie content, etc. that Paradise could use to distinguish it more clearly from LaTreat, thereby reducing cannibalization. But Bill doesn’t seem to know what these characteristics might be.

In addition, Bill has not considered all the issues involved in forecasting Sweet Dream’s post launch performance based on the test market results nor in Paradise’s agenda for the product. (The rollout might be nation-wide or the company might want to introduce the product on a regional basis). One major issue is “forced distribution” effects. In a segment as competitive as frozen deserts, is it realistic to expect Sweet Dream to get as much freezerspace nationwide as it did in the test supermarkets? Will the product be displayed as aggressively? Will Paradise’s salesforce and distributors pay as much attention to it? The likely answers to these questions are no. Bill might have suggested starting the Sweet Dream launch with a “sell-in” test in a lead market to verify that Paradise will be able to deliver on the company’s retail stocking objectives. This would also have made the launch less threatening to managers such as Barbara.

2. The Sweet Dream Launch Most students will realize that the case for launching Sweet Dream based upon the data collected is very compelling. A repurchase rate of 45% after 26 weeks is impressively high by industry standards and represents a high level of consumer satisfaction. In a market category like frozen desserts, novelty is a prerequisite for success. A company that wants to maintain a significant overall presence has no choice but to introduce new products on a regular basis so as to recapture consumers as they tire of existing products.

Why should Paradise launch Sweet Dream?

1. LaTreat is an older product in a category that thrives on novelty. Bill’ breakdown of LaTreat sales by customers categories is compelling evidence that there is plenty of room for a new premium-priced indulgent dessert. LaTreat will suffer cannibalization from other competitive entries if not from Sweet Dream.

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2. Sweet Dream should be able to cannibalize LaTreat at a favorable absolute contribution margin level. That is, overall dessert-group profits will increase by having both products on supermarket shelves. Sweet Dream has done well in its low promotion markets (Midland and Pittsfield) while more aggressive promotion in Corvallis and Marion simply generated a lower quality trial by price shoppers—hence the lower repeat rate. Paradise needs a coordinated strategy for its two products that will maximize their combined profits.

3. In the Sweet Dream rollout LaTreat will be able to defend its hardcore users. This should improve total company share of the frozen specialties category and reduce the three-year payout period that Barbara Mayer calculated for the marketing committee.

Additional Research Bill has enough data on which to recommend the Sweet Dream launch. However, there is additional research that would be helpful and even essential, given the Paradise environment, to support his recommendation.

Bill knows how Sweet Dream performed quantitatively in terms of trial, repurchase and market share in both test markets. There is no need to open more test markets. But these results explain very little about why there is a market opportunity for Sweet Dream in the first place. Bill should generate consumer attitude data on the frozen specialty dessert category in general, and on Sweet Dream, in particular. Not only could this information be used to help clearly differentiate Sweet Dream from LaTreat, it also might help the marketing committee to find his report more persuasive.

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SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER SIX STANDARDIZED SOURCES OF MARKETING DATA Outline of the Chapter Introduce the various sources of standardized sources of marketing data available Provide a description of each of the well known sources of standardized marketing data Discuss the sources and applications of scanner data Develop a framework for the various applications of standardized data sources Teaching Suggestions This chapter builds on Chapter 5 and discusses another alternative to primary sources of marketing data available to the marketing manager. Two major sources of marketing data have developed in recent years—computer retrievable data and scanner-based research services. These have been the result of advances in computer and information transmission technologies.

Discussion of scanner-based research and single source systems can be used to illustrate the quantity of marketing data available to the manager. This can be balanced against his need for information rather than volumes of raw data. Using this perspective, the necessity for effective marketing decision support systems can be underscored. These can be seen to provide the framework for effective use of both primary and secondary sources of marketing data.

Questions and Problems 1.

A product audit would be much more suitable for cameras and engine oil additives which are sold through a variety of specialty outlets and have long repurchase cycles. The major concern is with the extent of distribution coverage. By contrast, the Nielsen store audit is preferred for peanut better because it is a frequently purchased product sold through grocery stores. The primary concern is with monitoring sales fluctuations and competitive activity within this setting. Finally, chewing gum sales and distribution coverage could be handled with a combination of methods. The difficulty with this product is the enormous array of convenience outlets that sell the product. These outlets are not fully covered by Nielsen audits.

2.

This problem illustrates the way managers can use scanner data to analyze the effectiveness of their advertising vehicles. This is drawn from an actual experiment conducted for a Midwest retailer by TRIM inc., the Los Angeles-based market research firm that evaluates scanner data for retailers (Chain Store Age/Supermarkets, June 1983). This ad is also reproduced below.

Identical advertisements were run in four competing newspapers. Scanner data was monitored for stores located in areas serviced primarily by each newspaper. The products targeted in the advertisements were both food and non-food items and, in addition, the promotional appeals were varied. Scanner printouts from the specific market serviced by each newspaper indicated their selling effectiveness, by general product category and type of promotion. Effectiveness was measured by the percentage change in the average number of units sold per 1,000 shoppers in the store during the week the advertisement appeared. Advertising policies could then be based on an evaluation of effectiveness relative to costs for each type of advertisement and for different product classes, for each newspaper.

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The manager of one store, as in this problem, could conduct a similar experiment by placing identical advertisements sequentially in the two newspapers, offering promotions redeemable with the coupon in the advertisement. Scanner data for the advertised product would be collected for sales before, during and after the appearance of the advertisements. Other possible experiments noted in the text are different combinations of advertising copy, discount coupons, in-store discounts, and promotions.

3.

The Nielsen Store Audit Report could be used to measure the sales and distribution figures for the new cereal brand vs. the company's existing cereal brands. The type of information yielded by this report is listed in Table 6-1. Students should realize that distribution levels of the new brand would be critical to evaluating its impact on current cereal brands. Presumably the new brand would be launched with media and retailer support and this report would help the manager track retail displays for the new product. The SAMI report could be used in combination with the Nielsen report to track the cannibalization of sales of the current cereal brands by the new brand at the wholesale level.

Consumer Purchase Panels would be the best way to monitor trial and repeat purchase of the new cereal product, since these services would enable the manager to disentangle trial from repeat purchases. This information is not available by simply looking at product movement through the distribution channel. Scanner-based Audit Services could also be used.

4.

Consumer Panels may underestimate brand sales and market share in comparison with a scanner audit for certain types of products purchased by multiple household members. Since usually only one person in the household records purchases, items bought by other members can be missed. Scanners on the other hand record all purchases made in a retail store regardless of which household member does the actual buying. A scanner audit will be more accurate and consumer panels may be supplemented by scanner audits to estimate the proportion of variance between the two methods on brand sales and market shares.

5.

The storyline of the two programs appeal to different demographic groups. While viewers of both programs may be in the same age range, they are likely to vary on household size.

Viewers of “Search for Tomorrow” are likely to have young families (hence more spaghetti sauce purchases) whereas the viewers of “All My Children” are likely to have no children (hence more purchases of V-8 juice). Campbell Soup management should investigate whether these consumption pattern differences are indicative of other lifestyle differences (such as differences in health consciousness) and disposable income, in order to better target their advertising campaigns,

6.

Wash O'Well has decided to focus on its point of sale activities as means to increasing its market share. The options available to Wash O'Well are to go in for standardized data alternatives such as scanner data and diary panels.

Before explaining the scanner based audit services, the students should be exposed to how scanner data is collected and what its applications are. In case of markets activated by scanner checkouts, purchases are recorded by passing them over a laser scanner which automatically reads the bar code printed on the package. The cash register is activated, which relates the product code to its price and the amount due is calculated. Information on the newspaper features, displays and the likes are stored and measured with respect to the sales and contribution. The most important benefits of scanner data are accuracy, savings in time and ability to study very short time periods of sales activity.

Wash O’Well can obtain its detergent sales data from the scanner based audit firm at various level: they should obtain the data at the individual store level. Wash O'Well should experiment with various shelf spacing, with various kinds of displays and obtain data from all of these permutations. From the data available for various experiments, the management should be able to pinpoint the deficiencies in its point of sale and improve them.

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Alternatively, Wash O'Well could use the diary panel method to study purchasing activities. A continuous panel can be used by Wash O'Well. In this method, the panel member records the purchase in a diary and mails the diary at regulated intervals. A change in shelf spacing/ display may be performed in one region leaving the other regions unaltered and the results compared. The advantage of such a continuous panel is its accuracy. b.

The advantages of a diary panel for Wash O'Well are: * Provides aggregate sales activity, brand shares and shifts in buyer characteristics and types of retail outlets from month to month - the ability to measure changes in the behavior of individuals is of real advantage to Wash O'Well as it requires such information * Profile of the heavy buyers * Brand switching and the evidence of stable buying * Repeat purchase rates for Wash O’Well detergents However, the diary panels have limitations: * Lack of representativeness and hence selection bias due to refusal of individuals to participate in the panels * Excessive drop out rates * Testing effects wherein heavy purchase activity is noticed because of the novelty of reporting responsibility The advantages of scanner based audit services are: * High levels of accuracy * Time saving * Ability to study very short time periods of sales activity * Availability of data at any level, in any combination of stores Students should be encouraged to come out with more data source alternatives for this problem. It should be emphasized that their recommendation on the most optimal data source should be made after going through the pros and cons of each data source.

7a. The two types of consumer purchase panels are the home audit and the mail diary method. The home audit approach is where the panel member permits an auditor to check the household stocks of certain product categories at regular intervals. All used cartons, wrappers are all collected for recording by the auditor. The other method is the use of a mail diary in which the panel member records the details of each purchase in certain categories and returns the diary at regular intervals. b.

The mail diary method is extremely prevalent in the U.S.

c.

The advantages and disadvantages of using a consumer panel are discussed in Question 6 (b).

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CHECK-OUT SCANNER ULTIMATELY A MARKETING DATA GOLDMINE By EDWARD TAUBER In the 1990's, one of the most dramatic changes that will affect marketing research methods and capabilities is represented by the “arrival” of supermarket automated checkout scanners.

Computerized scanner data for UPC (Universal Product Code) items have been available in spotty distribution from research suppliers such as TRIM, Nabscan (NAB), Maritz and others. The giants, Nielsen and SAMI have studied the opportunity for a number of years and are just entering the game.

What marketing research opportunities will exist in the '90s, as more supermarket chains adopt automated scanner systems? Early in 1979, there were approximately 600 stores with scanners.

Based on current trends, there will be over 2,000 by 1981 and this trend will continue. Crystal ball gazing, I see three distinct periods of change for research as scanners diffuse: first generation, isolated experiments; second generation, projectable sales monitoring: third generation, integrated system of consumer and product tracking.

The adoption of UPC for food, health and beauty aids, and other supermarket items (excluding deli and perishables) in the early '70s encouraged some of the larger grocery chains to experiment with computerized checkout in some of their large outlets—Giant in Baltimore, Wegman's in upstate New York, Ralphs in Los Angeles, Milgrams' in Kansas City, Schmuck's in St. Louis, and others. Although the up-front capital commitment is heavy, as in the expense of training store and headquarters personnel, the payout is there for retailers. It is there in inventory control (automated reordering), measurement of shrink, and, maybe most importantly, in knowledge.

Computerized checkouts provide a wealth of data on consumer movement by item, which allows a retailer to establish better shelf allocation programs (dollar movement per linear foot); evaluate the effectiveness of in-store merchandising, price changes (elasticity), private label and generic plain wrap, and a variety of other marketing issues.

It must be obvious that as retailers become “smarter” with this new data base, manufacturers and processors who sell to these chains will have to be that much smarter or be put at a competitive disadvantage against their peers. For this reason, plus the marketing efficiencies possible through information abut consumer response to marketing variables (advertising, pricing, merchandising), scanner data and sophisticated used of this information are the wave of the present and the future.

The first generation represented isolated experiments. This generation of market research with scanners began in the mid-80's and continues today. A large number of manufacturers, through various research companies, have conducted instore experiments on a host of variables.

Analogous to controlled store testing, these experiments range from evaluation. of price changes, aisle-end and other displays, on-off packs, cross couponing, in-pack and self-liquidating premiums, package changes, shelf restocking patterns, and even door-to-door sampling in the neighborhoods surrounding the test stores.

In addition, limited work has been attempted in testing advertising media and weight changes, new product introductions, and flavor/size variation of existing lines.

My firsthand experience with many such experiments has provided an incredible learning experience regarding the consumer response functions to various marketing stimuli. Similar experiments across different product categories have also led me to conclude that generalizations are quite dangerous. Where displays can triple volume in one category, their effect may be nil in another that responds much better to couponing.

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These isolated experiments I have discussed will no doubt continue as more manufacturers experience their value. At present the major barrier to further development of research information from scanners is their limited and atypical distribution among stores. The obvious problem of the external validity of these experiments and therefore inability of marketers to have confidence in projecting their results to a broader universe (such as the total U.S. market) limits their present value.

Also, because companies know that consumers respond quite differently to a given category (tomato sauce, for instance) in various geographical areas, no isolated experiment can be expected to be generalizable. As the number of scanner installations expands, this problem will be solved.

In spite of the current limitations of the scanner data base, a number of new techniques for analyzing the data have been or are in the process of being developed: Purchase transaction analysis is a method that I developed in conjunction with TRIM. Certain scanner equipment allows the entire purchase transaction made by an individual customer.

(In the larger supermarkets, there are 20,000 transactions a week.)

Employing a very large base, it has been possible to investigate the overlap of items purchased frequently together in each shopper's grocery cart. This analysis has allowed us to look at overlaps of types, brands, flavors, sizes, coupon redemption, and magazine purchasing these suggest opportunities for new products, line extensions, cross couponing, women's magazine advertising, and so on. Of equal value are the inferences one can make about) purchasers of different brands or 2) non-buyers by comparing what else they buy.

Another technique developed by Jacob Kandathil, division research manager at Carnation Co., is designed to forecast new product performance in a small mini-market setting. The new product is stocked in scanner stores and a target group of shoppers is recruited to watch a number of commercials, including one for the new product, on a van outside the markets. These shoppers are then asked to join a special “savers dub,” in which they receive coupons, including one for the test product.

The shopper presents a special card when shopping, and the scanner records all her purchases.

Trial, repeat, adoption and frequency of purchase of the new product can be measured to provide a sales forecast based on this “diary” type of tracking.

Innovative uses of scanner data have just scratched the surface. More sophisticated data manipulation and modeling are no doubt coming in the future.

Second Generation: projectable sales monitoring. Although a number of firms now purchase category data from scanner stores which provide weekly item movement and brand share data, the value of this service is limited by the lack of protection it affords, as mentioned previously. Nielsen, however, has acknowledged that, as scanner stores diffuse and represent a significant portion of ACV (all-commodity volume), the mechanical system of in-store auditing now used will become obsolete.

T.J. Sullivan, Nielsen vice-president and manager of grocery industry services, stated in '78: “There are two values in scanning data for Nielsen. First, there is the possibility of replacing a manual system of data collection which has been in existence for more than 40 years. The second opportunity is for the development of new services; movement with consumer demographics and, in addition, a laboratory test market vehicle for new products.”

In my opinion, these are not simply possibilities or opportunities but developments that will occur, with 100% probabilities (created, if not by Nielsen, then by Nielsen's competitors). The reasons are basic economic efficiencies of scanners vs. the labor intensive cost of Nielsen's present in-store auditors and the superior quality and fact turnabout time of scanner data.

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Two barriers will prevent this 'second generation” from occurring until probably the end of the 1980's: (1) the growing but slow diffusion of scanners (predictability) and (2) technical bugs. New and improved computer checkout equipment is in continual state of development by the major manufacturers (IBM, NCR, Datachecker, Sweda and Univac). Still, there are bugs that Limit data accuracy, stemming from the two major sources - human error and data storage and retrieval.

Although scanners have brought technology to the supermarket, this has necessitated more skilled employees in-store, from the checkout clerk to the store manager. In addition, headquarters systems people must confront large “data bank” storage and analytical problems. My experience with scanner data has revealed that these technical and human sources of error are to date the greatest cause of data gaps and inaccuracies.

Eventually, these problems will be brought to a tolerable level of quality control. At that time, the second generation of scanner application to marketing research will be operative.

Third Generation: integrated systems of consumer and product tracking. This generation of the impact of scanners on marketing research will be by far the most exciting. I visualize it as providing a totally integrated system of consumer and product tracking incorporating static and time-series measures of purchase behavior related to all UPC coded items! While this is still far in the future, embryonic systems are already being developed and implemented.

A small but integrated system called Behavior Scan is in the development stage by John Malec, Bill Walter, and Gerry Eskin. Their small company, Information Resources inc., Barringon,Ill., has conceived a two-market real-world laboratory similar to AdTel, but with some important differences. All supermarkets in the towns are to have scanner checkout and a 3,000 household panel, with sales tracked by participants showing an ID card. Using controlled store distribution, split cable TV, and markets where the only source of TV is by cable, the towns represent a very tightly controlled jamming is possible, and protectability to larger markets or regions is questionable. Still, this attempt at an integrated plan for controlling marketing stimuli and obtaining unobtrusive measurement of consumer behavior is a great step forward.

A second emerging system is one planned by Mike O’Brien of TRIM in cooperation with our research department at Dancer. TRIM now has geographically dispersed chains—Ralph's, Schnuck's, Chatham, Wegman's and Quality Foods—that offer scanner date to them. Our plan is to recruit a panel of 8,000 households in six to eight cities to participate by an ID card.

Unlike Behavior Scan, the setup involves no attempt at a controlled minimarket environment.

Instead, an attempt at broad projectability is the goal. Upon being recruited, panel members will undergo a battery of demographic and psychographic questions. Then two of data will be available—actual store movement, as measured by scanners, and panel purchase data by the 8,000 households.

These data parallel what is obtainable from a standard mail dairy panel, with some important improvements.

1.

Measures are observed (actual) purchase behavior vs. reported (recorded later in a diary).

2.

Measures are unobtrusive—no interview, recording, or expert bias as in a mail diary.

3.

Participants are likely to be more typical than those who volunteer to take the time to record purchases.

4.

Allows studying purchase-transaction overlap, since all UPC categories are measured. In a mail diary, respondents could not possibly reliably record all items purchased.

This proposed system has distinct advantages for a prospective user:

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1.

Store movement and consumer dynamics are measured together by market.

2.

Since all UPC coded items are measured in the panel, users can investigate many product categories (even those they are not in) to determine loyalty, switching rates, etc. for their brands and to locate areas for possible entry. With mail diaries, new categories must be added to the diary and tracked for a number of months. With a scanner panel, the data are available in storage (the major costs are massive data storage and retrieval).

The third generation will offer many new possibilities for analysis behavioral segmentation; tying attitudes and demographics to behavior, broad-scale experiments; modeling or response functions as economic changes take place in the country or competitive maneuvers interact in the day-to-day battle for market share; early new-product forecasting and competition, e monitoring (sales, cannibalizations); and other new approaches I could not possibly foresee.

Marketers who recognize and quickly adopt this new information source (after startup problems are worked out) are going to have a competitive edge in the continuing fight for limited shelf space and the consumer food dollar.

For additional information on UPC Scanners, please refer to Ronald C. Goodstein’s article “UPC Scanner Pricing Systems: Are they Accurate?,” in the “Journal of Marketing,” April 1994, Volume 58, Number 2, pp 20-30.

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Teaching Notes for Cases Case 7-1 CARING CHILDREN’S HOSPITAL (Discussed online at www.wiley.com/college/aaker) 1) Pediatric home care is a rapidly growing area in home health agencies across the country.

Programs that combine quality/family care while decreasing health care costs can be initiated from this general model and customized to the particular service or clientele. A number of authors have identified the advantages of caring for an ill child in the home rather than the hospital. Here is what Dr. K found: 1) 2) 3)

4) 5) 6) 7) 8)

9)

Home healthcare is the fastest growing segment of the healthcare system. Growth rate in 1999 was 29% There has been an expansion of home care services and product lines with every home care company offering IV therapy, nursing service and DME 76% of home health admissions originate from hospitals and 85% of the ambulatory surgery programs connected to hospitals referred patients to home healthcare Home healthcare has strong growth opportunities in neo-natal and pediatric care The number of hospital based home health agencies has grown The average number of inpatients at children's hospitals have decreased through the years Large home care companies are growing at 20% (larger than industry average) According to HCFA, the average number of home care visits (for patients of all ages) increased more than 40% between 1992-97, rising from 52 to 74 visits per patient In the next 5 to 10 years, the home care industry is expected to spend more than $10 billion to $14 billion on information systems technology

Students must surf the web for as many web sites as possible dedicated to healthcare in India, the UK, South Africa, Australia, and Brazil using the Internet. Collect relevant information and find evidence to corroborate Dr. K' studies and new information on the specified countries.

2)

Introduction: Home care is a strategy that places less emphasis upon the costly inpatient setting and focuses on the home and family as a primary site for healthcare delivery. Recent years have seen the home care industry become very high-tech. The fundamental goal of planning and implementing the specific pediatric home care program should be to allow acutely and chronically ill children to remain in the most comforting and nursing environment possible.

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Overview: Pediatric homecare is a rapidly growing area in home health agencies across the country. Programs that combine quality patient and family health care whilst decreasing health care costs, can be initiated from this general model and customized to the particular service or clientele. This fundamental goal of planning and implementing the specific pediatric home care program should allow acutely and chronically ill children to remain in the most comforting and nursing environment possible.

Advantages of Pediatric home Healthcare: A number of authors have identified the advantages of caring for an ill child in the home rather than the hospital. Aday and Wegner (1988) identified benefits of homecare such as lower costs, a familiar, less-threatening environment and easier access to their loved ones.

Recommendations: See answer 4 3)

Home healthcare market is one with great potential. There are strong growth opportunities in the neo-natal and pediatric care areas. Home healthcare is the fastest growing segment of the healthcare system. Growth rate was 29% in 1990. The growth rate for medicaid has been 20% in 1995. In 1989, there were 225,00 home health aides, but in 1995 there were 579,000 of them.

After gathering country specific information to substantiate the above mentioned facts, students should then discuss and decide on a potential country to enter. The criteria for country selection could be based on the following: Industry Analysis Types of services Market Characteristics Market growth Trends Services offered Industry Information Technology Competition (Major Players)

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SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER SEVEN MARKETING RESEARCH ON THE INTERNET Outline of Chapter ▪ Provide a brief overview of the past and current developments of Internet ▪ Illustrate current commercial research applications for marketing decision-making ▪ Demonstrate the current use of the Internet as a marketing research tool ▪ Provide a brief outlook of the issues and concerns revolving around use of internet for marketing research.

▪

Teaching Suggestions Though there might not be wide variation among the students regarding familiarity with the internet, it is useful to ask the students about their internet experience and how much research they have conducted using this medium. To test their navigation skills, students may be asked to visit an internet site for collecting information on secondary data: here, accessing "census.gov" or “CIA factbook” could be a useful tool.

Alternatively, the students may search for industry-specific information such as healthcare or ice cream industries. Data on market size, trends, major players, etc., may be obtained.

This chapter can only be taught by assigning students at least two internet related projects. It is important for students to understand that although traditional forms of research will continue, the internet is rapidly gaining momentum in marketing research. Depending on the availability of time, the number of assignments on the internet could be varied.

Students can be asked to develop a questionnaire to survey product preferences and send it via e-mail through the creation of an e-mail distribution list of friends or classmates. The questionnaire could lso be posted on the web and fellow students may be asked to access the site and fill out the questionnaire.

Websites such as surveymonkey.com and zoomerang.com allow the designing of online questionnaires as well as preliminary data analysis for free to a limited extent.

Collection of primary information over the Internet has also gained popularity and students should be encouraged to find primary information for a specific industry or market.

Greenfield (www.greenfieldonline.com) is a good source for web surveys and focus groups on the Internet.

The main forte of the Internet is probably its advantage in researching secondary information. The Internet competes with several other on-line resources, like professional databases (examples: Lexis-Nexis, KnightRidder) to satisfy the information needs of businesses and consumers. Since finding information about competitor activities is an important task for businesses, students should be encouraged to discover information about competitors within the same industry.

Although it may seem relatively easy to find information on the internet, finding relevant information may not be so easy. Students should be told about the pitfalls and mistakes that occur when searching for information online. The use of the internet for marketing research today should be discussed at length as well as creating familiarity with the latest developments and technologies available to facilitate the online researcher. It is also important that extensive use of the web should be accompanied by an awareness of traps like identity theft, as well as other piracy and privacy issues. Validity and reliability of internet gathered data, long with ethical issues regarding privacy, simply asking a plethora of questions without an appropriate rationale, the uncertainty of who completes the questionnaire and in what time and question

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order, etc., should be stressed to subdue the enthusiasm students usually express for using online survey approaches over the idea of non-internet based approaches.

Suggestions for Questions and Problems 1.

The number of travel-related sites is constantly increasing. Two prominent examples that can be used for fare searching are http://www.expedia.com and http://www.travelocity.com. In the appropriate menu, the student can for no charge enter all the relevant parameters (departure city, arrival city, number of persons, day, time, preferred airline, etc.) and the site retrieves the information immediately.

2.

A very simple approach would be to begin with an intuitive URL http://www.nasa.org. The student might also try nasa.com or nasa.gov and thereby would quickly arrive at the right address. Another approach would be a travel site (expedia.com), search for Houston and then for NASA. A third approach would utilize a search-engine (such as http://www.altavista.com or http://www.google.com) and enter the words NASA and/or Houston.

Design the survey manually or using any of the free survey websites available.

Secondary data is one of the main fortes of the internet.

The web addresses of major US companies are very easy to identify.

3.

4.

5.

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Teaching Notes for Cases Case 8-1 MOUNTAIN BELL TELEPHONE COMPANY

The objectives of the case are: 1. To show the student an example of a qualitative research proposal in an industrial marketing setting 2. To address the focus group vs. individual interview trade-offs 3. To address issues in qualitative research such as: question flow, question selection, question wording sample size and sample composition A good way to start is to ask the class if they would buy the design and, if not what changes they would make. Alternatively, the class could be asked to discuss the research purpose and objectives prior to opening the discussion up to what do you think about the design. Discussion should be encouraged and pursued as these cluster around each question as they occur in the discussion.

1. What is the research purpose?

To help develop the marketing plan and in particular to develop sales objectives by product and by segment, sales training programs and sales support materials and information.

2. Evaluate the research questions Research Question 1 a. There should be more emphasis on the nature of the application. Salespeople really need to understand competitive offerings at the level of the application. The data terminal question does ask about the “functions/activities” of this equipment but that is the only product for which such questions are posed. b. Awareness may be useful but we must make sure that the research does not create awareness.

Research Question 2 a. Perception might be vague. We might want to know what is expected from a sales force and then how the Mountain Bell sales people compare on those dimensions. b. Other vendors—perhaps the main ones—should be listed.

Research Question 3 a. These questions introduce a basic issue—the trade-off between cost (in terms of respondent goodwill and interviewer time) and the ability to gain information about basic problems. Broader questions provide the potential to gain valuable insights into the customers’ situation and problems.

3. Focus groups vs. individual interviews.

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a. Problems with focus groups i.

Scheduling: getting professional people together at the same time could be a nearly impossible task. It’s not as easy as getting together ten housewives.

ii.

Employees from different hospitals are essentially competitors and may find it awkward to discuss problems.

iii.

Those in different occupations (administrators telecommunications people) may not communicate well.

iv.

An individual interview can be tailored to the individual and thus be more compact. Focus groups may take more of people’s time.

vs.

b. Problems with individual interviews. i.

The focus group provides the opportunity of people exchanging views. As a result, the mutual stimulation will generate more ideas and discussion.

ii.

The involved people may welcome the opportunity to exchange views on problems with those in other institutions and with other occupations. In fact, they might regard this opportunity as a substantial benefit to compensate them for their time. If the focus group is held at a very nice restaurant over lunch, the time commitment might be regarded as minimal.

4. Evaluate the question flow.

The flow is not appropriate. We want to start with general, broad questions (such as research question 4 and question set D) so that the respondent can provide a discussion that is not inhibited or biased by context. If the discussion starts with telecommunication equipment, and even involves specific vendors, then a more general discussion of problems will be distorted by that context. It would be best if it could be discussed without the respondent knowing that the interview was going in the direction of telecommunications. The fact that specific firms and products are discussed is worse. Ethical issues regarding the information given to respondents should be discussed here.

5. The question wording.

It is important to realize that this list of questions is more of an agenda than questions to be read verbatim. However, the students could still productively examine the list. The most logical route is to focus the discussion onto one subset of the questions such as Part A. An alternative set of question for Part A might start by obtaining a list of categories of equipment now in place. Then for each category a discussion could proceed as to: —

the application

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— — —

any problems whose equipment—Mountain Bell or which competitor why was that supplier selected and which others were considered?

Then, the discussion might turn to future purchase requirements. Again, the discussion would include the application, whose equipment would be considered and perhaps the advantages and disadvantages of each vendor.

Question 1 as it now stands, assumes that the purchase decision is relatively fresh in their minds. The question does not delve into any problems they might be having with the equipment nor into any new products that may have come out that are relevant to the problems.

Question set B is better. However, it might be useful to get the respondents to recall specific conversations with telecommunication specialists instead of having to make generalizations. Do you recall a specific conversation with a telecommunications specialist that was particularly helpful? Or particularly unhelpful? Why? What were the circumstances?

6. Sample Size A total of 14 interviews seems minimal. It might be adequate for the purposes if the views of financial and telecommunications people are not needed. However, if three groups are to be sampled, it is likely that a set of at least ten would be needed from each group. In qualitative research, the goal is to stop when the interviews start getting redundant. In that respect, a sample of 14 may not be excessively small. One approach may be to let the interviewers make a judgment as to whether additional interviews will generate new information.

7. Sample Composition Under the “Research Boundaries” component of the Research Purpose is the concept of the population to be studied. It’s a decision that should be made at the outset. Thus, a discussion of such issue should not at all be delayed until the sampling chapter is covered. The question is, should the population be segmented by hospital size and geographic area (State)? A case should be made that the research designers should at least consider this possibility although there isn’t really enough information in the case to decide for sure.

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Case 8-2 U. S. DEPARTMENT OF ENERGY (A) Introduction

There are several secondary sources of information about windmills. There is an American Wind Energy Association, the Wind Power Digest publication, state agricultural publications and general magazines such as Popular Mechanics and Popular Science. Several manufacturers including General Electric, Westinghouse and Scandia are working on huge windmills that might power cities and their researchers will very likely have useful information. There are around 300 windmills in operation and it would be useful to talk to a variety of owners.

Alternatives A focus group interview might be conducted with farmers, suburban homeowners in areas in which windmills would be practical because of the wind source. A question flow similar to the following example could be used.

1. What is your opinion about the current energy crisis? Is it a real crisis or not?

2. What do you feel are the most promising energy sources that the country should be developing? What is your opinion about solar energy, potential and desirability of energy sources such as solar, thermal and wind?

3. What are the advantages and disadvantages of windmills?

4. Do you know of any windmills in operation? How are they being used?

5. What is your opinion of these pictures of six designs? Which would be your preference aesthetically?

6. How much would you pay extra for windmill power over natural gas, or coal: 10%; 20%; 30%?

The case was stimulated by the research of Robert Ferber reported in the Marketing News of March 24, 1978.

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Case 8-3

ACURA (Discussed online at www.wiley.com/college/aaker) The problem that should be focused on in this case is whether Acura should reposition itself as a luxury car instead of a value-for-money model. The case states that consumers perceive Acura to be a “premium car at a bargain price”. Researchers should now find out if the target segment really wants another premium car at a premium price or if they prefer Acura the way it is.

Two hypotheses will have to be tested in this case. The first one is that Acura is thought of to be a premium car at a bargain price. The second hypothesis is that a consumer looking for a luxury car is not looking for a bargain price and is willing to pay a premium price.

To test the two hypotheses, Acura can conduct focus group studies of premium car owners in some test cities. The group should be asked to discuss the mechanics of buying a luxury car and the factors that affect the decision. This will illustrate how the sample of luxury car owner is affected by factors like price, features, perceived image of the brand and the model, appearance of the showrooms etc. The group should also be asked to discuss their opinion about Acura.

Based on the results of these discussions, Acura should decide on one strategy. If they decide to continue as a bargain luxury model, they do not have to make any change to their existing marketing plan. However, if they decide to reposition Acura alongside the European luxury cars, they should involve everyone in their distribution channel. The dealers cannot offer bargain deals while the company is promoting a luxury car image.

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Case 8-4 EXPLORATORY RESEARCH ON THE LLEYTON HEWITT NATIONAL VISA CARD The case’s requirements illustrate the process of exploratory research. Exploratory research could serve one or more of the following purposes: • Defining problems in more detail • Suggesting hypotheses to be tested in subsequent research • Generating new product or service concepts, problem solutions, lists of product features • Getting preliminary reactions to new product concepts • Pre-testing structured questionnaires Questions: 1. Demographic information includes age, sex, income, education, religion, family size, family life cycle, and ethnicity.

Psychographic information includes values, aptitudes, beliefs, opinions (i.e. consumer lifestyle) that affect the likelihood of groups within the market to make a particular decision about a product, person, or ideology (source: Consumers by Arnould, Price, Zinkhan).

All these information could be obtained through focus group, internet survey, individual interview, observation, etc.

2. The bank should use qualitative research to suggest a hypothesis to be tested in subsequent research. The hypothesis might be established through direct interview or focus group. A hypothesis as outcome of the interview or focus group would be that Lleyton Hewitt’s recent poor performance negatively affects the attitude of prospective and current credit card holders of the bank.

3. Students could follow the steps suggested in the text for the design of a focus group study.

Here are some questions that may be asked during focus group discussions: • What do you use credit cards for?

• What kind of credit cards do you favor?

• How important is a symbol associated with a credit card?

• What does Lleyton Hewitt symbol stands for? What values/beliefs/opinions do you have of Lleyton Hewitt?

• What do you think of a Lleyton Hewitt credit card? What does the act of owning a Lleyton Hewitt credit card mean to you?

• What is the likelihood that you will acquire a Lleyton Hewitt card? How about your colleagues, relatives…?

The focus group discussion could give some indication of the likelihood of card acceptance.

However focus groups represent only a small and sometimes biased sample, so it could not provide a reliable forecast. A better forecast could be obtained through quantitative research.

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4. Those people who have demographic characteristics or lifestyle, personal interests, and personality reflected by the Lleyton Hewitt symbol, would be more likely to become card holders. Individual interviews, focus groups, projective techniques, etc., can provide useful information about the demographic characteristics of prospective card holders. This information could then be used in a follow-up quantitative survey on a larger scale to provide more objective and accurate demographic profiles of the prospective car-holders and thus determine the target market.

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Case 8-5 HAMILTON BEACH CONDUCTS PRIMARY RESEARCH IN MEXICO AND EUROPE The case illustrates the use of qualitative research in new product development process.

Hamilton Beach, a well-known U.S. maker of small kitchen appliances, were interested in possibly expanding into Mexico and Europe with a new product line. Consequently, they conducted qualitative (and quantitative) research in Mexico to determine brand awareness and acceptance, desired product features and distribution channels. A focus group study was used in Europe to survey consumers’ ideas about the products.

Teaching suggestion The instructor can use this case as a platform to discuss qualitative research methods in general, and focus groups in particular. If time permits, students can be asked to select any qualitative methods they are able to apply to achieve the research objectives and explain the reason and pros and cons of selecting such a method. Comparing and contrasting different qualitative research methods could be another way to proceed with this case.

Question 1: Do you think the focus group research conducted in Europe was representative of the population in terms of: • Brand awareness and acceptance • Desired product features • Distribution channels It is noted from the case that the objective of the European focus groups was to get consumers’ general ideas about the product rather than other details. Through the focus groups, the company learnt that product design is important while product features are less so. However, no information was provided about how the company came up with the sample of selected consumers for the focus group or how many focus groups were conducted.

Furthermore, given the focus group’s small size and European diversity, it would be inappropriate to conclude that the focus group was representative of the European population.

However, the outcome of the focus groups at least provided a rather interesting picture of one of the three perspectives, i.e., desired product features.

Question 2: As a market research analyst, is there an alternate way to design the research process in Europe to address the issues?

Before answering the question, it is necessary to recognize the challenges to focus group studies in general and the specific way that focus group was conducted in this case. These challenges include misleading results due to a poorly conducted focus group, associated costs, recruitment of the participants, selection of moderator, and analysis of focus group findings etc. Any new research design should therefore, address these challenges.

Improvement to current research design should be considered. Alternatively, other methods (in-depth interviews, projective techniques and observation methods) can all be applied, each with their associated advantages and disadvantages.

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SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER EIGHT INFORMATION COLLECTION: QUALITATIVE AND OBSERVATIONAL METHODS

Outline of the Chapter ▪ ▪ ▪ ▪

Explain the need for qualitative research Introduce the different types of qualitative research methods Discuss in-depth interviews, focus group and projective techniques in detail Be familiar with the various observational methods

Teaching Suggestions Although qualitative and observational methods are treated together they frequently represent the two poles of a continuum of data collection methods: QUALITATIVE METHODS

OBSERVATION METHODS

-more flexible -unstructured -diagnostic -hypothesis generating -exploratory -prone to measurement and bias and misinterpretation

-more systematic -structured -descriptive exploratory -hypotheses are pre-specified -potentially a high degree of accuracy

The contrasting of these methods is a useful way to begin the discussion of primary data collection, which is the concern of the rest of this section of the book. Of course, both are useful exploratory methods and observations should be considered very early in the research design process as either a substitute or a complement to survey methods.

Two important points to develop with this chapter are: first the absolute necessity to precede the development of any survey instrument with suitable exploratory work to gain familiarity with the problem second, the value of having, multiple measures of the same phenomena using maximally different methods, The errors inherent in observations are very different from those in surveys, so the two methods are usually complementary. Also, the survey can sometimes help to provide the diagnostic insights necessary to understand the observed behavior which otherwise might be quite inexplicable.

This chapter lends itself to various interesting field projects which can enhance student understanding.

For example, students can be sent to observe purchase behavior in a specific section of a grocery store (and pool their experiences in the classroom), or use a contrived observation method to study the quality of services in a local bank or the effects of price bargaining strategies on the quoted price for a major appliance.

Instructors could discuss the importance and the value of in-depth telephone interviews and the situations that warrant a telephone interview. The instructor should stress the essential requirements of telephone interviews, such as employing an experienced interviewer, providing the interviewer with all relevant information about the organization being interviewed, ensuring that the interviewer creates a

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conducive environment during the interview for free information flow and ensuring that the interviewer does not spell out his personal opinions or judgments on the subject of the interview.

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Questions and Problems 1.

Non-direct and semi-structured individual interviews are quite different in practice, although they have several overlapping features. A nondirective interview is basically an exploratory research tool. The samples are small, as the usual rule is that interviews will proceed until the interviewer/analyst gets no new insights from the additional interviews. There is no attempt to get a representative sample, instead the objective is to get as wide a set of viewpoints as is possible. A semi-structured interview seeks a representative and substantial sample of the population, which is usually both specialized and difficult to reach. The objectives and information needs are specified quite fully in advance as a result of previous exploratory work. However, the open ended question format, with the potential for probes of interesting responses, is more flexible than the average structured survey. This flexibility is dictated both by the complexity of the topic area, and the necessity to communicate with busy people who tend to be impatient with rigidly defined response categories. Ultimately, the objective of a semi-structured interview is to obtain a representative range of answers to specific questions, and not just to explore the topic.

2.

The issue posed by this question is one of the most serious problems that affects the Relationship of researchers and managers; namely, the tendency of managers to dispense with subsequent quantification if the exploratory work confirms their initial expectations. Focus group studies are especially prone to this abuse. In this situation, the researcher has a variety of possible responses: (a) The principal argument should be that the objectives of the two focus group studies were to learn how the features would fit into the lifestyles and needs of prospective buyers; specifically how would the features be perceived, what benefits would be foreseen and what problems are anticipated in the pursuit of these perceptions? The discussion leader is bound to elicit lots of enthusiastic comments. This gives the manager plenty of data if he selectively hears only what he wants to hear and downplays the negatives. (b) The environment of a focus group is subject to many distortions. There are group dynamics, which may result in one person who is very enthusiastic dominating and overcoming the reservations of the rest of the group. These factors interact with the usual problems of concept tests, including susceptibility to courtesy bias and inability to incorporate price considerations. Even when there is no obvious ‘in-group leader’, it should be kept in mind that group dynamics (such as groups tendency to be willing to take risks) will be present. (c) Finally, the sample is very non-representative. The people who come to focus groups are quite likely to have more than average interest in new products, services and experiences.

3.

The appropriate approach here is the contrived observation method. One possible design is to recruit teams of men and women interviewers to pose as husband and wife during a shopping trip for a specific major appliance. The teams should be matched as closely as possible on all dimensions except ethnicity (that is, be similar in terms of age, dress, education, income, occupation and so forth). Each team should visit as many retailers as possible and negotiate the final price to be paid for the item (such as a refrigerator of certain size and quality with average features and energy consumption). To keep things simple it would be desirable not to introduce the issue of a trade-in since these are difficult to appraise. However, credit terms should be sought. Naturally, each pair of shoppers will obtain a range of prices that will depend on differences in the retailers (their margins, the brands they offer, etc.), but if all shopper teams visit all retailers then any difference in mean price will be a meaningful test of the existence of discriminatory treatment (as long as the difference is statistically significant).

Data should also be obtained on the interaction between shopper team and salesperson. How long did they have to wait for service? How many models were shown? Was there any attempt to offer a discount or seek the basis for a discount?

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4.

The problem the consumer organization faces is to draw a valid and defensible sample of products, stores and times of work to conduct their price survey. The problems with any arbitrary shopping basket of products, is that it pertains to no one in particular, as all shoppers have different requirements. Decisions will thus have to be made regarding the sizes to compare, the treatment of specials, discounts and coupons, and the potential for shoppers to switch both brands or types of products (such as cuts of meat) in pursuit of lower prices. Most vexing of all is the difficulty of obtaining comparable quality levels between stores. This is especially difficult for perishable products such as meats and produce which are used by some stores as loss-leaders, and which can vary enormously in consistency of quality and freshness. A related problem is the lack of comparability of lower quality private label and generic (no-name) brands with national brands.

5.

The first step is to generate hypotheses as to why self-reports of consumption should overstate the frequency of brushing teeth. The most obvious reason is that there is a socially desirable response bias operating: people know they should brush their teeth after every meal, and may feel compelled to report this as their routine behavior. Another problem is disparity in usage rates among family members. It could be that the response rate is poorer among younger members of the family who use less tooth paste. Also, some people don’t use commercial toothpaste, but may brush with baking soda.

One way to cope with these problems is to conduct a large scale study and ask randomly selected individuals in the household about many routine behaviors during the previous day, including tooth brushing. This would deflect attention from the real purpose of the study.

6a. Before attempting to recommend a suitable technique for the marketing research group, students should be exposed to an in detail explanation explanation of focus groups and in-depth personal interviews. The focus group is the process of obtaining possible ideas or solutions to a marketing problem from a group of respondents through discussions. The research purpose and the research objective are well laid out. The research purpose is then broken down into a set of research questions.

From these questions, the moderator prepares the specific issues to be addressed in the focus group discussions. The moderator tends to move from a general discussion to specific issues. The emphasis is on the results of the interaction when focused on a series of topics introduced by a discussion leader. A typical focus group has five to nine participants and each participant is encouraged to express his or her views on the topic and to elaborate on views expressed by others. Recently, electronic focus groups have started gaining popularity. In an electronic focus group participants type out their responses at a computer terminal. Responses are monitored by the moderator.

Focus groups are of three types: * Exploratory focus groups are commonly used in the exploratory phase of the market research process to aid in the precise definition of the problem. * Clinical focus groups are used where the moderator probes under the level of respondent consciousness to obtain respondents deeply embedded motivations and feelings. * Experiential focus groups allow a researcher to experience the emotional framework in which the product is being used.

Three or four sessions can help a researcher in uncovering relevant material required for the research problem being studied.

Individual in-depth interviews are conducted when the subject matter of the interview is explored in a detailed manner. The in-depth interviews could be nondirective or semi-structured. In a nondirective interview, the interviewer attempts to uncover a list of areas by allowing the respondents maximum freedom of response. It offers the scope to probe in order to clarify and elaborate interesting responses and when the respondent digresses from the topic the moderator brings the discussion back to the area or topic being pursued. In a semi-structured interview, the topic areas to be pursued are structured but there is room for the interviewer to pursue unexpected expressions or attitudes that might come out during the interview.

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In our case, the choice narrows down to a nondirective interview with a selected set of students and faculty and exploratory focus groups to uncover the motivation of students to carry weapons to schools. The research study is on a sensitive topic that seeks to uncover the reasons for a problem that could assume huge proportions. In this case, the student should be urged to express their solutions, that may fit in with the researcher’s needs. The discussion can be centered along the following lines: * * * * *

Whether group interaction may stimulate new thoughts from respondents?

Is it better to express sensitive thoughts in a noncompetitive environment?

Is it or is it not important to have time to probe deeper into interesting sidelights?

Will the subjects talk freely on such an issue in front of other members?

Is it easy to assemble a diverse focus group that would provide insights into the problem being researched?

These are some of the questions that have to be analyzed before arriving at the appropriate technique for Church and Associates. b.

The moderator should develop from the research purpose a set of relevant questions, which ensures that the researcher and the client agree on the specific objectives before the commencement of the study. From these research questions, the moderator prepares a discussion guide which serves as a checklist for the specific issues to be covered.

The topic in question is sensitive and it requires an effective moderator to facilitate the discussion of their feelings, anxieties and frustrations as well as the depth of their conviction on relevant issues. The moderator should establish rapport quickly with participants and address the group in simple language.

The moderator should be flexible enough to uncover certain interesting points but should also revert the discussion back on track in the case of digression. The moderator should guide the discussion in such a way that new topics are introduced to make way for exhausted topics. All the group members should be provided with opportunities to express themselves on the subject.

c.

The students should be asked to develop their research purpose and research objectives for this problem. From the research objectives, a set of research questions should be formulated, from which the interview questions can be developed. It is important to decide on the structure of the interview.

Assuming a structured interview, the following questions can be asked. * * * * * *

7.

Have you known anyone who has carried/been carrying arms in the past 3 months?

What is your assessment of the number of students who carry firearms to the class?

What are the reasons for carrying the firearms to school? (List the possible reasons: peer pressure, fear, hike in self esteem etc.).

Have the teachers noticed this phenomenon and if yes, have they taken any action in this matter?

How have the school authorities reacted in the case of complaints?

Do the students brandish the weapon(s) only when provoked or also in unprovoked situations?

What is your advice to the head of the institution in handling the situation?

The basis of any interview is the use of words. It should not be assumed that words in one language will mean the same in other languages. Care should be taken in the choice of an interpreter. After translation into a particular language, it is always better to back translate to check for discrepancies in translation. When words and ideas cannot be properly communicated in another language, it creates a particular problem in translation. Cultural factors must also be taken into account while interviewing. It may be unethical to question a subordinate on his boss, political views, personal details, etc.. These are some of the difficulties a researcher might face while interviewing internationally.

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8.

When information is required on the current behavior, observational methods are used. However, the researchers have long neglected the observation of ongoing behavior as they did not appreciate the considerable benefits offered by observational methods. Casual observation is observation on the extrinsic indicators that are readily available, whereas systematic observation involves looking deeper and noting things that are missed by the casual eye. In some cases, observation becomes the only research possibility.

Direct observational methods are used to obtain insights into search behavior and related issues. In this method, an observer disguised as a shopper, watches shoppers making their purchases. This type of observation can be highly structured. However, it is imperative that the respondents are not aware of the observer. Care should also be exercised that there is no invasion of privacy and it must be remembered that consent cannot be gained in these procedures.

To obtain insights, although perhaps not causal explanations, into the various aspects of the underlying beliefs, attitudes and motives of consumers, contrived observation techniques are used. To analyze written material into meaningful units, content analysis is used. Similarly, behavior recording devices have been developed that provide a good alternative to rectifying the deficiencies of human observers.

The people meter of A.C. Nielsen to measure the audience’s TV watching behavior, eye movement recorders, traffic counters are all examples of behavior recording devices. Observation methods have a major limitation in that they cannot observe motives, attitudes or behavior and hence their diagnostic usefulness is reduced.

9.

The pretest attempts to facilitate the matching of researchers’ expectations of the information that will be obtained from the questionnaire with the output from the questionnaire’s actual use.. The objective of a pretest is to identify deficiencies in a questionnaire and correct them. The pretests have to be looked at from a macro and a micro level. At the micro level, each question has to be looked at carefully to see exactly how respondents reacted to these and whether this response was the one desired for the study. At the macro level, the entire questionnaire should be examined to examine the flow of questions and to check if the questionnaire as a whole captured the research objectives. A pretest can identify problems in the questionnaire that uncorrected could lead to erroneous results and conclusions. Pretesting, upon a representative sub-sample of the studies sample, is vital for a questionnaire to produce data in which researchers and commissioning agents can be confident.

10a.Qualitative research. Individual interviews conducted at the point of purchase will be a good way of reaching a large number customers in a short time. All the people purchasing herbal tea could be interviewed about when and for what purpose they consume the product.

10b.Qualitative research. Have a focus group discussion with panel members from both the supporting and opposing populations. The topic of discussion should be what the general public expects from a political party and what changes in the existing agenda would attract more support.

10c.Observational methods will be very useful in this circumstance. It will help the designers if they know what rides attracts the most visitors. They may also be able to gather age profile estimations of visitors through observation, who are attracted to different rides. This will give them an indication of the enthusiasm with which the new rides will be received by the visitors.

10d.Systematic observation of customers who buy this product should be made at the point of purchase.

This will provide the company with an idea as to which packaging attracts customers the most when the product is placed on the shelves at retail outlets.

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Teaching Notes for Cases Case 9-1 ESSEX MARKETS (A)

Respondents were intercepted at the check-out stand with the following: Excuse me, I am a student at Sacramento State, and we are taking a survey at several Sacramento supermarkets. May I ask you a few questions about your shopping today?

Of the 1,149 people contacted only 30 declined to be interviewed. Only those with more than a few items in their cart were contacted.

After asking around 13 questions (for some, see the teaching note for the “B” case), the respondents were given a take-home questionnaire and asked to complete it and return it by mail (a stamped envelope was provided). They were told that as a small token of appreciation, several cash prizes would be offered in a raffle conducted among respondents.

The cover letter shown below describes the raffle. The respondent then filled out a raffle ticket which included a place for the name and the address. Those respondents who did not reply were sent a follow-up letter with another copy of the questionnaire. The response rate was approximately 75%. (78% for those who understood unit pricing and 72% for those who did not.) The cover letter read as follows: Would you help me?

I am a Professor at University working on my Ph.D. thesis. Will you please fill out this questionnaire which is the most important part of this research project?

This is a study to determine how your grocery shopping might be made easier and more economical. The number of women I am asking to complete this questionnaire is small, so it is extremely important for the accuracy of my research that a response is received from each of you.

Please return the completed questionnaire within the next few days. When it is returned with the raffle stub attached, you will have a chance to win one of the following prizes: 1st prize — $50.00 2nd prize — $25.00 and 8 more drawings for $10.00 each.

The drawing will be held Thursday, October 14th at 10:00 A.M. on the front steps of the Capital Building. You need not be present to win. Winners will be notified by mail and the names will be posted by the check-cashing window of each supermarket at which we interviewed.

Thank you.

Sincerely, If you have any questions, please call me at _______.

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Case 9-2 MORE ETHICAL DILEMMAS IN MARKETING RESEARCH

As mentioned in the textbook, these scenarios are similar to those presented in Chapter Two but they bear directly on the rights of the respondents in a research study.

Teaching Objectives 1. To make students realize that tradeoffs must sometimes be made between research requirements and preserving the rights of the research subjects.

2. To allow students to see the potential for abuses of marketing research in the name of ensuring “high quality” research results.

Analysis 1. Restaurants identify Respondents. An important issue for class discussion is the meaning of “confidential” and how this may be distinguished from “anonymous” by the subject and the researcher. If subjects interpret ‘confidential” as “anonymous” how should the researcher treat the information?

Students may be asked whether the government’s rationale is reasonable, and whether that matters. Some ask why the government waited until after the information was collected and suggest that the government’s request is too late to be honored.

2. Federal Study, Marijuana Use. Opinion is divided here. Some favor disclosing neither the name of the funding agent nor the actual purpose of the study. This situation involves a quite sensitive research topic. Disclosing neither the sponsor’s name nor the research purpose should significantly improve data quality. Fewer students are in favor of disclosure here than were in favor of disclosure in the problem about the fictitious market research firm (question #1 in Chapter Two.) Why? Is it because they can identify more closely with the subjects here or because they are more suspicious of the unpopular federal agent than they think a doctor should be of a drug company? The student’s reaction to this problem should make plausible the study the director’s concern about response rates. It is useful to force students to compare their answers to dilemma #1 in Chapter Two and this one. ___________ This note was prepared and is copyright 01987 by C. Weinberg.

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3. One Way Mirror. This problem can serve as a vehicle for a brief discussion of a variety of approaches to unobtrusive observation.

Discussions of this problem often focus on the issue of invasion of privacy and, in particular, whether the subject thought she was performing a private act. For example, would there be an ethical issue if the unobtrusive observation took place on the sales floor while the women were first choosing garments to take back to the changing room.

Generally, students will agree that the observation study would constitute an invasion of privacy because it occurs in a semiprivate or private environment without any participant’s fully informed consent. Moreover, it is difficult to see how consent could be obtained after observation without disturbing participants. Some students conclude that the manufacturer’s three research objectives can be met by unobtrusive observation in either a public or semi-private environment and still allow all participants complete privacy in individual dressing rooms. However, the instructor should not allow students to escape the dilemma so easily.

Fewer students will argue that posting signs that announce that “sales areas and dressing rooms are under continual observation by female employees” will relieve researchers from ethical considerations. However, people may not read the sign. Furthermore, on the sign no mention is made of what will be done with the observation data. Is it ethical to rely on such behavior? If the sign is read, can valid research be done? In resolving these issues, it is helpful to ask students how they would react if they were the subjects.

4. Ultraviolet ink. Most students do not approve of the use of ultra-violet ink. This point of view is based on consideration of the subject’s response (“outrage”) if he or she is to discover this deliberate deception. For example, when a National Observer reader, who happened to be a professor of optics, discovered this, even the editor of the magazine was concerned, as the following news excerpt indicates: “Henry Gemmill, editor of the National Observer. is ‘stunned and angry’ about what he calls, ‘the invisible ink caper’.

Gemmill has learned that his own newspaper and many other publications have been using ‘confidential questionnaires’ coded with numbers in invisible ink. These could be used to identify the individual respondents.

The questionnaires, often sent to readers by research firms acting for the publications, may ask about such personal matters as income and drinking habits. Because the reader gives neither his name or address, he presumably answers with the assumption that his anonymity will be protected.

Gemmill calls it ‘a piece of slick trickery’.

The purpose of the keyed mailing is to find out who had not answered the questionnaire so that a second mailing could be sent to them.

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The practice of invisible coding, which seems little known to the press and public, might have remained obscure if an alert reader had not protested.

The reader, a professor of optics, was in his laboratory one evening, thinking the Observer questionnaire in his pocket ‘asked me an awful lot of questions’ so ‘just for the heck of it’ he exposed the questionnaire to ultraviolet light and saw ‘a four-cipher identification number stamped in invisible ink’ in the upper left-hand corner of the form.

He asked for ‘a public explanation of these clandestine procedures.”‘ The issue should not be left here since for many research projects deception is required.

Students might be asked to specify the conditions under which deception could be allowed. Those who argue that it should be allowed for important or valuable research should be challenged to provide a meaningful standard of importance or value. A researcher or client is doing the research because he or she thinks it will be valuable.

Some issues that might be raised are the seriousness of the deception in terms of the risk of physical or psychological harm to the subject and also the adequacy and ability of the debriefing process to correct the deception and its effect on the subject. Again students might discuss how respondents would interpret “confidential.”

The use of ultraviolet ink in this manner is an unfair trade practice and illegal in some jurisdictions. But restrictions on this method don’t eliminate the essential issues of when deception is justified, what methods are acceptable, and how subjects should be debriefed. If the project director must identify respondents he should consider using an overt numerical code. Survey forms could explain to respondents that the code is used “for statistical purposes only” and that “no responses will be personally associated with any respondent for any other purpose.” What effect would such a procedure have on response rates and accuracy of the answers given? Are students able to support other techniques that involve deception over this technique? Ask them to explain their responses.

Commentary As discussed in the commentary for Case 2-3, variants of some of these ethical dilemmas were used in a recent study of marketing researchers and executives The instructor may wish to include these study excerpts to make students realize that these are real issues with which business people must grapple. The respondents’ judgments about these issues are listed on the next page in Figure 9-1.

In addition to the heightened societal attention to business ethics, changes in research technology/practices have occurred since the 1970 study, including the development of sophisticated data collection and analysis techniques. Although it is difficult to establish a one-to-one relationship between these changes and respondent’s ethical evaluations, the instructor might point out that they could have lessened the pertinence of some of the research ethics issues reflected in the scenarios (e.g., the use of one-way mirrors). The difference between executives and researchers on the use of ultraviolet ink with questionnaires probably sterns from the fact that researchers encounter this practice more often than do executives and thus are less sensitive to its unethical nature. ___________________ 4

1 Ishmael P. Akaah and Edward A. Riordan, judgments of Marketing Professionals about Ethical issues in Marketing Research. A Replication and Extension”, Journal of Marketing Research, 26(February 1989).

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Figure 9-1 Judgments of Marketing Professionals about Ethical issues in Marketing Research Percentage of Disapproval Marketing Researchers

1. “A project director went to the Marketing Research Director’s office and requested permission to use an ultraviolet ink to precede a questionnaire for a mail survey. The project director pointed out that although the cover letter promised confidentiality, respondent identification was needed to permit adequate cross-tabulation of the data.

The Marketing Director gave approval”.

Marketing Executives

1970 Study (n=259)

1989 Study (n=205)

1970 Study (n=142)

1989 Study (n=215)

70

57c

77

69

82

97b

2. “One of the products of X Company 78 94b is brassieres. Recently, the company has been having difficulty making decisions on a new product line.

Information was critically needed regarding how women put on their brassieres. The Marketing Director therefore designed a study in which two local stores agreed to put one-way mirrors in the foundations of their dressing rooms. Observers behind these mirrors successfully gathered the necessary information.” ______________ b Difference between 1989 & 1970 study is significant at .001 level. c

Difference between 1989 & 1970 study is significant at .01 level.

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SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER NINE INFORMATION FROM RESPONDENTS: ISSUES IN DATA COLLECTION Outline of the Chapter ▪ ▪ ▪ ▪

Briefly mention the different kinds of information that are collected through surveys Introduce the various errors that occur while conducting a survey Briefly mention the various factors that influence the selection of the various survey methods Discuss the ethical issues involved in collecting data from respondents

Teaching Suggestions Many instructors will choose to use this chapter in conjunction with the chapter on questionnaire development. This helps to reinforce the two key points of this section of the course, that: (a) no survey method can simultaneously satisfy all criteria, and (b) various issues have to be considered before deciding on data collection. The solution to these problems lies in anticipating the problems and sources of errors, and minimizing them during the design and analysis of the study. This may require using combinations of survey methods and taking account of the probable direction of bias during the interpretation of the results.

There are several teaching options open to the instructor, depending on the amount of time devoted to data collection methods. One approach is to rely on the cases and discussion questions. A second approach is to expand on the material in the chapter, in one or more of the following areas: (a) Response effects—a supplementary note is provided as a resource (b) Interviewer recruiting, training and controlling to minimize interviewer error (c) Ethical issues in data collection. The instructor might want to use some of the reader surveys published in magazines on a variety of issues and discuss with the class the “validity” of these types of sampling procedures. Alternatively, a discussion could be organized around key ethical concerns such as the invasion of privacy or use of selling methods disguised as research.

The key teaching point of this chapter is that all data collection methods take place in a subjective context and must be tailored to meet the requirements of a particular research situation.

Questions and Problems 1.

It is very unlikely that the average DIY respondent who has repainted a room has done so within the past week or month. There is likely to be a significant amount of forgetting and/or compression of time. These problems are accentuated by the need to establish the kind of paint, which is perhaps not an important fact to many people who rely on their dealer for a recommendation. To cope with these problems it is necessary to first establish the context of the redecorating job, to get the respondent thinking about the problems (i.e., of surface cleaning, time of year, etc.), and then ask how the type of paint was chosen, before asking the question of interest. Each of these steps will help to refresh the respondent's memory of the specific event. One important caveat in this type of survey is to be sure that the family decision-making process is understood, and the decision-maker is the one being interviewed. It may be that the husband bought the paint and the wife applied it, or vice versa. The person who applies the paint may not know anything about the kind that was used.

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2.

Ethical considerations arise whenever the potential exists for respondents' rights to be abused. There is no right answer to this question and whether students put the emphasis on research quality or on respondent rights depends upon their own orientation. Students should be encouraged to think of alternative ways to collect data in some of the situations mentioned in this chapter so that both interview quality and respondent rights are respected.

3.

The available evidence suggests that the biasing effects of an interview are more serious in a personal interview. There are several reasons: personal interviews are longer and are more like social interactions and accentuate problems of prestige seeking and social desirability and the physical presence of the interviewer means there are many more non-verbal cues to which the respondent may react. In both types of interview, the interviewer can bias the results through selectively listening, probing or recording. For the most part careful attention to the basics will minimize the problem. This includes: (a) thorough testing of the question so the interviewer doesn't need to resort to alternative wording, (b) use of required probes when there is doubt as to whether the interviewer will follow-up partial answers, (c) thorough training of interviewers so they understand the purpose of each question and the possible responses, and have had an opportunity to rehearse the question during the training session and (d) tight supervision and control, through follow-up validation of completed interviews and monitoring telephone interviews, to quickly correct problems as they occur.

4.

Because the majority of commuters or shoppers use cars the survey should emphasize the reasons for driving rather than taking urban transit. The prospective respondents should be asked to participate in a survey of their experiences and problems in getting to their destination. There are two reasons for this approach; first, it is something they are familiar and involved with, so they will be more willing to respond, and secondly, the plight of the transit system is probably best understood from the reasons it is not used.

5.

This set of questions will easily stimulate a lively discussion. (a) One overriding issue is the declining cooperation of respondents caused by the overuse of surveys and unpleasant respondent experiences. Taking more time than promised is one way to generate an unfavorable experience. The class could be asked to suggest others. Others could be: ▪ ▪ ▪ ▪ ▪

Misrepresenting the compensation Not sending a promised report of complete results A rude, unpleasant, or disinterested interviewer Inconvenient timing Personal questions

One survey found that 74% of those who had been interviewed within the last year had a favorable overall impression of their experience. However, 19% thought the questions were too personal, 17% thought the interview was too long (rising to 45% when the interview was over 20 minutes long), and 19% believed the interviewer was not interested in their opinions.

The following questions get into the ethics of the profession. (b) This question involves an outright deception and most students will be offended by it. However, others may argue that it really harms no one and will help the survey. 5(c) is more subtle since it was only implied that the group would not be taped. More subtle yet is the common practice to view surreptitiously the groups without informing them. (c) The general issue is the ethics of deception vs. the validity of the research. Such a trade-off is nearly always required. This case may be easily handled by the students. But there are others more subtle. What about the use of a deceptive cover story which is usually needed? For example, an advertising test is conducted on the basis that a program test is the focus. Other kinds of deception are common such as the use of a plant to stimulate discussion in a focus group.

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6.

The students can be made to look at this problem in many different ways. First, the research purpose and the research objective should be thought out. The research questions should then be formulated from the research objective and thus the information requirements can be assessed. The information required can be collected using focus groups, protocol tasks, in-depth interviews or surveys. The choice of a method depends upon the economics of cost, time and effort. The students should be made to go through an exercise involving the various methods of data collection, identify the pros and cons of each and then make their decision on the data collection method.

One way of looking at it would be to identify the aspects of the decision making process that consumers use to choose Brand M butter or the competitors. The premise would be that there are some reasons underlying the consumer purchase behavior that is causing people to switch to or buy other brands and hence cause loss in sales for brand M butter. Let us assume that a survey method is used by the product manager to collect the information required from the respondents. It should be kept in mind that effective implementation of the project requires the use of the correct choice of survey method, be it administered through telephone, or mail or by means of a personal interview. However, there are some distinct disadvantages to surveys that stem from the social interaction between the interviewer and the respondent.

In identifying the decision making process of the consumers in buying butter, the focus should not be on the decisions made in the past but on the process by which consumers evaluate alternatives. The manager wishes to measure the relationship between actions and needs, desires, preferences, motives and goals. The product manager would prefer to get information on the following counts: * Whether the respondents bought brand M butter or not? * If they did buy brand M butter, where did they usually buy it and when? Will they continue to do so in the near future? * How often did they buy brand M ? * Do they persist with brand M or do they opt for other brands too? If they do opt for other brands at times, why do they switch? * If they don't buy brand M, have they ever tried using brand M? What is their source of dissatisfaction with brand M? * If they have never tried brand M, what are the attributes of their favorite brand of butter? Responses to the above mentioned outline will give the manager a fair idea of the key aspects of the decision making process of the consumers in buying brand M.

7.

Observational method is limited to obtaining information about current behavior. Observation can be used as an important exploratory method. For instance, a customer service manager of a bank can monitor the customer lines in front of the teller service counter and identify potential problems. If the waiting time is too long, it may lead to customer dissatisfaction and the manager would do well to have an extra hand to help out in times of need. Alternatively, if the lines are too long always, then he or she may decide to hire another person to do the job. Also, observation may be the cheapest way to collect purely behavioral data. It may sometimes prove to be the only research alternative especially in doing research with young children who cannot articulate their preferences or motives. Observation methods are costly and time consuming and cannot observe motives, attitudes or usefulness and hence diagnostic usefulness is reduced. These cognitive factors are manifested in the observed behavior but there are so many other confounding factors and hence it is difficult to pinpoint the exact factor. Very little control can be exercised over the sample.

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Questioning, on the other hand, is a more complete way of obtaining the motives and preferences from the respondents. There is a social interaction between the respondent and the interviewer and hence the chances of clarifying and soliciting further details or developing on a line of questioning can be useful.

This is especially true in case of sensitive subjects. However, some research has shown that respondents may feel uncomfortable while answering sensitive questions as they may not admit a negatively valued characteristic to an interviewer. Also, the accuracy and the quality of information received from the respondents is also questionable, as there is little room for the respondent to consult their records or interact with their family members. There is a greater degree of control obtained with questioning as compared to observational methods.

8a. The choice of a data collection method is a critical point in the research process. The three basic survey methods are a. Personal interview b. Mail survey c. Telephone interview A brief outline of the various factors to be considered while choosing a survey method is given. * Type of population: The reading and writing skills of the population and their motivation to cooperate are to be considered in choosing the mode of data collection. If the workers are not well educated and whose reading and writing skills are less than ordinary, administering a questionnaire through a personal interview would be a better proposition as compared to a telephone survey or a mail survey. Alternatively, if the population meets at a particular place, administering questionnaires through groups is a good possibility. * Sampling: The factory management roster will give the precise addresses and telephone numbers of all the workers and hence using a mail survey or a telephone interview is possible. However, respondent designation, i.e. the worker only should be the respondent, is a major issue and hence mail survey is not appropriate as the researcher has no control over the issue. * Question form: if the questionnaire involves some visual cues or pictures, mail survey and telephonic interviews are out of question. * Response rates: Mail response rate typically tend to be low. Similarly telephone surveys draw a lower response as compared to personal interview. United Machine tools can administer the questionnaire in groups and hence obtain a good response rate. * Cost: The mail survey and telephone surveys tend to cost less than the personal interviews.

However, if the questionnaire is administered in groups, then the cost of administering it in person is reduced further. The budget allocated by United machine tools is a factor in determining the mode of the survey method. * Time: The time involved in a mail survey is higher as compared to a telephone survey or personal survey. However, the workers congregate at the factory daily and hence collecting the required sample is easier. b.

The researcher would like to have closed-ended questions because coding is easier and therefore data analysis is easier. If the questionnaire had open ended questions and was self administered, then the responses will not be comparable across respondents and hence coding becomes difficult.

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c.

Employee surveys help companies look inward for self improvement. In an organization, it is always possible that the top management lose sight of what happens in the lower levels. The job satisfaction survey will help the company to identify its strengths and weaknesses and helps the employees feel a part of the larger mechanism. The broad areas that could be covered in a job satisfaction survey amongst the United machine tools workers would center around the following. The specific questions are not discussed here.

Working conditions* Workers' satisfaction levels towards statutory and other welfare schemes * Working Conditions * Workers' attitudes to their supervisor * Satisfaction with remuneration and benefits; career advancement and awards * Workers' attitudes towards fellow workers * Company's interest in the employee welfare and commitment to good life of employees * Workers' attitudes towards job security and intrinsic job value

d.

The possible sources of survey error in this study are: * Sample tested is not representative of the population * The workers selected to interview are uncooperative, unwilling to participate in the survey or do not possess the knowledge required to respond to the survey * Interviewer does not administer the questionnaire properly * The interviewer does not understand the responses and records the responses incorrectly

e.

It should be highlighted that the students should not assume that the conditions in the rest of the world are the same as the US and hence the researcher should adapt himself or herself to the local situation.

A few pointers in this regard are explained below: While choosing the survey method, Houston resources consultancy should take into account the economic, cultural and social factors in India. While the factors discussed in (a) are important, Houston resources consultancy should assess whether it has the ability to conduct a survey in India or whether it should collaborate with an Indian agency to do the job. The language the questionnaire should be administered in should be ascertained. The questionnaire should be translated into the local language and then back translated into English to ensure that the translation is correct Also, while considering the choice of the survey method, it should be borne in mind that telephone ownership in India is not as prevalent as in the US and hence the telephone survey is not a viable proposition.

9a. It is not easy to state categorically that a seven page questionnaire will draw a good response or a poor response. In case of a mail survey or a telephone survey, the length of a questionnaire will definitely affect the response rate. It should be borne in mind that longer questionnaires are better administered through personal interviews as opposed to mail and telephone surveys: this is because the interviewer establishes a rapport with the respondent and hence refusing to cooperate becomes difficult. In case of a questionnaire administered to busy executives through personal interviews, usually it is the case that the shorter the questionnaire the better. In our case, we are looking at a questionnaire to be completed by the customers at surf stores. It should be remembered that accuracy of the responses diminishes with increases in questionnaire length. This is due to reasons such as fatigue or anxiety to get it over with, and this leads to response bias. Therefore, Hirst should be prepared for a poor response rate and for incomplete information on the questionnaires. b.

Hirst cannot be sure that the individuals buying at surf stores are users themselves. Such people may not be capable of answering his questions. Also, the sample thus chosen at the stores may not be representative of the population. This leads to selection bias as the sample is not representative of the population defined. Also due to the length of the questionnaire, some of the positive motivations that the respondent had to begin with could have dissipated leading to response bias and distortion of responses.

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10 a. “Families for the future” should choose a random, representative sample for its survey. The refusal or non-response rate can lead to a major source of error. In case of responses received, respondents could have been incapable of responding and hence this leads to response bias. The respondents might distort their responses to enhance their prestige in the eyes of the researcher and this leads to Social desirability response bias. b.

In order to achieve a fair response rate, some sort of an incentive or honorarium can be kept in the survey for the participants. This incentive can increase the survey responses to a certain extent. Also, a reminder can be sent after mailing the survey to all non-respondents so as to elicit their responses. In case the response rates are poor even after the mailing of the reminder, fresh surveys can be mailed.

The questionnaire has to be kept short in order that the respondents don't get fatigued and are as accurate as possible in their responses.

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SUPPLEMENTARY NOTES ON RESPONSE EFFECTS IN SURVEYS (Prepared by Al Silk, MIT) Sudman and Bradburn have developed a comprehensive review of available empirical studies bearing on the sources and magnitude of “response effects” in survey research. l A response effect is a systematic error or bias in an aggregate or average value of some measurement caused by a distortion factor present in the measurement process. An example of such an effect would be underreporting of purchasing of some products due to forgetting. Conceptually then:

O = T +i where:

O = observed value T = true value

 i =" response error " O, T. and i are sample aggregates or means. The authors assume that response errors are independent of true values.

Method A secondary analysis was carried out on virtually all published studies response effects—the raw materials are found in a bibliography of 935 articles. Each1 article was scrutinized for information reported relating to the size of response effect attributable to some particular procedure or factor. The following measures of the relative magnitude of response effect report in any study was computed: RE = (Actual - Validating) S where S is the standard deviation of the population, obtained from the validation information if possible. If data on S were not reported, RE was computed from: RE = Actual - Validating Validating For studies reporting information about attitudes (rather than observable behavior), the weighted mean of all observations was used for validation. Suppose, for example, attitudes on some topic had been measured via telephone interviews for one sample and by means of personal interviews with the second equivalent sample. Let Xl and X2 be the mean attitude scores for the two groups and G the grand mean of the two samples combined. Then: RE = X1 - X2 Sg where Sg is the standard derivation computed from the grand mean.

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Seymour Sudman and Norman M. Bradburn, "Response Effects in Surveys", Chicago: Aline, 1974. Also see the new review of this book by Benjamin F. King, Journal of the American Statistical Association,71 (March 1976), 246-247.

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Model of Response Effects for interviews The various sources of response effect that had been studied were grouped as independent variables according to the conceptual model of an interview shown in Figure 1. Mean values of RE were computed for the various estimates of a particular type or source of response effect reported in the studies found in the literature.

Three conceptually distinct sources of response effects were identified by grouping forty-six specific variables or types of effects: (a) variables that derive from the nature and structure of the task (b) variables that derive from the characteristics of interviewers (c) variables that derive from characteristics of respondents The task variables were further divided into three sub classes: (i) variables relating to the structure of the task and method of administration (ii) variables relating to problems of self-presentation on the part of the respondent (iii) variables relating to the saliency of the task to the respondent The following hypotheses were formulated: 1.

The greater the degree of structure, the lower the relative response effects will be.

2.

The greater the problems of self-presentation evoked by a question (i.e., the more socially desirable some of the answers are), the greater the pressure on the respondent to answer a question or the more controversial a question, the higher the relative response effects will be.

3.

The greater the saliency of the information required, the lower the relative response effects will be. a)

The more recent the event, the more important it is to the respondent, the less complex, and the more positive affect toward the event, the lower the relative response effects will be.

b) The more recent the event, the less complex, the more positive affect, and the clearer the subject of a question about an attitude, the lower the relative response effects will be.

4.

The greater the degree of structure in the interviewer’s role, the lower the relative response effects will be.

5.

The greater the degree to which the interviewer actually carries out the role demands, the lower the relative response effects will be.

6.

The greater the saliency of an interviewer's extra-role characteristic for the question being asked, the greater the relative response effects will be.

7.

The better motivated the respondent to perform his task of providing information, the less the relative response effects will be.

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Summary of Results 1.

Non-Threatening Behavioral Questions (a) Task Variables (i) memory Actors most important (mean RE = .15) (ii) other task variables of some importance, averaging about RE = .05 (b) interviewer and demographic characteristics are of little or no importance with RE 0

2.

Threatening Behavioral Questions Response effects are generally larger for threatening than non-threatening behavioral questions. (a) task variables, average RE = .24 (b) memory, average RE = .18 (c) respondent - interviewer variables least important average RE  0, except for college students and studies of sexual behavior

3.

Attitudes Task variables are more important causes of response effects in attitudinal studies than are respondent—interviewer characteristics, except where these characteristics are highly related to the attitudes being measured (e.g., studies of racial or sex-role attitudes).

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COMBINATION TECHNIQUE UNLOCKS HESITANT RESPONSES By Donald M. Fitch President Strategic Frontiers Ink Many survey researchers have experienced a decline in completion rates over the years and have tried stemming the tide through incentives and methodological innovations, usually with limited success.

This problem is especially acute among leaders in the professional, business, and government sectors.

They usually are unavailable or refuse to be interviewed because either they're too busy (doing precisely those tasks that makes us want to talk to them), the incentives for compliance are too meager, or they've been abused in the past by lengthy interviews, inept interviewers, and poorly constructed questionnaires.

Because these “heavies” control a disproportionately higher dollar share of products or services, we continue to seek ways to get their cooperation.

True, substituting the more available junior executives for senior executives or smaller companies for larger ones is easier and less expensive. But small companies generally account for a smaller percentage of the market, and junior executives rarely make major purchase decisions.

As obvious as this may be, it's surprising how many good researchers who regularly define their consumer populations precisely tend to ignore the problems of substitution when it comes to industrial or institutional studies.

Interviewing a “purchasing executive” is similar to interviewing “some one in the household.” Part of the problem is the inconsistency among organizations in job titles, functions, and personal roles. However, these can be handled in the screening questionnaire.

In addition to the problem of obtaining representative data among these populations, within the budget and in time to be useful, each of the three usual methods of interviewing has its own limitations.

Personal interviews are very expensive, costing $200 or more per case. Telephone interviews are less expensive, but they don't permit the use of visual concepts, ads, or exhibits. Mail interviews allow the respondent to read through the questionnaire, so you can't easily control the question order and preserve the sponsor's anonymity.

Even with the use of expensive gifts and callbacks, all three methods produce low response rates, usually under 30% and often less than 10%.

Whilst wrestling with these problems some years ago, the solution became obvious. Here's how it works: First, the respondents receive metal boxes with built-in combination locks. Accompanying letters explain that we would like to interview them by telephone in the next few days, on whatever topic is under study. In gratitude for their cooperation, we want them to have the combination lockbox for safekeeping of their insurance policies, stocks, or petty cash.

There's one hitch: the box is locked. We tell the respondents we locked it because there are several exhibits inside that we want them to see in a prescribed order.

When our interviewers call, they give the respondents the combination to the boxes. The respondents are then taken through the interview question by question, exhibit by exhibit.

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Where required, each exhibit is placed in a separate sealed envelope, to be opened only at the proper time during the interview. Interviewers record the respondents' answers, probing when necessary. There is nothing to mail back. We have our information, the respondents have their gifts.

We even include a booklet that explains how to change the combination to one of their own choice.

Some examples of the response rates we have experienced with this technique are: fashion designers, 96%; administrators of pension funds, 80%; presidents of Fortune 1,000 companies, 79% lawyers, 72%; vice presidents, 68%; plant managers/supervisors, 65%; and chief financial officers, 60%.

The reasons for not achieving even higher response rates are primarily due to inadequacies in the list, not the technique or refusals. Among the reasons are these: did not receive box, 4%; out of office or not available, 8%; plant or company closed or wrong address, telephone number, or name, 5%; no longer with company, 5%' and refused, 12%.

We've also had a few surprises, that are unheard of in our field. About 10% of the executives called us to say they were fascinated with the idea, they had half an hour to be interviewed now, and were too curious to wait a few days for our interviewer to call them.

Another 20% of those who initially refused called later to say they'd reconsidered their decision and were not willing to be interviewed.

The technique's novelty and the gift's quality were important appeals. Also salient was the involvement stimulated by recipients' trying to figure out the combination and waiting for the interviewer to call.

Our experience has also reaffirmed a few minor but often abused guidelines. Assure them and their organization of anonymity and keep it short (not more than 10 minutes), concise and tough (questions worthy of their abilities). Careful questionnaire construction and pretesting are mandatory.

The varied applications are bound only by one's own imagination and needs. The technique can be employed in a variety of studies in the consumer, industrial and governmental sectors of the economy print ad and concept tests, readership, corporate image, and even product tests, if the products can fit in the box.

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