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Chapter 1

Chapter 1. The Purpose of Marketing Research. What Is Marketing?. 1-2 What Is Marketing? (cont.). independent variables inputs includes: situational factors marketing courses of action to steer the market dependent variables outputs, phenomena one seeks to explain includes:

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Chapter 1

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  1. Chapter 1 The Purpose of Marketing Research

  2. What Is Marketing?

  3. 1-2What Is Marketing? (cont.) • independent variables • inputs • includes: • situational factors • marketing courses of action to steer the market • dependent variables • outputs, phenomena one seeks to explain • includes: • behavioral responses of consumers to the independent variables • performance measures • connecting variables • relationships between independent and dependent variables discovered through marketing research

  4. Why should we do Marketing Research? • The individual (wo)man is an insoluble puzzle, in the aggregate (s)he becomes a mathematical certainty.

  5. Why do we need Marketing Research? • Perception is Reality. Judgment-based vs. data-based. • Initial perceptions can lead to selective interpretation. That may hurt your prospects. • Environmental Changes. • Proactive. Sustainable competitive advantage.

  6. $4.000.000 in market research • 200.000 blind tests • New coke outperformed old Coke and Pepsi • 40.000 letters of complaint • 6000 calls a day • In 87 days Coca Cola reintroduced the Old Coke on the market

  7. How had the Coca-Cola management got it so wrong? • • They had focused on the product, not the brand. • They had neglected the emotional value of 'Coke' to the American public.• They asked the wrong questions, so their research provided irrelevant information. • As one Coca-Cola official said at the time "We betrayed a national trust". Why? Because they never thought to ask American consumers how they would feel about a change to Coke, whether or not they would want a 'New Coke'.

  8. -Opened in New Orleans in 1995 as a temporary casino • - Grossed less than half of $33 million it needed for month in 9 weeks • Losses in tens of millions

  9. How had the Harrah’s management got it so wrong? • auditorium's out-of-the-way location, next to a public housing project • ''People don't come here to gamble” • Gambling analysts say the casino will have to make about $260 million a year to pay its taxes and its 2,800 employees, which translates to 14,000 patrons a day losing an average of $50 each. • 14.000= New Orleans daily tourists population!

  10. Sephora entered Japanese market in 1999 with plans to launch 50 stores within the next two years. • Built 7 stores in high-class locations • In 2001 Sephora closed the doors to all of its 7 retail locations and left the country. • The failure in Japan is attributed to a lack of market research and understanding local demands (for example, making an accent on fragrances instead of cosmetics and targeting older age groups).

  11. How had the Sephora’s management got it so wrong? • Upsetting the suppliers (products w/o the sales support) • Confusing the consumer • Japanese are sensitive to the layout of the store: three floors, perfumes in the first floor! (fragrance market in Japan=5%) • Self-service not so popular: Japanese ladies want to be chatted to and pampered as a tradition before buying • Lack of Market Research!

  12. So, what then is Marketing Research? • Any decision that helps in making informed marketing decisions. • Descriptive (gathering facts) • What is the market share of our competitor? • Diagnostic (explaining data or actions) • Will sales increase if wall color is changed? • Predictive • Will this target market accept our product?

  13. Managerial Decision-Making • Marketing research gathers information on consumer needs to facilitate better production decisions. Information gathering. Intelligence, if you want. • Research methodology formalizes statistical reasoning in the analysis and interpretation of data. • Marketing vs. Market research

  14. Marketing Management Decisions Formal decision-making process: 1. recognizing a problem or opportunity 2. clarifying the decision 3. identifying alternative courses of action (i.e., combinations of marketing mix variables) 4. evaluating alternatives 5. selecting a course of action 6. implementing the selected course of action and monitoring its effects

  15. 1-1a Research Methodologies for Decision-Making Steps of marketing research methodology: 1. Determine what information is needed 2. Design a method for collecting this information 3. Manage the data collection 4. Analyze and interpret the results 5. Communicate the findings in a way that clarifies the implications for managerial decision making

  16. What Questions are Commonly Addressed in MR? 5Cs • Consumer: What needs do we seek to satisfy? • Competition: Who competes with us? • Company:What special competence do we have? • Collaboration: Who should we enlist to help us? • Context: What external factors limit us?

  17. 1-1cMarketing Research Criteria Criteria for marketing research: • systematic: data gathering and analysis must be designed and organized in advance • objective: unbiased and impartial • informational: collects data relevant to information needs of decision-makers • targeted for decision making: data gathered and interpreted with the goal of reducing uncertainty in a decision situation

  18. The “Three Questions” Rule • Before conducting any MR, ask yourself the following three questions: • What do I want to know? • Why do I need this information? • What decisions will I take once I've got it? • Answering these three questions will lead to ACTIONABLE RESEARCH.

  19. 1-3b The Marketing Management Process Informational feedback between the marketing system and decision making process • Figure 1-3

  20. 1-3cInformation Needs Information needs for improved decision-making include information on: • situational variables • economic climate, market trends, government regulation • marketing mix variables • pricing, promotion, point-of-purchase displays, ad spending • performance measures • monetary: sales, market share, profit, internal rate of return, return on investment (ROI) • non-monetary: image, attitudes toward the organization, consumer satisfaction, brand equity

  21. The Value of Marketing Research • The value of any given research project depends on the amount of money riding on related decisions. IMPORTANCE. • Decision rules: • If the decision already has been made, and research will not affect it, then research is not worthwhile. • If the decision has not been made, the value of research depends on its ability to provide clear direction.INFLUENCE.

  22. 0.6 Success $4 Mil Introduce 0.4 Failure Case A $1 Mil $0 Do not introduce Illustrative Decision Model How much will you willing to pay for perfect information in this case?

  23. 0.6 Success $4 Mil Introduce 0.4 Failure Case B -$2.5 Mil $0 Do not introduce Illustrative Decision Model 2

  24. Solution • Expectation of the product’s eventual performance is given by the expected value. • EV = (PS * AmtS) + (PF * AmtF) • EV = 0.6 * 4M + 0.4 (-2.5) = 1.4M. • Introduce the product? YES. • Would perfect information have value? YES. • Value of Perfect Information = 0.4 * - 2.5M = -1M

  25. 1-4 The Marketing Research Industry • first research firm in 1911: The Business Bourse • 1930s: modern probability sampling methodologies • late 1930's and 1940's: shift to marketing concept, first college courses and textbooks in MR • MR institutions include organizations which use MR, those which do MR for other organizations, and those which do both • main research types • consumer research: study of ordinary consumers • industrial research: study of industrial purchasers (often not the actual consumers)

  26. 1-4fOrganizational Structures • centralized organizations • single corporate research department performs all research • better coordination and control of the research activity • more economical and flexible use of facilities and personnel • decentralized organizations • company divisions have own research departments • more direct and specific interaction with area under study • more specialization to the division's needs and markets • better cooperation with divisional managers Marketing research function is best placed near to where marketing decisions are most often made.

  27. 1-4hProposal Guidelines Include, if available: • definition of the problem • decision objectives • information needs • alternative course of action • personnel qualifications • how the project will be evaluated • project budget • timetable

  28. Examples, performing research: integrity of the data treatment of participants and clients espionage bias subcontractors not held to standards study design errors data not stored securely Ethical Themes in Market Research Ethical dimension not covered by MR methodology -- must be constantly considered by decision-makers • Examples, using research: • deception of research suppliers to take their proposed designs • pressure on researchers to favor personal viewpoint • misuse of statistics • details withheld to make a pet project look better • social context issues, such as pollution, not covered by the research

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