Marketing Research

Key Terms: marketing information system, symptom vs. problem, primary data, panel data, secondary data, exploratory research, survey, sample, experiment, focus group, and depth interview.

A marketing information system is ongoing and information is collected whether or not it will be used. Many colleges have a student information system, a type of marketing information system, that routinely gathers information such as number of majors by discipline, number of students taking courses at various hours, number of closed sections by discipline, etc. One college recently did a study to determine the number of students by zip code of residence and by high school. This information was in their information system and they found that a large number of their students came from a small number of zip codes and high schools.

Marketing research is used to identify problems and opportunities and usually has a specific objective. It is also used to solve a specific problem or to provide assistance in making a decision.

Steps in Marketing Research: 
(1) Define the problem:  The first step in marketing research is to define the problem. It is easier to solve a problem once it is defined. Declining sales are a symptom and can be caused by such factors as too high a price, too low a price, unattractive warranty, poor product performance, bad package, inadequate distribution, etc. How can you solve a problem when you do not know whether to change the price, improve the warranty, redesign the package, improve distribution, or simply wait for the economy to improve? Exploratory research is used to help define the problem.

A college is suffering from declining enrollments. That is a symptom. What is the problem?  Is it high tuition, poor quality of instructors, poor course selection, not enough popular majors, not enough parking, changing demographics of feeder high schools, or declining reputation?  Note that you cannot come up with a solution unless you do some research.  One college found that its sinking enrollments were due to security issues.  Another college discovered that it had to introduce a business major to make enrollments increase.

(2) Develop the research plan:  What kind of data is needed to come up with a strategy?  How is the data going to be collected? 

(3) Find the information that is needed.   Sometimes you need primary data; sometimes secondary data is sufficient.

Secondary data: Data that has already been collected and that you have to find.  The advantage of using secondary data is that it can save you a great deal of time.  It takes much longer to collect new data (primary data) than to retrieve information that is already out there.  Also, it is much cheaper to get secondary data than primary data.  

--An organization’s own internal records (sales, customer complaints, etc.)
--Census information - Check out the US Census Bureau homepage: http://www.census.gov/
--Trade association data
--journals
--Internet

US Business Advisor – Find useful government information on the Web
http://www.business.gov/

AC Nielsen is the largest marketing research company:
http://www.acnielsen.com/

Primary data: Data that you have to collect yourself. This could take the form of  surveys, experiments, observation study, focus groups, or depth interviews. Obviously, this takes quite a bit of time to collect and can be quite expensive. 

--Surveys. It is usually too costly to take a census of the entire population (there are more than 300 million people in the United States).  Generally, we study a sample, i.e., a subset of the population.  Typical sample sizes are between 1,000 and 5,000 people.  If a sample is done correctly, it can be representative of the entire population. Random samples have the advantage that they are supposed to be representative.  With a simple random sample, every element in the population has an equal chance of being selected. A convenience sample of say 500 people shopping in a mall may not be representative. With surveys it is important to get a representative sample (which means a decent rate of response) and honest/accurate responses. A survey is meaningless if it does not represent the population you are studying. 

Some types of surveys are: mail, telephone, personal interview, mall intercepts, fax, e-mail, and Web.  One serious problem with mail surveys is the low rate of response. If you send out a mail survey and get a 15% rate of response, it is quite likely that your results will not be representative. Much marketing research today is conducted via telephone surveys. Telephone surveys are quick and not very expensive.  Some of you may have completed an online survey.  This is becoming another relatively inexpensive way to  survey people. 

--Experimentation. The key elements of an experiment are randomization, manipulation, and control. Subjects are randomly assigned to different conditions in order to test the effect of certain factors. For an experiment to be valid, you need a control group. For instance, the classical studies on shelf space were conducted by trying different amounts of shelf space (e.g., 3 feet vs. 6 feet vs. 9 feet). A product was randomly assigned to the three conditions and in, say, 50 stores the product was allocated 3 feet of shelf space, 6 feet of space in another 50 stores, and 9 feet of space in another 50 stores. The same price is used in all stores and, in fact, you try to keep everything as similar as possible. The manipulated variable is shelf space and you try to keep everything else as constant as possible (controlled variables). Thus, experiments are used to determine cause and effect relationships. Studies show that shelf space is very important for impulse items and not very important for staples.

Experiments provide information on actual behaviors whereas surveys are often attitudinal. Experiments are very useful to determine how customers will react to changes in packaging, pricing, and advertising. People cannot answer questions such as will you buy more of Brand X in the red package than the blue package? To answer this you must use an experiment.

--Observation. There are two types of observations: by machine and by people. Occasionally, marketing research involves people observing people. For example, you might use researchers disguised as shoppers and place them in stores in order to determine whether shoppers read the ingredients before purchasing a new product. This, however, is rarely done in marketing. Most research involves observation by machine. For instance, closed-circuit cameras are used to monitor customers and study such things as shopping patterns (studies show that customers like to start with the produce section in a supermarket). Television ratings are obtained by devices connected to a sample of households that own TV sets. Scanners at checkout counters in supermarkets also provide a great deal of information.  A supermarket can quickly discover how well different brands are doing every day.  They can see what effect changing the location of a brand (or increasing shelf space) has on sales.

--Focus Group Interviews – are very popular in research today. Most focus groups consist of 6 to 12 individuals and a moderator. Many open-ended questions are used; the goal is to get the group to interact.  The response of one person may get other people in the group to speak up.  Focus groups are sometimes used to find out what problems customers have with products and to help come up with ideas for new products.  For instance, a company might conduct a focus group with 10  users of its product to find out how it is being used, problems with it, and what can be done to improve it.

--Depth Interviews – These are detailed, one-on-one interviews and may last for 90 minutes or so. It is somewhat like a psychiatric interview (the one where the psychiatrist has you sit or lie down on a couch and engage in a lengthy, free-flowing conversation).  The goal is to get the interviewee to relax and talk.  Problems with new products might be discussed. One study I am considering involves asking students whether they considered dropping out of college as freshman, and why.  

Focus groups and depth interviews are qualitative research techniques. With qualitative research, you try to get consumers to open up so you can find out how they really feel.  You want considerably more than simple yes or no answers.  There is much reliance (possibly too much) on the subjective interpretations of the researcher. In fact, it is quite likely that two companies working independently and doing focus groups for a client may come to very different conclusions. Researchers refer to this problem as lack of reliability. Some companies will purposely hire two different marketing research firms to perform qualitative research and then see whether the results are the same or not, i.e., check for reliability.

Panel data:  Some research companies use a sample of consumers or stores and take measurements (e.g., sales) on a regular basis (daily, weekly, monthly, etc.).  This is known as panel data.  Some of you may be members of a consumer panel.  

(4)  Interpret the Data and Write the Business Research Report.   The data must be analyzed properly and recommendations as to the best course of action must be made. Research papers often have the following headings:  Introduction, Method, Results, Conclusions (or Discussion).

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A great deal of marketing research deals with customer satisfaction.  Are customers satisfied?  What can be done to increase satisfaction?  Research helps a company discover why they are losing customers (customer attrition).  What can be done to stop the loss of customers?  Can anything be done to get them back?

The Kerin, Hartley, and Rudelius marketing textbook has an interesting example of how marketing research is used by the film industry to come up with a good title for a film. Researchers found that the public did not like the title of a movie Clint Eastwood was directing-- Rope Burns. The title was changed to Million Dollar Baby.  A good movie title helps position the film and may also affect attendance.   Even the ending of a film might be changed after a test screening (film shown to an audience of several hundred people in the target market for the film). A good ending is important because an unsatisfying ending may reduce customer satisfaction and the word of mouth for a film.   A film that has a satisfying ending (not necessarily a happy one) will be talked about for a long time.  What do you think of the ending of the film Titanic?  Not a happy one but certainly memorable.   I never did like the ending of Gone With the Wind but have to admit that it works. Nowadays, many movie studios use test screenings to see whether anything can be improved (title, music, characters, ending of film, etc.).  I suspect that film directors and writers do not like the idea that a few hundred viewers attending a test screening (or a "sneak preview" ) will have input on how a film ends and decide which characters may not make it into the final edit of the film. 

Those of you who are interested in law might be interested in doing some research on the subject of mock juries and jury research.  There are firms that use mock juries as a type of focus group. The goal is to analyze how juries will react to different kinds of summaries, witnesses, and/or evidence.  A mock jury can help a lawyer make a more effective presentation before the real jury.
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As noted in previous chapters, one of the most important measures in marketing is customer/client satisfaction.  Measuring customer satisfaction in a reliable and valid way is important.  Attitude scales to measure customer satisfaction have been developed.  If you wish to learn more about measuring customer satisfaction, check out the following:  http://www.esmalloffice.com/SBR_template.cfm?docNumber=PL12_1200.htm#sampsurvey

Quirk’s Marketing Research Review is a "one-stop source for marketing research information":
http://www.quirks.com/

Market Research Links from KnowThis.com:
http://www.knowthis.com/research/marketingresearch.htm

"How to Learn About an Industry or a Specific Company"
http://www.virtualpet.com/industry/howto/search.htm

"Researching Companies Online"
http://home.sprintmail.com/~debflanagan/index.html

Green Book – Worldwide Directory of Marketing Research Companies and The Focus Group Directory:
http://www.greenbook.org/

MarketResearch.com database of market research publications
http://www.marketresearch.com/

Decision Analyst, Inc. -- Leading marketing research firm (articles, free software, etc.)
http://www.decisionanalyst.com/

@Researchinfo.com – The Online Market Research Community
http://www.researchinfo.com/