Market Research. Conducting Marketing Research and Forecasting Demand

Market Research

Conducting Marketing Research and Forecasting Demand

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Build-A-Bear Workshop makes the most of “interactive entertainment retailing”

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Marketing Research Defined

Systematic design, collection,

analysis, and reporting of data

and findings relevant to a specific

marketing situation facing a company.

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Types of Marketing Research Firms

Syndicated-Service—trade

Information (Nielsen

Media Research--track viewing habits of

varied audiences)

Custom(Specific projects

Design studyReport findings)

Specialty-Line

(interviewing Services)

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The Marketing Research Process

Define the problem

Develop research plan

Collect information

Analyze information

Present findings

Makedecision

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Step 1

• Define the problem

• Specify decision alternatives

• State research objectives

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Step 2

Data Sources

ContactMethods

ResearchInstruments

SamplingPlan

Research Approach

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Research Approaches

Observation—unobtrusive Observation—unobtrusive

Focus Group—discuss topics of interest

Focus Group—discuss topics of interest

Survey—knowledge, beliefs, preferences, satisfaction

Survey—knowledge, beliefs, preferences, satisfaction

Behavioral Data—purchasing data

Behavioral Data—purchasing data

Experimentation—cause and effect relationships

Experimentation—cause and effect relationships

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Focus Group in Session

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Research Instruments

QuestionnairesQualitative MeasuresMechanical Devices

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• Avoid negatives• Avoid hypotheticals• Avoid words that could

be misheard• Use response bands• Use mutually exclusive

categories• Allow for “other” in fixed

response questions

Questionnaire Do’s and Don’ts

• Ensure questions are free of bias

• Make questions simple• Make questions specific• Avoid jargon• Avoid sophisticated

words• Avoid ambiguous words

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Question Types - Dichotomous

In arranging this trip, did you contact American Airlines?

Yes No

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Question Types – Multiple Choice

With whom are you traveling on this trip?

No one

Spouse

Spouse and children

Children only

Business associates/friends/relatives

An organized tour group

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Question Types – Likert Scale

Indicate your level of agreement with the following statement: Small airlines generally give better service than large ones.

Strongly disagree

Disagree

Neither agree nor disagree

Agree

Strongly agree

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Question Types – Semantic Differential

American Airlines

Large ………………………………...…………….Small

Experienced………………….………….Inexperienced

Modern………………………..………….Old-fashioned

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Question Types – Importance Scale

Airline food service is _____ to me.

Extremely important

Very important

Somewhat important

Not very important

Not at all important

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Question Types – Rating Scale

American Airlines’ food service is _____.

Excellent

Very good

Good

Fair

Poor

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Question Types –Intention to Buy Scale

How likely are you to purchase tickets on American Airlines if in-flight Internet access were available?

Definitely buy

Probably buy

Not sure

Probably not buy

Definitely not buy

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Question Types –Completely Unstructured

What is your opinion of American Airlines?

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Question Types –Word Association

What is the first word that comes to your mind when you hear the following?

Airline ________________________

American _____________________

Travel ________________________

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Question Types –Sentence Completion

When I choose an airline, the most important consideration in my decision is: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________.

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Question Types –Story Completion

“I flew American a few days ago. I noticed that the exterior and interior of the plane had very bright colors. This aroused in me the following thoughts and feelings.” Now complete the story. ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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Question Types –Picture (Empty Balloons)

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Question Types – Thematic Apperception Test

Make up a story that reflects what you think is happening in this picture.

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Qualitative Measures

Shadowing—observing peopleShadowing—observing people

Behavior mapping—photographing people with a space—2 or 3 days

Behavior mapping—photographing people with a space—2 or 3 days

Consumer journey—keeping track of interactions a consumer has with a product, service,

or space

Consumer journey—keeping track of interactions a consumer has with a product, service,

or space

Camera journals—ask consumers to keep visual diaries of activities and impression

related to a product

Camera journals—ask consumers to keep visual diaries of activities and impression

related to a product

Extreme user interviews—talking to people about a product and evaluating their

experience with it

Extreme user interviews—talking to people about a product and evaluating their

experience with it

Storytelling—prompting people to tell personal stories about their consumer

experiences

Storytelling—prompting people to tell personal stories about their consumer

experiences

Unfocused groups—interview a diverse group of people to explore ideas

Unfocused groups—interview a diverse group of people to explore ideas

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Mechanical Devices

Galvanometers (measure interest or emotions aroused by

exposure to a specific ad or picture)

Tachistoscope (flashes an ad to a subject with an exposure interval and

respondent describes everything he/she recalls)

Eye cameras (study respondents’ eye movement to see where their eyes

land 1st and how long, etc.)

Audiometers (record when TV is on and the channel)

GPS (global positioning system, can determine how many billboards s person

may walk or drive by during a day)

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Sampling Plan

• Sampling unit: Who is to be surveyed?

• Sample size: How many people should be surveyed?

• Sampling procedure: How should the respondents be chosen?

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Types of Samples

Probability• Simple random

– Every member of population has an equal chance of selection

• Stratified random– Population is divided into

mutually exclusive groups (age groups) and random samples are drawn from each group

• Cluster– Population is divided into

mutually exclusive groups (city blocks) and a sample is taken from each group

Nonprobability• Convenience

– Selects the most accessible population members

• Judgment– Selects population

members who are good prospects for accurate information

• Quota– Selects and interviews a

prescribed number of people in each of several categories

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Contact MethodsMail Questionnaire

(For people would not give personal interviews or whose responses

might be biased or distorted by interviewer)

Telephone Interview(Gather information quickly, however interview are short and non-personal)

Personal Interview(Most versatile and expensive,

subject to interviewer bias or distortion)

Online Interview(Inexpensive, fast, honest, versatile, samples small

and skewed, tech problems and inconsistencies)

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Characteristics of Good Marketing Research

Scientific methodObservation, hypotheses, prediction, testing

Research creativityInnovative ways to solve problem

Multiple methods2 or 3 methods to increase confidence in results

InterdependenceData interpreted from underlying model that

guide type of information sought Value and cost of information

Estimating value of information against cost Healthy skepticism

Assumptions about how a market works Ethical marketing

Invasion of privacy or a disguised sales pitch

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Marketing Metrics

External• Awareness• Market share• Relative price• Number of complaints• Customer satisfaction• Distribution• Total number of

customers• Loyalty

Internal• Awareness of goals• Commitment to goals• Active support• Resource adequacy• Staffing levels• Desire to learn• Willingness to change• Freedom to fail• Autonomy

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Sample Customer-Performance Scorecard Measures

• % of new customers to average #• % of lost customers to average #• % of win-back customers to average #• % of customers in various levels of satisfaction• % of customers who would repurchase• % of target market members with brand recall• % of customers who say brand is most preferred

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Tools to Measure Marketing Plan Performance

Sales Analysis(Actual sales in relation to goals)

Financial Analysis

Expense-to-SalesAnalysis

Market Share Analysis% of company sales to

The total market

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Sales Analysis

Micro-Sales

Analysis(views specific products,

territories that fail to produce expected sales)

Sales-VarianceAnalysis

(Relative contribution ofdifferent factors to a gap in

Sales performance)

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Market Share Analysis

• Overall market share– total market

• Served market share– target market

• Relative market share – relative to competitor

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Financial Model of Return on Net Worth

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Simplified Profit-and-Loss Statement

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Distinguishing Types of Costs

Direct(assigned to

marketing entities) (sales commissions)

NontraceableCommon

(highly arbitrary)(top mgt salaries,

taxes, interest)

TraceableCommon

(Indirect to marketing)(Rent)

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The Measures of Market Demand

PotentialMarket

(interest)

PenetratedMarket

(buying product)

TargetMarket

(qualified available, company pursues)

AvailableMarket

(interest, income, access)

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Ninety Types of Demand Measurement

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Estimating Current Demand

• Total market potential– Maximum amount of sales available

• Area market potential– Market buildup method

• Identifying all potential buyers in each market and estimating their potential purchases

– Multiple-factor index method• Sales are directly related to a series of indices

• Brand development index–Index of brand sales to category sales

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Calculating Brand Development Index

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Estimating Future Demand

• Survey of Buyers’ Intentions—probability of purchase

• Composite of Sales Force Opinions--salespeople• Expert Opinion—dealers, distributors, suppliers,

marketing consultants, trade associations• Past-Sales Analysis—trend, cycle, seasonal,

erratic• Market-Test Method—select some territories to

sale the product

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Purchase Probability Scale

Do you intend to buy an automobile within the next 6 months?

0.00 No

0.20 Slight possibility

0.40 Fair possibility

0.60 Good possibility

0.80 High possibility

1.00 Certain

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Marketing Discussion

When was the last time youparticipated in a survey? How helpful

do you think was the informationyou provided? Could the research

have been done differently?

Analyzing Consumer Markets

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Emerging Trends in Consumer Behavior

Metrosexual – Straight urban manwho enjoys shoppingand using groomingproducts

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What Influences Consumer Behavior?

Cultural FactorCultural Factor

Social FactorsSocial Factors

Personal FactorsPersonal Factors

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Culture

The fundamental determinant of a person’s wants and behaviors

acquired through socializationprocesses with family

and other key institutions

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Subcultures

Nationalities Nationalities

ReligionsReligions

Racial groupsRacial groups

Geographic regionsGeographic regions

Special interestsSpecial interests

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Fast Facts About American Culture

• The average American:

– chews 300 sticks of gum a year

– goes to the movies 9 times a year

– takes 4 trips per year

– attends a sporting event 7 times each year

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Social Classes

Upper uppersLower uppersUpper middlesMiddle class

Working classUpper lowersLower lowers

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Characteristics of Social Classes

• Within a class, people tend to behave alike

• Social class conveys perceptions of inferior or superior position

• Class may be indicated by a cluster of variables (occupation, income, wealth)

• Class designation is mobile over time

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Social Factors

Referencegroups

Social roles

Statuses

Family

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Reference Groups

Membership groups—direct influence

Membership groups—direct influence

Primary groups—family, friends, neighbors, co-workers

Primary groups—family, friends, neighbors, co-workers

Secondary groups—religious, professional, trade-union

Secondary groups—religious, professional, trade-union

Aspirational groups—hope to join

Aspirational groups—hope to join

Dissociative groups--rejects

Dissociative groups--rejects

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Family

• Family of Orientation– Religion– Politics– Economics

• Family of Procreation– Everyday buying

behavior

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Roles and Statuses

What degree of status is associated with various occupational roles?

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Personal Factors

Age

Values

Life cyclestage

Occupation

Personality

Self-concept

Wealth

Lifestyle

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Behavior changesaccording to life cycle stage

•Family•Psychological•Critical life events

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Brand Personality

Sincerity--honestSincerity--honest

Excitement--daringExcitement--daring

Competence--reliable

Competence--reliable

Sophistication—upper-class

Sophistication—upper-class

Ruggedness--tough

Ruggedness--tough

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Lifestyle (pattern of living) Influences

Multi-tasking—doing two ormore things at one time

Time-starved

Money-constrained

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Model of Consumer Behavior

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Key Psychological Processes

Motivation(drive to act)

Memory(information & experiences

Short-term-temporaryLong-term—permanent)

Learning(changes in behavior

arising from experience)

Perception(Process of selecting,

organizing, interpreting information to create

a world picture)

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Motivation

Freud’sTheory

Behavioris guided by subconsciousmotivations

Maslow’sHierarchyof Needs

Behavioris driven by

lowest, unmet need

Herzberg’sTwo-Factor

Theory

Behavior isguided by motivating

and hygienefactors

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Maslow’s Hierarchy of Needs

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Herzberg’s Two-Factor Theory

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Perception

Selective Attention(notice)

Subliminal Perception(embed covert messages)

Selective Retention(remember)

Selective Distortion(interpret information to fit preconceptions)

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Consumer Buying Process

Problem Recognition

Information Search

Evaluation

Purchase Decision

PostpurchaseBehavior

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Sources of Information

Personal(family, friends, etc)

Experiential(handling, examining,

product usage)

Public(mass media,

consumer-rating Organizations)

Commercial(advertising, websites,

salesperson, etc)

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Successive Sets

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Non-compensatory Models of Choice(positive and negative attributes consideration do not necessarily net out)

• Conjunctive– minimum set of acceptable cutoff for each attribute and

choose 1st alternative that meets the minimum standard for all attributes

• Lexicographic– Choose the best brand on the basis of its perceived

most important attribute• Elimination-by-aspects

– Compares brands on an attribute selected probabilistically (probability of choosing an attribute is positively related to its importance) and brands are eliminated if they do not meet minimum acceptable cutoff levels

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Perceived RiskFunctional (product does not

perform)Functional (product does not

perform)

Physical (product poses treat to physical well-being or health of the user

or others)

Physical (product poses treat to physical well-being or health of the user

or others)

Financial (product is not worth the price paid)

Financial (product is not worth the price paid)

Social (product results in embarrassment from others)

Social (product results in embarrassment from others)

Psychological (product affects the mental well-being of the user)Psychological (product affects the mental well-being of the user)

Time (failure of product results in an opportunity cost of finding another satisfactory product)

Time (failure of product results in an opportunity cost of finding another satisfactory product)

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Other Theories of Consumer Decision Making

Involvement• Elaboration Likelihood Model

– High and Low• Low-involvement marketing

strategies– Link to some involving

issues– Personal situations– Personal values– Add Important feature

• Variety-seeking buying behavior– Encourage habitual buying

behavior by dominating self-space.

Decision Heuristics (rules of thumb)• Availability

– Quickness and ease with which a particular example of an outcome comes to mind

• Representativeness– How representative or similar

the outcome is to other examples

• Anchoring and adjustment– Consumers arrive at an initial

judgment and then make adjustments of that 1st impression based on additional information

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Mental Accounting (manner which consumers

code, categorize, and evaluate financial outcomes of choice)

• Consumers tend to…– Segregate gains

• Sum of parts maybe greater than the whole

– Integrate losses• House buyers more inclined to view additional

expenditures favorably given the high price of the house

– Integrate smaller losses with larger gains• Withholding taxes

– Segregate small gains from large losses• rebates

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Marketing Debate

Is Target Marketing Ever Bad?

Take a position:1. Targeting minorities is exploitative.2. Targeting minorities is a soundbusiness practice.

Analyzing Business Markets

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Organizational Buying

Decision-making process by whichformal organizations establish theneed for purchased products and

services, and identify,evaluate, and choose among

alternative brands and suppliers.

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Characteristics of Business Markets

• Fewer, larger buyers• Close supplier-

customer relationships• Professional

purchasing• Many buying

influences• Multiple sales calls

• Derived demand• Inelastic demand• Fluctuating demand• Geographically

concentrated buyers• Direct purchasing

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Buying Situation

Straight rebuy—routineStraight rebuy—routine

Modified rebuy—modify product specification, prices,

delivery requirements, or other terms)

Modified rebuy—modify product specification, prices,

delivery requirements, or other terms)

New task—purchase of new product or serviceNew task—purchase of new product or service

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Systems Buying and Selling

Turnkey solution desired;

Bids solicited

PrimeContractors

Second-tierContractors

System subcomponents

assembled

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The Buying Center

Initiators--requestInitiators--request

UsersUsers

Influencers—help define specification

Influencers—help define specification

Deciders—choose the product requirements

Deciders—choose the product requirements

Approvers—authorized proposed actions of deciders or buyers

Approvers—authorized proposed actions of deciders or buyers

Buyers—formal authority to select the supplier and arrange

the purchase terms

Buyers—formal authority to select the supplier and arrange

the purchase terms

Gatekeepers—power to prevent sellers or information from reaching

member of the buying center

Gatekeepers—power to prevent sellers or information from reaching

member of the buying center

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Of Concern to Business Marketers

• Who are the major decision participants?

• What decisions do they influence?

• What is their level of influence?

• What evaluation criteria do they use?

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Sales Strategies

Small Sellers

Large Sellers

Key Buying Influencers

MultilevelIn-depthSelling

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Types of Business Customers

Price-Oriented

(transactional selling, price is everything)

Gold-Standard

(quality selling)

Strategic-Value

(enterprise selling)

Solution-Oriented

(consultative selling)

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Handling Price-Oriented Customers

Limit quantity purchasedLimit quantity purchased

Allow no refundsAllow no refunds

Make no adjustmentsMake no adjustments

Provide no servicesProvide no services

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Purchasing Orientations

Buying (short term and tactical, lowest price for a given level of quality, commoditization, multi-sourcing)

Procurement (quality improvement and cost reductions)

Supply Chain Management

(seamless from purchase of raw materials to the

on-time arrival of finished goods to end users)

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Product-Related Purchasing Processes

Routine products (low value and cost to the customer

—office supplies)

Routine products (low value and cost to the customer

—office supplies)

Leverage products (high value and costs to the customer

—engine pistons)

Leverage products (high value and costs to the customer

—engine pistons)

Strategic products(high value and costs and involve in high risks—mainframe computers)

Strategic products(high value and costs and involve in high risks—mainframe computers)

Bottleneck products(low value and cost and low

risks—spare parts)

Bottleneck products(low value and cost and low

risks—spare parts)

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Methods of e-Procurement• Websites organized using vertical hubs

– plastics, steel, chemicals, paper• Websites organized using functional hubs

– logistics, media buying, advertising, energy management

• Direct extranet links to major suppliers– Dell, Office Depot

• Buying alliances (several companies combine to buy in volume to obtain lower prices)– Transora—Coca-Cola, Sara Lee, Kraft, PepsiCo, P&G,

and several other companies• Company buying sites

– For example, General Electric formed the Trading Process Network where it posts requests for proposals, negotiates terms, and places orders

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Forms of Electronic Marketplaces

•Catalog sites•Vertical markets

•Pure play auction sites--eBay•Spot markets—chemicals

•Private exchanges--suppliers•Barter markets—trade goods & service

•Buying alliances--Transora

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Assessing Customer Value

• Internal engineering assessment– determine product

performance characteristics• Field value-in-use assessment

– customer evaluate elements of new product

• Focus-group value assessment– determine value of potential

marketing offering• Direct survey questions

– place a direct dollar value on one or more changes in the market offering

• Conjoint analysis– rank preference for alternative

market offering or concepts and than estimate the implicit value placed on each attribute.

• Benchmarks– Compare a “benchmark” offering

and new-market offering and then asked how much more customers would pay if new features were offered or how much less if certain features were removed

• Compositional approach– Attach a monetary value to each of

three alternative levels of given attribute and repeat for other attributes. The values are then added together for any product configuration.

• Importance ratings– Rate the importance of a different

attributes and the supplier firms’ performance on these attributes

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Establishing Corporate Credibility

Expertise(Able to make and

sell products)

Likeability(Attractive, prestigious,

dynamic)

Trustworthiness(Honest and dependable,

sensitive to customer needs)

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Factors Affecting Buyer-Supplier Relationships

Availability of alternatives

Supply marketdynamism

Complexity ofsupply

Importance ofsupply

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Categories of Buyer-Seller Relationships

• Basic buying and selling– Simple routine exchanges with

moderately high levels cooperation and information exchange

• Bare bones– Adaptation by the seller and

less cooperation and information exchange

• Contractual transaction– Generally low levels of trust,

cooperation, and interaction; exchange is defined by formal contract

• Customer supply– Competition rather than

cooperation is the dominant form of governance

• Cooperative systems– Coupled closely in operational

ways, although not legally binding

• Collaborative– Trust and commitment leading

to true partnerships• Mutually adaptive

– Relationship-specific adaptation for buyer and seller, but without a need for strong trust or cooperation

• Customer is king– The seller adapts to meet the

customer’s needs without expecting much adaptation or change on the part of the customer in exchange

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Opportunism

Some form of cheating orundersupply relative to animplicit or explicit contract.