MGT 453 Marketing Research Lecture Notes PDF

Marketing Research Lecture 2: The Processes and Purposes of Marketing Research Professor Landry  Announcement No office hours tomorrow (Jan 16) can still email me with any questions …or ask questions during break normal office hours will resume next week ...

Marketing Research Lecture 2: The Processes and Purposes of Marketing Research Professor Landry  Announcement No office hours tomorrow (Jan 16) can still email me with any questions …or ask questions during break normal office hours will resume next week  Group Project: Coming Up If you want to form your own group and haven’t already done so, have one person in your group email me today with the names of everyone in your group, include all members on this email! For everyone else, I will assign you to a group by the end of the week (no need to email me) once you have your group, pick a topic! ~2 page proposal due in two weeks – see posted guidelines  The Marketing Research Process The Marketing Research Process: Steps 1 to 3 Marketing Research Process: Caveats This is a rough guide… not an instruction manual This could be presented in fewer or more steps Sometimes it may be possible to skip steps It is often practical to follow steps in an order other than how they are presented Sometimes it may be practical to go back and repeat an earlier step Marketing Research Process: Caveats Marketing research can sometimes be a source of creative inspiration and help generate new ideas but unless the manager seeks incremental changes to existing marketing activities, creativity and new ideas are generally best understood as inputs – not outputs – in the marketing research process What’s the Purpose of Marketing Research? Marketing research (broadly speaking) links the consumer to the marketer by providing information for making marketing decisions One common use of marketing research is to evaluate potential marketing actions, such as decisions regarding the marketing mix Let’s consider an example…  + What this is: a hypothetical case → with frequent interjections relating the activity to formal concepts of the marketing research process  A Hypothetical MGT 453 Fruit Service Suppose a local vendor is considering a “MGT 453 fruit service”… For each of the remaining lectures, the vendor would briefly come into the classroom when we have our 5-minute break halfway through class If you pay a one-time subscription fee, you would be given one piece of ripe and fresh fruit during each of these 5-minute breaks (therefore a subscription entitles you to eight total pieces of fruit over the semester) For the sake of argument, suppose the vendor will offer the same fruit – to give to all subscribers at each delivery – during the service period  The previous slide It represents a problem …which is not necessarily a bad thing! Textbook: a problem is a situation that calls for a manager to choose among the decision alternatives. What choice does the vendor need to make? The vendor needs to make two important marketing decisions!  1. What type of fruit will be provided in the service? After consulting with a local supplier, the vendor has narrowed down the possible types of fruit to provide to the following four: a) Red delicious apples b) Bananas These are the decision alternatives c) Navel oranges d) D’Anjou pears 2. What will be the price of a subscription? For simplicity, suppose the vendor has decided to charge an integer dollar amount Therefore, the decision alternatives for this choice are: $0, $1, $2, $3, $4, $5, $6, $7, $8, $9, $10, $11, $12, $13, $14, $15, $16, $17, $18, $19, $20, $21, $22, $23, $24, $25, $26, $27, $28, $29, $30, $31, $32, $33, $34, $35, $36, $37, $38, $39, $40, $41, $42, $43, $44, $45, $46, $47, $48, $49, $50… ………………………………………………………………  1. What type of fruit? 2. What price? However, the vendor lacks information on consumer demand… Textbook: if a manager must make a marketing decision buts lacks adequate information to make that decision, this signals the potential need for marketing research Therefore, the vendor may need marketing research! Establishing the Need for Marketing Research: Additional Guidelines Step 1: Establish the Need for Marketing Research When a marketing decision needs to be made, but the decision-maker lacks relevant information, marketing research may be needed In principle, weigh research costs vs. benefits (information value)  Is Marketing Research Worth It? Example Suppose you’re the marketing manager at Colgate and your company has recently developed a new type of toothpaste Based on existing research, it has a 60% chance of success, in which case it would make a $30 million profit, and a 40% chance of failure, in which case $20 million would be lost You could conduct research (a 3-month market test) for $10 million to find out if the new product will succeed Would you run the test? How much is the information worth?  Step 1: Establish the Need for Marketing Research In practice, weighing costs vs. benefits easier said than done Companies often adopt a policy on when to conduct marketing research Most smaller companies conduct marketing research on “as-needed” basis P&G conduct marketing research whenever considering a new product Coke and Pepsi regularly conduct marketing research on product sales...  Sources of Marketing Research Problems Marketing research is used to solve a specific marketing problem, which can refer to any situation in which a marketing decision needs to be made What are the sources of marketing research “problems”? 1. Not meeting objectives, e.g. failing to meet a sales target 2. Opportunities to meet a customer want or need in a new way What about routine, pre-scheduled marketing research tracking market performance of marketing-mix elements (or of the marketing environment)? Essentially a form of marketing research used to identify/detect marketing problems that may require further marketing research  Sources of Marketing Research Problems 3rd source: belief that traditional marketing problems worth pursuing are waiting to be found e.g. belief that sales can always be improved upon, that new marketing opportunities always exist In this case, the problem marketing research is meant to solve is finding the “real” problem  When not to do marketing research? Costs outweigh the value of marketing research The information is already available An effective marketing information system (MIS) can save a lot of $! Insufficient funds Not just to carry out research, but also to follow any recommendations Timing is wrong E.g., need to act quickly (not enough time to conduct marketing research); may want to “wait and see” in a rapidly evolving market  When not to do marketing research For very new products or ideas unlike anything already on the market, it may be premature to conduct marketing research In these cases, consumers may need more experience or familiarity with product to fully know their own preferences Therefore, if the goal is to understand consumers’ preferences, there may be a limit to what the researcher can learn http://retrothing.typepad.com/photos/uncategorized/appleii.jpg  we already identified a “problem” …but this is not the same as defining the problem  The step of defining the problem has multiple sub-steps One important sub-step is formulating a problem statement Problem statement: a concise description of the problem or opportunity that management is facing, which may need marketing research to make a decision  Formulate problem statement Problem statement: a concise description of the problem or opportunity that management is facing, which may need marketing research to make a decision Another sub-step is specifying the decision alternatives we already pointed these out…  Specify decision alternatives For the choice of fruit… For the choice of price… Specifying decision alternatives early in the research process helps: Guide research design to effectively obtain the information needed to choose among decision alternatives Ensure the manager knows what to do after research is complete Ensure marketing research isn’t being conducted for the sake of it Research objectives specify what information the researcher must produce to allow the manager to solve the problem defined in step 2 fully establishing research objectives is usually less of a “step” and more of an ongoing “process” that begins immediately after step 2 and is continuously formulated in conjunction with steps 4, 5, 6, 7, and 8 eventually, a formal “research objective statement” should be written Begins with two key questions: 1. From whom will the researcher collect information? 2. What kind of information will be collected? 1. From whom will the Sample research objective: fruit vendor collect information? “to measure MGT 453 students’ demand for a fruit subscription 2. What kind of service at various price points information will the and for different types of fruit.” fruit vendor collect?  Now suppose YOU are the vendor… The fixed cost for operating the service is $50 The unit cost per subscription is $2 your objective is to maximize profits…  Without marketing research… Which fruit would you choose for the service? How much would you charge per subscription? What can we learn from marketing research? …to begin, we can use the data to graph the demand curve for each type of fruit With marketing research… We can also determine which combination of fruit type and subscription price would maximize profits given demand… How valuable is marketing research to the vendor? One common use of marketing research is to evaluate potential marketing actions, such as decisions regarding the marketing mix Fruit service example: focused on price and product Product-focused research known as “Product Research” Price-focused research known as “Pricing Research” One common use of marketing research is to evaluate potential marketing actions, such as decisions regarding the marketing mix …or segmentation, targeting, …or branding decisions and positioning decisions e.g. selecting target markets  (Other) Purposes of Marketing Research Generate, refine, and evaluate Monitor marketing performance potential marketing actions 4 P’s Tracking sales of product Selecting target markets Tracking buzz on social media Branding decisions Identifying marketing Improve marketing as a process opportunities and problems Basic vs Applied Research …and doing so before the Often conducted by academics… competition  Marketing Research: Why Bother? Not doing marketing research can be very costly New products often introduced without adequate marketing research, then taken off the market because they fail to meet expectations It’s really hard to $250 billion spent on 34,000 new products each year come up with a new product that 75% of new product ideas never make it to the shelf will succeed in the marketplace! 80% of the new products that succeed in making it to the shelf are discontinued in two years or less Source: Schneider/Stagnito Communications Survey  Marketing Research: Why Bother? This is not just an issue for new product development – new businesses are often pursued without adequate marketing research, often leading to failure 80% of restaurants fail within 5 years of opening source: Cornell Hospitality Review and it’s not just small, inexperienced businesses… UNDESIRABLE LOCATIONS: failed to recognize that Zeller’s old store locations were inconveniently-located for middle-class target customers and widely viewed as “dumpy,” diminishing Target’s image among Canadians NO WEBSITE: Target Canada underestimated consumer interest in a website UNRESPONSIVE TO COMPETITORS’ SALES: inattentive to Walmart’s aggressive price discounts upon entry, failed to respond with sales of its own HIGH STICKER PRICES: higher prices than in US stores – 70 percent of customers had been to a Target in the US and were expecting similar prices PRODUCT OFFERINGS: did not sell many of its products sold in US stores, leaving customers who were expecting similar products dissatisfied STOCK-OUTS: Target was slow to recognize and respond to inventory needs, which undermined its one-stop shopping appeal among customers INSUFFICIENT DISTRIBUTION RESEARCH? INSUFFICIENT PRICING RESEARCH? INSUFFICIENT PRODUCT RESEARCH? “Empty shelves and higher-than-expected prices may have been contributing factors to Target’s failed Canadian expansion, those are simply signs of a greater lack of understanding about the Canadian consumer and marketplace.” “Target’s failed foray into Canada demonstrates the value of deep customer intelligence before and when entering a new market.” “Companies should see Target Canada as a cautionary tale. Today’s retailers need to truly understand their customers—not just what they are buying but why they are buying. Customer intelligence has never been more critical.”