Marketing Research, 11th Edition David A Aaker Solution Manual by Ace Test Banks

Marketing Research, 11th Edition By Aaker, David A., Kumar, V., Leone, Robert, Day, George S. published by Wiley

Email: Richard@qwconsultancy.com

PART 1 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 in an organization. Comprehend how marketing intelligence fits in 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 and use of Marketing Research Comprehend how Marketing Research fits in the bigger schema of marketing environment 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 of 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 Figure1-1 below to highlight the increasing importance of concepts such as Business Intelligence and Marketing Intelligence. It is important to upfront educate the students on 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.

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

Some Guidelines Based on the new material added in the 11th 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, often times organizations are not aware that valuable information 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 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. Before delving further into marketing research, instructors should refer to Figure 1-1 adequately 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. The 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 include: (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 products of fashion items, (f) new product concept and market testing, (g) studies of the effectiveness of media advertising (television and local print advertising) (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 ad 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 the organization can 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 can 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, customer research on why they 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 served market segment 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 into this question 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. Surveys of customer preferences for combinations of features are useful here. (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. 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.

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 with an ethical dilemma are: •

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

•

The need to code respondent answers for subsequent analysis vs. promising anonymity to the respondents;

•

The trade-off between gaining respondent cooperation and revealing the true duration of a lengthy interview;

•

Withholding information on the purpose and sponsorships of the interview in order to ensure respondents answers remain unbiased;

•

Misrepresenting the compensation or not mentioning to a respondent that a follow up interview will be made in order to gain cooperation.

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-run 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 level in the organization with responsibility for these requirements.

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.

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? 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.

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 help make decisions in the following areas: segmentation, product, distribution, advertising and promotion, personal selling, price, branding, customer satisfaction. 9. From the sponsor’s point of view, it depends on the purpose for which the research was initiated in the first place. If the very purpose of the research is for an unethical purpose like publishing false or highly exaggerated advertisements, a written code of ethics cannot stop the sponsor. Sponsors could also use research as a tactic 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 supposed to be 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 grabbing off 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 99year 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—that certain something that makes a consumer keep buying over and over again—is an exclusive quality. 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. But when a branded product has been around along time and is heavily advertised, it can pick up 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. 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 mis-step. “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. 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 systems for measuring it. 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 has 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.

Teaching Notes for Cases

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 kids and among kids, 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 kids’ 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 market is a potential one.

b. Competition: Several companies were mentioned as Firefly’s competitors. Among them 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 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 kids. Consumer behavior: a. What and why customers buy a product: Obviously parents buy cell phones for their kids 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 preteens 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, kids’ tendency to lose their belongings, and even cell phone ban in classrooms. Manufacturers and service providers can familiarize themselves with all these issues through appropriate 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 1. Allow the students to appreciate the business decisions behind 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 thereby 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 local demographics. It lures high spenders by stocking more merchandise, offers right products to the relevant segments (e.g. pricey home-theatre systems to upper income people), and offers more service options. To keep the undesirables away, the company cuts back on promotions, enforces 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 costs. Early results indicate that pilot stores [those applying the stated segmentation scheme] performed far better than conventional ones, 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.

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 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 general 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 researcher-subject 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 and is Copyright 1987 by C. Weinberg.

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 appear too 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, and (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? 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 proceed as requested. 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, the end result is a 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 end 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 not in marketing research but in advertising, if the advertising agent knows of the misuse. 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 engage in a discussion on whether this practice is ethical or not. Then, ask the students what they think are other ethically questionable practices corporations might do. With regard to the dilemma itself, a first issue is how do the students verify what information have 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? 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 done in 19701. The three scenarios listed in Figure 2-1 (below), 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 over the past twenty years, though in different directions. 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 the drug epidemic. 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 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.

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 name, Media Research Institute. This successfully camouflaged the identity of X company as the sponsor of the study."

30b

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."

26b

3. 'The National Marketing Advisory Council 39 20b (formed of top marketing executives ant 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 inner city appliance prices are significantly higher 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. c

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

PART I 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 disseminate usable information to the managers who use it. 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. The marketing information is of three types: Recurring information that is obtained on a day to day basis, Non recurring 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, impending product launches by the competition is 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.

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. Hence 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.

the

It should be made 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 study in Europe. The manager should go through all of the above mentioned steps before deciding on the research firm for his study in Europe.

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.

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.

*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 a research is mounted, 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.

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 they 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 check-out 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 opportunity for students to learn about innovative practices in marketing (which should spark a lively discussion on its own) as well as begin to appreciate the challenges of doing relevant research in an uncertain environment.

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 support for U.S. universities has never been so strong and many campuses have sports facilities which are outdated and have been poorly maintained. But 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 longrun 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 last; 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 group s 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.

•

2. The previous class ends with the instructor presenting the "framework for market selection" and then students work 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 as an introduction and then a follow-up case where the problem has an implementation focus rather than this first-cut selection one. Using the framework for market selection helps provide a theoretical model for the export market selection decision. Market information gathering must first be focused by the assessment of the firm s unique competence 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 on 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 buyer does not have ability to see/experience a physical product in advance; and • past experience with joint ventures (so could export or joint venture to “distribute” service).

Weaknesses?

• industry subject to extreme volatility; • 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 US market as being similar to Canada. In answer to this question they may come up with the following possible questions that will need to be addressed before they can move to establishing criteria 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: Climate—S/M designs are climate-specific. Their expertise eliminates markets in tropical countries for example.

Affluent society— The designs are for the “premium” end of the market. Students should develop a sense of a minimum acceptable GNP or other income measure (in the case of a dual economy) for inclusion. 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 get the students to think about appropriate evaluative criteria e.g. a market with at least the size and population of Atlantic Canada a similar or faster growth rate more baby boomers per 100 000 population and so on so that they can make a first elimination of all possibilities. It may be that the most important criteria are the number of hours flying time or flight connections to the target market if they decide that a high service export strategy is appropriate. 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 which can be accomplished with judicious use of the trade commissioner service and the consulate in Boston. They will need to identify municipalities and/or universities in the region and the state of their existing facilities. Epilog Sperry/MacLennan decided that it was important to get their CADD capabilities up to a competitive standard before entering the U.S. market and focused their energies on this during the fall of 1988. They concluded that they should enter the US. via a joint venture given their previous experience with this approach their limited financial capability and market knowledge. A joint venture would enable them to retain technical control over their expertise and prevent diffusion of their special knowledge in the recreational field.

Mitch Brooks took advantage of the New Exporters to Borders Staff program offered by the Department of External Affairs now External Affairs and International Trade Canada to learn about exporting and visit the Boston market in September of 1988. He found that a second visit would be necessary to collect all the information the company would need for planning purposes. Meanwhile the American Institute of Architects in spite of their support for the Canada US. Free Trade Agreement refused to work further 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 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 Nova Scotia s south shore. 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.

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 is going to bring a taste change whenever it plans to do so.

PART I 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.

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).

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

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

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.

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.

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 fled 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 republican voters satisfied 2. On what issues is Romney vulnerable 3. What are the key issues?

Hypothesis 1. There is dissatisfaction with Mitt Romney (only 57% are satisfied). 2. Is vulnerable on foreign policies. 3. At least one issue that Romney 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.

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, (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?

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.

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?

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.

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.

(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

(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. 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 is the strategy 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.

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.

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 accepted totally 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.,

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

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.

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.

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.

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

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.

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

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.

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

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.

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. 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. 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. 5

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 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.

PART I 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.

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

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

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:

“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.

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

***

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.

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.

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.

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

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.)

How long have you lived at this address?

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

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

(Specify)

When?

Yes No

1 2

(Specify)

Yes No

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?

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

Other (specify)

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.

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

Q-9c

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

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 ?

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

l 2 3 4 5 6 7 8 9 10 11

Often Occasionally Seldom Never Don't read TV listings

1 2 3 4 5 6

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

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

Q14 Why do you not have cable TV now? (do not read list unless respondent Billing problems w/ Cable Co. 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?

Antenna Cable Rabbit Ears Other

1 2 3 4

Antenna Cable Rabbit Ears Other

1 2 3 4

Yes No

1 2

(Specify)

Cost of Cable TV Reception no better w/ cable 3 Poor customer service/repair Ordered it—no one installed it No one ever asked Didn’t know who to contact Never thought about it

1 2 4 5 6 7 8

(Specify)

Yes No Don’t know

12 2 3

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?

Yes No

1 2

(Specify) (Specify)

1 2

(Specify)

Own No

1 2

Yes Number No

3 4 5

Yes No Yes No

6 7 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. 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.

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 the third world countries. Therefore, the product has to be defined differently in the third 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. While in some countries, purchasing manager could make the decision to buy computers, in some 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, exceeds the value of information then the company would do well to shelve the project. 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 through 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?)

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 Valu 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.

• 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.

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.

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 upto 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, but for Brazil. In order to conduct market research there, it is necessary for the translator or speaker to be aware of the nuances that exist within 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, it does 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 of the 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 to that in the United States where it 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, and development of direct marketing activities in each Latin American country. 4

This 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, and the local newspapers and magazines in the respective countries. 3) Dell should build a full-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.

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 them into long-term customer relationships Turn potential opportunities into profit Measure, evaluate and fine tune marketing plan's performance

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 researches to profile its shoppers in different geographic locations and 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.

PART II SECTION A 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.

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 the new North American Industry Classification System (NAICS) to the students, 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)

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 compare directly 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 for 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 is 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 and Public.

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

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? The 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.

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 get 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 – Is there any free version 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/

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.

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,

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

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.

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 can be explained by demographic variables.

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, it can 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 the educational institutions from government published sources. The number of teachers in any geographic segment can be obtained from the census data. Using rule of the thumb and experts’ advice, the number of transparencies per teacher for a time period is calculated, multiplied with 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 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.

By using secondary data, Educational edge can initiate a lot of savings in cost, effort and time. In this case, it would neither be physically nor financially possible for Educational edge to conduct a primary research to obtain 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 tested later through primary research. Secondary data sources can help Howard to assess market opportunities in countries that 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 macroeconomics data, based on various sources like 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 in there. Howard should also check for private published sources to obtain industry relevant information.

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 various values for the same indicators due to different definitions followed 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 also highly variant between countries.

7. From the EIS Industrial Plants or EIS Manufacturing Establishments obtain information about any one industry. This can be done 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.

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

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) was 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 S.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.

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 normalcy. 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 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 soups 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.

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.

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

$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

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, that 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

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. Manufacturers will be able to analyze, using robust data, such detailed information as brand performance in stores stocking their product where a two color store flyer is present supported by an end-aisle 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 training 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 outstandingly good. 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.

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 which are vastly richer than that which were available S10 years ago. Getting the 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.

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. But 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 on the basis of 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 customer 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. 9

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.

PART II SECTION A 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 fairly recently 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 butter 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.

This problem illustrates the way managers can use scanner data to analyze the effectiveness of their advertising vehicles. It 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.

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.

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 the 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.

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

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 like 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 in various levels. It 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 the data. From the data

available for various experiments, the management should be able to pinpoint the deficiencies in its point of sale and improve them. Alternatively, Wash O'Well could use the diary panel method to study the 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 can be done 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 their own 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 wherein the panel member permits an auditor to check the household stocks of certain product categories at regular intervals. All the used cartons, wrappers are all saved up 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 very prevalent in the U.S.

The advantages and disadvantages of using a consumer panel is discussed in Question

6 (b).

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 checkout provides 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.

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 protectability, 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.

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).

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

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

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:

Store movement and consumer dynamics are measured together by market.

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.

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)

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 the 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) The average number of home care visits (for patients of all ages) has increase more than 40% between 1992-97, rising to 74 visits per patient from 52, according to HCFA. 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 are to 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 on 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. This 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.

Overview: Pediatric homecare is a rapidly growing area in home health agencies across the country. Programs that combine quality patient/family care while 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 be to 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 and 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 is 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 225,000 home health aides, but in 1995 there were 579,000 of them. After gathering country specific information to substantiate the above mention 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)

PART II SECTION A TEACHING NOTES FOR CHAPTERS CHAPTER SEVEN MARKETING RESEARCH ON THE INTERNET Outline of Chapter ▪ Give 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 a wide variation among the students regarding familiarity with Internet, it is useful to ask the students about their Internet experience and how much they have researched 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 industry. Data on market size, trends, major players, etc. can be obtained. This chapter can only be taught by assigning students at least two Internet related projects. Students can enhance their learning by using the available resources themselves. Google Analytics is fairly new and not many students will be familiar with using this. A short assignment on that would be useful. 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 a distribution list. This distribution list should be the e-mail list of friends or classmates. Also, the questionnaire could 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 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 out information about competitor activities is an important task for businesses, students should be encouraged to find out 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 also be accompanied by an awareness of traps like identity theft, as well as other piracy and privacy issues.

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 enter all the relevant parameters (departure city, arrival city, number of persons, day, time, preferred airline, etc.) and the site retrieves the information immediately for no charge.

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.

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-like 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. At any rate, the discussion should duster around the following questions. As each appears in the discussion, the class should be encouraged to pursue it. 1. What is the research purpose? To help develop the marketing plan. 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 into basic problems. Broader questions provide the potential to gain valuable insights into the customers’ situation and problems. 3. Focus groups vs. individual interviews. 1

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.

People 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 the time spent. 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 a context. If the discussion starts with telecommunications equipment and even involves specific vendors then the 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. 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 them. 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 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. It 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 a bit 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, a set of at least ten might be needed from each. 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.

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 taut 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 like the following might 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%? 2070? 30%? The case was stimulated by the research of Robert Ferber reported in the Marketing News of March 24, 1978.

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 good 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 reveal how a 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.

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 card 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 group represents only a small and sometimes biased sample, so it could not provide a very reliable forecast. A better forecast could be obtained through quantitative research.

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

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. With a view to expand to Mexico and Europe with a new product line, Hamilton Beach, a wellknown U.S. maker of small kitchen appliances, conducted qualitative (and quantitative) research in Mexico to determine brand awareness and acceptance, desired product features and distribution channels. Focus group study was used in Europe to get consumers’ idea about the product. 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 can apply to achieve the research objectives in this case and explain the reason and/or pros and cons of selecting such 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 idea about the product rather than any 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 selected, and given the focus group’s small size and European diversity, it would be inappropriate to conclude that the focus group was representative of the population. But the outcome of the focus groups at least gives a rather good 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 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, however with their own advantages and disadvantages.

PART II SECTION A 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 -prone to measurement and bias and misinterpretation

-more systematic -structured -descriptive -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, and 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 very complementary, Also, the survey provides 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 students’ 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 telephonic interviews and the situations that warrant a telephonic interview. The instructor should stress the essential requirements of telephonic 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 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.

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 end question format with 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.

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. (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.

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?

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, for 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) to pursue 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.

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 explanation of focus groups and in-depth personal interview, in detail. 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. Then, the research purpose is 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. Of late, electronic focus groups have started gaining popularity. In an electronic focus group, the participants type out their responses on a computer terminal and the responses are monitored by the moderator. Focus groups are of three types: * Exploratory focus groups are commonly used at the exploratory phase of the market research process to aid in the precise definition of the problem. * Clinical focus groups are wherein the moderator probes under the level of consciousness of the consumer to obtain a person’s true motivation and feelings. * Experiencing 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 to respond. 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 enough room for the interviewer to pursue unexpected facts or attitudes that might come out during the interview.

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 come out with their solution that could fit in with the researcher’s needs. The discussion can be centered along the following lines: * * * * *

Whether group interaction may stimulate new thoughts from the 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 being covered. The topic in question is sensitive and it requires an effective moderator to discuss their feelings, anxieties and frustrations as well as the depth of their conviction on relevant issues. The moderator should establish a rapport quickly with the participants and address the group in simple language. The moderator should be flexible so as to uncover certain interesting points but should also revert the discussion back on track, in 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 a chance to express themselves on the subject.

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 can be developed 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. * * * * * *

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 like Peer pressure, Fear of life, 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 case of complaints? Do the students brandish the weapon(s) only when provoked or even 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 some other language. The choice of an interpreter should be done with care. 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 communicated in another language properly, it creates a special problem in translation. Apart from this, the cultural factors have to 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.

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 a systematic observation involves looking deeper and noting things that are missed by the casual eye. However, observation becomes the only research alternative in some cases. To obtain insights into search behavior and related issues, direct observational methods are used. In this method, an observer disguised as a shopper watches the 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. Also, care should be exercised that there is no invasion of privacy. To obtain insights 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.

The purpose of the pretest is to match the expectations of the researcher in terms of the information that will be obtained from the questionnaire. The objective of a pretest is to identify the 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, if they justified their place in the questionnaire. At the macro level, the entire questionnaire should be examined to see for the flow of questions and to check if the questionnaire captured the research objectives. A pretest can identify problems in the questionnaire, which if left uncorrected could lead to erroneous conclusions. Hence, it is always better to pretest as it adds to the enhancement of the quality of the research study.

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 brig in more support. 10c. Observational methods will be very useful in this circumstance. It will help the designers if they know what rides attracts visitors the most. They would also be able to gather by observation the age profile of visitors who are attracted to different rides. His 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 give the company an idea as to which packaging attracts customers the most when the product is placed on the shelves at retail outlets.

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 _______.

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 that 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 lab 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 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 1987 by C. Weinberg.

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. 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 ultraviolet 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 nor 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. 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. 3

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? 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 to provide 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. ___________________ 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).

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)

57c

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.

PART II SECTION B 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 venous 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) that 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.

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

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 for the respondent to use. In both types of interview, the interviewer can bias the results through selective listening, probing and 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 a 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.

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.

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.

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/ 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.

Observational method is limited to obtaining information on 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.

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 for further details or developing on a line of questioning can be useful. This is especially true in case of sensitive subjects, though there is a school of thought that believes 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 greater degree of control obtained with a sample 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 close 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.

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 workmen * Company's interest in the employee welfare and commitment to good life of employees * Workers' attitudes towards job security and intrinsic job value

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.

It should be highlighted that the students should not assume that the conditions in the rest of the world are not 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 should it 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 categorize 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. It 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, 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 as accuracy of the responses diminishes with increase in questionnaire length, owing to reasons like 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.

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.

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.Each 1 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 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. 1

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.

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.

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.

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 dearer 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.

The greater the degree to which the interviewer actually carries out the role demands, the lower the relative response effects will be.

The greater the saliency of an interviewer's extra-role characteristic for the question being asked, the greater the relative response effects will be.

The better motivated the respondent to perform his task of providing information, the less the relative response effects will be.

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.

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.

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).

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%. While 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.

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.

Teaching Notes for Cases Case 10-1 ROLAND DEVELOPMENT CORP. Introduction

To exploit the growing Texas, Arizona, California, and Oregon market for condominiums arid townhouses, the company has added four new higher-priced models to their previously limited product line. Their problem is to decide how best to position the new models in a highly competitive market. This requires identifying the market segments with the highest probabilities of purchasing the new models, and then formulating a creative strategy that would do the best job of positioning the new models. The case is useful both for providing experience in evaluating a research design that is proposed by the research supplier, and introducing a variety of data collection methods. The challenge for the students is to decide whether a totally different research design could do a better job of achieving the research objectives, and if not, whether the proposed design needs to be modified to do a better job of identifying qualified prospects. Teaching Suggestions Students should first carefully identify the research questions that Roland management needs to have answered. After having done so, they can then look at the research proposal with an eye toward evaluating whether or not it will result in the needed information being made available. For example, they might review ways of measuring different market segments to see if some other method might be more appropriate. They might also ask if “qualified prospects” have been properly defined or, more generally, if the pertinent universe has been properly defined. The case refers to identifying “segments--with the highest probability of purchasing the new line.” Students should discuss and describe this term in relation to whether or not such information can be obtained through market research and, if so, how. By defining the information they feel is needed and comparing that with some of the things they see in the research proposal, students can begin to see whether or not the proposed research will yield useful results. Research Design Students should ask if there are any research design alternatives to the three-phase mail and telephone approach suggested in the proposal. When the universe is small in comparison to the population as a whole, it is not practical to draw a probability sample from the entire population. Thus, the proposed approach appears to be well tailored to the fact that the market for the new line is relatively small. Students might try to identify research design alternatives by trying to identify how it might be possible to draw probability samples of upward mobile homeowners or renters who have the needed financial resources as well as favorable attitudes towards condos and townhouses. The resulting research designs should be evaluated in terms of how effective they are likely to be in gathering needed information.

Data Collection Approaches With respect to the three phases of the proposed research, students should ask if Phase 1 will result in a sample of respondents which is representative of all those families likely to buy a modular condo or townhouse within the next few years. They might ask the research supplier to provide evidence which shows that the individuals selected in Phase 1 are representative of the universe as a whole. Of course, this issue- applies to each of the segments. A useful question at this point asks how one could be sure that the hypotheses of Roland management about their target market are correct. This brings out a major deficiency in the proposal, which is the lack of exploratory research. What is actually known about recent buyers of condominiums, for example? Given California lifestyles it is unlikely that nuclear families are the only buyers. This counter-hypothesis could be checked by interviewing recent buyers or perhaps it would be better to intercept prospective buyers who are visiting new condominium or townhouse developments. This kind of information is necessary to assess the potential for bias in the YKG bank of 200,000 families. Perhaps they are only partially representative of the target market. Some questions might be raised with respect to Phase 2, especially the use of telephone interviews when trying to obtain “reactions and impressions” and other qualitative data. Ordinarily, telephone interviews do not provide qualitative data as good as that obtained from personal interviews. This may not be true in this case, since respondents have agreed to cooperate. Students might also ask if the qualitative data obtained in Phase 2 should be broken out by segments to see if each of the different segments might be suggesting different creative strategies. If so, Phase 3 of the proposed research would have to be modified accordingly. An interesting question is whether focus groups might either replace or supplement the telephone interviews. There are obvious logistical problems to be overcome if six or eight of the “qualified prospects” are to be brought together in the same place. But, because the objective is to identify themes that can serve as the basis for an advertising message and creative platform, it could be argued that there should be current occupants of condos and townhouses (and especially recent buyers) in the groups to add both diversity and insight. A drawback of someone who is only a fair prospect is that he/she is unlikely to have given much thought to the features that really are appealing. Only when they are actively in the market are they likely to be able to specify what they are looking for, and have enough experience in visiting developments that they can confidently compare the proposed new models to those presently on the market.

Several issues might be raised in regard to Phase 3. One issue is whether or not the sample size is large enough. With a sample of 2,400 and a research design consisting of 12 cells (3 segments times 4 creative strategies), the sample size in each cell is 200. Is such a sample size sufficient if further breakouts are desired? (What may they be?) The second issue is whether the sample size in each of the three segments should be the same or whether the larger and/or more important segments should have larger sample sizes. Finally, there is a fundamental question of whether all four advertising themes need be tested in this manner, or whether two or three would be sufficient. Some of the advertising testing procedures described in Chapter 21 could be mentioned here. They would certainly be cheaper to use and will probably yield better diagnostic insights. Thus, all four ad themes could be tested quickly for communicability, etc., and the best features of these four combined to create two very different advertisements that could then be tested with larger samples. Analysis For each creative strategy, Phase 3 will measure the percentage of respondents rating the new line as (1) most appealing, e) attractive enough to write for more information, and (3) the brand they are most likely to purchase. One important issue is how these three percentages will be used to compare creative strategies, both for the study as a whole and for individual segments. If the three percentages are somehow combined into a single measure of effectiveness, there is the question of whether each of the three percentages should be weighted equally or whether disproportionate weighing should be used; e.g., 1 for “most appealing”, 2 for “write for further information”, and 3 for “brand most likely to purchase.”

PART II SECTION B TEACHING NOTES FOR CHAPTERS CHAPTER TEN INFORMATION FROM RESPONDENTS: SURVEY METHODS

Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪

Introduce the different kinds of survey methods Discuss the survey methods and describe the process involved in each method Enumerate the advantages and disadvantages of the survey methods Discuss the future trends in survey methods Introduce students to e-Surveys Elucidate the problems faced by the researcher in conducting international surveys

Teaching Suggestions This chapter on survey methods has been written with a practical orientation. This chapter should be taught in conjunction with the Chapters 8 and 9. The different kinds of survey methods and their advantages, disadvantages and limitations are explained in detail. The instructor can provide an overview of these methods, in a lecture format. Trends in data collection methods. Estimates in 1978 by Walker Research were that primary research interviews were divided as follows: telephone -shopping center interviews 55 - 60% door-to-door 20 - 25% personal interviews 10% mail surveys 10 - 15% Internet surveys are becoming increasingly popular and they probably steal share from mail surveys. This edition of the book offers information related to nature of the e-surveys. Key problems of the esurveys such as users changing e mail addresses frequently, need for continuous monitoring , difficulty in translation, possibility of lower response rate and hence the statistical value are to be highlighted to the students. These results can be given to the students as the basis for a discussion of the factors underlying the shift to telephone surveying. This can be used to provoke the students into identifying the present day trends in surveys. Table 10-1 in the text gives the comparative indices of direct costs per completed interview that should give the students an idea of the costs involved and how budgets can determine survey methods. Questions and Problems 1.

The Purchase intercept Technique is ideally suited to this type of research question. Shoppers are more likely to be able to articulate the reasons for shopping at a particular retail store when they are in the shopping environment. Mall intercepts could also be used but this would yield only general shopping information and not data specific to a particular retail store.

A respondent’s willingness to participate in a research study may be affected by his perceptions of surveys, the survey sponsor, the interviewer, the data collection method or the survey subject. Increasing response rates require motivating the respondents to cooperate through some reward which may be tangible or intangible. Students should be encouraged to think of cost-effective ways to increase response levels. The supplementary article included at the end of this chapter by Donald M. Fitch could serve as a starting point for a class discussion on this issue.

For obvious reasons there has been very little research on the effects of very large incentives. The general feeling is that the incentive should be a motivating tool rather than full compensation for time spent. The appropriate size of this motivation will depend on the situation: a $5.00 gift certificate will be necessary for a mail diary panel where the respondent routinely records a large number of details for each of 50 or so purchases. On the other hand, that would be quite inappropriate for a modest 2-3 page mail questionnaire.

The appropriate actions during the first 30 seconds of an interview which will maximize the response rate are roughly the same for both telephone and personal interviews. (a) establish credentials, to allay fears that the survey is a disguised sales pitch or that a credit/tax check is being conducted. This is easier to do in a personal interview where documents can be shown. (b) build rapport by sounding warm and enthusiastic and avoiding any mention of threatening words that might indicate a sales pitch. Avoid an introduction that sounds mechanical and rehearsed. (c) give the reasons for conducting the survey in a way that is meaningful to the respondent. Don’t just say, “May we ask you a few questions?” (d) if the respondent sounds doubtful or hurried, find out if there is a better time to conduct the interview and make an appointment, and finally, (e) give a realistic time estimate.

The telephone prenotification approach has relatively few disadvantages other than cost (relative to imply sending out a mail questionnaire), the need for a sampling frame with telephone numbers, and the possibility of sample bias because of the frequent need to compromise with a frame that does have numbers. For example, the appropriate frame may be readers of a special interest magazine. However, the subscription list only gives names and addresses. If it is desired to use this list, then telephone numbers must be obtained from directories or information operations, which is not only time consuming but will miss all subscribers with unlisted numbers.

This assignment is made difficult by the very sensitive nature of the topic. If there is any question in the respondent’s mind that the results could be used against them (i.e., to discover which houses in a neighborhood were vulnerable because of a lack of protection devices), then they will simply not return the mail questionnaire. The cover letter should emphasize the reputation of the sponsor, clearly indicate the purpose of the survey and emphasize the lack of identification questions that would permit a trace of the answers to a particular house. A good procedure during class is to have several cover letters read and critiqued, as the basis for preparing a more suitable cover letter.

7a. There are many ways of looking at this problem. The fundamental step is to identify the uses of this chemical and also the user of this chemical (intermediate or industrial user) and identify the end-user. The industrial user is the likely purchaser of this chemical. The survey could be conducted from the industrial user’s or the end-user’s perspective to assess the market potential of this chemical for various uses.

To identify various uses, the research firm could carry out a survey amongst the R&D scientists and production managers of select companies to identify the possible uses. The companies chosen could be drawn from a gamut of engineering and chemical industries like Automobiles, Aircraft industry, Kitchenware, to name a few. From this, a list of possible uses can be drawn up and the potential for each use arrived at. The chemical firm can target the most profitable segments depending upon their capability. Assuming, that kitchenware manufacturers find this chemical extremely useful in the manufacture of their utensils after a test production run, then the survey could be done to elicit the responses of the industrial user. From their estimated production for the next few years, the chemical consumption can be worked out and hence the total potential can be determined. Also, the enduser can be contacted with the survey on how many of them would purchase this type of kitchenware and at what price levels. This can also give a fair idea of the potential. This information collected from the endusers can be used by the researcher of the chemical firm to identify the buyer’s perspective and armed with this knowledge, they can contact the kitchenware firms for their business. b.

In case of contacting the R&D and production personnel of various factories, in-depth interviewing through the use of a questionnaire is a possibility. However, executive interviewing is a costly affair in terms of time, effort and money. It is difficult to schedule interviews because of the presence of gatekeepers and also because executive time is hard to get. The distinct advantage of a personal interview is that information received is of high use because the respondents are quite knowledgeable on the subject and hence various lines can be pursued. Mail interviews cannot be done. Telephone surveys can be tried but it is difficult to fix up a telephone interview with a busy executive and due to the fact that it is impersonal, conducting a long interview may be difficult. Focus groups are an excellent alternative but assembling a group of qualified professionals is tough. It is therefore best to choose a personal interview method.

The students can be asked to design a survey and obtain the desired information. The suggested outline for the process is to identify the respondents whether they are factory personnel or end-user of a particular product. Also, identify the technique to be employed for data collection, as instructions vary with various types of method employed.

The type of method is to be identified and the respondents are to be identified. The costs can be calculated using the comparative indices of direct costs per interview available. This will give the firm an approximate idea of the costs involved.

All the educational institutions are connected by the electronic mail facility. It has become common practice for all professors to include their e-mail addresses on their correspondence. The e-mail has become an excellent mode of communication in terms of economy of time and money and also because of its flexibility. If the e-mail addresses of professors are not known, they can be found out. The researcher can send his questionnaire to the respondents’ computers and get their responses back directly without any human interference at all, thereby reducing the errors committed in the surveys. Email surveys will be a very effective and popular survey method in the future.

In a computer interactive interviewing, the respondent sits before the computer and responds to the questions as they appear on the screen. The responses are directly entered into the computer by the respondent. The advantages of computer interactive interviewing over traditional interviews are many. It eliminates the use of paper and pencil as used in traditional interviews. It reduces the respondent bias by not allowing the respondent to compare his or her responses with the responses to previous questions. The coding and verification details are greatly simplified and the data can be readily used for analysis purposes.

10. Conducting research in developing countries has its own advantages and disadvantages. Various factors have to be considered while conducting research in a developing country. Wage costs are typically low in the developing countries and hence the costs can be kept down. However, the availability of skilled research staff is scarce and hence training of the staff becomes important. Developing countries are also typically marked by low levels of telephone ownership, poor communication facilities, absence of mailing lists, poor mail services and high levels of illiteracy. These are some of the problems faced by an international researcher in conducting research in the developing countries. 11. The students should be made to identify the research purpose and the respondents to be surveyed. This will eliminate some methods that are not relevant to the objective being studied and a shortlist of survey methods can be arrived at. In order to identify the optimal survey method in each of the countries, the students should be made to draw up a checklist of the important factors to be considered. This will help in the process of identifying the most suitable survey method. For instance, let us assume that a washing machine manufacturer wishes to capitalize on the economic boom in India and plans to launch his or her range of products in the near future. The manufacturer wants to identify the various aspects of the decision making process of the consumers in the purchase of a washing machine. The respondents are middle to high income groups with equal proportion of men and women. In this context, after consideration of the costs involved in using questionnaires through intercept method, mail survey or a telephone survey seem to be the ideal method. Low levels of telephone ownership in India, poor communication facilities, and high costs make telephone surveys unviable in India. With respect to mail surveys, absence of mailing lists, reluctance of respondents to respond by mail may make a mail survey not so attractive in India. This leaves us with the option of the questionnaires administered through intercept method in upscale consumer durable stores which is suitable in India. 12a.A mail survey is a process involving a series of difficult decisions regarding the identification of study participants and the interview package that consists of an outgoing envelope, cover letter, questionnaire, return envelope and incentives, if any to be used. Any problem on anyone of the above mentioned factors could lead to a low response rate or incomplete responses. Ideal Idaho should have a broad identification of the individuals to be sampled before commencing the data collection exercise. Mailing lists have to be precise, failing which the mail surveys do not serve their purpose. The questionnaire should be concise, well laid out and unambiguous in order to get high response quality. The cover letter is an important component of a mail survey. It should clearly state the objective of the survey and seek cooperation from the respondents. It is prudent to attach a honorarium with the cover letter and the questionnaire as an incentive to ensure that the customers respond to the survey. A pre-addressed, stamped envelope should be enclosed so that the respondents send back the survey. In case, the response rate is not to the expected level, it is better to send in a remainder after a specified interval of time. Even after the remainder is sent and the response rate remains low, a fresh set of questionnaires can be mailed to another set of respondents. Thus the company can collect the relevant data effectively by using a mail survey. b.

There are many advantages of conducting a telephone survey. More interviews can be conducted in a given time period because there is no time lost in locating respondents. Also, it is easier to get to interview people over the phone rather than traveling to meet them. If the respondent is not available, callbacks can be made at a very low cost, in a very easy manner. The telephone interviews are marked by speed, absence of administrative problems and cost per completed interview. However, there is an element of sample bias that may creep in the telephone surveys as respondents without telephones or with unlisted telephones are not covered and might be the part of the sample. Also, there can be an amount of impersonality in a telephone interview and hence the interviewer has to rely on verbal cues to judge the understanding and reaction of respondents. The focus groups can be used to ascertain if the consumers would be interested in this unique product offering but it is not a useful method in estimating national sales potential.

In case of a mail survey, the non response bias is a major factor. It should always be tested whether there exists any differences between the respondents and non respondents to eliminate the chances of biased results. In case of a telephone survey, there could be the possibility of sample bias as only the respondents with telephones are considered.

The foreign markets to be considered are identified first. A preliminary list of the possible survey methods is considered. The countries’ infrastructural, economic, sociopolitical and cultural data should be studied. Based on these available data, the most appropriate survey method can be identified. An example of this kind is given in Q. 11.

13. The research purpose of this study would be to identify the reasons for the stagnant sales of art objects in the last two years. The students should be made to identify the possible survey methods, the advantages and disadvantages of the methods with particular emphasis on the following two dimensions: cost and time. An outline of the solution to the problem is given. At a basic level, the personal interviewing of all the specialty store owners is unviable. Mail survey is too impersonal and also the response rate will not be high. The possible survey methods could be Fax surveys or Telephone surveys. b.

A foreign market opportunity analysis is to be conducted to identify the possible markets in Europe. The markets could be looked at two levels: identifying the countries that would be receptive to these specialty goods or identifying market segments across countries. For instance, Ms. Gomez could look at individual markets of Britain, France, Italy etc., or the upper income segments of France and Italy. The buyers of such a specialty good would typically belong to the upper middle to higher class of people who have higher income levels and are art lovers. Personal interviewing seems to be an inviable option. The options boil down to mail, fax, mall intercept surveys and telephone surveys. The advantages and disadvantages of each method should be identified. Within the scope of the constraints and after ascertaining that the research method fulfills the research objectives, the final survey method is then selected.

c. There are many ways to approach this question. Ms. Judy Flook will need a lot of survey data to understand the buying sentiments. Judy may decide to use a traditional paper and pencil method to understand the buying behavior. However, conducting and processing such a study will take enormous time and costs. If she can persuade her directors to make a one-time investment on computer related equipment, she can resort to computer interviewing. the advantages of computer interviewing are that it is faster, more accurate than using pencil and paper. In Computer interactive interviewing, the respondent directly interacts with the computer and responds to the questions as they appear on the screen. The information is directly input by the respondent. Many hardware and software developments continue to make this form of interviewing more feasible. 14. Since the list of patrons is available and most of the patrons are likely to be residents of the city, it is easier and cheaper to reach them by telephone and inform them of the purpose of the survey. This could be followed up by a questionnaire mailed to them asking them about their attitudes concerning the collection and ways of improving the collection. The questionnaire could contain several open ended questions that the respondent may not have answered during the telephone interview. This will be cheaper and fast because the survey will have focus only within the city limits.

Teaching Notes for Cases Case 11-1 NATIONAL KlTCHENS Case Objectives

The case provides an opportunity to apply consumer attitude research to management planning and decision making. The case sets up the presentation of the concept of attitude measures as precursors of behavior, which can then be transformed into an estimate of market potential for a new product. It also highlights the role for management analysis and judgment in interpreting research results. Specifically, this case can be used to present (a) The process of translating research results into useful and realistic assessments of market potential for a new product. (b) The importance of the critical evaluation of research, through questions that include: • data?

What is the source of the data and what are the objectives of the suppliers of the

•

How valid and reliable are the measures?

•

What are the strengths and weaknesses of the data and how do these have an impact on our ability to use the data to make decisions?

Situation National Kitchens, a diversified packaged food manufacturer, is poised to exploit several emerging trends. These are the rapid growth in microwave ovens and changing lifestyles that emphasize convenience, while indicating a willingness to pay a premium for convenience. In response to such trends, National Kitchens is considering the viability of ready-to-eat soup in glass jars. Data on consumer attitudes towards the product concept and price sensitivity have been furnished to National Kitchens by a glass manufacturer. Teaching Outline The focus of this case is to get students to critically evaluate research results. One way this can be approached is to have students generate a list of issues that should be resolved before the research results are accepted. This could form the basis of a class discussion on the problems of attitude scaling questionnaires. Some issues for discussion might be as follows:

1. Source of the research •

Who supplied this research? (a glass manufacturer)

•

What are their objectives and how should we use this consideration in assessing the research results? 2. Type of study conducted •

How much or at what “rate” do you suppose an attitude translates into behavior and then to market volume?

3. Evaluation of the questions •

Can a valid judgment be made without tasting the soup or at least knowing about it?

•

Does the price of the canned soup need to be there?

•

What is the justification for using only 20 cents? What does this tell us?

4. Other ways to approach the study •

What about using attribute scales about soup to get an idea of the importance of convenience?

•

What about getting expectations about taste if the product was in a glass (for example a taste test could be used with one group being served out of a glass and another being told that this was prepared from a canned container).

•

How else could price sensitivity be determined without giving a specific price (for example consumers could be given a set of price premiums or asked how much extra they would be prepared to pay)?

PART II SECTION B TEACHING NOTES FOR CHAPTERS CHAPTER ELEVEN ATTITUDE MEASUREMENT Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪

Introduce the concept of measurement and scaling in marketing research Briefly discuss the different scales in measurement Introduce the different types of scales used for measuring attitudes Give a description of each of the well known scales that are used to measure attitudes Provide an approximate heuristic for choosing an attitude scale Discuss the concept of reliability, validity and generalizability

Teaching Suggestions The instructor has a number of options for using this chapter: 1. 2.

In Conjunction with the chapter on questionnaire development, As a basis for discussion of related consumer behavior theory; including consumer decision processes, market segmentation theory, consumer values and beliefs and so forth. For example, it may be desirable to discuss AIO lifestyle (psychographic) measures in this context to clarify the distinction of middle-level beliefs and specific attitudes towards products, persons or situations.

Questions and Problems 1.

There are severe practical problems encountered in using a sales response criterion for budgeting and evaluation purposes. Sales are a consequence of multiple influences (competitive behavior, changes in other elements of the marketing mix etc.) and very carefully controlled experiments are necessary to separate these effects. To complicate matters advertising does not act immediately, and the length of the lag in effect is often unknown. Finally, a sales response criterion is not helpful in diagnosing the reasons for good or poor sales performance, and suggesting possible improvements. The relationships between brand awareness, brand acceptance and brand preference is shown in Figure 11-1.

Measurement is a standardized process of assigning numbers or other symbols to certain characteristics of the objects of interest according to some pre-specified rules. Measurement often deals with numbers because it is easier to conduct data analyses on numbers. The essential characteristics of the measurement process are that there should be one to one correspondence between the symbol and the characteristic in the object that is being measured and that the assignment rules should be invariant over time and objects being measured. Each object should be measured and placed on a continuum depending upon the amount of measured characteristic the object possesses. The process of creating such a continuum is called scaling. The measurement scales are classified into nominal scale, ordinal scale, interval scale and the ratio scale. Nominal Scale: The objects are assigned to mutually exclusive, labeled categories but there is no ordering involved. Sex, geographical location and marital status are nominally scaled i.e. if one entity is assigned the same number as another, the entities are identical. Ordinal Scale: This scale is obtained by ranking objects or by arranging them in order with regard to some criteria (e.g. income). it provides information on the relative preference between objects. Assume that brands of frozen vegetables are rated on quality, from the highest quality to the lowest quality, on a scale from 1 to 5, then the scale is said to follow an ordinal scale.

Interval Scale: The numbers used in the scale also represent equal increments of the attribute being measured and the differences between the numbers can be compared. The difference between 1 and 2 are the same as those of difference between 2 and 3 and the difference between 2 and 3 is half that of the difference between 2 and 4. The location of zero is not fixed. Ratio Scale: A kind of interval scale that has a fixed zero point. Interval scale permits us to make comparisons of absolute magnitude. For example, an income of $30,000 is two times as large as $15,000, has a known zero point and therefore a ratio scale.

3. a. Nominal b. Interval c. Ratio d. Ordinal 4.

Two types of attitude changes would be of interest to the product manager. The first is whether the attitudes of the baby boomers themselves are changing as they age. The second is a comparison of the attitudes of baby boomers versus the current target group if the ‘product caters to a 40-50 consumer age bracket. Attitude changes about environmental issues would be of interest since they might affect packaging preferences (i.e., biodegradable containers). Attitudes about health, additives, fitness, nutrition, convenience and so on could all have an impact on consumer attitudes about branded food products. The product manager might also conduct a segmentation analysis including changes between the segments of light vs. heavy users.

A variety of sources of data could be utilized to generate category descriptions for this purpose: Previous studies of financial institutions focus group interviews in-depth exploratory interviews repertory and techniques (these ask: in what ways is institution A different from B and C? is B different from A and C etc.)? These sources should be followed by exploratory work which tests the ability of the adjectives or phrases to discriminate among financial institutions.

If the intent of the research question is to try to predict whether or not smokers will try to quit then both attitudes about smoking and the intention to quit should be researched. Students can use any number of different scales for these questions. Some possible questions that could be asked are: a) Do you believe that smoking in general is detrimental to a person’s health? b) Do you believe that your smoking is detrimental to your health? c) Do you agree/disagree with the following statements? i. Smoking is a dirty habit; ii. Smoking is a difficult habit to break. iii. Smoking should be banned from all public places. iv. Smoking is a pleasurable social habit. v. Smoking is related to stress. d) How often and have you tried to quit smoking in the past? e) Would you like to be able to stop smoking? f) Do you intend to quit smoking some day? g) Do you intend to quit smoking within the next year?

In fact, it can be shown that A50 B50, B50 C50 and A50 C50 is consistent with any of the results in the three arrays. If it is A25 B25 C50 then there is a group constituting 50% of the sample that always prefers C over A or B. and is indifferent between And B as a second choice. Similarly, if the preferences in the array are A33, B33, C33 then the result A50 C50 is obtained by having half of those preferring B choosing A as their choice, and the other half choosing C. Finally, A 50 B50 C50 is consistent with the pair-wise results if the half of the sample preferring A always prefers B rather than C, and those preferring C always prefers B rather than A. In this last example, B is always a second choice, although there is no evidence to that effect from the pair-wise data.

Attitude measures will be good predictors of behavior when the measures are reliable, the attitudes are stable and well-informed, and there is little likelihood of significant extraneous variables influencing the subsequent behavior. As an example of a situation where attitudes are poor predictors consider a person who is poorly informed about a product category or thinks all brands in the category are alike and is thus not involved in differences among brands and is very susceptible to short-term price promotions and out-of-stocks.

Validity refers to the extent to which a scale truly reflects the underlying construct it is attempting to measure. For instance, differences in attitude scores should reflect differences among the objects or individuals on the characteristic being measured. There are three approaches to assessing validity. (i) Face Validity refers to whether the contents of the scale fully capture the relevant facets of the construct being measured. (ii) Construct Validity relates to what a scale is measuring. It tests whether or not the measure confirms hypotheses generated from the theory based on the concepts. This validity can be measured only after establishing the discriminate and convergent validity. If the scaled measure correlates with other measures of that variable, convergent validity is established. If the scaled measure correlates weakly with other measures that are not measuring the same variable, discriminant validity is established. (iii) Predictive validity refers to how well the scaled values are able to predict some other observable variable that the scaled construct is supposed to influence. The ability of a measure to produce the same results on different tests over time is reliability. An unreliable scale produces wide variations that are not reflective of true differences in attitudes. The three methods for establishing reliability can be classified according to whether they measure stability of results over time or internal consistency of items in an attitude scale. (i) Test-retest reliability: This method is used by measuring a subject’s response on the same scale at two different time periods. (ii) Equivalent form approach: This method is appropriate for attitude measures that presumably measure the same underlying uni-dimensional attitude. (iii) internal consistency: This method compares different samples of items being used to measure a phenomenon during the same time period.

10. Students should be asked to follow the following steps in developing a multi item measure. * * * * * *

Delineate the major characteristics of the given construct from other similar constructs. Determine clearly what is to be measured. Generate as many items as possible and evaluate it using experts. Specify the actionable steps that must be followed in order to determine the type of attitudinal scale to be measured. Include validation items in the scale. Administer the items to a sample and evaluate and refine the scales. Optimize the scale length.

11a.Several explanations for the substantial difference between stated and actual were given by Joffroy Milstei of the Federal Energy Administration: “The difference between that temperature and the measured actual temperatures of 70°F. from the same time indicates a feeling on the part of people that they ought to have lower temperatures. Also, it is possible that many American thermostats are miscalibrated. The President had asked (in his fireside chat shortly after his inauguration) the people to set their daytime temperatures to 65°F. and night time temperatures down 55°F. There is at least a 10 percent overall difference in fuel consumption between the temperatures people said they had and what they were directly measured to have. Thus a large fraction of the public felt they should be saving energy during this winter’s crisis, even if they were not.” b.

The problem with a telephone survey is that there is no way to validate the verbal reports of household temperature. However, one can use the evidence from the personal interview surveys that those who actually had lower temperature readings tended to be higher income, suburban people in professional and managerial occupations. In addition, it was found that people who practice certain conservation behaviors tended to practice others as well, e.g., tanning off lights, using less hot water, dosing off unused rooms and insulating attics, windows and walls. This gives a picture of those people who are likely to give realistic answers to questions about conservation behavior. To understand their conservation attitudes, it is necessary to understand: * * * * *

knowledge about what to do to save energy; orientation to the comfort and welfare of the family; belief in the existence of an oil shortage; concern over dependence on foreign sources; belief in the right of citizens to use as much energy as they want.

12. It is helpful to begin discussion of this question by putting the results of the two surveys side-by-side on the board: Gallup Approve Disapprove

Harris 55% 28% 83%

Excellent Pretty Good Only fair Poor

| | | |

46% 52% ____ 98%

Among the possible reasons for the difference are: (a) that many respondents rated Ford “only fair”, in the Harris survey, but such a rating would not be sufficient to register disapproval. (b) the Gallup question forces a response into one of two categories, and judging from the high nonresponse rate of this question, many people are not happy with this limited choice. (c) a president’s performance has to be evaluated on many dimensions, and those people who were unhappy with his performance on several of these dimensions might not want to register overall disapproval. (d) variability due to random sampling error, (e) differences in data collection method, elapsed time of data collection and so forth. The clear implication from these problems is that an accurate picture of people’s attitudes can only be obtained by asking several related questions. Reliance on the results of one question is unwarranted.

13. It is true that in decisional research cases, researchers prefer to have an attitude measure predict some future event. The more the uncertainty of the future events, the greater is the use for predictive validity. The very nature of decisions requires predictions of uncertain future events and hence predictive measure is useful. For instance, assume a brand manager of a toothpaste company wishes to conduct a brand preference study. If a brand measure he or she has developed can predict the future sales, then the measure is valid and is also the most important one as it enhances his decision making capabilities. If it is shown through past sales records that the measure is consistent in predicting future sales, then the measure is reliable. 14a.The same questionnaire cannot be used in all the three countries. The same type of survey method cannot be used in all the three countries in question The different languages or dialects in the three countries make it impossible to use the same questionnaires. It is important that the survey method to be used is identified and a basic questionnaire be designed in English. This questionnaire has to be translated in the languages of other countries and back translated to check whether it reads the same in English. The scales used to measure the attitudes or preferences have to be chosen after careful consideration of the specific country factors. b.

Before developing a scale to be used in international marketing research, a suggested outline of the factors to be considered are given below. * * * *

Literacy levels of the countries identified. Educational levels of the respondents in each country so that the questions can be directed in an appropriate manner. Cultural factors specific to each country. Calibration of the response formats.

Based on the steps outlined in (b) above, the most suitable scale for each country can be identified.

15. Ben Gatsby needs to learn the basic orientation or attitudes of the prospective customers. The study of their attitudes includes the information they have, their feelings of like and dislike and their intentions to behave. Ben Gatsby should understand and influence consumers’ behavior to buy his artifacts. This is possible only through the study of attitudes because attitude is a precursor to behavior. Also attitude questions are easier to ask rather than observing behavior which is influenced by a lot of factors. Attitude studies can also be used to evaluate competitive alternatives and to get an insight into the process by which choice decisions are made. Therefore, Ben Gatsby needs to get an insight into consumer attitudes to understand their buying behavior. 16a.Marketing strategies depend upon understanding attitudes of target consumers and when necessary, attempt to modify or change those attitudes. Measurement of attitudes is much more difficult to measure as it is not observable and present in the minds of the consumer. Attitude scaling is based on various operational definitions created to measure the attitude construct. b.

As the name suggests, single item scales are those which have only one item to measure a construct. The various issues that have to be considered regarding the single item scale are given below: * * * * *

Number of scale categories Types of poles used in the scale Strength of the anchors Labeling of the categories Balance of the scale

Brand Awareness: Response to Network TV (PSB)

Teaching Notes for Cases

Case 12-1 WINE HORIZONS Introduction

This case demonstrates the use of attitude questions to assess the reactions to a new product concept. The case can be used to illustrate the benefits and problems of attitude measurement. It is also a useful vehicle for fitting the questionnaire design into the overall research process. Indeed, it is recommended that the discussion in class be directed to follow the steps in the process: research purpose and objectives, assessment of information requirements, research design, and then details of questionnaire construction. The Appendix to this teaching note summarizes the results of a pretest that can be handed out as an in-class exercise. Research Objectives and Information Requirements A good starting point is to review the stated research objectives and their ability to satisfy the clients’ research purpose. An alternative research objective such as the following could be considered. To determine if champagne drinkers felt that champagne in six-packs of small bottles would be considered more convenient for consumption by only one or two persons, and if such convenience would encourage its use in many social situations where presently champagne was not likely to be consumed. The next step, following the procedure described in Chapter 7, is to make a list of the information requirements. Such a list would likely include: identify potential consumers of champagne in six-packs of small bottles, their characteristics, and their number; identify the occasions when such champagne might be consumed; identify the section in liquor stores where consumers would expect to find such champagne; measure consumer acceptance of wine in six-packs. Some students may argue that the proposed project does not collect any information regarding the activities and/or lifestyles of respondents. Such arguments may have merit in the sense that people with certain lifestyles, or people who participate in certain activities, may be the best prospects for the new champagne packaging. Students who make the suggestion that activities/lifestyles information also be obtained may then be asked to recommend changes they would make in the questionnaire. A useful question that sharpens the definition of information requirement is to ask how a “very likely” potential trier is to be distinguished from a “somewhat likely” trier. Some indicators of a strong likelihood of trial from the survey are: (a) consumption of wine from a wine six-pack, (b) very favorable attitude toward champagne sold in six-packs of small containers, (c) high willingness to consider trying the six-packs, and (d) attitudes that the small containers are “convenient” and a “good idea.” Students should be encouraged to think of other indicators that could then serve as the basis for a question.

Students may notice that only one price is being tested, and that there is no discussion of alternative prices. Yet, price sensitivity of demand could be highly significant. There is also a question as to whether champagne that is too low-priced would suffer from a poor-quality image. Research Design. Two aspects of the research design might be criticized— limiting the research to those markets where the six-packs of wine are being tested, and using intercept sampling in shopping centers. It could be argued that a similar survey should be undertaken in other markets to see if champagne consumers in those other markets might be favorably inclined toward the proposed new packaging. This could ten management if consumer acceptance of the champagne six-packs would be dependent upon consumers having already accepted wine six-packs. Questionnaire. Generally speaking, the questionnaire shown in Exhibit 1 obtains the information management seems to want (but does not include lifestyle or activities questions, as pointed out above). However, students are likely to suggest changes in specific questions, and these can serve as the topics of a class discussion. Some comments on specific questions are provided below. Question 6 is asked as an open question without any probing or aided recap As a result, some respondents may not report all of the occasions when they drink champagne. Perhaps it would be appropriate to have interviewers ask “Any others?” after the respondent has answered. Some students are likely to suggest changes in questions 10, 12 and 14. Regarding questions 10 and 12 (attitudes toward wine and champagne in six-packs), it is likely that someone will suggest using a five- or seven-point scale (e.g., “Very good idea” to “Very bad idea”). If so, the class can discuss the advantages and disadvantages of using a scale question in place of the ones shown in the questionnaire. Similarly, someone is likely to suggest using a scale in question 14 to address the respondent’s purchase intention (e.g., “Very likely to purchase”, “Likely to purchase”, “Somewhat likely to purchase”, etc.). If so, the suggestion can be evaluated by the class. Analysis of Pretest If the instructor elects to hand out the description of the pretest in the Appendix, the students should be instructed to consider (a) what changes they would make in the questionnaire as a result of the pretest, and (b) what analyses they would suggest. Although the subject hasn’t been covered to this point in the book, the instructor can also discuss the question of sample size.

Tabulation. The nine findings presented in the case are, for the most part, the tabulated responses to single questions, as follows: 1. 2. 3. 4. 5. 6. 7. 8.

Frequency of champagne consumptions (Question 5). Champagne appropriate at informal occasions (Question 7). Occasions champagne consumed (Question 6). Aware, purchased, consumed wine in six-packs (Questions 8 & 9). Attitude toward wine in six-packs (Question 10). Attitude toward champagne in six-packs (Question 12). Consider purchasing champagne in six-packs (Question 14). Occasion for using champagne in six-packs, unaided and aided combined (Questions 16 and 17). 9. Where respondents would expect to find champagne in six-packs (Questions 18 and 19). A number of other useful tabulations which probably should be made if the large-scale study is undertaken, will involve the simultaneous tabulation of response to two or more questions. Some of those tabulations are: 1. Divide the total sample into “very likely” potential users, “somewhat likely” potential users, and not potential users (Questions 9,12,14), and count the number of respondents in each class. 2. Further subdivide each of the three classes of potential users into heavy, moderate, or light consumers of champagne (Question 5). Again, count the number of respondents in each class. 3. For each of the nine classes identified in 1 and 2, determine their demographic Characteristics (Questions 20 - 26). This information could reveal how the moderate and heavy consuming potential users differed (if at all) from the light champagne users and the not potential users. This information would identify the size and characteristics of the potential market. 4. For each of the moderate and heavy consuming potential user groups, determine the occasions when champagne in six-packs is most likely to be consumed (Questions 16 and 17). This would provide useful ideas as to how champagne in six-packs could be promoted to potential users. 5. Repeat tabulation 4 above, except using Question 6 instead of Questions 16 and 17. By comparing this tabulated data with that from 4 above, management will be able to identify how the smaller bottles win change the occasions where champagne is considered for consumption.

Conclusion Having gone through this type of classroom exercise, students will have had the opportunity to see how the steps of marketing research process are interrelated. If the expected tabulated data satisfies the research objectives and the information needed to achieve the research objectives, management has evidence suggesting that the use of the proposed research on a larger scale win provide them with the information they want. If the expected tabulated data does not satisfy the research objectives and /or the information needed for the research objectives, the weaknesses of the proposed research project can be identified and remedied.

Case 12-2 SMITH'S CLOTHING (A) Introduction

This is a rich case with several objectives. First, it gives the student a chance to actually create a questionnaire and sampling plan as opposed to simply critiquing designs of others. There is ready no substitute for getting your hands dirty. It is actually an ambitious task and could be assigned in sections over two, three, or even four or five class periods. A second objective is to address the classic question of who is our competition—what is the market? There are several approaches that might be considered. One is to simply ask respondents where they last bought a piece of fashion apparel and, on that occasion, in which stores did they shop. Another is to ask what stores are similar to Store A, Store B and Store C. Another is to use multidimensional scaling and get similarity judgments on a predetermined set of stores. A third objective is to understand some alternative ways of generating positioning information. One approach to obtaining positioning information is to use multidimensional scaling and to generate a perceptual map. There are, of course, many other ways. One, amenable to telephone interviewing, is to ask “I’m going to name a series of stores. I want you to imagine that I am a stranger in town and tell me something about each one.” Another is to provide the respondent with a list of stores and ask him or her to identify which is the best and worst on a set of attributes. Still another is to scale on an agree-disagree (or applies-does not apply) scale several stores on a set of attributes. One limitation of this approach is that it is difficult to evaluate more than three or four stores. For other approaches, see Chapter 10, Chapter 18 and Chapter 19.

A fourth objective is to become involved in the design of a segmentation study. The research question ready makes this a segmentation study. Among the variables that could be included are: 1. Demographics, such as age, income and location. 2. Stores patronized and store preferences. 3. Opinion as to importance of store attributes. Trade-off analysis might even be considered. 4. Lifestyle variables. 5. Transportation to shopping. 6. Tastes in clothing and fashions. 7. Media habits. The three research questions provide a nice way to break up the case if several class periods are to be devoted to it. If the case is covered in a single class then the research questions provide a nice structure to the class discussion.

Case 12-3 COMPACT LEMON The purpose is to decide whether to proceed with the development of the product. There could be several research questions. What percent of compact users react favorably to the product concept? What percent will buy? These questions might be asked for subgroups such as those compact users who perceive an odor problem. The focus group would not provide the needed qualitative estimate of demand. The phone interview is quicker than a mail questionnaire and has less bias due to fewer refusals although a mail questionnaire could include an ad mockup. A man intercept has severe sampling problems and it probably is not necessary to see this product. The questionnaire is crude and allows the students to revise a questionnaire to improve the flow and wording. Comments on the individual questions are given below. 1. This is a screening question. As written it excludes renters. “Do you have a compactor in your home?” would be better. 2. The time period should be specified—how many times do you use it each week? It might be useful to know how often they empty it. Note: The initial questions should be easy and not threatening or personal yet interesting. Do these qualify? 3. If you wanted to cut the analysis by whether they were satisfied or not, this question may be adequate but a three to five point scale might be considered. 4. The open-ended question will take time. However, if odor problems come up in this question, they will be more salient. 5. Those with an odor problem will be more likely to actually buy than those without— thus this question should help refine the estimate and provide a feeling for how much the deodorizer feature will be valued. Should this question go after the key “will you buy” questions so that a bias is not created? 6. This question should go after the next one because it is too abrupt; respondents will not have had a chance to digest the concept. These questions should be slanted more toward the “will buy” end because only a very small percentage of those that are only mildly interested will actually buy. Something like: Definitely would buy Probably would buy Might buy Not interested

would be better. In the analysis we might divide the sample into those interested and not interested but finer grades here make sense as they should help the respondent. Would an abrupt “Do you think you would buy this?” make sense? A case could be made that it would be easier and just as useful. 7. The open-ended question serves to get them into the concept and should go before the “will you buy” question. It might also provide some diagnostics. Should price be included? If not, there might be some that like, but will not buy. If so, the price my dominate their reactions. 8. The point is to be able to cut the sample into those who use deodorizers in the home. The respondent should first be asked if they use a deodorizer in the home and may be what type. Then a usage level question might make sense. 9. It is not dear how useful this question will be. It is also a bit personal The terms “family” is not appropriate for many and “living unit” sounds stilted. How many people are living in your “home” might be better. 10. The age question is very personal. As a minimum, it should go to the end. Deleting would be better. 11. The next question is not a very precise measure of life cycle. Given the varied living arrangements the life cycle set of questions will be difficult. Creating a set would be a good exercise. They should discriminate between unless you know, what demographics would you consider and how would you ask the questions. 12. There may be few home renters and their reaction may be the same as apartment renters. If so, you could just ask whether they rent or own their home.

Case 12-4 PROJECT DATA: AN URBAN TRANSPORTATION STUDY Introduction

This case ostensibly deals with the possible improvements to a research design that is seriously flawed by a poor response rate, and consequently will not serve the research purpose. It should become apparent that tinkering with the mail-back survey will probably not correct the problems, and that the whole research design has to be reconsidered. However, it is not advisable for the instructor to move to the discussion of alternatives until there is a clear understanding of the problems of the mail back survey. The assignment questions have proven to be a useful guide for the classroom discussion. However, the first two assignment questions should be combined into one overall question as to the problems with the mail back survey: Analysis of Problems There are three categories of problems stemming from: (1) the questionnaire (2) the features of the design that contribute to the low response rate, and (3) the consequent biases. To put these problems into perspective, it is useful to trace the steps between the questionnaire being handed out and then returned by mail.

Handed out

Questionnaire Received y

n Read and Objectives Understood

Retained to record tips

Thrown away: no motivation to respond; established, may be misinterpreted as an advertisement.

Thrown away because of inability (confusion or inability to read) or unwillingness to respond

Only necessary if distributed during morning trip.

Questionnaire filed out

Questionnaire mailed to project data

No mail box handy

In addition to the deficiencies of the design that reduce the response rate, there are many shortcomings to the survey form itself, even when it is completed. Clearly, for some people, it is too detailed and awkward to complete. A more serious problem is the ability or willingness of respondents to record all their short trips on the form. Evidently, it is not easy to get people to retrace all their steps during the day (if they have retained the form after receiving it on the inbound trip). Yet it is the short bus or car trips in the center city that are a primary concern of the transportation planners. The problems cited in Tables 3 and 4 are a further basis for discussion.

The cumulative effect of these problems is that the survey is likely to under-represent the following groups: (a) The lower income, poorly educated residents - especially those who live in the central business district and who would not be eligible to receive a questionnaire. (b) People who arrive outside the peak traffic hours, notably shoppers but also shift workers. (c) People who make a large number of trips during the day (such as messengers or shoppers) who would not want the bother of filling out a questionnaire for every trip. (d) Automobile commuters who park in private garages, perhaps in conjunction with their office building. Opportunities for improvement Response rates could be improved, and bias somewhat reduced with the following improvements: (1) provision of an incentive to respond, such as two bus tokens, (2) limiting distribution to inbound (a.m.) trips where marginally better response rates were obtained, (3) asking only about yesterday’s trips - perhaps limiting the questions to trips within the central city, and (4) making it easier to fill out, and eliminating some of the sensitive questions (such as income) if they are not essential to the purpose of the research. It is not evident that these improvements will yield data that is of sufficient reliability and representativeness to serve as input to a large, and probably data-sensitive simulation model of traveler behavior. Hence, other designs should be seriously considered, either instead of or in conjunction with the mail-back survey. Alternative Designs The most attractive alternative would utilize a telephone survey within the metropolitan area (the catchment basin). Such a survey should try to contact all members of the household. A useful supplement would be an on-board survey. With this survey an interviewer is stationed at the bus or subway stop and proceeds on with the passengers to ensure that all the questionnaires are returned. The telephone survey could provide the basis for weighting the results of the on-board survey. The advantages of the telephone survey are a superior response rate and an opportunity to ask the respondent to trace his or her travel steps during the day to ensure that no short trips are overlooked. The net result would be less bias, but higher costs per completed interview. Just how much the costs per interview are higher depends on whether the poor response rate of the mail-back survey can be improved. At present this is a high cost method. The remaining problem is ensuring a random and representative sample of residents of the central business district, as they are less likely to have a listed telephone.

PART II SECTION B TEACHING NOTES FOR CHAPTERS CHAPTER TWELVE DESIGNING THE QUESTIONNAIRE Outline of the Chapter ▪ ▪ ▪ ▪ ▪

Introduce the concept of questionnaire design Be familiar with the process of questionnaire design Help recognize the characteristics of a good questionnaire Learn how to deal with sensitive questions Discuss the issues of questionnaire design in the international context

Teaching Suggestions This chapter may be used in conjunction with Chapters 8, 9, 10 and 11 as a background source, or treated in depth as a separate subject. If a session is devoted to writing questionnaires most of the effort should be directed to writing and critiquing questions. The questions for discussion are a useful vehicle but virtually any survey offers a fertile source of faulty questions. Below are some further thoughts on ways to help make the point that responses are very sensitive to the wording of the question, and that questions can be asked in many different ways. (a) Impact of different ways of asking the question: As an example of the basic problem, here are two questions that were asked at about the same point in 1969 concerning the president’s plans for withdrawal of troops from Vietnam. The Gallup Poll (June 1969): “President Nixon has ordered the withdrawal of 25,000 United States troops from Vietnam in the next three months. How do you feel about this—do you think troops should be withdrawn at a faster rate? (“Same as now” not presented, but accepted if volunteered.) Responses: Faster, 42 percent; same as now, 29; slower, 16; no opinion, 13. The Harris Poll (September—October 1 969): “in general, do you feel the pace at which the president is withdrawing troops is too fast, too slow, or about right?” Responses: Too slow, 28 percent; about right, 49; too fast, 6; no opinion, 18. (b) When the question suggests the answer, The following quotation comes from a column by Daniel Seligman in the May 7, 1979 Fortune page 105. It has now been demonstrated conclusively that a pollster who asks the right questions, or, to be more precise, the wrong questions can get the American people to agree to anything. He can even get them to run up huge majorities against economic growth. Indeed, he can make the whole country come out sounding like candidates for Hare Krishna. All he has to do is (I) ask compound questions that must nevertheless be answered yes or no; (2) build some Krishna-like assumptions about the economy into the questions; and (3) appeal heavily to the yearning for spiritual regeneration that is lurking down there somewhere in the psyche of every Bloomingdales charge customer.

Consider how easy the Louis Harris organization makes it look. In one recent survey, Harris asked the people: “Do you feel economic growth and increasing G.N.P. tends to overproduce products which in turn lead to more waste?” Not wanting to be on the side of waste, 59 percent said yes. Then Harris asked whether economic growth “makes us far too dependent on physical resources which are running out.” Not wanting to be guilty of such bad planning, 68 percent said yes. Another questions asked Americans to ponder whether growth “falsely makes people want to acquire possessions rather than to enjoy nonmaterial experiences.” Being opposed to falsity, 60 percent held to the affirmative yet again. At this point, the people were already looking amenable to a saffron robe and a haircut, but the Harris organization was obviously determined to run up the score and came up with the following lengthy question: “Of course, what we have asked you about here would mean a very different style of life in America. It would mean buying fewer products, not expanding our standard of living, not working as long hours or weeks, and having less income. But the alternative might mean higher inflation, more shortages, and more recessions. If you had to choose between those two, change in life-style or the risk of more inflation and more recessions, which would you choose?” You will not be stunned to learn that 71 percent came down on the side of a nobler life-style, while only 12 percent opted for more inflation and recession. Commenting on the meaning of these data, Louis Harris himself recently told an audience in Richmond, Virginia, that “the age of materialism as we have known it is going to be radically altered.” We would have more confidence in that judgment if the Harris organization seemed a little stronger on economics and a little weaker on ventriloquism. (c) Creative question writing. This parody was done in 1958 by Alan Barton, but still has lots of potential for humorous insight. It is a series of ways to ask the question, “Did you kill your wife?” 1.

Causal Approach: “Do you happen to have murdered your wife?”

The Numbered Card: Would you please read off the number on this card which corresponds to what became of your wife? (Hand card to respondent.)

1. Natural death 2. I killed her 3. Other (what?) (Get card back from respondent before proceeding) 3.

The Everybody Approach: “As you know, many people have been killing their wives these days. Do you happen to have killed yours?”

The “Other People” Approach: (a) “Do you know any people who have murdered their wives?” (b) “How about yourself.”

The Sealed Ballot Technique: In this version you explain that the survey respects people’s fight to anonymity in respect to their marital relations, and that they themselves are to fill out the answer to the question, seal it in an envelop, and drop it in a box conspicuously labeled “Sealed Ballot Box” carried by the interviewer.

The Kinsey Technique: Stare firmly into respondent’s eyes and ask in simple, clear-cut language such as that to which the respondent is accustomed, and with an air of assuming that everyone has done everything, “Did you ever kill your wife?”

Problems of this sort can be avoided through proper pretesting. The instructor may wish to emphasize that it is not just individual questions that need to be pretested, but also the questionnaire as a whole. Questions and Problems 1.

The first question is very general. It does not specify why a respondent might be happy or unhappy. People may answer in terms of different combinations of their health, job, marriage and so on. For this reason, answers to the general question are affected by whether it is asked before or after the marital happiness question. Either of two processes may occur. When the marriage question is asked first, respondents’ feelings about their marriage may influence their judgment about life in general. Alternatively, answering the marital question first may lead respondents to subtract that topic from the second question relating to happiness in general. The specific question on marital happiness, however, is not vulnerable to this order effect. Respondents will answer the marital happiness question the same way regardless of whether it comes before or after the general happiness question. Its greater specificity will make its interpretation less subject to influence from factors like question placement.

The order of questions is an issue of concern here because answer to question (a) has an obvious implication for the answer to question (b) and people may want to maintain consistency in their answers. We can reverse the order of questions to avoid this concern.

The questionnaire is an important tool to elicit information from the respondents that would aid the researcher in getting an insight on the marketing phenomenon being investigated. Exploratory research is preliminary research conducted to clarify the exact nature of the problem to be solved whereas descriptive research is research conducted to provide information on the relevant characteristics of a group of sample units of interest. Exploratory research involves a flexible and less formal approach in contrast to descriptive research that is less flexible. Therefore, exploratory research typically requires a list of topics to be covered. The descriptive research is more specific as the information requirements are more stringent. This makes the design of a questionnaire an easier task in case of exploratory research compared to descriptive research.

It is not necessary to have a question included in the questionnaire because of its relevancy to the researcher’s standpoint. Questions should be chosen such that the respondents are willing to answer them and they are capable of answering them. Care should be taken to ensure that the questions are not sensitive to the respondents, otherwise, the respondents may feel offended and hence refuse to respond.

The general advantage of open-response questions is the freedom they offer to respondents and their ability to make the respondents more comfortable with the questioning process. Thus they serve as useful introductory questions. When used to assess saliency they have two additional advantages (1) they establish a broad context for the respondents to discuss things which irritate/bother/annoy them, and (2) they give absolutely no hint as to what specific subjects are being investigated so there is no artificially heightened saliency, which is a problem with questions which ask directly “How concerned are you about the frequency of advertisements on TV?”

Unaided recall awareness questions are usually superior, for the brands the respondent recalls are usually in the consideration set and will be very familiar. Thus, it is a persistent finding that “top of mind” awareness (first brand mentioned) is a very good predictor of subsequent brand choice in certain frequently purchased product categories. This question provides a very conservative estimate of the number of brands that a respondent might know or remember if they thought at length about the product category. For this reason, it is a good idea to follow with an aided recall question, to learn whether the respondent had heard of the brand name. Unfortunately, this measure tends to be biased upwards, for respondents want to appear cooperative and informed and will say “yes” to any brand

name they have dimly heard about in the past, or which seems reasonably associated with the product category (even if it is not). 7.

The randomized response question can be structured as follows: Flip Coin

Question

Heads

Did you report all your income to federal tax authorities? Is your birthday in June?

Tails Total population

Proportion of Population 50%

% of Group Answering Yes ?

50% 100%

10% 16%

We know that 16(100) = 16 percent of the total sample answered “yes” to something. Since 50% of the sample presumably chose the income tax reporting question we can then estimate the proportion of this group answering yes. For convenience, assume the total sample is 100 people. The 50 x+ .10(50) = .16(100). Solving x = .22. 8.

The researcher needs to make a preamble in his questionnaire to request the respondents to participate in the survey. This should be done so that the researcher communicates to the respondent that he/she understands the value of time spent by the respondent in responding to the survey. An assurance is to be given that the invaluable information provided by the respondents is used only for research purposes and will not be used elsewhere. Also, the benefits that will accrue to the respondents should be specified. For instance, assume that a famous soft drinks company wants to conduct a survey of its suppliers to obtain information on the efficiency of its bottling operations. The researcher should make sure that the preamble contains a statement that the information is invaluable for the research and it will be used to aid in improving the efficiency of the bottling operations. The preamble should communicate that participation in the survey will provide the company some information on improving its bottling operations and thereby will benefit the suppliers.

9a. The term “private citizen” is ambiguous and should be defined. Does it, for example, include all civil servants in their private life? This should be specified. Another ambiguous phrase is “read books and articles.” Does it mean both books and articles or does it mean, books and/or articles? b.

The term “sometimes” is ambiguous and should be defined in terms of the proportion of times the respondents eat at the same place. The term “same place” is ambiguous too because it could mean either the same location or the same chain perhaps at other locations. For example, when traveling, respondents may eat at the same franchise but at different locations. This problem could be solved by inserting the proper term. Finally, the question is not applicable to all respondents because some respondents may never eat out. A third category such as, “never eat out”, should be included.

The main problem with this question is that there is no category for those respondents who feel that there is too much government regulation of environmental protection. A better phrasing would include three categories like, “Enough, too much and not enough.” Furthermore, due to the knowledge required of the respondent, some respondents who are less informed than others, may not know how to answer and a “don’t know” category is required.

This question will be difficult to answer for some types of respondents. Some respondents, like university students living at home may not buy all their own clothes. Other respondents do not buy their clothes at any particular store and instead shop at stores depending upon their seasonal price specials. Still other respondents may evenly divide their shopping between two or three stores. These problems could be avoided if “most” was less ambiguously defined. Instead, the respondents could be asked where they buy “60% of their clothes.” A “never buy clothes” option and a “no particular store” option could be provided.

This question is very ambiguous. The term “everything possible” could theoretically include shutting down the generating station. In this case, the answer to the question will always be “no.” Perhaps a word like “reasonable” is still vague, although it is closer in meaning to what the questionnaire is asking. Furthermore, a “don’t know” category should be provided, given the technical nature of the question.

The respondents will have a difficult time providing an accurate estimate concerning the “average” issue. A better approach would be to ask respondents about the “least” issue. This will reduce the memory recall problems.

Although the researcher has attempted to define the terms used in this question, there are still some ambiguities, which could cause problems for respondents. “Almost as often as the magazine is published” is a subjective assessment.

The word “hobbies” is too vague. It is not clear whether sports or travel are hobbies. Furthermore many hobbies are performed alone versus being part of a club. It’s not clear whether the researcher is looking for a list of all recreational activities or only those of a particular kind.

10. Car problems may be the result of all three factors and this should be kept in mind by the students in developing appropriate questions. Either/or alternatives may not capture the necessary information. Some suggested sample questions might be as follows: a.

Suppose you had 100 points to divide among these three groups. How would you divide the 100 points to indicate how much each is responsible for any problem you have had with your car? _____ manufacturer _____ services _____ yourself.

We are interested in determining your attitude toward your car. Please use this scale from 1-3 and circle for each item, the number which best describes how satisfied...or...dissatisfied...you are with these aspects of your Car.

Its appearance and design The way it is built The costs of operating it Performance The amounts of service it needs

Totally Satisfied 1 1 1 1 1

Somewhat Satisfied 2 2 2 2 2

Somewhat Dissatisfied 3 3 3 3 3

11. These questions could reflect several different research objectives. If the researcher is interested in the type of respondents’ leisure activities then questions (c) and (e) are unnecessary, since the subject of interest is how respondents spend the free time that they have. If on the other hand, the researcher is interested in respondents’ attitudes about their free time, then questions (b) and (d) should be changed to ask respondents whether they feel they have enough time to engage in hobbies or read magazines of their choice. The kind of hobby or magazine is not relevant to this research objective. 12. Double barreled questions: (i) Are you satisfied with the cost and quality of the food items at Restaurant X ? (ii) Do you prefer sitting out in the patio and eating spicy food? (iii) Are you satisfied with the location and interior design of this restaurant?

Corrected version: (I) Are you satisfied with the cost of food items at Restaurant X? Yes

No opinion

Are you satisfied with the quality of food items at Restaurant X? Yes

No opinion

(ii) Do you prefer sitting out in the open? Yes

No opinion

Do you prefer eating spicy food? Yes

No opinion

(iii)Are you satisfied with the location of this restaurant? Yes

No opinion

(iv)Are you satisfied with the interior design of this restaurant? Yes

No opinion

13. When a question deals with a sensitive issue or is potentially embarrassing, the respondent may refuse to answer it or may respond incorrectly. Such questions may also irritate the respondents. Therefore, a researcher has to decide whether sensitive questions are absolutely essential in the questionnaire. If they are absolutely necessary, then disguised techniques have to be used. A disguised question is one whose true purpose is not known to the respondents. If the researcher feels that direct questions may not elicit truthful answers, then disguised questions have to be resorted to. As an exercise, a sensitive question can be given to the students and various ways of disguised questioning (viz) the casual approach, the numbered card approach, the everybody approach, the sealed ballot approach, the other people approach can be discussed in the class. An example of a sensitive question and the possible disguised question is given below: Sensitive question: Would you buy food from a local, inexpensive restaurant and pass it off to your guests as food from an upscale, expensive restaurant? Disguised question: Is it alright for people you know or associate to buy food from a local, inexpensive restaurant and pass it off to your guests as food from an upscale, expensive restaurant? 14. Pretesting is extremely important because it ensures that the information to be obtained from the study meet the research objectives. It provides a test to the flow of the questionnaire, the length of time it takes to fill out the questionnaire and the wording of the questionnaire. It helps the researcher identify the potential problem areas as far as the respondents are concerned and to ascertain if the categories are exhaustive. It also helps in identifying the limitations of the questionnaire.

A personal interview pretest can use either a debriefing or a protocol approach. In the debriefing approach, the subject is asked questions after the interview. The questions pertain to the respondents’ mindset when he or she answered each question and whether any aspects of the subject were not covered by the interview. In the protocol method, the subject thinks aloud as he or she fills out the questionnaire. The interviewer records these thoughts and at the end of the interview asks for clarification, if necessary. The pretest questionnaire, to be designed for the interviewers should encompass the following broad outline: * Do the respondents infer the meaning to questions as intended by the researcher or do they vary drastically? * Are there obscure questions that are simplified by the respondents to make it easier for them to answer? * is there any question that shows far greater variation than intended? * Are the questions of correct length, unambiguous, not double barreled etc.? * Are the questions arranged logically? * Is the questionnaire of ideal length that it keeps the respondents’ attention and interest? A possible questionnaire for interviewers might be constructed as follows: Please make out a separate questionnaire for each pretest interview you conduct. For all “yes” answers, please specify the question numbers or section and explain what the situation or problem seemed to be: 1. 2. 3. 4. 5. 6. 7. 8.

Did any of the questions make R uncomfortable? Did you have to repeat any questions? Did R misinterpret any questions? Which questions were the most difficult or awkward for you to read? Do you dislike asking any specific questions? Why? Did any of the sections in the questionnaire seem to drag? Were there any settings in which you felt that the respondent would have liked the opportunity to say more? Were there any questions where the respondent gave an answer not provided for in the questionnaire?

And so on. The specific questions of interest will depend upon the survey and its particular problems. 15a.In any research study, the research objectives have to be identified. Before individual questionnaire items can be written, these objectives have to be translated into information requirements. The items in the questionnaire should aim to elicit the possible answers to the questions implied by the research objectives. The possible information requirements for the researcher in this case are: * General attitudes with respect to scholastic testing system and specific attitudes regarding the existing system. * Satisfaction with the existing trend in rise in incidence of cheating at school. * Sources of influences. * Classification variables like year of study, background information etc., b.

There is no ready-made answer to the format to be chosen for questioning as choosing an open or closed ended questions is not an either or distinction. The information requirements decide the individual question format. In case of an open ended question, the respondent is free to express exactly the way he or she feels about the issue and hence can provide the researcher with wide array of information. Also, an open ended question will give the researcher some alternatives that cannot be provided by a closed ended question. The disadvantage is that the coding and processing of questions is extremely time consuming. In case of a closed ended question, the processing of data is simple but the limitation is that some valuable information could be lost.

In our case, as the study is exploratory in nature, the questionnaire needs to be flexible and hence it would be better to opt for some open ended questions in conjunction with closed ended questions to gain insights into the problem and to assess the students’ thinking in this critical issue. c.

The order of questions should be carefully looked into as they tend to make the questionnaire as easy as possible for the interviewer and also help in maintaining the cooperation of the respondent. Care should be taken that the prior questions do not influence answers to subsequent questions. In other words, order bias should be eliminated. A suggested outline to eliminate order bias is given below: * Opening the interview with a non threatening question * Avoiding sudden shifts in topic and questions to which the respondent identifies the preceding questions as the frame of reference * Proceeding from general topics to the specific topics * Placing the sensitive questions and questions pertaining to demographics to the last.

d(i) Pretesting is extremely important because it ensures that the information to be obtained from the study meet the expectations of the researcher. It enables the researcher to identify the flaws in the questionnaire and rectify them. It helps the researcher identify whether the respondents face any problem as far as the questions are concerned and to ascertain if the response categories are exhaustive. It also helps in identifying the limitations of the questionnaire and test for the flow of the questionnaire. (ii) Care should be taken that the respondents are reasonably representative of the sample population. If the questionnaire is straight forward, a small sample of 15 students is required and for longer questionnaires a sample of about 25 students may be used. e.

In the international context, it is often noticed that the researcher has no prior experience with the determinants of response in another country. Open ended questions have to be used with care in the international context after due thought to the educational, literacy and cultural factors in the country chosen for research. In France, use of open ended questions may be desirable as they do not impose any cultural bias by the researcher. Also, the familiarity with all the possible responses is not required.

It is necessary to have a fair idea of the literacy, demographic, cultural, economic and infrastructural factors of the foreign country. The questionnaire design has to be adapted to the requirements imposed by these factors.

16a.The committee is conducting interviews at homes of the members. This means that the identity of the respondent cannot remain anonymous. The members will want to give socially correct answers and hence overestimate their attendance to the Sunday services. The respondents are also likely to overestimate the dollar value of their donations to the church. 16b.The questionnaire design and wording will also affect the response. The second question is really a statement phrased in the form a question because not too many members will answer no to that question. It also induces a guilt feeling in all members who think they do not donate enough to the church. As a result they will overstate their donation amount to the church. The third question is not needed at all as the church is only interested in the amount donated and not the frequency with which the donations come in. The subject of the interview is a sensitive one and hence it may be better for the church to guarantee anonymity to the respondents to avoid stepping on sensitive issues. The interviewer could also induce a lot of bias as he/she is a member of the finance committee in the church and hence may expect all respondents to have the same loyalty to the church that he/she has. 17. Here’s possible questionnaire with a view to uncover the reasons for not buying the product. 1. Do you own a lawn mower? ___Yes ___No Continue if the answer to question 1 is “Yes”, otherwise stop here.

2. What make/manufacturer is your lawn mower? 3. What other brands of lawn mower did you consider before your purchase? 4. Please check all sources of information about lawn mower that you used for your purchase? Magazine Radio Television Internet Other (please specify) 5. You purchased your lawn mower because of (please check top 2 reasons): Type Price/Value Packaging information Manufacturer reputation Sale/promotion Warranty Recommendations Other (please specify) 6. How much did you pay for your lawn mower? Less than $100 $100-$199 $200-$299 $300-$399 $400-$500 over $500 7. Where did you buy your lawn mower from? Large supplier store Special equipment store Discount store Online Direct catalogue Other (please specify) 8. What type of mower is yours? Rotary Cylinder Hover 9. What type of power source does your mower use? Battery Electric Gas 10. Which group best describes your family income? Under $15,000 $15,000-$24,999 $25,000-$34,999 $35,000-$49,999 $50,000-$75,000 over $75,000 18 Suggestions: a.

The research objective has been stated: change the image of a technology feature-led company to one focusing on fashion and brand value. Before coming to the actual design of the questionnaire, it is necessary to determine information requirements. Hypotheses should be stated and questions designed to elicit support for the hypotheses. Following are some sample questions: The survey will be done over phone on a cross cultural basis, so open-ended question is probably the most appropriate format. Do you own a camera? If yes, what brand? What do you generally use your camera for? Why did you select your camera brand? What features of the digital camera are important to you? How much did you pay for your camera? Other questions about demographics of the interviewees.

The research is conducted on cross cultural basis, therefore some caution should be taken regarding question formats (e.g. open ended question, direct/indirect question, verbal/non verbal), wordings, consumer behavior under the influence of socio-cultural or economic environment, etc.

Teaching Notes for Cases Case 13-1 EVALUATING EXPERIMENTAL DESIGNS 1.

Bayer Deceptive Advertising Case

This is a simple situation to diagram, for there are two separate after-only studies; one for print advertisements which apparently is externally valid (representative), and the second using nine convenience samples to evaluate the television advertisements. There is no mention of any exposure of the respondents to advertisements for other products, or of any program or magazine context in which the advertisements were presented. The major threats to internal validity are a consequence of the complete absence of experimental control. In particular, there is a history effect stemming from previous exposure to analgesic advertising by Bayer and its competitors and possibly knowledge of the pending deceptive advertising case. There is an additional testing effect as a consequence of the respondent’s awareness of being in a study concerned with Bayer advertising, which will naturally focus their attention on the specific claims. A possible courtesy bias may be operating to inflate the perceptions of superiority. To properly interpret the results, one would need to know whether the answers of Bayer aspirin users were different from the answers of users of competing brands. Bayer users may be responding in light of their favorable attitudes toward the brand. 2. National Chemical Advertising Evaluation This is a separate sample before-after design with randomized groups: _R_(n - 2500)_ _ _01 _ _ _ _ _(X)_ _ _ _ _ _ _ _ _ _ R (n - 2500) X 02  <--------1 year------------>  Response rate 01 = 23%

02 = 21%

By far the most serious problem is the inability to account for history, i.e., enhanced efforts of sales force stimulated by concurrent changes in the marketing program, such as new product introduction or by competitive efforts (or lack of effort). Thus, it is possible that the competitors cut back on their advertising as National Chemical was increasing their effort. Finally, National Chemical may have gained significant publicity during this period (indeed, a heavy advertiser is usually accorded more attention in a trade magazine than a nonadvertiser). There are other problems which compromise the value of this experiment. A possible instrumentation problem cannot be discounted because of the poor response rate overall, and the lower response rate at T1. It is important to know whether there was a change in the composition of the sample between time points; were there more purchase influentials at T versus T2 and so forth.

To properly evaluate the campaign, the researchers should certainly measure any change in the number of leads produced by the advertising, and conduct a follow-up study to see whether respondents are different from non-responders. 3. This is a quasi-experiment using “separate sample before-after designs” in two different unmatched geographic areas:

--------------------------------------------------R R

R R

(X) X

3/4 of network stations

1/4 of network stations

Because the groups are not matched, there is no control for history. The fact that respondents are randomly assigned is irrelevant to this problem. There is also likely to be a serious selection bias since the fact that the program was not chosen by affiliates in some areas suggests that these areas have different tastes, or that the program might be controversial or otherwise unacceptable to viewers in these areas. In any event the exposed areas are likely to be quite different from the unexposed. This will not be uniformly true, and there is a possibility that the two viewing areas may overlap somewhat, creating contamination. 4. This is a Solomon four-group design: R200

Final Sample 165

R200

160

R100

100

R100

100

The effect of the sample is measured by: (05 - 06) - (02 - 04), and (02 - 01) - (04 - 03). Among the problems of interpreting these results are: (a) The lack of qualification of respondents at 01 and 03 (as well as 05 and 06) means that those being interviewed may not be decision makers or coupon recipients within the household. (b) There is significant mortality between 02 and 01 and 04 and 03; those dropping out are likely to be quite different from those who were reinterviewed. Thus, the samples at T2 are not the same. 2

(c) There is also a question as to whether the same people in the household were always re-interviewed, creating an instrumentation effect. This would be accentuated if different interviewers were used to interview the same household at two points in time. (d) The telephone interview introduces a number of sampling bias problems, especially if the frame is a telephone directory. This will influence external validity. (e) There is potential contamination, to the extent that intended coupon recipients do not receive the coupon (because of poor distribution) or they pass the coupon to a friend who is known to use the product. (f) The criterion for success is to create new users yet the study only measures trial. If triers don’t like the product or only buy products on deal, they will not become longrun users.

Case 13-2 BARRIE FOOD CORPORATION

The real issue in this case is whether the costs and limitations of the advertising testing method are sufficiently offset by the advantages of a behaviorally-oriented measure of the effect of an exposure. Most companies will probably conclude that it is not worth the effort. Since the design is not easy to understand, it is important to have it diagrammed on the board before any discussion begins: 01 Screening Question

X1 Advertisement

Post-call to establish viewing

Coupon receipts from viewers

The next question to ask is, how will you know when you have an effective ad with this procedure? The answer is that no single test is meaningful per se. What is needed are norms at to the proportion for the sample redeeming coupons for a whole series of different ads in the same and related categories. The method could be used to compare redemption rates for two different ads for the same brand in the same television market if one ad was run one week and the second ad was run the following week. The only problem is a modest threat. If the same design were employed in two different markets at the same time there would be a serious threat to internal validity from the lack of matching. The most serious problem with the proposed method is from selection bias. To begin, the sample is likely to be limited to people who are regular TV viewers and thus able to forecast their viewing behavior in advance. Granted, if the person did not watch the show as planned they are eliminated from the sample base by the follow-up call. Still, there is a problem with those who don’t plan to see the show, since they may well have changed their minds. This can be diagrammed as follows:

Plan to see show Don't plan to see show

Saw show

Didn’t see show

If Group 3 is of any significance, the method could be seriously flawed. What is needed is empirical work on the predictive value of TV viewing plans to assess this risk.

The assurance of the absence of testing effect are not persuasive. At the very least there is likely to be heightened interest in the program and the commercial content because of the screening survey. This may not be too serious if there is not a strong interaction of testing and advertisement exposure effect. Certainly the follow-up call, combined with the receipt of a coupon, may lead to respondents connecting the elements of the design. A further problem is the likelihood of mortality (attrition) between X and 02 due to notat-home etc. This plus the prior problems stemming from the screening questionnaire lead one to ask whether there is any significant benefit to O1 Couldn’t the advantages be achieved simply with 02 and 03? There should be no more bias from this simpler bias, and it would certainly be cheaper. One further issue concern the merits of coupon redemption as a measure of sales effect since no evidence as to subsequent repeat purchases can be adduced. On the other hand, such a problem should be encountered uniformly with all uses of this design for different ads in different areas.

PART II SECTION C TEACHING NOTES FOR CHAPTERS CHAPTER THIRTEEN EXPERIMENTATION Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪

Define experimentation and discuss the distinction between experiments and other types of research approaches Understand the concept of causality and the conditions required to infer causality Discuss the basic issues and terminologies involved in experimental research Distinguish between classical designs and statistical designs Understand the differences between pre-experimental, true experimental and quasi-experimental designs Identify and comprehend the advantages and limitations of the different types of experimental designs Distinguish between laboratory and field experiments Comprehend the concept of validity as applied to experimental research and distinguish between internal and external validity Provide guidelines for conducting experimental research and to understand the limitations of experimental research Recognize the different threats to validity that are controlled by each type of design Become familiar with common marketing applications of experimental research

Teaching Suggestions The material in this chapter normally requires two full class sessions. Appropriate objectives for these sessions are: 1.

To further clarify the distinction between exploratory, descriptive and experimental designs. In particular, it is worth emphasizing that important decisions should be based on relationships that are robust, unambiguous, general (externally valid) and persistent. Only experimental evidence can satisfy each of these criteria.

To give students experience in using a checklist of threats to validity to evaluate past or prospective designs.

To reinforce the need to make conscious trade-offs between cost, time required and validity, in the recognition that anticipation of the threats to validity means that the extent and nature of the bias can often be incorporated into the evaluation of the results.

Our experience has been that these objectives are best achieved by having the students evaluate a large number of designs, and suggest improvements. This is the reason for the seven mini-cases in the questions for discussion section, in addition to the four longer cases dealing with the same issues. One of the objectives of this book is to avoid giving the reader the impressions that marketing research in general and data analysis in particular, is simply a matter of turning a crank or reading a cookbook. There should be a continuing effort to generate and apply theory about the relationships that are hypothesized and that emerge from the data analysis.

This chapter serves the important function of indicating the richness of causal relationships that can exist when a third variable is added to the analysis. In particular, an association between two variables can simply be spurious, resulting from the fact that both have a common cause. In data analysis, the researcher should always be on the look out for the possibility that associations may simply be spurious. In fact, one of the conditions for causation is that it is not possible to identify alternative explanations for an association. (The other is that a cause-effect time lag is present). The chapter also presents and discusses intervening variables, additive effects, interactive effects and direction of causation, all in the context of causal arrows. The goal is really to get the student to realize that these different relationships exist and can be analyzed by cross-tabulations so the theory building process will be richer and less constrained. Questions and Problems 1.

Descriptive and experimental research are not totally different. Experimentation is designed to test causality whereas descriptive research is primarily used for describing the phenomenon under investigation. Experimental research, by systematic manipulation of causal variables and greater control over extraneous variables permits causal inferences to be made with confidence. Both descriptive and experimental research can measure influence but only experimentation can test the causal relationship between variables. The essential difference between the two types of research is in terms of the confidence level associated with the causal inferences stemming from them.

Association measures by themselves do not demonstrate causation because they can be the result of extraneous variables. For instance, let us consider association between the number of prisons and churches in a city. It is impossible to imply the causality between the two. There is the presence of a third variable (i.e.) size of city that influences both the number of churches and prisons. It is not so much that the association is spurious but it is the causal interpretation that is spurious. Association measures can be used in prediction even if no causal analysis is involved. A major task of data analysis is to help the researcher identify spurious associations, determine the nature and extent and to correct them. An intervening variable is very different conceptually from a variable causing spurious association. The spurious association can be distinguished from the intervening variable by determining the direction of causation between the variables. If the third variable seems to intervene between two variable, then the association is not spurious. However, if the third variable either caused the other variables or is associated between the other two variables, then the association is spurious.

An association between two variables does not necessarily indicate the presence of a causal association. Extraneous variables could have been responsible for the presence of this association. The students should discuss three principal components for imputing cause and effect relationships, namely, concomitant variation, temporal ordering and control over other extraneous factors.

4a. Experimental treatments: The alternative manipulations of the independent variables being investigated are experimental treatments. For instance, in an advertising experiment, low exposure level and high exposure level are all experimental treatments. b.

Manipulation: The creation of different levels of the independent variable is known as manipulating the variable. In an experiment, the independent variable is being manipulated and the effect of manipulation on the dependent variable is observed.

Extraneous variable: Variables other the manipulating variable that affect the response of the test units and hence the results of the experimental research. They are known as confounding variables as they may interfere with the changes in the dependent variable and thus confound the experiment results.

Selection bias: If an experimental group is systematically different in some relevant way from the population being studied it invalidates the result of the study and is known as selection bias.

Randomization: A procedure in which the assignment of subjects and treatments to groups is based on chance. Randomization ensures control over extraneous variables and increases the reliability of the experiment.

Blocking: Even after the adoption of random assignments of subjects and treatments to groups, it is possible at times for the experimental groups to differ in a systematic manner on some relevant variable. Blocking is a procedure by which a non-manipulated variable is introduced into the experiment to ensure that the groups are equalized on that variable.

Matching: The procedure by which the assignments of subjects to groups that ensures each group of respondents on the basis of pertinent characteristics. Matching helps reduce the experimental error that arises out of the selection bias.

The discussion in this case should center around the difference between control and generalization. It should be emphasized that there is a tradeoff between control and generalization of the results that helps the researcher in choosing the type of research. Laboratory experiments have greater control than field experiments. Field experiments have more generalizability than lab experiments. Laboratory experiments are conducted in artificial settings with all the extraneous factors virtually controlled whereas field experiments are conducted in natural setting. There is an inherent limitation to a lab experiment. Due to the artificiality of the setting, there is a question whether the established causal link will hold in natural conditions. Similarly, though the results of a field experiment are generalizable, it cannot be stated confidently that the manipulated causal variable is responsible for the effect. In this case, the need for control in the experiment is greater than the need to generalize the result. Hence all the extraneous influences are shut out and the effect of the advertisement on the brand recognition and purchase behavior (due to the favorable attitude) is studied. In case of a field experiment, it is not possible to attribute the purchase behavior only to the effect of the advertisement. Hence a laboratory experiment would have been preferred by the researcher.

The students should be exposed to the difference between demonstrating that the effect was due to manipulation versus generalizing that effect to a larger population. Internal validity refers to whether the criterion variable was the result of the manipulation whereas external validity is concerned with the generalization of the results to the larger population. Field experiments tend to have lower internal validity and higher external validity in contrast to the laboratory experiments. The various threats to internal validity are outlined: History, Maturation, Testing, instrumentation, Statistical regression, Selection bias, Mortality and Selection-maturation interaction.

The experiment may accurately determine that 60% or whatever preferred the new formulation, but several serious issues of external validity remain. The major problem is that the perception of the image of the product as personified by the name and package can swamp taste differences especially for those that do not have well defined senses of taste (which are most people—a substantial number of people cannot distinguish between 7-Up and Cola and certainly can’t distinguish between colas). Thus, it can be argued that a blind taste test has very limited external validity and usefulness.

The textbook contains a summary of most of the terms, and detailed definitions and illustrations can be found throughout the chapter.

Experimentation differs from the other research approaches in that in an experiment, the researcher manipulates the independent variable(s) before measuring the effect on the dependent variable. In this case, the experimentation is not possible due to the fact the independent variable has already been conducted and hence measurement is not possible. Descriptive research is primarily used for describing the phenomenon under investigation. Hence descriptive research is most suitable wherein the researcher can use the company’s internal data to ascertain past sales. The sales performance of the individuals who attended the sales training program can be found out and compared with their past performance to see if the sales training had an effect on the employees. Also, a survey can be conducted amongst the participants of the sales training to elicit their views on their pretraining sales efficiency and post training sales efficiency. A multi-item scale can be developed to measure the employee attitudes. However, it should be remembered that descriptive research does not offer much confidence in making causal inferences (i.e.) sales training improved sales performance.

10. The key principle in this experimental study is manipulation of the exposure to rap music (X) followed by observance of the behavior (Y). If change in the manipulation causes the behavior to change in a hypothesized way, then we can safely attribute that X caused Y. In our case, two groups of teens can be identified: one group with a confirmed record of violent behavior ( could be taken from juvenile homes) and another without record of violence. Various questions can be asked to the two groups on their exposure to rap music and the association between the action and the outcome can be established. The study can be done in various cities across the United States in order to generalize the results of the findings. The limitations of experiments are that it is costlier than either survey research or observation based research. Also problems could be encountered in implementation of the experiments. It may be extremely difficult to obtain cooperation from the respondents or the group of respondents may be mistakenly included in a test. 11. The students should be made to go through the distinction between laboratory and field experiments. The advantages and disadvantages of both the categories are identified. Then, the different ways of conducting this experiment are considered and the pros and cons are assessed and the type of experiment to be conducted is determined. 12. True experimental designs offer the most effective control of internal validity. 13a.This is an example of the one-group, before-after design. The attitudes and perceptions of the smokers are measured and then the group is exposed to the literature. At the end of stipulated time period, the attitudes and perceptions are measured again. This establishes the effectiveness of the literature campaign to stop smoking. b.

The before measure may alert the respondents to the fact that they are being studied. This may prompt them to give socially desirable responses and behavior. Before measure can also lead to heightened attention and may lead to discussion with friends and hence modification of behavior is possible. There is also the chance that the respondents might drop out of the study due to various reasons. Also, the change in the interviewer or change in wording might lead to a bias in the responses.

14. The internal validity threats possible are discussed with the students. The adoption of a random assignment procedure will help in that every member of the universe has an equal probability of being chosen for that assignment. In this case, Cheryl Martin is entrusted with the responsibility of assessing women’s attitudes to pantyhose. She can take two categories of women, the working women and the non working women. In each category, she can study the attitudes of the various age categories. The study can be done across cities thereby ensuring randomization and hence threats to internal validity are eliminated.

15a.In trend studies, the measures over time come from a succession of separate random samples from the same population and yield much of the basic information on which marketing decisions are made. The data collected from trend studies can only be analyzed in the aggregate form in which they are collected. The availability of data across a number of time periods means that maturation (changes in the respondents that are a consequence of time) is not likely to be an effect. However, history ( events external to the environment that affect the responses of the people involved in the experiment) and instrumentation (the change in measuring instrument) remain as possible threats to validity. b.

Of the possible threats to validity in trend studies, effect of history is difficult to rule out. If this design is to be used, there must be continuing sensitivity to plausible competing explanations. This should be done before the experimental treatment, so that the data is available to confirm and disconfirm the specified hypotheses.

16a. Independent variable: Exposure to anti-gun ownership commercials Dependent variable: Attitude towards gun ownership 16b.Design used: Two group-after only design 16c. Not possible to ascertain that the test group and the control group are exactly identical.

Teaching Notes for Cases Case 14-1 EXERCISES IN SAMPLE DESIGN

These four exercises illuminate some of the difficult design decisions involved in preparing a sample design. The emphasis in the discussion of each should be on the definition of the target population, consideration of possible frames or lists and the trade-off between probability and quota approaches. A. Appliance Department Study The issues are primarily the definition of universe and frame. Who do you want to sample? What will the sample results be compared to? The objectives of the department manager have to be cleared up first. Then decisions can be made on whether the ideal target group is, for example, all potential customers for the department, all customers making a purchase, or perhaps all customers entering the physical boundaries of the department. No lists of customers as such can be precompiled if a sample from the flow of customers is desired. A systematic procedure becomes the frame and decisions will have to be made on precisely how individuals will be selected. This will include consideration of the number of days over which sampling will be conducted, the times h the day for sampling, these sampling ratios (e.g., number questioned out of number entering the department), and target sample size. A major input to the desired size is consideration of the cross-classifications specified by the department manager. Non-probability sampling would not be desirable for this application. B. Airline Survey This study is a preliminary exploration, probably more oriented to generating hypotheses than testing them. This does not mean sampling should be done in a careless way - but it opens the door to a quota approach, which is particularly appealing considering the widespread sample units, travel costs and cost per interview. As before, the main problems are with universe definition and frame. Do we want to study all students (which would include those going to university in their own home town) or some sub-group which is more likely to use air travel. Is the interest, in fact, in travel to and from universities or does it include summer transatlantic business, etc.? The sampling problem may be viewed at different levels: (a) geographical regions, (b) universities, (c) students. In making a choice of the three, we want to ensure, on the basis of any prior knowledge, that the scope of different attitudes is going to be tapped. Non-probability-sampling seems most appropriate here, although not essential.

C. Tourist Departure Survey The tourist development agency for the island wishes to know: (1) the number of tourists, (2) the length of their stay, (3) their activities, and (4) their attitudes toward some programs and activities. It is useful to begin by asking how they would use this information; what possible purposes are served. However, the main issue is to evaluate three different methods for choosing a sample for a short interview, with a leave-behind questionnaire for collection of detailed Formation. The choice of a random sample of hotel rooms has a number of problems, including a bias toward those who stay longer, the possibility that people may stay in other places (hostels, pensions, private homes etc.) and most seriously, the difficulty of contacting visitors at their hotel room. Either they are not in the room, or they are in no mood to be disturbed. The second method is an intercept approach, which is equally beset with problems. It is biased toward longer-term visitors, as well as those whose patterns of interest lead them to frequent the sampling point. There is the endemic problem of how to choose the people to be interviewed from the passing crowd. One bash is, of course, to sample those who appear to have the time or disposition to cooperate. The third alternative has the most merit. With (6+3) 30 = 270 departures there are plenty of sampling points, so a cluster design could be utilized. That is, it would only be necessary to have an interviewee at 50 of the 270 departures. The key is to choose the clusters to reflect the differences in carrying capacity of ships versus planes. Once the clusters are chosen then 10 individual respondents could be selected randomly according to time of arrival at the debarkation point. (One complicating factor is the difference between those departing on ships versus planes. Since many of those on ships are probably on a cruise it is likely their stay was shorter, they engaged in more group activities and possibly were more homogenous in interests and background. This opens the possibility of a stratified design.) D. Financial Services Segmentation Study The target population is implied to be all homeowners. Depending on the purpose of the study it may be desirable to exclude very low income areas, or rural areas the bank doesn’t serve. The question of sampling frame is not easy to resolve, although in some instances property tax rolls will serve the purpose. One difficulty is that homeowners and taxpayers may not be occupants and it is not dear whether this group satisfies the purpose. A further question concerns the treatment of joint property, and indeed the whole question of husband/wife decision-making. It may be necessary to interview both husband and wife.

Case 14-2 TALBOT RAZOR PRODUCTS COMPANY Introduction

This case is a useful adjunct to the exercises in sample design. It introduces a number of fundamental problems in designing and implementing a sample within a fixed budget, with the further complication of an advertising manager with intuitive but wrong-headed ideas about sampling. The class should at some stage be asked to indicate how they would overcome his ignorance. If the instructor so chooses, this case can also be used to introduce the material in the next chapter, dealing with the determination of sample size. This teaching note is based on this pattern of usage. Target Population On the surface the research objectives appear to be well conceived and appropriately documented, in light of the research purpose which is to learn how to better promote the Enhance brand in light of what is found about position in the after-shave market. However, there is an immediate problem with the way an Enhance user should be defined, because this has a major impact on the sample size and design, as well as budget. Somehow the advertising manager has decided that he is only interested in users who say Enhance is their favorite brand. This is a questionnaire reorientation of the study. If the research doesn’t lead to a better understanding of hair spray users who don’t currently use Enhance (these could be never users or past users), then the company will not have learned how to appeal to the users of other brands or protect Enhance from erosion by other brands that are better positioned. Thus, it might be better to change the target population to hair spray users rather than solely Enhance users. Sample Selection and Size Assuming the target population is the Enhance user, the critical issue is how many Enhance users should be interviewed in each city (or area), and how many cities (or areas) are to be sampled. When these two issues are combined with the issue of how to define an Enhance user, the magnitude of the problem comes into focus. Consider the following sample-size calculations for locating 100 Enhance users within a single city. (These are based on figures from the Sacramento study.)

An enhanced user is defined as one who purchased the enhanced brand within the last 12 months

3 months

1. Total sample

1,465

3,145

2. Resp. on home/willing to cooperate (79% of line 1)

1,026

2,202

3. After-shave users (65% of line 2)

667

1,431

4. Enhanced brand users (15% of line 3)

100

5. Enhanced brand users (7% of line 3)

100

Thus, Talbot management will have to conduct approximately 1,465 households in a city to locate 100 individuals who purchased the Enhance brand within the last twelve months. If an Enhance user is defined as one who purchased within the last three months, the total sample size in a city increases to approximately 3,145. If the cost per contact is approximately $6.00, the total field costs for one city would be either $8,790 or $18,876, depending upon how an Enhance user is defined. With about $23,000 available for field work, Talbot could sample in not more than three cities in the first case, or in one city in the second. Based on the calculations in the above paragraph, Talbot would be interviewing either 667 or 1,431 after-shave users in each city. One might ask whether these samples are too large. For example, if much of the information desired from the study is the percentage of after-shave users who prefer brand X, who think the Enhance brand has a masculine image, who watch the CBS evening news, etc., then it is possible to calculate “a for different sample sizes and for different hypothesized universe means. For example, for a sample size of 667 hair spray users:

PART II SECTION D TEACHING NOTES FOR CHAPTERS CHAPTER FOURTEEN SAMPLING FUNDAMENTALS Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪

Distinguish between census and sample Know the differences between sampling and non sampling errors Learn the concepts of the sampling process Describe probability and non probability sampling procedures Determine sample size with ad hoc methods Learn to deal with non response problems Understand sampling in the international context

Teaching Suggestions The objectives of this chapter are first, to acquaint students with the basic terminology and basic issues in sample design and an understanding of the alternative methods of selecting a sample. Because this objective has primacy we have left the technical issues of sample precision and sample size determination to the next chapter. This also helps the achievement of the second objective, which is to develop an appreciation that an appropriate sample design is largely a matter of common sense, exercised within the context of the research purpose and objectives. The third objective is to emphasize that the determinants of an acceptable marketing research sample are the precision and freedom from bias required by the research purpose, within a reasonable budget dictated by the value of the information. This chapter also provides a good opportunity to review the multiple and conflicting considerations that have to be balanced by research designers, and to further emphasize that random sampling error (due to taking a sample rather than a survey of the population) is often a small proportion of the total error. The diagram below has been found to be helpful as a basis for discussion when put on the board at the beginning of the class. Each question for discussion, and example provided by the instructor can be related easily to this scheme. Questions and Problems 1(a).The frame could be those who ride during a one-week period or during a one-day period. Or the frame could be those who enter the system from any of five stations. Alternatively, an area telephone survey could use the telephone directory. (b) Yellow pages of telephone directories. A list supplied by an association of sporting goods retailers. (c) Such a frame would have to include sporting goods stores, discount stores, department stores, hardware stores, etc. Again, the yellow pages might provide a start, but it would probably have to include several categories of retailers (not just sporting goods). (d) The whole population would need to be in the frame since such a high proportion of people watch TV. A telephone directory could provide the basis (if 10 were added to the last digit, those with unlisted phones would be included) if a telephone survey were planned. (e) An area sample could be restricted to census districts with high average income. Lists of people with high average income are available like subscribers to the New Yorkers. (f) Like the television viewer, such a population is so broad that a frame would have to be comprehensive. See (d).

2(a) By where their trip originated, their destination and their area of residence. (b) By size, and by location in terms of area of the country (shopping center location vs. stand-alone location, vs. other types of locations). (c) By type of store, by tennis racket sales volume. (d) By area, by time spent watching TV per week, by program types watched. (e) By area, by income, by family size (f) Male vs. female (g) By area, by community. (h) By shopping frequency, size of disposable income. 3.

This calls for a stratified sample. If a sample size of 200 is budgeted, a sample of perhaps 100 or 150 should be taken for the strata of large stores and the rest (50 or 100) should be taken from the population strata of large stores. Since the information about stores will probably be as valuable as information from small stores, it doesn’t make sense to sample them proportionately to their numbers. It would be useful to know the cost of sampling, the relative value of the two strata to the study, and the variance within each strata.

This question is intended to get the student to think through the mechanics of a telephone survey. A key issue is whether it will be worthwhile to attempt to include those without telephone listings by some mechanism like randomizing the last digit. One consideration is the number of unlisted phones in Fargo. Another is the likely bias in excluding them. A second issue is how many call-backs to include in the sampling plan. A third issue is when to schedule calls. Presumably, most would be scheduled as close to 24 hours after the broadcast as possible.

The issue here is whether an in-store sampling plan should be designed. If so, people could be intercepted while shopping at the checkout line or upon leaving the store. The design would probably stratify by hour of the day and perhaps sample proportionate to the number of shoppers during that hour. The problem is that those who shop exclusively at other stores would be missed. The alternative would be an area sample or a telephone sampling design. The frame could be obtained either from the names of owners of cars in the parking lot (since the license plates can be noted) or from those who fill out a coupon for a free draw. (It should be noted that it is usually difficult to get permission from competitors to sample their shoppers.)

If the problem were the low usage of the library it might well be important to survey users who are not cardholders and even more important to survey those who do not use the library at all. Thus, a general survey of the population might be much more appropriate. A convenience sampling frame can often be biased.

The point of these questions is to get the student to have a hand-on feel for simple random sampling. The acts of drawing four samples and observing that the sample mean is different in each, should provide an understanding of the concept of the sampling distribution of the sampling mean.

A serious bias may be introduced because those living in dense neighborhoods (high-rise apartments, for example) will have a much lower probability that those living in roomy subdivisions. The person on the five acre estate will have the largest probability of being drawn.

To obtain information about windmills in use, Robert Ferber (Marketing News), March 24, 1978) attempted to take a census of the 300 or so power generating windmills in use. He approached 3,000 county extension agents, owners. He then employed snowball techniques to have those owners identify other owners.

10. Students should use the approach given in the textbook to answer this question, using tables 13-2 and 13-4. For example a student might take the sixth row of Table 13-2 and start from the right to obtain the number 39,359. The selected city from Table 13-4 would be the one with the cumulative population corresponding to 39,359: Filmore. Students can use the random number table to answer this

question. For example a student might take a number from a random number table and use that number to select the city with the requisite population. 11. As mentioned in the textbook, one entrance of a shopping center may draw from very different neighborhoods than another. A solution is to stratify by entrance location. To obtain an overall average the resulting strata averages need to be combined by weighting them to reflect the relative traffic that is associated with each entrance. In this case if the sample is stratified by entrance A & B. the proportion of shoppers using entrance A is .44 (1100 people out of a total of 2,500) and the proportion of shoppers using entrance B is .56 (1400 people out of a total of 2500). The estimate of people saying they will buy the product would be the Entrance A total plus the Entrance B total weighted by the proportion of shoppers represented as follows: (.44 x 95) + (.56 x 125) = 111.8. This represents 4.5% of the total shoppers polled. Another way to stratify the sample might be on the basis of time of day (i.e., weekdays, evenings and weekends) rather than by entrance since different shoppers may shop at different times. This would result in a different estimate of the proportion of people that say they will buy the product. Students should justify whichever method they choose to arrive at their answer. 12. Stratified sampling is the probability sampling procedure that divides a population by a specific strata after which people are chosen randomly from each stratum. Two types of stratified sampling is possible: Proportionate and disproportionate stratified sampling. An ideal stratum in stratified sampling must be as homogeneous as possible with respect to the variables of interest. Therefore the withinstratum similarity of units will lower the standard error contributions from each stratum to the overall standard error. Thus the more homogeneous the strata, the more precise the confidence interval estimate will be. However, a stratified sample is marked by heterogeneity between groups. Cluster sampling is a probability sampling procedure in which the population is divided into clusters. Clusters of population units are studied at random and then all the units in the chosen clusters are studied. When a sampling frame is not available to stratify the population, cluster sampling may be resorted to. Unlike in stratified sampling, Cluster sampling does not include units from all the clusters into which the population is divided and hence the clusters should be as heterogeneous as possible. But clusters are homogeneous between groups. An ideal cluster should be an exact replica of the population. 13. Sampling efficiency is defined as the ratio of accuracy over cost. It is the trade-off between cost of employing a probability sampling procedure and the resulting accuracy that can be achieved. Higher the cost, higher is the accuracy. Sampling efficiency can be increased by various ways as described below: (i) Holding accuracy constant and decreasing the cost (ii) Holding cost constant and increasing accuracy (iii) Increasing accuracy at a faster rate than the rate of cost increase (iv) Decreasing accuracy at a slower rate than the rate of cost decrease. 14. Simple random sampling is an approach by which each population member and each possible sample has an equal probability of being selected. Systematic sampling is spreading the sample in a systematic manner through the list of population members. The sampling list is of paramount importance in case of systematic sampling and the sampling efficiency depends upon the list used. For instance, let us consider that we need to sample a group of 100 girl scouts for a survey out of a list of 1200 girl scouts. The list is arranged in three different ways: a random order, cyclic order of the month each one of them joined and in ascending order of their ages. In case of the random order list, the sampling efficiency of the systematic sampling will be equal to that of the simple random sampling. In case of sampling using the ascending ages of scouts, the sampling efficiency of systematic sampling will be higher than that of simple random sampling. In the case of sampling by the month of joining the scouts’ movement and if the sampling interval is twelve, the sampling efficiency

of the systematic sampling will be lesser than that of simple random sampling as the same month will be selected resulting in lower accuracy. 15. Probability sampling insures that each element within the population of interest has a known chance of being chosen whereas non probability sampling is a subjective procedure in which the probability of selection is not known. Non probability sampling does not insure that each unit will have a known chance of being chosen. The advantages of non probability sampling over probability sampling are that it costs less, useful in exploratory research, takes lesser time to execute and are simple in design. An important feature of non probability sampling is that it offers researchers greater freedom and flexibility in selecting individual population units. Probability samples are drawn when there is a need for highly accurate estimates of market share or volume that has to be projected to the entire market. Heterogeneous markets favor probability samples. Non probability samples are used in cases of limited budgets and when probability sampling becomes prohibitively expensive. Non probability samples are used in concept tests, product tests, package tests and focus groups. 16. Proportionate random sampling is a form of stratified sampling in which the sample consists of units selected from each population stratum in proportion to the total number of units in the stratum. Disproportionate random sampling is a form of stratified random sampling in which the sample consists of units selected from each population stratum according to how varied the units within the stratum are. The total sample is allocated on the basis of relative variabilities rather than sizes as compared to the proportionate sampling. 17a.The target population of the study will be all the residents of Winona (individuals above the age of fifteen), from households over a stipulated annual income, with an interest in sports. b.

If the study involves only the attenders, the sampling frame will be the list of all attenders collated in the past two seasons. However, in order to gauge the attitudes of both the attenders and non-attenders, this sampling frame will be inadequate. Any list that gives the names of the residents of Winona can be used. For instance, a mailing list can be bought from a survey company can be used to obtain a cross sectional sample of the residents.

The researcher should decide whether to use a traditional method of sampling or a bayesian method. Most of the marketing research projects employ a traditional sampling method without replacement since a respondent is not contacted twice for the information. In our case, since the financial resources are pretty scarce and the nature of the study point towards a non probability type of sampling. The specific type of probability sample depends upon a host of reasons. The students can be asked to assess the advantages and disadvantages of each method and recommend what they think is an optimal method.

18a.In domestic research, the identification of target population and determination of sample frame is easier relative to the international context due to the availability of information. However, owing to the paucity of information, the generation of the sampling frame is a major problem. Even if the lists are available, they may not provide the adequate coverage. Another difference between domestic research and international research is that sampling may take place at a number of geographic levels in the international context. The level at which the sample is drawn depends upon the product market, research objectives and on the availability of lists in each level. b.

Before conducting an international marketing research, the researcher should determine if the research should be conducted across all countries or if the results are generalizable across all the countries Due to the high costs of research in the different countries, there is a tradeoff between the research costs and the number of countries in which the research is conducted. After the countries have been identified, the sampling technique is to be determined. Probability sampling is not too very feasible owing to the paucity of the sampling lists. A popular technique is the snowball sampling technique in which the

initial set of respondents are selected at random and the additional respondents are selected based on the responses given by initial respondents. The international researcher should not set his mind on using the same sampling procedure in all the countries as each procedure varies in its reliability across countries. Also, costs involved for various procedures differ from country to country. An appropriate sampling procedure should be chosen based on the tradeoff between the costs and the reliability and a sampling procedure chosen. 19. Students can be asked to go through this exercise by following the procedure as outlined in Q.17.

PART II SECTION D TEACHING NOTES FOR CHAPTERS CHAPTER FIFTEEN SAMPLE SIZE AND STATISTICAL THEORY Outline of the Chapter ▪ ▪ ▪ ▪ ▪

Discuss some ad hoc methods of determining sample size Introduce the concepts of population characteristics and sample statistics Discuss confidence intervals and interval estimation Show how to calculate sample size for a simple random sample Calculate sample sizes for stratified sample and also for multistage designs

Teaching Suggestions This chapter was deliberately separated from Chapter 14 so that it could be bypassed by some instructors who want a less quantitatively oriented course. The chapter presents the approach to sample size determination based on statistical theory. This approach really is rarely applied directly because of its focus upon a single question, simple random sampling, and the assumption that the population standard error and the confidence level are both known. Further, as the last chapter made clear, several ad hoc methods are available. However, it introduces several useful concepts that do provide guidance to the sample size question and are useful in themselves: concepts like population characteristics, sample characteristic, sample reliability, and interval estimation. Also, it sometimes is used directly to determine sample size, although the student should not get the impression that marketing research can not be conducted if these formulas are not understood. The first two sections attempt to graphically make clear the distinctive population characteristics (parameters) and sample characteristics (statistics). Students always seem to get these two concept confused when learning this material. Consequently, the distinction should be emphasized in class. Another source of confusion is the distinction between the distribution of X and the distribution of . For some encountering the normal curve for the first time, Figure 15-4 will be important to understand. One trick to teaching interval estimation is not to get too bogged down in probability theory. Try to keep it as natural and simple as possible. Of course, the concept of a confidence level needs to be explained in the context of probability theory. The sample size formula immediately follows from the interval estimate. It is best to de-emphasize the derivation (the curious students can work it through). The interpretation and determination of the terms in the general formula should be the focus of the discussion.

Questions and Problems 1.

This question is intended to make the student note the difference between the population and the sample and to provide an opportunity to actually do some calculating (one of the few in the book). One approach is discussed below: (a)(b) R 5 4 3 2 1

 3.32 3.32 3.32 3.32 3.32

f R.F .20 1.00 .32 1.28 .24 .72 .08 .16 .16 .16 Total 3.32 = , 1.73 = 2

R- 1.68 .68 -.32 - 1.32 -2.32

(R-)2 2.82 .46 .10 1.74 5.38

Thus,  = 3.32; 2 = 1 73;  = 1.31 (c)

R 5 times 4 = 4 times 9 = 3 times 4 = 2 times 3 = 1 times 5 =

(X-X) 2 times Freq. 13.54 6.35 0 4.04 23.33

Freq. 20 36 12 6 5

Total 79/25 = 3.16

X = 3.16 Thus,

s2 = 1 97 s = 1.40

(d)

x = Sx =  (e)

= 1.31

= 1.40

= .262

= .28

for

n = 100  x = .131

for n = 100 S x = .14

The population mean () is 3 and the variance (2) is (5-3) 2 12,500 + (1-3) 2 12,500 = 4 = 2. Thus  = 2. 25,000 25,000

This value of the population standard deviation would be larger than any estimate because it represents the extreme case of the maximum possible variations.

(R-)2f .56 .15 .02 .14 .86

(a ) X  5 3

or .52  5 x

3 (1.49 )

100

(b )

X  2 x

or .52  2 (1.49 )

(c )

X  5

or .52  5

3 n

X  27 n

100

or .52  .30

3 (1.62 ) 100

.52  2 (1.62 )

or .52  .25

100

or .52  .27

.52  .32

(d) n > (c)2/(error) 2 where c = 2  = 1.49 error = .10 3.

(a) n = c 2 /4 (error) 2 =

2 2 = 10,000 4(.0l) 2

(b)

n=c 2 /4(error) 2 =

22 = 1,l11 4(.03) 2

(c)

n = c 2 2/4 (error) 2 =

(d)

for a 90% confidence level c = 5/3

2 2 = 278 4(,06) 2

error  .01 n = (5/3) 2 = 6,944 4(.01) 2 2 error  .03 n = (5/3) = 772 4(.03) 2 error  .06 n = (5/3) 2 = 193 4(.06) 2 4(a) n >

= (5/3) 2 = 1,736 4(error)2 4(.02) 2

(b)

c2 = 2 2 = 2,500 2 4(error) 4(.02) 2

(c) If it were known that P is less than .3 then we would use .3 in our formula instead of .5 because .3X(1-.3) is smaller than .5(1-.5). Then instead of .25 we would use .21 (if we wanted to be that precise). = 2100 for 95% n=

(d)

C2p(1- p) (error) 2 .3 + (5/3) * P(l-9) 400 = 0.3 + 0.017.

= 1458 for 90%

5(a) The assumption is made that the usage follows a normal curve and it is known that 95 percent of a normal curve lies within plus or minus two standard deviations from the population mean. Thus, a total of four population standard deviations are 16 times per month and one standard deviation would be f. (b)

n = (c) 2 / (error) 2 = (5/3 x 4) 2 / 1 2 = 45 90 percent error = (2 x 4) 2 / 1 2 = 64 95 percent error

(c)

n = (c) 2 / (error) 2 = (5/3 x 4) 2 /l (4) 2 = 281 = (2 x 4) 2 / (4) 2 = 400

90 percent error = .4 90 percent error = .4

(d) in selecting the confidence level and desired accuracy, higher confidence level and increased accuracy must be traded-off against size. Some considerations that will affect this decision are the importance of the decision that relies on the estimate, the profit potential and investment required by the decision and the cost of the sample. 6(a)By looking at the table, it is intuitive that we should sample least from small and most from large because of the differences in the standard deviation and source interview cost across strata. Strata

i

1. large 2. medium 3. small

.1 .2 .7

i 40 3 2

 i  i / i c

64 64 64

0.5 0.075 0.175 0.750

0.666 0.10 0.234 1.00

200 30 70 300

To determine this, use the formula as follows: n i = i i  ci n i( i  i ci) (b) We recommend 200 interviews from the large strata as opposed to 30 in a simple random sample because of the large variation in order sizes in this stratum. (c)

X= i = 1 X i i =0.1 x 100 + 0.2 x 8 + 0.7 x 5 = 10 + 1.6 + 3.5 = 15.1 (thousand $)

(d) The estimate of the variance of the population mean is as follows: If we had taken a simple random sample of 300, we would sample only about 30 people instead of 200 from the large strata. There would be much larger variance in the estimate of the mean for this stratum with 30 people instead of 200. This would raise the estimate of variance from the simple random sample as a whole. The reason for using a stratified sample is to improve the variance estimate over a simple random sample. (e) Total interviewing cost = $19,200. (f)

Strata l. large 2. medium 3. small

i .1 .2 .7

i

ii/ ci

40 3 2

64 64 9

0.5 0.075 0.467 1.042

144 22 1340.234 1.00

200 30 134 300

(g) Total interviewing cost under (f) = 64x (144+22) + 9x 134 = $11,830 n (h) If the total budget was $19,200 as in (e), the budget = i=i cini

19,200 = 64nl+ 64n2+ 9n3

n1 = .480n n2 = .07n n3 = .448n

= 64(.480)n + 64 ((.072)n + 9(.448)n = 30.72n + 4.61n + 4.03n = 39.36n: n = 488 Revised allocation n1 = .080n = .48(488) = 234 n2 = .072n = .072(488) = 35 n3 = .448n = .448(485) = 219 488 7a. Assuming that the total qualified population (over a specified age and is able to attend sports events) is 144,000. The list of the number of attenders includes 1200 names. Therefore the number of nonattenders should be 142,800(144000-1200). Proportion of nonattenders in the sample is 99.1% (142800/144000) and the sample should contain 99.1 % of the nonattenders in the sample. b.

The nonattender population contains 142800 people and the sample should contain 99.1% of non attenders.

8a. The owner of Galaxy Pizza can use census information of the area, municipal list of the households in the area etc., This can be used as a sampling frame. b.

Assuming each household has 5 people, the total number of households is 20000. A random sample of 2000 households will imply that 10% of the population is covered in the sample.

The residential areas within a ten mile radius and/or within a thirty minute journey time of the store is identified. Area sampling can be used. After selecting a sample of clusters from the city, a sample of consumers can be contacted from each cluster. This helps in reducing the traveling time and money.

PART III TEACHING NOTES FOR CHAPTERS CHAPTER SIXTEEN FUNDAMENTALS OF DATA ANALYSIS Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪

Familiarize with the fundamental concepts of data analysis Understand the need for preliminary data preparation techniques such as data editing, coding and statistically adjusting the data where required Describe the various statistical techniques for adjusting the data Discuss the significance of data tabulation Identify the factors that influence the selection of an appropriate data analysis strategy Familiarize with the various statistical techniques available for data analysis Provide the need and a brief explanation for the various multivariate techniques

Teaching Suggestions This chapter is written to be used in conjunction with Chapters 17 and 18 for maximal benefit to the students, it includes the basics of data analysis including an introduction to the various data preparation, editing, coding, weighting and adjusting the data. The reality is that most data analysis is practical, marketing research uses the measures and techniques described in this chapter. In part, that is because these techniques are extremely powerful and useful although it is also, in part, due to the fact that many analysts and their clients are not familiar with more advanced techniques. Whatever the emphasis of the course, this chapter will deserve thorough treatment. Each section can legitimately be stressed as important to effective data analysis. At the outset a very useful six-step process is put forward. It represents a structuring of the chapter and of data analysis in general. It suggests a natural, logical flow to the process. The Table 16-2 calculation can be tricky for some and the instructor may want to walk the students through it. The difference between means discussion might be related to the theory of marketing segmentation—the development and pursuit of marketing programs for market subgroups. Multivariate analysis is only mentioned in this chapter. The results presentation is most important. Questions and Problems 1.

Another coding question was taken from one of the California Poll surveys shortly after Brown was first elected Governor. One way to compensate for the number of answers a respondent gives is to code separately the first, second, third, etc., response. Then the analysis can be conducted separately for only the first response in addition to analyzing all responses together. (a) Should the first comment be coded as “like his ideas” or on a “welfare” category or both? (No, the category is for answers that literally say something similar to “like his ideas.”) Should the next two involve a “business climate” category or a “regulation” category or both? Should “too soon” really be combined with “not bad or good?” (b) Does this respondent like his ideas? Should category one be used because he is doing OK (the respondent did not say “so far” so he really doesn’t fit there?) (c) This response will probably require two new categories. (d) Should the “strong stand” be coded as category 5? Probably not since category 5 is a positive category.

(e) Should these be coded as category 3? Probably not, since category 3 refers to “people” and this comment refers to “farm workers.” Similarly, “is doing a good job” and “l like him” really does not fit well into any of the categories. Some of the other categories used and the number of responses are as follows: (56) (57) (52) (53) (30) (34) (33) (25) (25) (20) (21) (20) (19) (24) (39) (135)

Young. Not influenced by private interest groups, others. Sets an example, small car, small apartment, walks to work, etc. Like what he did about smog device bill. Like position on Vietnamese refugees. Has not kept promises. Policies are poor, expected more, general negative mention. Is keeping campaign promises. Improving economy. Likes position on farm workers. Like appointments and what they are doing. All other positive. Too young, immature. Negative personality, mentions (too politically ambitious, doesn’t think, too quick, not realistic). All other negative responses, No answer.

Figure 16-4 indicates that those most interested in the HMO tended to be lower income and younger families, The implications are that it might be useful to use income and age to identify target segments. I would first cross-tab income by age to make sure that there are really two variables involved. It may be that the low income families are also young and thus the two tables would really be measuring the same thing in which case we really have found only one segment defining variable. The second data analysis step would be to describe the “low income segment” in terms of other variables that we have in the survey. This step is a standard approach in a segmentation study.

This figure indicates that those not intending to have children are better prospects than the others. Here again it is very likely that “not intend to have children” reflects an older family and a higher income family and thus it would be premature to say that a new segment has been identified. It is more likely that this question simply describes further the young, low income segment. Cross-tabulation of intentions to have more children with income or age would confirm this judgment.

Teaching Notes for Cases Case 17-1 MEDICAL SYSTEMS ASSOCIATES: MEASURING PATIENT SATISFACTION Introduction

This case provides the student an opportunity to interpret preliminary results of a research study in light of the research objectives, and shows how creative data analysis can substantially clarify the meaning within the results. Because the tables in the case are relatively straightforward the case is also a good vehicle for demonstrating alternative measures of association. A workable teaching approach is to first have the students interpret the results in Table 1 of the case, in terms of possible limitations with the data inputs and the structure of the tables. This is a good basis for a re-analysis of the bottom table of Table 1 which may require the instructor to put the various steps on the board to illustrate what could be done. Finally, the strong results from the re-analysis suggest that the variables influencing ERI need to be examined from a fresh perspective. Interpretation of Results It is advisable to begin the class by putting the following scheme on the board, since it appears to be the model used by the investigators to guide their analysis: ERI = ƒ[Determinants of ERI] (Satisfaction with - room size - layout - staff courtesy - cleanliness)

modernity of home size of home reasons for being in home mobility selection process ability to make friends religious affiliation

Many questions can be raised about the inputs to this analysis approach, as well as the method for testing for the relationship: 1. One likely source of error, and hence of reduced association, is the construction of the ERI Index. One can question the use of equal weights for each of the 14 component variables, the possibility that components are not independent of other components and hence there is double counting, and finally, we have no information on the choice of cutting points. A better approach would have been an overall satisfaction judgment. 2. Another potential flaw of the ERI is the variability in standard of judgment used by the respondents. The individual’s previous experience will drastically influence their definition of what is or is not satisfactory.

3. The list of determinants of ERI that was tested includes a number of noncomparable variables and raises a question as to what model was being tested. Some of these determinants are directly controllable by the staff or are a feature of the nursing home while others are a consequence of staff’s effort or the physical environment. “Ability to make new friends” is a possible example of the latter type of variable. The model to be tested is as follows: X -------> (Determinants)

Z ------------->Y  (ERI)  Ability to make friends

This model becomes important in light of the re-analysis of Table 1, which shows that “ability to make friends” has a strong association with ERI 4. The following re-analysis using  instead of x2 also raises a serious question about the use of x2 as a screen to decide whether a determinant is worth examining. It is quite possible that because of the small sample size a variable could have a meaningful relationship with ERI and yet be rejected by this criterion. Re-analysis of Relationship of ERI and Friends Step 1 Convert cell values to actual numbers and re-orient table so dependent variable (y) is on left-hand stem. Number of Friends Just a Couple

Just a Few

Quite a Few



Low

ERI Medium

High



103

Step 2: Compute 2 value (for entire Table and individual cells) and compare results to 2 derivative measures such as 2 2 =

10.90 sig at 0.95 level (4 degrees of freedom)

2 = 2/n = 10.90/103 = .106 C=  x2 =  10.9 n+ x2 113.9 = .096 = 0.31 Evidently, there is a reasonably adequate relationship, but note that the cell (low; just a couple of friends) contributes a large proportion of the total 2 (over 30%). 2 (Cell) = (5-2.24)2 = 3.4 2.24

Step 3: Compute a T (promotional reduction in error measure) for Table 3.  533 (error not knowing x) - 51.9 (errors knowing x) 53.3 = 0.027 Step 4: Combine Tables 2 and 3 (since they refer to the same questions). To make the table less cumbersome also combine the categories “just a few” and “just a couple” (since they are not semantically different) and combine the low and medium categories, they are both small in number. The result is the following table: Number of Friends No new

Few and

Quite

Friends

a couple

a few



Low & Medium ERI

High

119

Step 5: Compute for the transformed table as well as for a baseline table with the same marginals that reflects the strongest possible relationship.  = 59.4 - 51.6 = O.13 59.4 Table representing maximum relationship: Number of Friends

None

Low & Medium 16

High

Few and couple

Quite a few

119

 = 59.4-l2.4 = 0.79 59.4

PART III TEACHING NOTES FOR CHAPTERS CHAPTER SEVENTEEN HYPOTHESIS TESTING: BASIC CONCEPTS AND TESTS OF ASSOCIATIONS

Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪

Understand the logic behind hypothesis testing Familiarize with the concepts basic to the hypothesis testing procedure Describe the steps involved in testing of hypothesis Interpret the significance level of a test Understand the difference between Type I and Type II errors Describe the chi-square test of independence and the chi-square goodness of fit test Discuss the purpose of measuring strength of association

Teaching Suggestions The emphasis in this chapter and the next chapter (as in the whole data analysis section of the book) is not upon calculation. The computer or a statistical consultant can do the calculating. The emphasis is, rather, upon asking the right questions and making proper interpretation of the results. Thus, the chapter seeks to get the student to: 1.

Ask the hypothesis test question. Maybe these empirical findings simply represent sampling variation. What is the probability that such (or even more impressive) results would have emerged if the null hypothesis was true? A low p-value means the results are impressive and that their implications are worth considering. A high p-value means that the results should be disregarded or discounted.

How to interpret the significance level: a significance level of 0.10 simply means that the p-value was less than 0.10. The four steps in Figure l7-l summarize the logic.

There are two things that this book is not. It is not a reference book for the hundreds of statistical tests that could be used. We do not feel a marketing research book should provide that function or that a student should be burdened with sorting out all the available tests. Second, this book does not attempt to provide the ability to perform calculations. Rather, it emphasizes inputs, outputs, assumptions, and interpretations. The inclusion of the formulas behind chi-square tests in cross tabulations is the exception to the rule. The computer will perform the calculations. The task is again to ask the right questions and to interpret the results appropriately. The cross-tabulation example is used as a vehicle to explain conceptually what independence (the null hypothesis) is. The experiment in Table 17-2 is the primary vehicle. The use of chi-square as an association measure is discussed but it is the appendix that provides a more detailed discussion of association measures for nominally scaled variables.

Questions and Problems 1.

Column Total b.

E1 = 17.8 E2 = 19.8 E3 = 42.4 (80)

E4 = 46.8 E5 = 52.1 E6 = 111.3 (210)

Row Total 22.3% (89) 24.8% (99) 53.0% (212)

E7 = 24.5 E8 = 27.3 E9 = 58.3 (110)

E1 means that if the rows and columns were independent (a knowledge of one provides no information about the other--like flipping a coin or drawing a card), then a total of 17.8 people would be “expected” to be in cell 1. If the experiment were repeated many times, on the average 17.8 would be in cell 1.

Cell 1 2 3 4 5 6 7 8 9 Total

(O-Ei)2 17.6 38.4 73.9 33.6 198.8 445.2 6.3 59.3 84.6

(Oi-Ei) 2/Ei .99 1.94 1.78 .72 3.82 4.08 .25 2.17 1.48 17.3 = chi square

d. With four degrees of freedom, (r- 1) (c- 1), the critical value given in the table at the end of the book is 18.5 at the 0.001 level and 14.9 at the 0.005 level. Thus, the chi-square statistic is significant at the 0.005 significance level and we would reject the independence null hypothesis. e. False. It just shows that if usage differs by age, then the probability of getting a chi-square value this large or larger would be very small. Thus, the evidence points to the conclusion that usage differs by age. 2.

Ho: Preferences and brands are not related. Ha Preferences and brands are related. Purchaser

Total

Buys the brand Doesn’t buy the brand

45(50) 55(50)

50(50) 50(50)

45(50) 55(50)

60(50) 40(50)

200 200

Total

100

400

Expected value (represented in brackets) = Row total x Column total Grand total EII = 200 x 100 400 EII = 50 X2cal

= (O - E) 2 = (45 - 50) 2 + (50 - 50) 2 + ... + (40 - 50) 2 E 50 50 50

= 0.5 + 0 + ... + 2 = 6 X2 test statistic at (4-1)(2-1) = (3)(1) = 3 degrees of freedom a.

 = 0.05 = 7.815 X2cal, X2table therefore Ho cannot be rejected Preferences and brands are not related.

3. Ho: Ha:

The observed distribution attending the concert fits with the on campus distribution (statistically equivalent) The observed distribution attending the concert with the on campus distribution

Observed value

Expected value

Juniors = 74 % (59)

Juniors = 62 % (50)

Seniors = 17 % (14) Freshman & Sophomores = 9 % (7)

Seniors = 23 % (18) Freshmen & Sophomores = 15 % (12)

degrees of freedom = (3 - 1) = 2 X2tab at  = 0.05 = 5.991 X2cal = (O - E)2 + (59 - 50) 2 + (14 - 18) 2 + (7 12) 2 E 50 18 7 = 1.62 + 0.889 + 3.571 = 6.08 X2cal > X2tab Therefore, reject Ho and conclude that the observed distribution does not fit with the on campus distribution. 4. Ho: The observed application pool coincides with the historical pattern. H a: The observed application pool does not coincide with the historical pattern. at  = 0-05. Observed pattern

Expected pattern

In-state = 75 Neighboring states = 15 Other states = 10

In-state = 70 Neighboring States = 20 Other states = 10

X2(da = (3-1) = 2) at  = 0.05 = 5.991 X2cal = (75 - 70) 2 + (15 - 20) 2 + (10 - 10) 2 70 20 10

= 0.357 + 1.25 = 1.607 X2cal < X2tab Therefore, do not reject Ho and conclude that the observed application pool coincides with the historical pattern. 5.

=0.1 Ho: There is no association between a child’s sex and the hours of play. Ho: There is an association between a child’s sex and the hours of play.

Boys Girls

Less than 2.5

2.5 or more

Total

18 (16.9) 17 (18.1)

10 (11.1) 13 (11.9)

28 30

Expected value is given in the brackets. X2tab at  = 0.01; df = 1 = 6.635 X2cal = (18 - 16.9)2 + ... + (13 - 11 9) 2 16.9 11.9 = 0.0715 + 0.109 + 0.067 + 0.1016 = 0.349 X2cal < X2tab Do not reject Ho, and conclude lack of association between child’s sex and hours of play.

Teaching Notes for Cases Case 18-1 AMERICAN CONSERVATORY THEATRE Introduction

The purpose of this case is to illustrate the power of a tabulation using percentages (Table 2) and a difference between means analysis in the context of a most interesting study. It also illustrates how respondents can be divided into groups (continual, gradual and sudden subscribers) on the basis of several questions (attendance for each of the past five years). Analysis a) The conventional wisdom is that people advance from no attendance experience, to some attendance, to becoming subscribers, that the sudden subscriber pattern would be rare. Thus, the finding that 21% of the respondents are “sudden subscribers” is surprising. Further, the sudden subscribers, according to Table 1, do not really differ much from the gradual subscribers in terms of how long they have lived in the area. The sudden subscribers do participate in fewer cultural activities. Thus, their ACT subscription may be their introduction to the performing arts. Because of their high income they can afford to subscribe. We might further note that the live theatre is somewhat similar to television drama whereas dance, opera, and the symphony represent cultural events to which many people have had little exposure. An implication is that the marketing program cannot focus entirely upon people who attend but must reach people who are not now attending any performance. As a result of this study, ACT expanded their promotion using some charge card lists of prestige stores in the area for mailing promotional pieces. The footnote reports that the null hypothesis that the population means are the same would be rejected at the 0.01 level—the probability of getting sample means that differ this much under the null hypothesis would be under 0.01. b) Table 2 essentially shows that there is little difference between the three groups in terms of benefits obtained by subscribing to ACT. The most important finding of Table 2 is that the price discount (a “7" for the price of “6” discount) was not cited by respondents as a major reason for subscribing. Partially because of this finding ACT discontinued the price discount and the total subscription sales did not seem to be affected. Of considerable interest was that the most frequently mentioned benefit was that the respondent felt that a subscription would make it more certain that each play would be attended. This finding provides an interesting perspective upon behavior and suggests some copy themes for the promotional material.

Question 5 in Chapter 14 discusses the difference between mean tests of Table 1 and presents the chi-square value (23.9—significant at the 05 level) for Table 2. More details can be found in the Journal of Consumer Research article by Adrian B. Ryans and Charles B. Weinberg entitled, “Consumer Dynamics in Nonprofit Organizations.”

Case 18-2 APPLE APPLIANCE STORES

This case illustrates a randomized block design where the blocking variable is store size. The table shows three F values which provides the basis for three statistical tests. The null hypotheses are: 1. There is no advertising effect. All advertising treatments would generate the same level of sales if enough stores were included in the test. 2. There is no store size effect. Sales would not differ by store size if enough stores were included in the test. 3. There is no interactive effect. The advertising effect is the same for each of the three store sizes. The fact that advertising is significant at the 0.10 level means the probability of observing the differences in sales between the advertising levels under the null hypothesis is less than 0.10. It thus means that at the 0.10 level we would reject the null hypothesis that there is no advertising effect. The null hypothesis of no interaction effect would be rejected at the 0.05 level. The figure shows the interactive effect—the advertising impact is clearly greatest for large stores. The figure also shows that the high level of advertising generated more impact than the other three. The analysis in the table does not show which advertising level generates the greatest impact, only that there is a difference between them. The shape of the advertising response function is not addressed. Similarly, the nature of the interactive effect is not suggested by the statistical tests reported in the table.

PART III TEACHING NOTES FOR CHAPTERS CHAPTER EIGHTEEN HYPOTHESIS TESTING: MEANS AND PROPORTIONS Outline of the Chapter ▪ ▪ ▪ ▪ ▪ ▪

Get exposed to the more commonly used hypothesis tests in marketing research-tests of means and proportions Understand the probability values (p-values) approach to hypothesis testing Understand the relationship between confidence interval and hypothesis testing Describe the effect of sample size on hypothesis testing Discuss the use of the analysis of variance technique Describe one-way and n-way analysis of variance

Teaching Suggestions As reiterated in Chapter 17, this chapter should not be used for calculation purposes. It aims to provide a conceptual framework upon which the commonly used techniques in marketing research can be built upon. The instructor should be able to provide insights to the students and elicit proper interpretation of results. ANOVA is introduced in the context of a small numerical example with actual (though contrived) data. The use of “actual data” is intended to make the discussion more understandable and less abstract and will be the rule followed in the later chapters. The chapter has a minimum of symbols and concepts but it still does include some concepts that are normally taught in a statistics course. Further, the basic idea is exposed in Chapter 16. This chapter, like other technical chapters, should usually be supported by a lecture and discussion which follows the text fairly closely. The students should understand the various figures and tables. Make sure that they see the link between the difference between means discussion in Chapters 16 and 17 and the ANOVA table. The interaction discussion is also worth reviewing. Questions and Problems 1.

The evidence is indeed that the gasoline cost question is the one that best distinguishes the two groups. However, before Question 3 is considered, it should occur to the reader to check the probability (pvalue) that a difference of 1.7 or greater would have occurred if the two groups were equal. Footnote C indicates that this p-value is less than the 0.01 level. Thus, we conclude that the null hypothesis that the two population means are equal is not true (rejected). However, a sophisticated reader should ask the question with a null hypothesis that the difference is no greater than question 1. Data and methodology to answer that are not available to the student, but he or she should still intuitively see that the difference between 1.4 (question 1) and 1.7 (question 3) is not statistically significant. Of course, question 3 is answered with a different frame of reference and contains a different amount of variation than question 1, so that the two should not be compared directly. But it is still appropriate to consider a null hypothesis that the difference between population means for question 3 is not more than 1.4 as it places the results in a useful perspective.

Since the p-value is 0.07 the results are significant at the 0.10 level but not at the 0.05 level. Suppose we felt that 0.07 was a “low p-value”. Does that mean that the point has been proved, that the null hypothesis that the population mean is 10 ounces has been disproved? No. You never prove or disprove anything with a sample or with the hypothesis test associated with the sample. You just generate strong or weak evidence. And you certainly do not generate a decision like whether to boycott. Such a decision would involve a host of considerations.

3(a) The null hypothesis would be that the population proportions would be the same -that trial would be the same in each city. (b) That trial would be higher in Tulsa than Fresno. (c) 0.06. (d) The p-level (0.06) would be significant at the .10 level but not the .05 level. The null would be rejected at the .10 level but not the 0.05 level.

hypothesis

(e) The hypothesis test only provides the p-level, a measure of the strength of the evidence against the null hypothesis—it does not show it true or false. To determine whether to use a $.50 coupon we would need much more information, such as costs of various types. 4.

A random sample of 100 automobiles.   5 miles/gallon  < 5 miles/gallon

H o: H 1: n = 100 x = 4.4 S = 1.8  = 0.05

One tailed test (left tailed) Therefore, Z =

x-M Sx

= 4.4 - 5 S x

Standard error of the mean six S x = S = 1.8 =0.18 n 100 Zcalc = 4.4 - 5 0.18 = -3.33 Ztab at  = 0.05 = -1.45 Zcalc > Ztab Therefore, reject Ho and conclude that the population mean is less than 5 miles/gallon. P value < 0.001 A small p-value is observed and hence greater the researcher’s confidence in the sample findings. The p-value is the largest significance level at which we fail to reject Ho.

H o: H 1: = s=

Sx =

.  40  < 40 cases 0.05 12.2

12.2 12.2 = = 2.44 r 25

Zvalue from the table = -1.645 (left tailed) Zcal = 31.3 - 40 = -3.56 2.44 Zcal > Ztab Therefore, reject Ho and conclude that the population mean sales increase is less than 40 cases. 6.

The data for this can be statistically described as: pn = 0.75 Hypothesized value of people with business experience prior to opening the business. qn = 0.25 Hypothesized value of people with no business experience prior to opening the business. p = 0.70(sample proportion of people with prior business experience) q = 0.30(sample proportion of people with no prior business experience) Ho: p  20.75 H 1: p < 0.75 Standard error of the proportion p = poqo n = 0.0228 Therefore, one tailed test of proportion Zcal = 0.7-0.75 = -2.19 0.0228 Ztab = -1.645 Zcal > Ztab Therefore, reject Ho and conclude that more than 25% of members had no prior business experience.

Ho: p = 0.5 H a: p  0.5 : 0.05 Two tailed test of proportions

Therefore, Zcal = (172/400) - 0.5 = -0.07 (0.5)(0.5) 0.025 = -2.8 Ztab at = 0.05 (two tailed) =  1.96 Since Zcal > Ztab; reject Ho and conclude that half of all purchases are not women. 8.

H o: p  0.45 H a: p < 0.45  = 0.05 One tailed (left tailed) test of proportions

Z cal = (70/200) - 0.45  (0.55*0.45)/200

= -2.84

Ztab = -1.645 Since Zcal > Ztab: reject Ho and conclude that members opting for international marketing research is lower. 9. n1

= 120

x 1 = 3.355 Sx1 = 2.03

x 2 = 9.5 n2 = 100 Ho: 1 - 2 = 0 (Population means are equal)

S x 2 = 2.1 Ha: 1 - 2  0 (Population means are not equal.)

S X1−X 2 =

s12 s 22 + n1 n2

=  0.0343 +  0.0441 = 0.28 Zcal = (3-355 - 9 5) - (1 - 2) 0.28 = (3.355 - 9.5) - 0 = -21.9 0.28 Ztab at  = 0.05; Z/2 =  1.96 Since  Zcal  > Ztab; reject Ho and conclude that population means are not equal.

10.  = 0.10  = 0.1 x = 5.1

 =5.0 n =5 Ho:  = 5.0 Ha:   5.0 Two tailed test at  = 0.1 Ztab =  1.645 Zcal = 5.1 -5.0 = 0.1 =5 0.1/25 0.02  Zcal  > Ztab Therefore, reject Ho and conclude that the mean preference is not 5.0. 11. n = 9  = 2.0  = 0.06

x = 1.95 H o: 2 H a:  < 2 Left tailed test at  = 0.05 Ztab = - 1.645 Zcal = 1.95 - 2 = -0.05 = -2.5 0.06/9 0.02  Zcal  > Ztab Therefore, reject Ho and conclude that the mean is less than 2 units. 12.(a)

Null hypothesis is that the “population” means are equal—there is, no difference between the three advertisements. The alternate hypothesis is that there is some difference—they are not all equally effective.

(b) The F-ratio is: 6.0 = 3.0 2.0 The p-value is about .055. (c) The p-value is significant at the .10 level but not at the .05 level. (d) There may be. The evidence against the null hypothesis is fairly strong but we don’t know for sure.

13. (a) The new F-ratio is:

6.0 = 3.315 1.81

(b) The p-level is about .049. It is different because the unexplained variance has been reduced. F-ratio = 24.0 = 13.3 which is significant at the .001 level. 1.81

Teaching Notes for Cases Case 19-1 THE SEAFOOD GROTTO Introduction This case is drawn from a Journal of Marketing article (July 1974, pp. 60-63) by Robert D. Hisrich and Michael P. Peters entitled “Selecting the Superior Segmentation Correlate”. This case is a good example of a segmentation study. The discussion might start by addressing the question: Why are we interested in correlating usage with segmentation variables like income, age, social class and life cycle? Such an analysis is a routine part of a segmentation study. The object is to identify those segments that have the most potential because they are the heavy users. With the heavy users targeted in terms of their income, age, life cycle and social class, effective marketing programs could be directed toward them. As Chapter 20 brings out, usage is not the only possible dependent variable in such an analysis, but it is often a good one to try. Some other general observations are possible. First, a variable, like income, might be an important correlate for one activity but not for another. It is difficult and naive to generalize that social class is better than income because it depends upon the product class (and also the extent to which the variable, like social class, will help in the development of a marketing program). Second, a variable, like income, might be a good predictor of use/non-use but not a good predictor of the frequency of use which usually is more relevant. For example, note the golf activity. Income predicts use/non-use but not the frequent of use. A third observation is that age and life cycle are by definition themselves correlated and so they really don't represent two different variables. One way to approach a table like this one is to look at the highest correlations (assuming that they are significant). Using this approach a strong finding is that for movies, age and life cycle have a high positive correlation with use/non-use and a high negative correlation with frequent of use. Clearly it is the young who are the heavy users of movies. A similar finding holds for nightclubs. Turning to expensive restaurants, income is the best predictor of use/non-use although life cycle is also significant. However, social class is the best predictor of the frequent of use. It is of interest to contrast the results for expensive restaurants, and nightclubs. The pattern of correlations, if supported by theory, will enhance the validity of the results. In this case, note the pattern of correlations between social class and the frequency of use of these four activities. The statistical test reported tests the null hypothesis that the population correlation is zero. Significance at the 0.01 level means that the probability of getting an observed sample correlation with that large and absolute magnitude (under the null hypothesis) is under 0.01. A significance level of 0.01 provides strong evidence that the null hypothesis is false should be rejected.

Case 19-2 AJAX ADVERTISING AGENCY Introduction The objective of this case is to give the students an exercise in model building— conceptualizing constructs, developing measures for those constructs ant postulating relationships between those constructs and the dependent variables. The case is based upon the article “Prediction of New Product Performance: An Analytic Approach,” by Henry Claycamp and Lucian Liddy in Journal of Marketing Research. November, 1969. An instructor using this case is strongly encouraged to read this article. The case is best handled over two class periods. From 20 to 40 minutes will be needed in each class. The second day will really be more productive, as during the first day the students will see exactly what is involved in the approach. Teaching Approach The first day starts by asking what constructs would cause product knowledge. The students should be pressed to tell how each construct would be measured and whether the relationship would be linear, nonlinear or interactive. The results of the actual Claycamp and Liddy model are then presented. They found that a “product uniqueness” variable (which represented the judgment of a panel of judges as to whether the product was a “me-too copy” or truly unique) was the most significant variable. The second most significant variable was the square root of the product of advertising (number of media impressions per household) times the judged quality of the advertising (again based upon the subjective judgment of the panel). Two other variables, coverage of consumer promotions and an index of consumer interest in the product category (measured by Starch ad norms), were not significant. The total r2 for the 35 new products used in the estimation phase was .72. An additional 23 new products were held back as a validation sample. The r2 for this group was .56. The reduced r2 was due to several products (one being Spaghetti-O’s) which had catchy radio jingles. Clearly, the subjective judgments about advertising quality did not take into account the power of catchy radio jingles. The second day repeats the exercise for the trial and repeat variables. The students by this time will be more sure of themselves and the construct and relationship building process is much more useful. The variables found to be significant in the Trial prediction task by Claycamp and Liddy included: The product knowledge variable. — The extent to which the new product was under a family brand (determined by the panel). — A variable which was the product of distribution (adjusted for shelf space, special displays and store size) and packaging quality (again judged by the panel). The concept is that the package has a lot to do with the trial purchase. — Coverage of consumer promotion. The r2 for the trial equation was about .71 both in the estimation sample of 35 and the validation sample of 23.

The family brand variable is most interesting. A good question to pose is, “Should a specific new product be under a family umbrella?” The model suggests that it should and most students will agree. This leads, however, to the question, “What does the model show?” The answer is that it shows that family branding helps trial. It says nothing about the cannibalization that might be fostered or about the risk of tarnishing or diffusing the images of the other brands in the family. It says nothing about getting repeat purchases. Thus, it is not clear that family branding is always optimal.

Case 19-3 ELECTION RESEARCH, INC

The regression coefficients reflect the change in the dependent variable to be expected if the independent variable changed one unit and the remaining independent variables were unchanged. Thus, if WSTE change by 1 percent and WSRV and I were not changed, WSU would change by 0.174 percent. The I coefficient of 0.071 means that incumbency is worth 7.51 percentage points. The effect of WSTE (advertising) is greater in nonincumbent districts as when there is an incumbent, he or she has the advantage of being well known and probably has a loyal following. It is difficult for advertising to have much of an impact in such a situation. The t-value is the regression coefficient divided by its standard error. It is used to test the hypothesis that the regression coefficient is zero. Since at greater than 3.0 is considered significant at the 0.1 level (two-sided test), all the variables would here be considered significant. The term R2 is the percent of variance of the dependent variable explained by the independent variables. In the three equations the dependent variable variance can easily vary as can the percent explained. Note that the sample is not huge (17, 55 and 72). The dummy variable is not needed in the last two equations and since the incumbency factor is handled by the intercept term. In addition the parameters should help guide advertising expenditure levels and to analyze the voter registration and the incumbency factor. Yes, it could be used to predict assuming that the values of the independent variables are known.

PART IV TEACHING NOTES FOR CHAPTERS CHAPTER NINETEEN CORRELATION ANALYSIS AND REGRESSION ANALYSIS Outline of Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪

Understand the use of Correlation as a measure of association Distinguish between simple and partial correlation Discuss the objectives of regression analysis Explain the procedure adopted to estimate the regression parameters Interpret the meaning of parameter estimates Discuss the applications of regression analysis Understand the concept and use of multiple regression

Teaching Suggestions The instructor can start off by explaining correlation analysis. Specific emphasis can be placed on the reasons underlying correlation analysis. In discussing correlation analysis, start off with the pearson correlation coefficient by going through the example in the text (Table 19-1). After discussing correlation analysis, the instructor can discuss regression analysis. Care should be taken to differentiate between the two techniques. The regression material was written to be as accessible as possible. The emphasis is upon the output and its interpretation. Although the hypothesis test on the regression coefficient is covered, statistical theory is either deleted or relegated to footnotes. Students should be encouraged to bypass footnotes regarding them as reference material and not material that really should be understood. It is tempting to delete them entirely, but they do provide a sense of completeness and some readers, particularly those who have had some regression elsewhere or who will be applying the technique, will find them useful. Estimation is introduced as a curve fitting procedure. The concept that an independent variable can serve to explain and predict a dependent variable is stressed. The students should be pushed to realize that the key assumption is that the independent variables are appropriate and that some conceptual theory and hard thinking are usually needed to identify good independent variables. A related point is that regression can be used in an exploratory, model building context as was done in the HMO example. However, it is always good policy to hold back some data so that a “model kit” can be conducted using as independent variables those variables that had high beta coefficients. The HMO would have been an ideal time to do exactly that because the sample size was large enough that both the exploratory phase and the testing phase would have enough data. Unfortunately, it was not done at the time and the data are not now available to us to redo the analysis. Stepwise regression is not covered. Some instructors may want to mention it. Stepwise regression is where the computer has a set of candidate independent variables and selects the one that will provide the highest r2. With the first variable specified, the computer selects a second variable that will generate the largest incremental r2. The problem of stepwise regression, is that one variable (i.e., income) may just miss getting selected in the first round. If that variable (income) is correlated with the variable (i.e., education) that was selected in the first round, then it might never get selected. The analyst might be tempted to erroneously conclude that it should not be part of the model. Stepwise regression is a technique of an exploratory or model-building phase.

The raw data for the Figure 18-5 illustration are given below in case student analysis or replication is desired. The students might be asked to do a stepwise regression or to attempt models without using the advertising variable, or to exclude the urban suburban variable (which really explains little variance). The correlation is: I. Store Traffic 1.00 II. Advertising .59 III. Store size .62 IV. Urban-Suburban -.25

I 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12, 13. 14. 15. 16, 17. 18. 19. 20.

II 90 550 380 180 200 600 300 220 790 700 380 1000 870 200 500 580 1000 600 730 1020

III 0 0 40 100 110 180 200 300 310 380 420 480 500 520 550 580 570 720 680 690

IV 1.3 2.0 2.1 1.5 1.0 1.9 1.0 1.5 2.0 2.0 1.6 2.8 1.4 2.3 1.7 1.9 2.8 2.5 2.4 2.0

1 1 1 1 0 0 1 1 0 1 1 0 1 1 1 0 1 0 0 1

The regression models discussed in this chapter have been cross section models. Time series models are not covered here. Questions and Problems 1a. Pr ice X

(Y − Y ) (X − X )

12.2 18.6 29.2 15.7 25.4 35.2 14. 11.1

29.2 30.5 29.7 31.3 30.8 29.9 27.8 27

-8.06 -1.66 8.94 -4.56 5.14 14.94 -5.56 -9.16

Y = 20.26

X = 29.53

Sales Y

(Y − Y ) (X − X )

-0.32 0.98 0.18 1.77 1.27 0.38 -1.73 -2.52

(Y − Y )

(X − X )

2.62 -1.62 1.56 -8.10 6.55 5.60 9.60 23.14

65.00 2.76 79.88 20.82 26.39 223.13 30.94 83.95

 = 39.35  = 52.88

0.11 0.95 0.03 3.15 1.63 0.14 2.98 6.38

 = 15.35 2

Sx = 8.72

(

)

2  1     xi − x  n −1

Sx =

(

)

2  1    y− y  n −1

Sy = Sy = 2.193

r yx =

1  n −1

(x − x )(y − y ) i

sx sy

ryx = 0.43 (b)

Ho: P=0 Ha: p0 at 5% level

tcal = 1.16

t = r

n−2 1− r 2

tcri at  = 0.05, df = 6, = 2.45 Since, tcal < tcri, we fail to reject the null hypothesis. We fail to conclude a relationship between sales and price and attribute it to a chance occurrence. 2. The problem is similar to Question # 1. (a). ryx = 0.64 (b). tcri = 1.372 tcal, = 2.63 Therefore, we reject the null hypothesis and conclude that the sample correlation coefficient is distinctly different from zero and is positive. 3.

A product manager will have to project sales forward. In doing so, one independent variable will be time and a second might be a dummy variable to introduce seasonal effects. Models with independent decision variables such as price, shelf space, advertising, could serve to help make the associated decisions. For example, a sample of stores could be selected and price, shelf space and advertising measured. The dependent variable could be store movement detail (supplied by store audits) or perhaps the change in store movement from the previous month. It would be best if the stores could be involved in an experiment in which price, shelf space and advertising were systematically varied (perhaps with a factorial design). Even without an experiment, a useful model may result if there is some variation among the stores on the independent variables. This model would really be aimed at gaining an understanding of the relationship between the decision variables and sales goal if the product was going into a new chain. But the product manager should be cautious since the “environmental conditions” underlying the model might not exist in the new chain.

Both i and ii are true.

5(a). The model can be specified as y = 644.52 - .4258x where x = price and y = sales. (b) The model can be specified as y = 708.39 - .43x 6(a) The slope indicates that for a one unit change in the spot rate predicted by the forward rate, there is an actual change of 0.7916 units of the actual spot rate. (b) 0.1 of the total variation of y is explained by x. (c)

Ho =  1 = 0 Ha =  1 > 0 The statistic is given by:

t =

b1 −  1 sb1

Substituting the appropriate values in the equation, tcal = 2.93 tcri= 1.67(at  =0.05) Therefore, reject the null hypothesis and conclude that ., is positive and that there is an effect of the change in spot rate predicted by the forward rate on the actual change in the spot rate. (d) Ho = 1 = 1 Ha =  1  1 tcal = -0.77 tcri =2 (at  = 0.05) Do not reject the null hypothesis and conclude that,1 is one. This means that for a the independent variable 7(a) The value of r2 means that 30 percent of the variation in Y is accounted for by X. It also means that the correlation between X and Y is the square root of .30. (b) The parameter estimate b1 is the estimate of which is the change in Y to be expected if X changes by one unit. The parameter estimate a is the value of Y expected when X is zero (assuming the linearity assumption of the model holds at X equals 0). (c) Yes, at the 0.05 level. (d) 103,000, The major assumption is that the assumption holds at such an extreme value of X. There is no data at that level of X. 8.

This question is intended to get the student to do some hard thinking about what independent variables should be used and how they should be measured. Among the possible variables are:

(a) The size of the population within a two mile radius (or within that area that contains 90 percent of customers).

(b) The population income (which could be obtained from census tract data) or age or average percent of families with children under 16. (c) Distance from competing store or number of competing stores within the drawing area. (d) The size and quality of competing stores. (e) The size of the shopping center in which the store is located or the number of large department or discount stores in the shopping center. (f) Parking. 9.

The beta coefficient is interpreted as the change in terms of the standard deviation of Y that would be expected if Xi were increased by one standard deviation of Xi and the other independent variables were not changed. It removes the units problem (one variable like age might be measured in years and another, like income, might be measured in dollars) and therefore, makes the relative comparison of the regression coefficients less ambiguous. The footnote means that the hypothesis test, that the_i is zero, has associated with it a p-value under 0.01. The probability of getting a nonzero_i is zero, is under 0.01. It is interesting that different independent variables appear in the two models. The coverage provided is the dominant basis upon which the present plan is evaluated. Thus, when selecting target segments a useful approach might be to look at people who have plans that are short on coverage. The coefficients in the “proposed HMO” model indicate that distance to doctor or hospital and ability to choose doctor seem to be important explanatory variables whereas in the other model they were not significant. Thus, those dimensions might be given a close look when making the final design decisions.

10a) Significance is determined by the t-value and X1 is the most significant. Some students might select X3 because it has the largest coefficient. (b) None are significant at even the 0.13 level. Yet, r 2 has increased dramatically. Why? The reason is that the independent variables are inter-correlated (there is multi-collinearity). Such a situation will hold down the t-values. In essence, the new variables are important but the model does not know which one because they are correlated. Thus, the t-values for each are lower than we might expect knowing the increase m r2. (c) The estimate would be 100,000, although the values are within the range of the data. A primary concern might be that conditions surrounding the estimation context differ from those surrounding the data. The student should observe that the sales will surely not be exactly 100,000. There will be uncertainty associated with our estimate. The biggest source of uncertainty will be the fact that 55 percent of the variance remains unexplained. Other sources include the uncertainty associated with our estimates of the regression coefficients (d) Crosby, North Dakota might be quite unlike those stations in our random sample. It is a farm community and the involved station will draw from a large area. There is no independent variable that reflects these special conditions although it might be possible to create one. 11. The regression coefficients for X2 (product mailing expenditures in year t) is the highest. The t value for X2 is the highest and it leads us to believe that X2 is the most significant variable in the equation. However, caution should be exercised when interpreting the regression equation. It should be made sure that all the relevant variables are accommodated in the model and that the presence of any observed variable is not specified. Also, it should be made clear that the model was specified accounting for the possible multi-collinearity among the independent variables. In this context, it is not advisable to recommend without making sure that the model was correctly specified.

Teaching Notes for Cases Case 20-1 Southwest Utility

The appropriate interpretation of each term, for example, income, is as follows: The mean income of the group preferring less heat is significantly different from the mean income of the group preferring more heat. In other words, income helps to discriminate between the two groups. Assuming no multicollinearity, the variable "family member 15-19 years," appears to be the most important variable (based on the standardized discrimination coefficients). The variables that are most helpful are the ones that are displayed in the table. The appropriate hypothesis test in this analysis is to ascertain whether the group centroid of one group is different from the group centroid of the other group. Also, several univariate F-tests can be conducted to test if the variable mean for each group is different from the other group means.

Case 20-2 THE STORE IMAGE STUDY REVISITED 1

Two very different stores could be rated on the same scales and have a similar factor analysis output. If a respondent rates Store A high on variable 14, he or she should rate it high on variable 16 as well if both variables are reflecting the same underlying factor. The same respondent might rate Store B, a very different store, low on both variable 14 and variable 16. The stores would be very different but the factors could be the same. The key is that the stores are perceived by the respondents with respect to the same dimensions or factors. If stores are perceived and evaluated with respect to different dimensions or factors then different factors should emerge because the stores differ. The factors might be interpreted as follows: Factor 1:

Store Environment

Factor 2:

Price Level

Factor 3:

Convenient Location

Factor 4:

Fast check-out

Factor 5:

Advertising

Given the ambiguity, Factor 5 might be omitted. Factor 2 is clear and comparable with the second factor in Figure 3. The first factor here really represents Factors 1, 3 and 4 in Figure 2. 2. There are fewer very low communalities than in Figure 2. Note that variables 2 and 10 have a high loading in Figure 6. There are several variables, however, with communalities below 0.40 (variables 3, 5, 11, 19, 20 and 28).

Case 20-3 BEHAVIORAL RESEARCH This case provides an excellent illustration of the use of “product specific” (as opposed to general) lifestyle variables. It also illustrates a rather classic segmentation study. Respondents are identified in terms of a segment defining variables which here is the response to the product disposal question. The segments are then described in terms of other variables so that they may be better understood. The ultimate purpose is, of course, to develop marketing programs oriented towards the defined segments. Some answers and comments on the discussion questions are given below. 1. The following are a set of possible labels and descriptions: Factor I - “Cynics”. An individual who scores high on this factor is skeptical regarding the durability and reparability of small electric appliances and of the motives of manufacturers of such products. Factor 2 - “Hedonists”. A high score on this factor is related to a lifestyle that could be described as “wanting the latest with the least effort”. The Hedonists will replace working products with more stylish ones, are convenience oriented, and buy more products than they need. Factor 3 - “Careless Consumers”. Those who do not put much effort into purchasing or caring for products would score high on this factor. Factor 4 - “Trashers”. This factor reflects a proclivity to discard an appliance as soon as it malfunctions regardless of its purchasing price. These individuals do not feel a responsibility to have a product repaired and will buy less expensive products so they can discard them without experiencing guilt. Factor 5 - “Anti-Repairists”. Individuals who score high on this factor feel the repair industry is a “rip-off”—it’s inconvenient, expensive, time-consuming, and so forth. Factor 6 - “Pack Rats”. A high score on this factor would indicate a tendency not to permanently dispose of old appliances. Instead, the appliances are kept around the house, given away, or perhaps fixed by the individual. Factor 7 - “Consumerist”. Individuals who score high on this factor endorse many of the concerns of the current consumerism movement, c.

0.010 for both the demographic and lifestyle variables. Thus, the lifestyle variables did better.

6. The point of this question is to get the students to engage in some serious theory development (or hypothesis generation or model building or whatever you want to call it), to do some real head scratching. The “right answer” as determined from the discriminate analysis is presented in the following table. Factor scores were used to represent the factors. One rule of thumb in interpreting the coefficients is to consider those variables with a standardized coefficient with an absolute value at least as great as one-half the value of the largest standardized coefficient. Applying this rule suggests that factors 4, 5, and 6 were the most important variables in the lifestyle variable run. When the demographic variables were added the anti-repairist dimension no longer met the criterion and the demographic variable of age would be added. Table 3 DISCRIMINATE COEFFICIENTS LIFESTYLE FACTORS

COMBINATION

Independent Variable

Standardized

Unstandardized

Standardized

Unstandardized

Factor 1-Cynics Factor 2-Hedonists Factor 3-Careless Consumers Factor 4-Trashers Factor 5-Anti-Repairists Factor 6-Pack Rats Factor 7-Consumerists

.3091 .0790 .1134 .6403 .3379 -.5182 .1954

.3448 .0921 .1327 .7333 .3910 -.6299 .2471

.1285 .0773 -.0130 .5626 .2143 -.5241 .0689

.1434 .0901 -.0152 .6444 .2479 -.6371 .0871

Age Marital Status Education Level Occupation Income Constant

-Not Included-

.6847 .0043 .1442 .1343 .2223

.0419 .0088 .0538 .0461 .0350 -3.1747

PART IV TEACHING NOTES FOR CHAPTERS CHAPTER TWENTY DISCRIMINANT, FACTOR, AND CLUSTER ANALYSIS Outline Of the Chapter ■ Understand the concepts of discriminant, factor, and cluster analysis. ■ Be able to use these techniques for business applications. ■ Be able to interpret the results of these techniques. ■ Identify the potential limitations (through violations of the assumptions) of these techniques. ■ Apply all these techniques on a computer system. Teaching Suggestions The text has been written to be as much accessible as possible. However, owing to the nature of the techniques, it may be difficult to reach out to the students. The instructor can begin by discussing the need for Discriminant Analysis. Emphasis can be on the need for a method that considers the influence of a number of variables simultaneously. This can be used to motivate the students to learn this technique. The instructor can go through the basics using the example provided in the text. The class discussion can center around the following: the objectives of the technique, interpretation of the discrimination coefficients, classification of objects using the discriminant function and the use of the confusion matrix. Considerable time should be spent on the use of discriminant analysis in the marketing applications. The part on cluster and factor analyses is written to be very accessible. It really requires only an understanding of what a correlation is. Thus, it could be the only chapter assigned beyond Chapter 18 or one of two or three. Despite the fact that the chapter is accessible, factor analysis will be new to everyone, even those who have had some statistics including regression. There are several concepts that will be new and slippery such as factor, factor score, factor loading, variance explained, communality and varimax rotation. It’s usually very worthwhile to go through the chapter presenting the concepts in lecture form and making sure the students are comfortable with them. The discussion questions can be used in this context. The factor analysis presented in Figure 20-5 is interesting and the study on which it is based might be worth additional discussion. It should be emphasized that factor analysis is a highly subjective process and the various steps involved in a factor analysis involve subjective judgment. Also, it is to be made clear to the students that there are no statistical tests employed in factor analysis and hence it is difficult to know if the results convey anything meaningful. Therefore, it would be in the best interests of the researcher to divide the sample randomly into two or more groups and independently run a factor analysis with each group. If the same factors emerge, then the researcher can be confident of the results. Cluster analysis will also be new to the students. It is better to go through the chapter in a lecture format and then supplement the class discussions with discussion questions. Cluster analysis can be a practical tool. In a segmentation study, for example, the segments need to be defined on the basis of homogeneity of benefits sought, perceptions held, or lifestyles. Second, it gets the reader thinking about combining variables to form constructs. It differs from factor analysis in that the context is usually people

or objects instead of variables and because the method is more direct and therefore transparent. Third, by introducing the concept of quick clustering and by providing opportunities to practice it, the reader will get a feel for correlation (or association) matrixes and with looking for relationships instead of just looking for the nearest computer. Among the important cluster analysis concepts are those of similarity measures and the level of clustering (the number of clusters). Another point to be made is the relationship between duster and segmentation research. Segments, like benefit segments, can be created via cluster analysis and used as dependent variables (and independent variables) in subsequent analyses.

Questions and Problems 1.

With the number of groups (m) being three and three independent variables (p), the number of discriminant functions that can be generated is given by the minimum of (m-l, p) and which is two. However, since all of the (m-l) axes may show statistically significant variation among the groups and hence fewer than m-l discriminant functions may actually be needed.

Discriminant analysis involving deriving the linear combination of the two or more independent variables that will discriminate best among a priori defined groups. This is achieved by the criteria of maximizing the between group variance relative to within group variance. The linear combination for a discriminant analysis is derived from an equation that taxes the following form: Z = b1 X1 + b2 X2 + b3 X3 + ... + bn Xn where Z = Discriminant score b = Discriminant weights X = independent variables

The value of the discriminant weights or coefficients for a particular predictor depends on the other predictors included in the discriminant function. The signs of the coefficient are arbitrary but they indicate which variable results in large and small function values and associate them with particular groups. Predictors with large standardized coefficients contribute more to the discriminating power of the function. The relative importance of the predictors can also be obtained by examining the structure correlations also called as discriminant loadings. These simple correlations between each predictor and the discriminant function represent the variance that the predictor shares with the function. However, both the loadings and the weights need to be interpreted with caution. Unless the sample size is large, both the loadings and the coefficients are unstable. 3.

The validation of discriminant function is necessary to avoid sample specific conclusions. The U method or cross validation makes use of all the available data without serious bias in estimating error rates. This method holds out one observation at a time, estimates the discriminant function and classifies the held out observation. This process is repeated until all the observations are classified. Most discriminant analysis programs estimate a classification matrix based on the estimation sample. Because they capitalize on chance variation in the data, such results are better than the classification obtained on the hold out sample.

The assumptions underlying the discriminant function are: a.

The p independent variables must have a multivariate normal distribution

The pxp variance-covariance matrix of the independent variables in each of the two groups must be the same.

The assumptions of the discriminant analysis have to be tested as it is possible that the assumption of equal variance-covariance matrix of the independent variable in each group is not met. In such cases, alternate techniques such as the logit analysis have to be resorted to. 5.

This question can be used to stimulate classroom discussion and can be used to explain to the students the various facets of discriminant analysis.

The factor loading is interpreted as a measure of association between the factor and the variable (just as a regression coefficient is a measure of association between an independent variable and a dependent variable). In the chapter it has been assumed that the variables are standardized and the factors are independent (orthogonal). Under these assumptions the factor loadings are correlations. This question like the next six are answered fairly well in the chapter.

A communality is the percent of variance of a specific variable that is explained by the factors. A low communality indicates that the variable involved is not represented by the factors. If it is believed that the relevant dimensions are reflected by the factors, then it can mean that the variable is not of importance. However, it can also mean that the variable was alone in measuring an important underlying construct. Because there was only one variable representing that factor, the factor probably explained only a small percent of the total variance and because of the rules of thumb in selecting the number of factor to consider, it never emerged.

In the rotation discussion the criteria of the two approaches are described. Some discussion might be warranted on the various rotation schemes and how you choose between them. There is no concept of a variable being a function of a few factors and an error terms. Its purpose is to select a factor that will explain the largest amount of variance possible. With one factor selected, principal components will then try to select a second factor (holding the first one fixed) that will maximize the explained variance of the second factor. The process continues until there are as many factors as original variables or until the analyst stops the process. In many analyses, there is a strong halo effect and in fact there really is only one factor, a general like-dislike factor. In that case, it may not be appropriate to use a varimax rotation which because of its objective function will not allow a general like-dislike factor to emerge. The varimax rotation maximizes the variance of the loadings for each factor. The maximum would occur for a factor if half the loadings were zero and half were either -1 or +1. Another rotation is quartermax which attempts to find factor loading patterns in which a variable has a high loading on as few factors as possible. A problem with quartermax is that it has a great tendency to result in a general factor as was found in the principal components solution of Table 20-1.

Factor analysis is normally performed to identify underlying constructs and to reduce the number of variables or scales to a more manageable set. One rotation might accomplish this objective better than another. In fact, there are infinite number of rotations possible. A persistent analyst could try thousands. (If thousands were tried, hopefully the data set would be divided so that a validation sample would be available.) The most valid rotation can really only be determined by evaluating the resulting factors using some theoretical judgment.

10. When there is a general like-dislike dimension and all variables are really tapping that dimension, one could easily argue that the data of principal components analysis of Table 20-1 fit this description and the principal components solution was the most theoretically valid. 11. The rule of thumb is to include only those factors that explain one fifth or 20% of the variance. Thus, only one factor would be included. The drop on variance explained from factor 1 to factor 2 would support that judgment. However, the first factor might well be a general factor that under rotation might be decomposed into interesting and interpretable factors such as happened in Figure 20-2. Thus, it might be worthwhile to include two factors and to subsequently look at varimax rotation to see if the resulting factors were indeed helpful and interpretable.

12. A routine approach for items b through e is to run a factor analysis on them. It would be appropriate to divide the sample in half to make sure that the factors that emerge are not just an accident. The factor analysis would be used to generate variables or constructs to use on subsequent analysis. Variables might be selected to represent factors or factor scores might be obtained to use in subsequent analyses. The question really is what type of factor analysis should be conducted for the data described in item a. One approach would be to conduct six different factor analyses, one for each of the six sets of image ratings. Another would be to combine the data for the three bands (giving 6,000 ratings on each image scale). Under this approach a factor analysis could also be run for the two savings and loan firms (giving 4,000 ratings on each image scale). The final possibility is to combine all six rating sets together (giving 12,000 ratings on each image scale). Actually, such a large sample is not necessary; comparable results would split and two analyses run). The selection of the appropriate base will depend upon whether it is felt that different dimensions would be used by respondents when evaluating the different objects. The “Store image Study Revisited” case addresses this question as well. 13. There is plenty of room for a variety of interpretation of the varimax rotation factors. It could easily be argued that the principal components solution though less interesting is more valid. 14. This question can be used to stimulate class discussions. 15. See the teaching notes for PG & E (B) case. 16. There are researchers who will never use hierarchical clustering for the same reason they will not rely upon step regression. The final solution is sensitive to the first few steps which themselves might be rather unstable. Thus, splithalf reliability is low. However, if the data does have structure to it and splithalf runs are possible, a hierarchical program is much easier to work with and to interpret. 17. The quick clustering techniques will generate clusters of four clusters: 3-8-11 2-7-1 4-6 5-9-10-12

Teaching Notes for Cases Case 21-1 NESTER’S FOODS This case is from “Product Positioning: An Application of Multidimensional Scaling” by Yoram Wind and Patrick J. Robinson published in Russell I. Haley (ed.), Attitude Research In Transition (Chicago: American Marketing Association, 1972), pp. 155-175. 1. The authors label the dimensions as “Diet-Artificial vs. Nondiet-Natural” and “MealLike-Healthy vs. Snack-Fattening”. 2. The authors suggest the following clusters: a) A cluster of high calorie snack/dessert products such as cookies, candies, milk shakes, etc. b) A cluster of “non-natural” diet concepts and products including the new diet concepts and Metrecal. c) A cluster of natural diet foods such as yogurt, fruit salad, celery sticks, etc. d) A cluster of solid, meal-like items. The positioning implications are several. First, the new concepts will compete with other “artificial” diet products such as Metrecal and Weight Watchers Complete Meal. Second, the concepts seem to be positioned opposite their “natural” counterparts. Hence, if Dimension 2 is viewed as “fattening-healthy,” it may suggest that the “fattening” attribute of the natural products may “rub off” on the diet concepts, leading to estimation of the fattening attributes of the concepts such as a “diet cookie”. 3. The study also had the respondents provide preference rankings overall and by scenario. Possible scenarios included: for lunch, short crash diet, to improve appearance, at dinner, when I am by myself, etc. They also rated the products and concepts on a set of 12 attributes including calories, nutrition, taste, convenience of preparation, vitamins, cholesterol and fillingness. This latter information was used to obtain the following joint space configuration which can be used to augment and evaluate students answers to the first two questions.

Case 21-2 PEPSI-COLA This case permits the students to have an experience of doing a hands-on MDS data analysis. The case also allows the use of cluster analysis, factor analysis and regression analysis. However, the case can also be used without student data analysis. The first two questions win support a useful discussion on the use of MDS—in particular what should the input data be and how do similarities maps differ from preference maps and what are the implications of these differences. In addition the several other analyses shown below could be distributed and will support a discussion of analyzing subgroups and comparing similarity and preference maps with factor analysis maps. 1. Critique the Questionnaire a. The objects—How would you develop the object set? One way is to determine from another study what drinks compete with Pepsi. People could be asked on what occasion do they use Pepsi and what other drinks would they consider for that same use occasion. Another approach is to ask what they would buy if Pepsi was out of stock. The problem is to keep the set to a manageable number. Thus, here Calistoga represents a class of drinks. There would be little value to include eight different sparkling waters and it would make the task much harder. b. The questionnaire might have had a host of other questions such as media exposed to, life style, use occasions, demographics, etc. as they might have helped in implementing any positioning decision and the marginal cost would be low. It should have had some question asking about familiarity. Some respondents were probably not familiar with Dr. Pepper and Calistoga Natural Orange. Their judgments with respect to those drinks will basically be garbage. A familiarity question will help avoid the use of meaningless data. In fact, the position of Dr. Pepper in Figure 18 4 which is on top of one of the diet drinks, Diet Coke, may be in part due to unfamiliarity. c. The students might be asked to complete a portion of the questionnaire. It’s much easier to discuss if you have had firsthand experience at dealing with the questions. d. The task of rating 45 pairs could perhaps be made easier by using cards for each pair and asking respondents to conduct sorting tasks. They would first put them into two piles based upon similarity and they systematically break down each pile. Rank order is another possibility to avoid getting a lot of ties. Usually people don’t go to the trouble to discriminate unless they have to. e. The attitude question (II) could be rank order. It could also be based upon behavior—how many times did you drink X during that last month Such a measure would be more objective but it doesn’t discriminate between liked drinks

that didn’t happen to be purchased and disliked drinks. The next question at least does provide a limited behavioral measure.

f. A discussion on how to come up with the six adjectives for IV might be productive. One approach is to recognize how the various drinks are positioned and make sure that appropriate adjectives are included. Another is to ask respondents in a qualitative study why two drinks are similar or different. 2. Clearly there are dramatic differences with very different implications for Pepsi. In the similarities map, the drinks are divided into first cola-noncola by the vertical axis and then basically positioned with respect to diet-nondiet by the horizontal axis (with Dr. Pepper being a bit out of place—that could have been due to a lack of knowledge of Dr. Pepper as noted above). This observation suggests that Pepsi should be positioned with respect to colas and nondiet drinks. The target market for enhancing share would be Coke and Pepsi Light drinkers (forgetting cannibalization issues). In contrast the preference map suggests that Pepsi really does not compete with Coke because people are loyal to one or the other. To increase business, the key issue is to position the product to attract users from Diet Coke and (similar products). It suggests that Diet Coke and 7-Up would be more fruitful targets than Coke. One way to resolve the dilemma is to build loyalty into the analysis. For high loyal drinkers the preference map implications will make sense. For nonloyal drinkers the similarity map implications may apply. The bottom line is that insight is obtained by having both and either one by itself would be limiting. The factor analysis provides another perspective—it is closer to the similarities map than the preference map although Coke and Pepsi are not as close together as Slice and 7-Up. Obviously, Coke and Pepsi have stronger and more distinct positions than do Slice and 7Up. It will be of interest to discuss the two maps from the perspective of other drinks such as Schweppes, Diet Pepsi. 3. There follow some map outputs and a discussion of what insight they add. The analysis of the similarities and preference maps in Q.2 suggests that Pepsi should try and attract consumers of Diet Coke ant 7-Up instead of Coke. We can get some additional insights into this issue by looking at maps based on some subsets of the data. Here we present two such subsets: (1) subset of those who prefer diet drinks - Diet 7-Up, Diet Coke and Pepsi Light and (2) subset of all drinks excluding the diet drinks. The coordinates for the similarities and preference map for the first subset are given below:

Similarities Map (N=24)

Pepsi Diet 7 Up Calistoga 7-Up Slice Schweppes Dr. Pepper Diet Coke Coke Pepsi Light

Preference Map (N=24)

Coordinate 1

Coordinate 2

Coordinate 1

Coordinate 2

1.6804 -1.3877 -1.4617 -0.8076 -1.0260 -1.4595 0.8317 0.8309 1.5808 1.2186

0.2318 0.3603 -0.6912 1.4651 0.3769 -0.4453 -0.5788 -0.5806 0.1351 -0.2733

1.0037 -0.5182 0.6599 0.5418 -0.0152 0.7801 -1.8390 2.1791 0.9573 -1.8349

-0.0675 1.2547 0.2652 0.2770 0.2694 -1.4016 0.1842 0.4134 -0.9789 -0.2159

As in Q.2, these data show that Pepsi and Coke are close to each other in the similarities map but far apart in the preference map. So Pepsi should not go after Coke consumers. Rather, the new preference map confirms that Pepsi should go after consumers of Diet Coke, 7-Up, Calistoga and Slice. However, the additional insight from the new preference map is that in the perception of those who prefer diet drinks, Pepsi is closer in preference to Calistoga and 7-Up than it is to Diet Coke. While Figure 18.7 might lead to a recommendation for Pepsi to go after Diet Coke consumers, the new preference map suggests it would be more worthwhile to go after Calistoga and 7-Up consumers. The coordinates for the similarities and preference maps based on a subset of the data excluding all diet drinks are given below: Similarities Map (N=64)

Pepsi Calistoga 7-Up Slice Schweppes Dr. Pepper Coke

Preference Map (N=64)

Coordinate 1

Coordinate 2

Coordinate 1

Coordinate 2

1.6809 - 1.3990 - 0.5288 - 0.7956 - 1.3137 0.7385 1.6176

-0.0751 0.5827 -1.3041 -0.6077 0.5058 0.8627 0.0358

1.1215 0.5909 0.6066 0.0467 1.1162 -2.2752 -1.2067

0.0395 0.9843 0.9320 -0.2846 -1.3314 0.2740 -0.6136

These data once again confirm that while Coke and Pepsi are seen as being similar to one another, they have distinct groups of loyal consumers. Since we have left out the diet drinks, the new preference map shows that 7-Up, Calistoga and Slice are the closest in preference to Pepsi, which was also indicated in the earlier subset. While the original positioning of Pepsi in Figure 18-4 is as a cola, non-diet drink, it seems that if Pepsi wants to increase business, it should try and attract consumers from the non-cola, non-diet drinks, namely, 7-Up, Calistoga and Slice.

Students may be asked to plot the data given in the above tables and draw implications for positioning strategy as discussed. Alternately, they may be asked to actually run MDS using subsets of the data and a program like SPSSX and come up with these maps before interpreting them.

Case 21-3 ELECTRIC TRUCK CASE 1.

The Attributes

It is not clear how the attributes were selected. A useful question is to ask the class how they would have selected the attributes. Ideally, the discussions during the “seminars” would be used to help select important attributes to be included but, of course, the conjoint study had to be designed prior to that time. However, some qualitative research should have been done. Further, secondary sources such as trade magazines could have ideas perhaps based upon previous studies or upon the opinion of experts in the area that would be useful. Some might suggest that “increased freeway travel” might be an attribute. However, it’s not clear that such an attribute is a policy variable. If the design is “study” with very limited freeway travel then the study might as well focus upon those applications for which freeway travel is not a requirement. Thus, freeway travel should not be an attribute. However, the respondents might be told that the preference should be given in the context of applications that excluded freeway driving. The selection of the attributes and their levels is really sensitive to the study objectives. The objectives were a bit vague. The utility really wants to stay on top of electric vehicles so they can forecast demand for energy and perhaps even influence it by encouraging the use of electric vehicles. Thus, one important output might be what improvements need to be made in the design to make the product attractive to users. Thus, they should all have the attributes that will be significant in determining the choice. Again, they have apparently decided to reduce the scope of the study to those 11% of applications that can live with a light vehicle that can not use the freeway much or make a lot of stops. Such reduction in study scope probably makes sense. If the electric vehicle can not get into this segment it will not be much of a factor. In retrospect the inclusion of the propulsion system was a mistake. But it is easy to be a Monday morning quarterback. The students might be asked whether they might have excluded this attribute before the study was designed. The use of the two levels is a major limitation. A legitimate question might be how much you increase the demand if you increase the range by 80 miles. The use of levels limits the ability to make such judgments. Similar comments could be made about most of the other attributes.

Validity of the Task A concern is always the validity of such an artificial task. Does a set of attributes levels really have any meaning? Further, can the respondents deal with the five attributes at once? Another concern is the fact that important omitted variables like freeway access, size, styling, power, etc. might be perceived as being related or correlated with included variables. If operating cost is assured to be correlated with size by some, they might then feel that a higher operating cost may not be so bad, because it will probably mean a bigger car.

2. The Outputs The outputs provide an indication of the relative importance of the various attributes. Of course, the relative importance is conditional on the attribute levels used. If different levels were used the relative importance would be different. Further, they assume that the omitted attributes are perceived as “hold constant.” The averaging of the respondents is a significant issue since there will be substantial differences between groups of respondents.

Case 21-4 FARGO INSTRUMENTS

1. Dollar Metric Pros: Like conjoint it does provide trade-off judgments. It also in this case provides the dollar worth of the various options so that the value of the options to the respondents can be compared to their costs. To get the same information from conjoint a price dimension would have to be added or a known price attached to one of the features. The dollar metric would lend itself to telephone interviewing, but no better than trade-off analysis except that there may be less questions required. Both would be better in that respect than the full profile method. The inspiration for this case comes for a JMR article (November 1984, pp. 456-462) by Thomas Leigh, David MacKay, and John Summers. They ran full profile conjoint on 122 undergraduate business students with the dimensions of the case, asked the students to select a calculator offered in a prize drawing and compared the result (part worth estimates to a dollar metric measurement). They repeated the study two weeks later, thereby providing a test-retest measurement. They essentially found that the dollar metric had no worse reliability or predictive validity and, in fact, may have been marginally better. They suggested that a dollar metric type approach might be sufficient (or even better than conjoint) when: • The attributes are dichotomous (e.g., features which are either present or absent), • Attributes which are not correlated,

•

Products and attributes with which the respondents are very familiar.

They conclude that in other cases it may be necessary to rely on conjoint techniques. The bottom line is really face validity. Can the respondents directly give a dollar metric judgment about attributes? All the familiar issues arise. Are they willing and able to do so? In many cases more valid judgments will be obtained from the less direct conjoint task, particularly the full profile method. However, there is really little empirical evidence to back up such an option. Cons: Like trade-off judgments, the dollar metric suffers from the attribute correlation problems, thus if one attribute like price is correlated with another like performances, then a respondent may be unable to consider one attribute holding all others constant. Full profile, of course, avoids this problem. In this context, the features seem very independent and thus correlated attributes are not a major problem. The task may be more unrealistic and artificial. It may be easier to choose between features that tell how much you would pay for an attribute level. Constant Sum The constant sum has the same pros and cons as the dollar metric, although there are some differences. It is probably more difficult for the respondent to complete the task validity than with either of the two competitors. It is more complex conceptually and more artificial. There is further a question as to how sensitive it could be. People certainly would not say one attribute is worth 6.30 points and another 1.6 points. The output is ambiguous. Is an attribute with 4 points attached to it really twice as valuable to the respondent as another with 2 points? Some respondents may associate all points with a key attribute and none to the others. What does that mean? 2. Full Profile vs. Trade Offs In this case, trade-off is preferred because of the desire for telephone interviewing and because the attributes seem very independent. See the notes for Question 3 for a more general discussion. 3. This question could lead to a discussion of the study and the interest dictated. All aspects of the study should be covered, including the selection of the attributes, the possible use of stores where people interested in calculators could be found, the use of focus groups and research questions concerning use of calculators, applications, etc.

PART IV TEACHING NOTES FOR CHAPTERS CHAPTER TWENTY-ONE MULTIDIMENSIONAL SCALING AND CONJOINT ANALYSIS Outline of Chapter ▪ ▪ ▪ ▪

Understand the concept and need for multidimensional scaling and conjoint analysis Discuss the different types of input to create perceptual maps and partworth utilities Explain the different types of procedures to create perceptual maps and compute the partworth utilities How to interpret the solution of MDS and Conjoint Analysis

Teaching Suggestions Although some students will have been exposed to MDS in other marketing courses, for others this material will be all new. Thus, it will be useful to make sure that the student understands the basic concepts of a dimension and the positioning of an object on the dimension. If the factor analysis chapter was covered the students should have a good feel for this core concept. Another important element of MDS is the concept of a similarity based input scale and how it differs from an attribute scale. It should be noted that a preference based scale in this context is really just providing a measure of similarity. Objects that are ranked fourth and fifth should be more similar than objects that are ranked fourth and tenth on a preference scale. Considerable time could be spent on how you can use MDS to make positioning decisions, new product decisions and to define and analyze markets. However, one view is that the research course could really focus upon the methodology, its inputs, outputs, assumptions and limitations, and let the management and strategy courses (and other courses on the functional aspects of marketing) have the primary responsibility to apply MDS. The location of conjoint analysis at this point is somewhat arbitrary. Some of the material may be best understood in terms of the data collection issues in Chapters 7-9. However, with the emphasis on conjoint analysis, the chapter fits more readily with the data analysis topics. There are at least three ways this chapter may be used depending on the instructor’s objectives. (1) The chapter can be used as an extension of the attitude scaling discussion in Chapter 10. The emphasis could be on the special problems of measuring attitude importance. (2) The topics of this chapter could also be used in a discussion of consumer behavior with special emphasis on decision-making choice models. (3) In a more methodologically-oriented course, the instructor may choose to use the material (as positioned) as an introduction to the analysis of dependence techniques. Questions and Problems 1.a. One approach would be to ask Indiana students what other schools they applied to, what other schools were second and third choices, or what other schools are “similar” to Indiana. Another would be to ask high school seniors similar questions. An issue is from what high schools would the sample be drawn. Still another source of respondents might be from other colleges mentioned by the Indiana students.

(b) One professor made this the dominant question of a whole course. One approach is to ask respondents “why are the two objects similar?” or “why are they different?” It is usually necessary to use factor analysis to remove the redundancy for the attribute list. (c) One approach is to ask whether object A is more similar to object B or object C. Another is to ask whether the pair of objects, A and B. are more or less similar than the pair of objects C and D. Still another is to ask which of the objects is most similar to Object A. A very different approach utilizes free association data linking objects to image components and is reported by Jain and Etgar (Journal of Retailing, Winter, 1976-77, pp. 61-70). A variety of approaches can be based upon attribute data. (d) This question should lead to a useful discussion of exactly what perspective provides the bases for similarity judgments. 2.

Basically, ideal object clusters should identify “holes” in the space for which there is demand for a new product. For a review of the problems see Alvin J. Silk’s article, “Preference and Perception Measures in New Product Development: An Exposition and Review,” in Sloan Management Review, Fall, 1969, pp. 21-37.

This question identifies a very practical problem of scaling and of product development. It is possible to link changes in product composition and taste, in packaging, in advertising, etc., to changes in image on psychological dimensions but it is not at all trivial or obvious.

The Hustad et al. article in the Journal of the Academy of Marketing Science (Winter, 1975, 34-47), indicates that ideal objects were obtained from preference data. The interesting fact and the point of the question is that preference judgments and the ideal object locations were made conditional on context. Thus, for use contexts such as: During the Summer During the Winter For breakfast For lunch

When friends come for dinner When you are thirsty When you wish to relax When you need a pick-me-up

Hustad et al. determine context specific ideal beverage dusters and attributes most closely related to them. 5.

The statement is a bit strong. The use of similarity data is motivated more by a desire to improve validity than by a hope to gain insight into “unconscious” motives a la motivation research. A purpose of the question is again to get the student to think in terms of what underlies a perceptual map.

MDS has been used to evaluate advertising (e.g., Lautman, Percey and Kordis’ article in JARS June, 1978, pp. 35-40.) Of concern are questions such as: Will a few exposures change a position, especially for an established brand like Pepsi? Will the map really represent the position? Will the key dimensions and relative competitive objects be represented?

A family may buy two brands for two different family members or for two different use applications. In either case, there is no reason to assume that the brands are in any way similar or competitive. However, the potential value of getting maps from scanner data is so large that it is probably worth pursuing.

These questions are addressed by John Summers and David McKay in their article, “On the Validity and Reliability of Direct Similarity Judgments”, in MR. August, 1976, pp. 289-295. They got students to provide similarity judgments of automobiles and distances between campus buildings. They then asked them to indicate which of three perceptual maps matched their view: their own, an aggregate map or a third map. Such a test plus a test retest measure paints a rather discouraging picture of the validity and reliability of similarity judgment data.

Such an exercise is useful to show the students that the dimensions in practice are not so easy to identify.

10. Before a study, cluster analysis would be used to cluster respondents with respect to the similarities measured(or whatever perceptual data was involved) so that the MDS is conducted on groups who are homogeneous with respect to their perceptions. After the perceptual map is generated, we may want to cluster objects to see what competitive groups exist or we might want to cluster people to identify segments. 11. The advantage to using a rating scale is that it can be administered via a mail questionnaire. A ranking task is more complex and usually requires a personal interview. 12. Attribute importance is measured by the difference in utility between the highest and the lowest level of an attribute. The greater the difference in utility, the more important the attribute. If all levels of an attribute have the same (or nearly the same) utility, the attribute has no influence on overall attitude. The levels chosen for consideration may influence the resulting importance rating. In the credit card example (Figure 21-6), the respondent appears to be relatively indifferent between marketing support at the 1.0% level vs. at the .75% level (there is little utility difference). However, if marketing support were to increase to 1.25% or decrease to .50% the respondent’s utility may be quite different, 13. Full-Profile Advantages - Description of concepts more realistic since all aspects are considered simultaneously. - Can employ either a ranking or rating scale Trade-Off Advantages - Dealing with only two attributes at a time makes respondent's task easier (though longer) - Researcher is assured that respondent has considered each attribute - Yields somewhat higher predictive validity for large numbers of attributes, which are environmentally independent. In the battery case, only three factors are involved which are not environmentally correlated, therefore, the trade-off approach would not be tedious or difficult. Moreover, the manufacturer is especially interested in the maintenance question and would not want to take the risk that the respondent ignore the variations in this attribute. Since quality is not being asked about explicitly, the danger with “price” being included is not acute. There is no necessary reason why price would be correlated with either of the other two attributes. Normally, price and quality attributes should not be considered separately in a trade-off analysis. Both the Marden SUMM model and trade-off analysis assess importance from the standpoint of a respondent’s willingness to give up some amount (level) of a less important attribute to get as much as possible of a more important attribute. The SUMM model uses a compositional approach coupled with a constant sum rating scale. The trade-off or conjoint models use a decompositional approach which starts with overall judgment of descriptions of concepts or objects. Both types of models require explicit, prior specification of the levels of all possible attributes. As such, both encounter difficulties with attributes which are difficult to categorize into objective and comparable levels. Because the SUMM model can, in principle, ask about an almost unlimited number of attributes, it may be better suited to very complex choice situations with more than seven or eight distinct attributes. One limitation which the Marden model shares with trade-off, but not conjoint analysis, is the problem of environmental correlation among attributes. 14. One can answer this question with both a “yes” and a “no”. The reason lies in the nature of the purchase decision process for major appliances and in particular, in the lack of relevant product experience that a prospective purchaser brings to the initial stages of search and evaluation. When these factors are coupled with the large impact of the cost of these products on the family budget, we typically encounter a two-stage evaluation of alternatives. In the first stage, price is used (along with size and availability of financing, perhaps) as a screening attribute. The set of those brands/products to be seriously considered is determined by the price range the buyer can afford. Those that are either too

high or too low in price are not considered further. This can be tested by asking either recent buyers or current prospects to define their consideration set, and describe the difference between those brands inside versus those outside the set. One would expect only a description. A different evaluation procedure, employing a compositional model of preference, is likely used to choose the specific brand and features from within the consideration set. This may only entail a comparison of two or three possibilities. Here price assumes an incomplete sentence. Different role, as an indicator of value for money, which involves a judgment about the price versus perceived quality and features provided. However, it is only one of a number of attributes, and may not even be the most important. Indeed, if all the refrigerators, for example, are at the same price point, it may not even be determinant. This could, of course, be readily tested with a multi-attribute compositional model. One of the implications of this two-stage process is that a manufacturer must first be aware of the variables used by consumers to define consideration sets, for these will dictate how the product line is to be designed, i.e., size and price ranges. Then the feature combinations, plus guarantees and serviceability, must be superior within the probable consideration sets. 15. The choice of airline presumes there is more than one carrier serving the route. Among the attributes that are likely to be considered are: (a) Type of aircraft (b) departure time relative to ideal (c) punctuality of arrival (d) passenger load (e) number of stops en route (f) attitudes of flight attendants (g) entertainment (h) quality of food (i) amount of leg room These and sixteen other service factors, including on-ground services, decor of cabins and others were reportedly used by one airline to develop utility functions on a “route and a purpose of trip” basis. See Paul E. Green and Yoram Wind, “New Way to Measure Consumer’s Judgments,” Harvard Business Review (July-August 1975).

16. While this question is designed as a class field exercise, it should be noted that these questions are precisely those asked by Xerox in researching the plain-paper copier market. Indeed Xerox managers are likely to be among the largest users of conjoint and trade-off analysis, and have developed considerable proprietary software. Among the attributes they use are: o speed o copies per minute o time to get the first copy o capacity/volume o plain versus coated paper o loading time o rent vs. purchase o size o process type o size of image o form of copy paper

PART IV TEACHING NOTES FOR CHAPTERS CHAPTER TWENTY-TWO PRESENTING THE RESULTS Outline of Chapter Guidelines to Successful Presentations ▪ ▪ ▪ ▪ ▪

Communicate to a Specific Audience Structure the Presentation Create Audience interest Be Specific and Visual Address issues of Validity and Reliability

The Oral Presentation ▪ ▪ ▪ ▪ ▪

Don't Read Use Visual Aids Make sure that the start is positive Avoid distracting the audience Involve the Audience

The Written Presentation Questions and Problems 1.

The criteria should draw upon those covered in the chapter. Communicate to a specific audience. Well structured. Motivated. Interesting to read. Well written at the sentence and paragraph level. Specific rather than being too general. Figures and charts used well. Understand the main points after reading. A results document would likely have numbers and a quantitative analysis. If so, there is a special need to avoid getting buried in the numbers and instead to highlight those of most interest and relevance. There will also be a need to present statistical tests in a fair and understandable manner. They usually should be in footnotes - in any case, they should not intrude. Some students let the statistical significant issues dominate.

These follow one evaluation form.

The point of this exercise is to sensitize the students to the problems of oral presentations Evaluation of an Oral Presentation Rate each item from 1 (very poor) to 10 (very good) or NA (not applicable).

Content 1. Introduction 2. Central idea / first statement 3. / development 4. / re-statement 5. Pace & density of information 6. Level of detail: low/high 7. Conclusion 8. Suitable for the audience Delivery 9. Poise 10. Mannerisms 11. Eye contact 12. Handling of notes or script 13. Voice/pitch 14. /audibility: soft/loud 15. Rate of speaking: slow/fast 16. Conviction & enthusiasm 17.(a) gestures (b) bearing (c) movement Visual Aids 18. Decision to not use visual aids 19. Legibility 20. Handling of aids Suitability for the intended Audience 21. Content 22. Delivery 23. Length: short/long

Teaching Notes for Cases

Case 23-1 BROWN MICROWAVE The purpose of this case is to illustrate and to provide a basis for discussion of concept testing of a durable where it is not feasible to get a trial purchase. The case can be used to raise several issues. 1. The use of the van. Will the portrayal use of mock-ups displayed in actual kitchens be more realistic than simply showing people pictures? The use of pictures would, of course, be much less costly and the firm would not have to wait for a van to be prepared. Further, the van is still very artificial. The women are really exposed in a laboratory setting which is very different from that seen in a retailers In fact, many retailers probably to not have such elaborate kitchens. They also display many more models and features than are displayed here. An alternative might be to display the proposed models in the six or ten or so cooperating dealers and get the reaction of women who are shopping for countertop microwave ovens. 2. The sampling plan. Countertop units of a more expensive design will be targeted at a specific segment, namely those who have counter space, who are attracted to appliances, who will benefit from the convenience of microwave cooking (this might be working wives), who have adequate incomes, etc. It might be worthwhile to determine and project the characteristics of the countertop microwave oven buyer using secondary or internal data. The sampling plan might then be adjusted such that the key segments are adequately represented. There are obviously choices that can be made about the type of shopping centers selected, their neighborhoods, the cities, etc. An alternative might be to use a quota plan to guarantee that, for example, working women are represented. It would be possible to recruit via telephone a “random sample from each community, or perhaps a random sample stratified by working/nonworking. However, the nonresponse bias would be troublesome and it is questionable if the increase in cost would be worthwhile. 3. Interpreting the choice data. The artificial situation may distort the choice situation. It may be possible to ascertain if the respondents who select the higher priced designs can afford them or if they have previously opted for the “deluxe” model when buying appliances. It would also be possible to: a) Scale the choice decisions to determine how much preference exists for the first choice. b) Ask if they would like information sent to them when the product becomes available. Such an expression of interest would help interpret a first choice decision.

4. The intentions question. The intentions question, specially those obtained after exposure to the models, is undoubtedly biased upward. Respondents have just been exposed and asked to judge something new and will naturally develop a relatively high level of interest. Further, the advertising and distribution of National will not reach all shoppers. In this case, all respondents are aware of the new models and are exposed to them. 5. The analysis. Since the sample is not randomly selected, the greatest interest will probably be in the segments such as working single women. If acceptance of the new model is high among this group, then externally obtained data should be found that will determine the size of this group. The sample size should be adequate to compare the acceptance of various meaningful segments. The instructor may want to look at a IMR. November 1966, article by Donald Payne which describes the use of a simulated retail store to compare various models of portable TV sets. The simulated store was located at a shopping center and the respondents were recruited from passerby shoppers who qualified by being married household heads stratifying quota targets with respect to income and sex. A test of six models showed that respondents’ judgments were very consistent across five style scales and six performance scales but that could, of course, be due to a halo effect.

Case 23-2 NATIONAL CHEMICAL CORPORATION The trial-and-repeat measurements win provides a way to estimate sales. The original Dow test fount trial at 20% and repeat at 85%, indicating an enormous demand, but that test involved a very different marketing plan. Usage frequency should also be obtained because that will provide a more sensitive measurement of the purchase frequency that just repeat buying. Also helpful would be a tighter estimate of the number of uses per can. One problem is that the repeat could represent add-on purchases for a second car rather than additional usage potential. A question should ascertain whether the repeat was for the same car as the original purchase or not. The test should also provide diagnostic information about the product. In that respect, it would be useful to ask about the usage, the situation, and about any problems. In the original Dow test, many consumers found the product difficult to use. When it was tipped on its side, the aerosol can frequently did not discharge its contents. In addition, at very cold temperatures, the aerosol can frequently did not work. Some motorists who had had the can in their car trunks for several months of thawing and freezing weather discovered that the cans simply did not function at all after those extremes of temperature change. Compounding

the problem was the fact that many consumers attempted to use the product in deep snow and other places where it simply was not intended to work. The test should also provide information about the marketing program. Often a test market provides insights that can lead to major changes later. In the test of 1969 widespread distribution had been achieved. However, when the product was actually introduced, the focus was on service stations and on point-of-purchase displays and brochures just as in the proposed test market. Automotive service centers, discount houses, and supermarkets generally did not carry the product. There was negligible advertising support. As a result, there was modest trial and very little repeat or add-on (buying for a second car) business. The results comparable to the test market where there was extensive advertising and distribution were simply not repeated. Only one marketing program was proposed. Another option might be to use two or three test markets and try more extensive advertising in one or two other cities. If the marketing program fails (as, in fact, it did) there is little information to plot a revised course. Also, the sales to fleet owners win be sensitive to decisions of a very few people. Thus, the information on the fleet side will be unreliable again, suggesting more than one city. Before making the test, cost details on the production side would be necessary, as would information as to the possibility of a competitor benefiting from the delay and from monitoring the test market experience.

Case 23-3 U.S. DEPARTMENT OF ENERGY (B) The objectives of this case are to: 1. Show how concept testing can be applied in a public policy area involving new technology, and 2. Gain experience in evaluating concept test designs. The following points might emerge from a discussion: a. Events external to the laboratory will affect people’s reaction. For example, in the future there might be a controversy about the visual pollution of windmills or there might be some attitudes formed as a result of the energy crises. Thus, this concept test has external validity problems in that it might not predict future attitudes as well as we might hope. b. There is undoubtedly a testing effect in that respondents will feel that they are being asked to make judgments on an issue that is vital to the nation's future. They might be affected by their motivation to make a contribution to the nation's problems. 3

c. The stimuli are really artificial in that slides are used. The respondents are not exposed to the actual reality nor are they asked to live with it. d. There might be a selection bias depending upon how the recruitment of respondents took place. e. A sample size of 300 is probably very low if definitive judgments are to be made about the relative acceptability of the various designs. The analyst will probably want to look at several subgroups. A sample size of 600 to 2,000 may be more appropriate unless an exploratory, qualitative study was called for in which case 30 to 60 might be enough. f. Respondents should probably come from areas that did have good windmill sites. Further, it might be useful to specify the location of potential windmills. Concept presentation should always be as complete and realistic as possible. g. We would evaluate each of the 18 slides as they appear. It would then be possible to get the effect of the scene as well as the design effect. A comparison would then be possible. It may be that the background is much more important than the design. It might also be that there are interactions present.

Case 23-4 HOKEY POKEY IS BORN IN INDIA The objectives of this case are to: 1. Understand the important issues associated with concept, development and launch of a new product and, 2. Applying the tools of marketing research to aid the launch of a new product This case requires students to collect data and conduct analyses in order to answer the questions. Chapters 5 and 6 list all the secondary and standardized sources of marketing data. Some of the secondary sources of data are: • Trade magazines • Reports of statistics collected by syndicated services • Reports of government statistics • Reports of surveys that have been conducted • Market research reports conducted by competitors • Reports of surveys by industry observers

Many articles and databases can now be accessed using on-line retrieval systems. This provides a rich, one-stop source of country and industry information. Following the data collection and analyses exercise, students are expected to provide clear answers along with justifications on (a) the market for ice creams in India, (b) the marketing strategy for Hokey Pokey, and (c) the areas of future growth for the brand.

PART V TEACHING NOTES FOR CHAPTERS CHAPTER TWENTY-THREE MARKETING-MIX MEASURES Outline of Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪

Information requirements of new product research Discussion of various techniques for concept generation, product evaluation, pre-test and test marketing. Discussion of Forecasting techniques Applications of Marketing Research in pricing a product. Marketing Research in distribution decisions Information requirements and techniques used for place decisions Measures to evaluate advertisements Methods to obtain information on other media decisions

Teaching Suggestions New product research is often the easiest research to justify since the purpose is usually clear and the value obvious. Thus, much of marketing research does involve new products. In fact, many of the cases in the book are actually new product cases. The purpose of this chapter is to structure and organize this important application area. In this regard, Figure 24-1 provides a very useful structuring function. The concept evaluation and development is organized by the questions: How are the concepts exposed? To whom are the concepts exposed? To what are they compared? What questions are asked? The validity of the concept test often is dependent upon the nature of the exposure which necessarily has to be somewhat artificial since the product is not yet fully developed. The point that it is easier (and thus more valid) for respondents to make relative judgments about concepts than absolute judgments might be emphasized. Also, intention responses are nearly always inflated and this source of bias needs to be considered carefully when designing concept tests. Students might be asked if they have ever been respondents in concept tests. Or if they know of any product that has bombed, do they think a well-designed concept test would have detected the product’s problems and caused the cost of its market entry to be saved. Product Evaluation and Development differs from concept testing in that the product and parts of the marketing program have been developed and product use tests are usually possible. The chapter discusses use tests, and laboratory test markets. The laboratory test market is useful in itself and makes a nice contrast to the use of test markets. The next section of the chapter discusses test marketing. One issue is how to design a good marketing test—the considerations like selecting the test area, controlling the test, the length of the test, and the types of measures used. Another issue is the limitations of the market. Students often ascribe more power to a test than it warrants and believe that a scientific manager should always test the market, and that, in contrast, a laboratory test, for example, is rather invalid and crude. The fact is that a test is expensive in time and money, is difficult to control (and thus may generate biases results), contains substantial variation (product

acceptance often varies widely among cities), and requires that the marketing program be essentially complete (a test market is not the place to refine all elements of the marketing program). Forecasting is a subject that can be bypassed in a research course. We included it in this book because it has such practical value. Many students will seldom be exposed to a focus group, a survey, or an experiment when they get on the job, but most will have to forecast. Consequently, a feel for forecasting and the role of research techniques to designing and executing forecasting systems will be very beneficial. The final section in this chapter deals with pricing research. It is worthwhile for the instructor to go through each and every pricing strategy and the informational requirements for each strategy, in detail. Wherever needed, examples have been provided to explain the various pricing concepts. A feel for the marketing research applications in distribution will be very useful to the students. Advertising is an excellent context to illustrate and discuss the concepts of marketing research because it is inherently interesting to students and because it is a well-developed and focused research area. To motivate students it might be well to start with an open-ended questions—what is advertising supposed to do anyway? Hopefully, some feel of the variety of tasks (and thus, response measurements) that can be involved will quickly emerge. Another question that might add motivation is which test is the best? The students may well benefit from a review of four or five representative copy test methods. There are a lot of tests and it gets somewhat confusing. It will be helpful if they are comfortable with a few and those can then serve as a frame of reference. A discussion of just a few in-depth—can serve as an excellent review of practically the whole course. For each the instructor should first get it described accurately (through discussion or lecture) and then discuss its limitations and assumptions. Question 4 and the discussion of it below can be a point of departure. The chapter also provides an overview of the marketing research applications in distribution decisions. The role of marketing research in distribution decisions is generally overlooked but due to the practical value of applications in this area, we have decided to include it in our book.

Questions and Problems

In all these situations several key issues will emerge. Which segments will be the most fruitful? The demand estimate will nearly always need to be made by segment. What will be the marketing program? Distribution channels and price are particularly crucial to most estimates. The estimate will usually need to be based upon some assumption of these two critical elements. For example, consider the first two products. (a) One market is travelers. Airline travelers could be sold either through vending machines or overthe-counter. In either case the package design will be important because it will have to communicate the concept. The airlines themselves have, in fact, bought quantities of these for their passengers. Another market is truckers. In this case, focus groups might be appropriate to get reactions to the product and to various distribution alternatives. Another approach is to visit airline, bus and train waiting rooms and truck stops, expose the concept and get reactions. (b) One market is restaurants and other commercial eating establishments. One approach would be to obtain a list of a variety of restaurants such as fast foods, chains and company and school cafeterias. The concept could be exposed to them and their reaction obtained. (c) Another market is the home. To explore the market, “experts” like gourmet cooks and buyers in the relevant departments of department stores might be contacts. Use tests might be highly appropriate to see if it actually works. A knowledge of how much lemon is used on food (as

opposed to in drinks or in cooking) might be helpful in assessing the total market potential. Secondary sources or a survey could provide such information. 2.

Benefit Structure Analysis is described in the cited article by Myers (IM, October 1975). It starts with 25-50 in depth interviews or several focus groups. Specific use occasions are probed. One objective of this phase is to obtain the list of benefits and product characteristics. Specific questions that can be used include: (a) Why is that brand preferred? (b) is Brand A more similar to Brand B or Brand C? Why? In what respects? Describe Brand B. What are its characteristics? (c) The second phase involves 500 or so respondents obtained from 12 metropolitan areas. Among the available outputs are: a. Benefits Wanted b. Benefits Received c. Product Characteristics Wanted d. Product Characteristics Received e. Use Occasions f. Products Used g. Brands Used h. Respondent information A variety of analyses are possible. Two key variables are benefit deficiencies (benefits wanted-benefits received) and product characteristic deficiencies. For a detailed discussion, see Myers’ article.

Douglas Jordan, of Schrello Associates, puts forth the following set of criteria: (a) is it real? Is the market real? o Is there a need? want? o Can the customer buy? o Will the customer buy? Is the product real? o Is there a product idea? o Can it be made? o Will it satisfy the market Can the product be competitive? o On design/perf. features? o On promotion? o Is the price right? (b) Can we win? Is the timing right? Can our company be competitive? o In Eng./production? o In sales/dist.? o in management? o in other considerations? Will it be profitable? o Can we afford it? o is the return adequate?

is the risk acceptable?

One approach is to compile a list of relevant words, break them down into syllables and develop a computerized list of all possible combinations and permutations of those syllables. They are screened for reasonableness and then scaled as to desirability.

The point of this question is to illustrate that some new products are easily communicable even over the telephone or via a mail questionnaire and others must be demonstrated visually via television or in person. The second question should serve to introduce the trade-offs that all new product managers must make. On one hand, there is enormous pressure to move quickly and “quietly” before competitors can react to it. On the other hand, testing can avoid introducing losers or using ineffective marketing programs in the introduction phase. When the pressures are severe (although they always seem intense), then it is very tempting to bypass testing.

There are several approaches. One is to determine if the respondent has the capacity to purchase and the need for the product. Capacity to buy a car might depend upon financial resources. The age of present car might indicate the need. Another approach is to ask for a commitment. For example, a respondent might be asked whether he or she would be interested in receiving information about the product when it is available. A negative reply might indicate that the intentions interest was inflated. Another approach is to scale the intentions questions so as to obtain a measure of intensity. For example, the respondent could be asked if the concept was appealing even at a higher price. The best way, however, is to obtain an agreement to actually make a purchase commitment. Sometimes that is feasible.

The main set of assumptions relate to the artificiality of the laboratory setting. It must be assumed that the advertisement exposure and the simulated shopping expedience have enough realism so that the resulting trial purchase is a valid indicator of a trial purchase in the market. There is non-response bias (many recruited will not cooperate), before measurement effects, and a testing effect all affecting internal as well as external validity. In particular, the home use of a new brand is rather artificial because of the testing effect and the before measurement effect. It is also assumed that brand awareness and distribution achieved can be forecasted. Finally, there is the assumption that something will not happen in the market (competitive reaction or channel development) to alter radically the context in which the brand will be introduced,

The CDSM basically has two problems, the inability to test the product’s ability to gain distribution and the possible lack of projectability of the available test cities. Some firms may have so much channel power and/or experience that they can forecast their ability to gain shelf space and retailer cooperation for displays, etc. Another consideration is the product type. A new cereal’s ability to get shelf space is more predictable than some product that is opening up a new product class.

The question was stimulated by the Beecham suit against Yankelovich Clancy Shulman because the YCS laboratory test market provided an inflated forecast of the sales of Delicare Cold Water Wash because of alleged YCS mistakes. Some possible responses/positions are as follows:

(a) The research firm is a professional organization and it should be responsible for this unprofessional error to the degree that this error affects the result of the project. (b) A research firm is simply supplying information. The client has some responsibility of understanding what the research methodology is and how the research output gets transferred to recommendations. The client is not a naive man off the street but in fact an experienced user of marketing research

information. The model used is not a blackbox—the basic structure and assumptions are exposed to those who choose to make the effort. (c) The research firm is a professional organization that should be held responsible for incompetence just as a physician is held responsible when a mistake causes a patient to be permanently harmed. 10. Periodic discounting is followed by firms that possess information on the reservation prices of consumers. When some consumers in the market have differential reservation prices, then firms can start at a high price and periodically discount their prices in order to draw consumers with low reservation prices. Companies follow random discounting when they perceive the customer differentiation in terms of the search costs. Consumers with high search costs tend to buy at undiscounted prices and the consumers with low search costs tend to wait and buy at the lowest price. 11. This would be considered as a case of Second market discounting. 12. This question has been framed so as to enable the student to think of the various possibilities. This question can also be used to stimulate classroom discussion. 13. There is a basic hierarchy notion that attention to the ad must precede communication. Recognition is an indication that the ad was at least seen. If recognition is low, that tells you something useful about the ad. Further, there is the argument that some ads, namely those use an emotional appeal, do not attempt or even want the audience to engage in information processing. Thus, a recall measurement would be completely inappropriate. The FCB study in the text in which emotional ads did relatively badly with recall scores makes the point. 14. The BRC uses a large (500) sample mail survey and is inexpensive (under $1,000). The large sample provides high reliability. The issue is the stimulus. The BRC experience is that the stimulus is, in fact, adequate and it can even tap feelings of warmth and irritation that could only have been present when the ad was first exposed. Communicus involves costly personal interviews even with mail samplings, However, the stimulus, namely exposure to an excerpt of the ad is much more realistic. 15. Again, the hierarchy notion is that attention should be followed by interest/processing of a communication to be effective. DAR is a measurement of interest/processing that has high face validity. If a message was processed, it should be recalled. In contrast, you can recognize all sorts of nonsense material that had no meaning to you. The “day after” feature is also highly supportable. How useful are the measurements taken just after an exposure? After all, you don’t buy right after right after an exposure. The controversy over DAR may be an overreaction to it simply because it was so established that it began to dominate the creative process. You could not get a commercial through (even with an emotional appeal) if it did not Burke out well. The power of DAR needed to be cut back and a full-scale attack was about the only way. 16. The McCollum/Speilman version does use multiple geographic locations and a different persuasion measurement. It also features two exposures and the A/C measurement. (a) The Mapes and Ross Approach * also involves a before measurement * probably has less of a selection bias, but still requires cooperation and draw only from cable homes * the artificiality of the viewing context is much less * the lottery might be a more involving valid measurement of preference, but it could also stimulate a variety-seeking bias—l’ll try something new—it’s free (b) The Apex Approach * uses a before measurement, although it is different—how much does that help? The control group provides a comparison point. * Uses a brand preference measurement that should be more sensitive and valid than a

single choice while retaining the “prize” motivation * the artificiality of the viewing context is the same as the Mapes and Ross test * the control group helps to control for some elements of sample composition (c )

The Tele-Research Approach * has no before measurement—the results are compared to a control group * there is a nonresponse bias and a selection bias (caused by the selection of the shopping center(s) * the forced exposure is similarly artificial—perhaps more as there may be more time pressure to get out of the test and resume shopping * the coupon requires perhaps more commitment than a prize selection—further, the shopping is done in natural surroundings

(d) The Sherman BUY Test * has a fairly artificial setting and sample * probably has a good dependent measurement. The Guttman scale concept that someone has to go through all steps provides a nice theoretical background to the test * there is no before measurement (e) The Behavior Scan approach eliminates nearly all threats to validity. The only problem is the representativeness of the sample. The nonresponse bias remains and the issue as to whether the test towns are not representative. IRI has added 12 “neighborhood” samples from New York, Los Angeles, and Chicago so they recognize the problem. 17. A host of factors other than advertising can cause sales such as price, distribution, and most of all competitor actions. Tracking studies focus in on the advertising performance and allow you to address the key questions. Is the advertising performing satisfactorily? Or do we need a new campaign or a new agency? As the example in the text illustrates, it can also provide guidance as to what is the problem. Ad awareness (and sometimes brand name awareness) is usually measured. A low awareness level has obvious diagnostic value. 18. An adjective check list will help to determine if the advertising is perceived as being warm, irritating, entertaining/humorous or informative. Similar devices are widely used. In particular, Leo Burnett and Y&R use a similar phrase check list extensively. Instead of a warm factor, they have an empathy factor. “I can see myself doing that.” “I can relate to that.” etc. Some believe that unless some ads can achieve a degree of empathy they will not perform well. 19. Such a field experiment should be concerned with: (a) External contamination such as competitor actions, weather factors, seasonal effects, etc. Some thought and information gathering would be worthwhile. (b) A big concern would be the carry-over effects, although since this is a new product (a new version), there should be an immediate impact. Nevertheless, the teflon image, long term, is very important and we should be concerned about what happens to it. If the same test were repeated two years later, the carry-over issue would be even more crucial. Agencies sometimes argue that it may take three years to detect carry-over effects. (c) The experiment seems costly. Could fewer cities be used if they were matched instead of randomly selected? Could the response be measured in terms of audited sales of key retailers instead of calling 1,000 people? Could a store-based experiment be conducted using the store’s retail advertising effort instead of spot buys of broadcast media?

20. Mediamark uses the recent reading techniques, while Simmons uses the through-the-book. Obviously, the recent reading has more potential for inflated readership scores. Someone who normally reads it may incorrectly assume they read that issue when they didn’t. (On the other hand, someone who saves up issues may be incorrectly noted as not reading an issue.) The through-the-book is more certain to record only those people who actually read it. The more serious concern is to make sure the comparison is consistent across vehicles within a given method. The text mentions the case where Newsweek does better at out-of-home readership which is detected easier by the recently reading method. Time. in contrast, will get more serious, thorough readership which is best measured by the through-the-book approach. 21. Respondents would generally tend to exaggerate their readership of prestige magazines to build their own self-esteem, to impress interviewers, to conform to perceived social norms, etc. The use of an unobtrusive measurement might help to remove or estimate the bias. One technique might be to check the refuse of a home or office to see what magazines are actually being thrown out. Another might be to have some organization, like the Salvation Army, collect magazines from a home and see what magazines emerge. Still another might be to sit in a public lobby and simply observe which magazines are picked up. 22. The audimeter cannot provide information as to who is doing the viewing. The diary requires considerable effort. Some may neglect to fill it out at times and others may try to do it by memory and make mistakes. Nonresponse bias is another problem. A camera is considered by many as too Orwellian. Is it reasonable for marketing research to ask anyone to give up that much privacy? Further, there is the practical question of nonresponse bias. Are not those who would agree to such a request different than others? The switch, people use to indicate entering or leaving a room is a good possibility. It could have each person’s name on it. Or everyone could have their own p switch. It could be made portable like a remote control, however, with the VCR remote control and the TV remote control, can a respondent keep track of them and avoid losing them? 23. There are three approaches to this issue. The first approach called the sales effort approach is logical and straightforward. In this method, the number of sales calls to be made to prospects are determined is divided by the average number of calls that can be made by a representative and the number of sales representatives is estimated. In the second method, the territory sales history is examined. An analysis of the sales versus market potential is done to assess the manpower requirements. In the third method, two areas are considered. While more frequent calls are made in one area increasing the number of representatives and the frequency of calls, the intensity of sales effort is reduced in the other area and the effects studied. Also, there are a number of computerized models for determining sales force size and for allocating the sales force by market and product line. 24. Trading area data is useful in creating mailing lists, evaluating a store’s or shopping center’s market positioning, measuring competitive customer bases, determining potential of new locations and evaluating regional retail chains and acquisition plans. Formal models have been designed for predicting the trading area of a given shopping center or retail outlet based on relative size, travel time and image. An analysis of the credit card customers can give a useful estimate of the trading area. However, the best method is to conduct surveys to determine the trading areas. Shopping center surveys are conducted along with a survey of the non shoppers to arrive at the appropriate trading area. 25. The point of this question is to get the students to review the various models available for location of warehouses and salespersons and to recall the pros and cons of each model. The students should identify the key capabilities of each model. The review should provide the students with the opportunity to appreciate the various types of computerized models available. 26. Total Quality management (TQM) is a process of managing complex change in the organization with the aim to improve quality. The characteristics of an organization that has successfully implemented TQM are as follows:

* A TQM company continually strives for quality. To help in this, all employees must be trained and educated continuously. * Formation of cross functional teams is a must. * Quantifiable measures of progress must be established and rewards should be based on these measures. * Use of the state of the art techniques, processes and tools to achieve total quality. In order to achieve Total quality, it is important to have the measures for the TQM programs. It should be remembered that the measurement be specific. All the relevant information pertaining to the customer should be converted to suitable measures so that customer expectations can be met. It is also important to have internal goals and measure the achievement periodically.

PART V TEACHING NOTES FOR CHAPTERS CHAPTER TWENTY-FOUR BRAND AND CUSTOMER METRICS Outline of the Chapter ■ Introduce the agenda for marketing research in the twenty-first century. ■ Discuss the concept of competitive advantage and the various ways of measuring it. ■ Discuss brand equity and the various techniques used to measure it. ■ Discuss customer satisfaction and the different methods of operationalizing it. ■ Introduce the concept of the “Wheel of Fortune Strategies” and discuss the strategies to maximize customer profitability. Teaching Suggestions In a sense, this chapter represents the trend of the marketing research today. The role of marketing research is all too pervasive, encompassing all spheres of marketing. With so much of uncertainty in the business environment, more and more corporations are seeking research help to provide insight into matters of critical importance. In this context, this chapter will be very beneficial to students in that they are exposed to some of the very latest in marketing concepts. The instructor can start off with an introduction of the corporate environment and explain how “Buyer –Centricity” is emerging as an important concept. The instructor could define “Buyer- Centricity” and explain how current IT tools and technologies can enable organizations to analyze existing data and pinpoint specific buying patterns, preferences of their individual customers. One key point to be emphasized is that buyer centricity benefits both the sellers and the buyers because organizations produce only those products and services sought by the customers. Next, the instructor can discuss how competitive advantage plays a vital role. The various methods of assessing competitive advantage can be gone through, in detail. Then the concept and measurement of brand equity can be done. Emphasis should be placed on this topic, as an exposure to this topic will be very beneficial to the student, as it has very high practical value. With so much of importance placed in customer satisfaction, it is obvious that measurement of customer satisfaction will play a big role in the nineties. This topic can provide the instructor with the launch pad to move over to topics like relationship marketing, integrated marketing communications and total quality management. Finally, conclude with a discussion of various strategies that companies can use to maximize customer profitability.

Questions and Problems

The type of data to be collected depends upon the nature of business and the clientele covered. In case of a service oriented organization, specific measurements to measure the service quality indicators must be developed. Let us assume that an airline wants to design a customer satisfaction measure. After assessing the customer expectations and the relative importance of each event to the customer, the airline may decide that timely arrivals/departures and efficient baggage handling are the keys to enhanced customer satisfaction. The airline should focus on developing quality measures in order track

the customer satisfaction measures. This information should not be made exclusive to the top management but this information should percolate to all the employees. Similarly, information related to various suppliers, employees should be collected so as to achieve quality in all spheres. 2.

Customer satisfaction research is a natural corollary to the quality movement of the 90s. Satisfaction research can be studied in the context of an interrupted time series quasi experimental design. Over time, management can improve its processes and evaluate at regular intervals to see if the programs worked. The major guidelines to a customer satisfaction measurement process are: * Define goals and the use of the information * Discover what is important to the customer and employees * Measure the critical needs * Act on the information * Measure performance over time. The students should be made to go through the strengths and weaknesses of the methodology discussed in the text and ascertain the validity.

The objective of this question is to stimulate a healthy classroom discussion on the issue of brand equity. There is plenty of room for varied interpretation of the various issues involved.

Measuring competitive advantage is central to strategic thinking. Businesses seeking advantage are exhorted to develop distinctive competencies and achieve differentiation through lower costs or higher customer value. Measurement of competitive advantage can be done using a market based approach or a process based approach. The text contains a summary of all of the market and process based approaches.

Integrated Marketing Communications (IMC) is in the process of developing and implementing various forms of persuasive communications programs with customers and prospects over time. Goal of IMC is to influence or directly affect the behavior of the selected communications audience. The process starts with the customer and then works back to determine and define the forms and methods through which persuasive communications program can be developed. The costs involved in an IMC approach is the creation of an infrastructure to assess the needs and wants of the customers. The scope of the team is focused. Research regarding customer needs must go beyond features and benefits to determining the best way the products and services are best delivered. Post search measures how well the organization did in improving customer perceptions and behavior and which areas need improvement. The benefits are focused communication, enhanced customer satisfaction and increased shareholder value. The advertising agency should conduct a cost-benefit analysis along the above mentioned lines and convince the management that IMC is a worthwhile strategy.

SECTION II TEACHING NOTES FOR CHAPTERS CHAPTER TWENTY-FIVE EMERGING APPLICATIONS OF MARKETING INTELLIGENCE: DATABASE MARKETING, E-COMMERCE, AND RELATIONSHIP MARKETING Outline of Chapter ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪ ▪

Introduce the concept of database marketing research Discuss the use of marketing research for direct marketing Discuss the marketing research needs for constructing a database Discuss the key elements of building a customer database Discuss the scope and role of e-commerce in marketing research today Discuss the emergence and role of mobile marketing Discuss the recent trend in social marketing and experiential marketing Briefly discuss the role of marketing research in relationship marketing Trace the latest developments in relationship marketing, learn the metrics used in measuring customer loyalty Understand the Customer Lifetime Value metric Discuss the concept of “Customer- DNA” Briefly discuss the trends in relationship marketing in terms of customer equity calculations.

Teaching Suggestions This chapter focuses on the emerging concept of “Customer-DNA”. Customer – DNA refers to the ability of organizations to specifically “Identify” or “Profile” target customers and their preferences. Instructors can present this concept as an extension of the “Buyer – Centricity” concept introduced in the earlier chapter. Students must be made aware that with the current technological tools it is relatively easier to identify satisfied and profitable customers, their buying patterns, preferences and short-term and longterm business needs. After the above introduction, the instructor can explain how the “Customer – DNA” concept interconnects with the database marketing and customer relationship marketing (CRM) concepts. The students may be exposed to the utility of direct marketing. In other words, the shift from mass marketing to direct marketing has been made possible with the use of databases. By using probing technique, the students themselves will realize that how direct marketing works. Information on consumer and business databases can be taught to students by asking them to study/access various databases available to the public. Additionally, the value of list acquisition and targeting could be stressed. The difference between mailing to a random population versus selected households/businesses can be illustrated with the criteria of overall response/success rate. The utility of adding information (e.g. demographics and lifestyle) database to enhance a list can be stresses. The power of statistical models (choice models) can be illustrated by discussing the possible use of the information in a database. For example, how a computer firm can use their customers' profile on spending habits to target potential customers who have a tendency to spend more in a given time period. Finally the customer database allows a firm to identify their profitable customers, thereby providing the ground for relationship marketing. E-commerce is another popular application of marketing research today. The instructor must spend time in discussing various e-commerce applications and trends. Various tables are given that reveals the revenue implications of e-commerce.

Mobile marketing is meant to describe marketing on or with a mobile device, such as a mobile phone. This is an emerging application of novel marketing methods wherein a mobile device is used as the marketing vehicle. The chapter initiates a discussion on what this type of marketing is about, why it has not taken off in a big way and what promises does this area hold in the future. This topic should initiate class discussions on the current trends in this area. Social marketing refers to the use of social media such as Facebook, Twitter, MySpace, YouTube among others to host marketing campaigns. This is an important area of development that warrants attention. This form of marketing has attracted large amounts of marketing spend and is expected to increase manifold in the future. This discussion provides some of the popular means of adopting social marketing and the viral nature that it holds. Experiential marketing proposes to connect consumers with brands in an effort to make the consumers as advocates. This is yet another development in the field of marketing and many companies are providing experiential treatment to their customers in an effort to grow customer advocacy for the brands. Finally, the area of relationship marketing needs to be discussed. The keys to relationship marketing should be followed by a discussion of the recent developments in relationship marketing research like calculation of customer equity or customer lifetime value, which can have a huge impact on marketing resource allocation of firms based on profile analysis, and prediction of purchase sequence and timing of next purchase. Questions and problems: 1.

With available data about its customers in hand, AT&T can segment and target customers for Universal Credit Card from its existing customer base. It can send information and introductory offers for the credit card along with the monthly telephone bills to existing customers. Current customer profiles can be used to identify and communicate with prospective customers who exhibit the characteristics of profitable customers. Students can research and discuss their findings in class.

With a marketing database, marketers have information about customers, their demographic characteristics and their response characteristics. With a database, marketers can use past actions by customers to predict their future preferences or profile customers for effective market segmentation. With knowledge about current customers’ tastes and preferences, marketers can effectively target new customers with the same characteristics, and even predict the lifetime value of these newly acquired customers.

The database should be updated monthly, which is in line with the cycle of fees collection. With monthly update, the company can identify active and inactive customers and thereby update its customers contact plan.

Modeling customers serves several purposes: It helps to profile a typical customer and so become more effective in prospecting. It helps to identify the best customers, another aid to prospecting. It helps to identify niche markets to add to the marketing universe. It helps to develop more effective marketing tools (materials and media). It is costly to try to solicit every member of the database. The rule is to solicit only those segments whose expected response rates are above the breakeven rate.

Modeling customer characteristics to identify prospects is a continuous process because customer characteristics are under constant change. For example customer age, household income, preferences etc change over time. Other factors, such as competition, also drive customer switch.

Teaching Notes for Cases CASES FOR PART 1 CASE 1-1 CLOVER VALLEY DAIRY COMPANY Introduction

This case, although it presents a relatively simple business decision, provides an excellent wrap-up for the introductory section. Class analysis should bring out three key points: (1) the purpose of the research, (2) the role that the marketing manager plays in the research process, and (3) the need to assess the value of the research information. 1. The student should recognize what purpose the research should perform. In this case, Clover Valley needs specific information as to product acceptance rather than exploratory research with routine feedback. The text proposed in the case can be viewed as an example of field experimentation or even as a preliminary form of test marketing. 2. The student should evaluate the role of the marketing manager in the research process by taking the role of the manager in a situation where there is no market research specialist. He must struggle with (a) defining the problem to be studied, (b) deciding how much to spend on the research, i.e., how valuable is the data which he wishes to collect, (c) designing the research project, and (d) deciding what data need to be collected. The case provides an excellent example for the student to see the kind of involvement which a marketing manager must play in the several stages of the research purpose. Much of the discussion should probably center on the quality of the research design and what design would be most appropriate to collect the information needed. 3. The case also offers an opportunity for a conceptual discussion of the value of research information although sufficient data are not available to permit a quantitative analysis of this topic. For a company the size of Clover Valley, the issue of how much to spend on research is an important one and the risk involved in putting out a bad package is clearly evident. Thus, the student can balance off the need for “perfect information” against the fact that there are few funds for research activity. Teaching Approach Some students will argue that as the risk is low and the value of new information is slight, the company should not test; others will argue that as additional risks exist and as the cost of information is low, the company should test. It is probably useful to get the break-even analysis out early in the class. Without this analysis, the students cannot see how far sales could drop with the new package before contribution begins to be lost. The computational work may be preceded by a discussion of what information Clover Valley should have before making the decision about testing, and once the break-even figures are obtained, students can usually conceptualize the problem concretely.

The discussion can then cover the buying motives for yogurt and move into an evaluation of the proposed test and possible redesigns of the test to obtain better information. Special Topics of Interest A. What information should Clover Valley Dairy obtain before making the decision? The information required will depend upon the judgments they make about (a) the amount of uncertainty which would be reduced by adding additional information to existing information, (b) the amount at stake in the decision, and (c) the amount that Clover Valley can afford to spend. 1. Amount of uncertainty. Uncertainty should be rather high since case data suggest that a package change may have a major effect on sales. The point can be emphasized by looking at the notion of product differentiation through packaging. But Clover Valley still does not know why a certain type of package influences sales and consequently does not know how the proposed package will affect sales. This should lead to a discussion of buying and use patterns related to yogurt. Even after this discussion, however, most students will probably want to test. 2. The amount at stake. Before specifying the information needed, the amount at stake should be considered. At the current level of sales, the amount to be saved is low in an absolute sense, but this amount is 100,000 units x $.035 =

$3,500

120,000 units x $.045 =

5,400

Total Contribution:

$8,900

which is relatively high compared to the total sales of 6 oz. units of around S77,000. Thus, what can be saved is approximately 12% of current sales. As can be seen from the contribution analysis at the end of this note, however, unit sales can drop in the neighborhood of 50% if the proposed package were used and the contribution to fixed cost would be roughly the same as at present. Thus, the possible gains of a “perfect decision” are not high and sales could drop substantially before contribution suffers. However, the effect of the sales decline on consumer preference for other Clover Valley products and trade attitudes, especially where Clover Valley is having trouble obtaining shelf space for other products, must be considered. Students will probably decide the risk involved warrants testing even if they are reasonably sure that unit sales won’t drop 50% with the new package.

B. Many students will argue that since the risk is low, the value of new information is slight, and therefore, Clover Valley should not test: 1. Housewives buy on quality, price, promotion, brand and shelf location to a much greater extent than on package. 2. The threefold increase in Clover Valley sales may have been caused by increases in primary demand, death of competing dairies, or Clover Valley’s maintenance of quality. 3. Unit sales of the proposed package could fall by 50% from their present level without a decrease in $ contribution and since such a drastic decline is unlikely, we have little to lose by going ahead without a test. Other students will argue that additional risks exist and that since the cost of new information is low, Clover Valley should test: 1. Clover Valley can’t afford to risk unfavorable relations with its retailers; lowered yogurt sales may affect both sales and shelf position of other Clover Valley products; Clover Valley’s present independents are unlikely to grow, and since national accounts are unavailable, existing relationships are vital. 2. The cost of a test—even if redesigned—is modest, probably less than $500 to $1000. 3. How much can Clover Valley Dairy afford to spend? Clover Valley probably can’t afford much because of the sales drop in 1976. Students should realize that different types of information with different degrees of validity are obtainable, however, depending upon the nature of the research design, and on the amount spent. C. How do customers buy yogurt? What influences their choice? 1. brand loyalty - is it high or low? 2. native taste for yogurt 3. the quality of the yogurt, price, store where the yogurt is sold, amount of shelf space that yogurt has, and the characteristics of the package such as: • • • • • • •

convenience material shape impression of size printing viewability recommendation of retailer

A review of these factors may suggest that a test is not necessary. D. Retailer: what would the effect be on our entire line if we faced a rapid drop in sales level?

E if a test is necessary, what should the criteria be for success? • • • •

more total contribution from the new package more sales volume favorable effect on retailer relations favorable effect on brand image

F. Amount of decrease possible before losing money. Here the student can work through break-even analyses such as those presented in the back of this note. Some evaluation should be made by the students of whether a 50% decrease in sales volume is likely, and would they accept the new package if they knew that even a 30% drop in sales volume were possible given the risks associated with the loss of goodwill in the distribution channels. G. Is the proposed test any good? 1. If the test is to measure consumer demand for the new package, the question may be raised as to whether a test should be conducted in a store where no competitive brands are available. Certainly this situation is not present in most of Clover Valley’s territory. 2. Giving Bill’s a special deal on the new multi-packs may result in enthusiastic display or recommendation by store employees. 3. Leaving the new package at Bill’s exclusively for the next ten days could, however, provide some information if sales dropped drastically In such a case, consumers are obviously either foregoing yogurt or going to the trouble of visiting another store inasmuch as Bill’s is an exclusive outlet. 4. There is a real question as to whether the reintroduction on the third weekend of the regular package along with the new in Bill’s represents a realistic consumer situation. Given the relative attractiveness of the package, the sales comparisons on this weekend may not be particularly relevant. 5. The in-store survey raises some real questions of validity inasmuch as it is a situation where valid consumer questionnaire responses might not be anticipated given a respondent tendency to want to please the company. Some information might be obtained, however, if there was substantial antagonism towards the new package. 6. The length of time of the test - (ten days) - may not be long enough to get a measure of repeat purchases, a key variable if the new package should prove to be unsatisfactory in home use.

H. What kind of test should have been run? 1. It should have duplicated the conditions consumers will face, i.e., in a competitive situation facing competitive containers. 2. It should have been conducted long enough to permit repeat purchases. 3. It may be argued that the test should have included tests in a number of different types of stores including small stores and supermarkets. This decision should be balanced against loss of dealer goodwill if the test fails. I. Some lessons from Clover Valley’s experience. 1. Assumptions about what the consumer will do can be dangerous. 2. Frequently assumptions can be tested inexpensively. 3. Set up base for judging information before you get it—this reduced arguments later on and assured usefulness of test. 4. Market research need not be complicated - however, if done incorrectly, market research can mislead rather than help. Analysis of Revenue and Costs June 1976 to May 1977 (Pre - intro)

June 1977 to May 1978 (Post-intro)

64,354 — 38,308

— 226,206 36,099

26,385.00 — 28,731.00

— 76,910.00 27,074.10

Total Retail Sales

$55,116.00

$103,984.00

Revenue to company (= 90% of retail)

$49,604.00

$93,585.00

8 oz. unit sales 6 oz. unit sales 1 lb. tub sales Retail Sales 8 oz. ($.41) 6 oz. (S.34) 1 lb. ($.75)

Variable Cost Analysis Assume that a constant x% variable cost applies to all sizes of yogurt, except the 6 oz. size where the variable cost per unit is increased by the amount of the more expensive package: 12.0 cents—7.2 cents—4.9 cents. The savings in yogurt of 4 cents in a 6 oz. container doff not change this variable cost proportion. Because we know that the total dollar contribution from yogurt only increased by 5% despite a tripling in volume we obtain the following equation: (49604 - 49604x} 1.05 = 93585 - (93585x + 10858) Where the extra packaging variable cost of 4.8 cents on 226,206 of the 6 on units is $10,858. Solving for x: 52084 - 52084x = 82727 - 93585x and x = .74 the variable cost proportion. Savings on Proposed Package 1.

Total variable costs (June 1977 to May 1978) VC = .74 (93585) + 10858 = $80,110.90

Savings on: (a)

first 100,000 of new containers = 12 - 8.5 (100,000) = $3,500.00

(b)

remaining 120,000 units = 12 - 7.5 (120,000) = $5,400.00

(c)

Total Saving = 5400 + 3500 = $8.900

3. Allowable drop in unit sales of 6 oz. package without loss of dollar contribution: = $8,900/contribution per unit with new package = $8,900/.306 (0.74) = 111 250 units. (this assumes that the variable cost proportion is 0.74 which is reasonable inasmuch as the cost of the new containers is comparable to that of the old containers). In effect, sales with the new multi-pak could drop by 109,070/226,206 = 48% and the contribution would be the same.

Teaching Notes for Cases CASES FOR PART II: DATA COLLECTION Case II-11 CURRENCY CONCEPTS INTERNATIONAL Synopsis

This case places students in the role of a marketing manager (Karen Anderson) responsible for the Currency Concepts International Project. The project concerns the feasibility of automated currency exchange machines located in major foreign airports. Arriving passengers (mostly Americans) would be able to exchange U.S. currency for the local currency with all the convenience and reliability that characterize the ubiquitous automated teller machines. As a case on marketing research, the problem is one of assessing the value of information from a qualitative perspective. In addition, students are expected to develop research objectives for future research (i.e. delineate information requirements). Teaching Objectives This case was prepared to teach students that: l.

Marketing research reduces, not eliminates, decision uncertainty.

2. Marketing research may be evaluated in terns of its accuracy, currency, sufficiency, and relevancy. 3. Good marketing research will have clearly defined objective that are relevant to the problem at hand. 4. Good marketing managers have the ability to take the role of the consumer when they analyze a marketing situation. These and other insights that follow from class discussion might be presented by the instructor at the end of the class period. Teaching Suggestions This case is best suited for that portion or the course when the instructor wishes to examine qualitative issues in the appraisal of marketing research. The case can be taught in a 50 minute class session and is best suited for an undergraduate class. Specific questions that might be posed to students prior to or during a class discussion are: 1

These teaching notes were prepared by Professor James E. Nelson, University of Colorado at Denver

Describe how the currency exchange machines would work from the standpoint of the consumer.

2. Describe how the currency exchange machines would work from the standpoint of the company. 3. Evaluate the research conducted by Information Resources, Inc. 4. If Ms. Anderson conducts additional marketing research, what should her objectives be? 5.

What should Ms Anderson recommend to the Executive Planning Committee? Why?

Areas for Discussion/Analysis A. Describe how the currency exchange machines would work from the standpoint of the consumer. 1. Students generally have little difficulty with this question and produce a lively detailed discussion. The instructor might expect these main points and record them on the board. a. Most U.S. citizens flying abroad either will have exchanged U.S. currency for local currency before departing or will exchange at the foreign airport, hotel, or bank. b. About half or all U.S. citizens flying abroad could be expected to use the currency exchange Machines eventually. c. However, initially. only a small percentage of U.S. citizens flying abroad would try the machines (i.e., the innovators). This percentage would grow over time but still remain small because few customers would make a number of trips abroad. d. Amounts exchanged would probably be small because of the novelty and the risk of mechanical failure. Most users would probably exchange less than $100, an amount that would enable travelers to reach a hotel or other destination. e. The conventional exchange’s posted exchange rate will be important in the decision to patronize a machine. However, if waiting lines are long (or nonexistent because the exchange is closed), a traveler probably will not care if a machine charges, say, 4.80% while the conventional exchange charges 4.60%. Per $100 exchanged, this difference amounts to only 20 cents. f. Some travelers say prefer to exchange their U.S. currency via machines are honest, rest, and expect no social interaction while responding in perfect English. 2. The instructor might summarize student points as follows: At the rise or generalizing but for the sake of later analysis, let us assume that 5% or U.S. citizens flying abroad would use the machine and that each user would exchange 2

$50. Let us recognize that over time both figures are likely to increase (as will the number of U.S. citizens flying abroad). Let us recognize further that some foreign nationals arriving from the U.S. will also use the machines (and, thus, make our estimates even more conservative) B. Describe how the currency exchange machines would work from the standpoint of the company. 1. Students find this question more troublesome. The instructor can direct discussion here by clarifying the question’s intent—the question’s purpose is to force students to consider details of the machine’s operation from the position of the rare. Three points should surface during the discussion: a. The machines appear to be quite profitable. Data in the case’s last section allow students to estimate the total annual gross margin realized per machine per 100,000 U.S. citizen travelers. (Using the assumptions identified above): (100,000) x (5% innovators) x ($50) x (5% gross margin) - $l2,500 Students might instead examine each City’s total gross margin from case Exhibit 2. For London, they would calculate: (1,313,865) x (5% innovators) x ($50) x (5% gross margin) = $164,000 Students could use these figures (or similar ones based on different assumptions) and the stated machine cost or $60,000 to calculate either a simple payback period or discounted rate On return Students should conclude that airports receiving more than 100,000 U.S. travelers would warrant one or more currency exchange machines. b. Machines will require frequent adjustment to keep exchange rates current and the machine full or local currency. In effect, machines will function like any group of vending machines but dispense an expensive product over an extremely long route. Thus, bidden fixed costs say be quite high unless the firm can arrange service through a local bank in each market c. Installation of machines will require no small effort because approval is highly controlled and rests with local municipal bodies. Such agencies will likely grant approval to only one or perhaps two firms. Thus, a Strategic window is open for aggressive firms willing to comply with a multitude of local regulations and able to negotiate with local officials.

2. Some students will argue for a single trial machine placed in London or another high volume port. While such a “test market” will minimize risk, more perceptive students will point out that it alerts competitors who may beat Ms. Anderson’s firm to the market in the Caribbean and Middle America markets. Further, a test market seems overly cautious for an initial strategy that, say, 20 machines in European ports. Downside risk is low while the potential for profit is high. 3

C. Evaluate the research conducted by Information Resources. Inc. 1. This question will generate discussion that can easily become disjointed. The instructor can help greatly here by asking students to evaluate Information Resources, Inc’s three approaches separately against the text’s suggested criteria accuracy, currency, sufficiency, and relevancy (availability may be omitted). Evaluations (as typified below) can be made on a 10-point Scale and arranged as a grid Research Approach Secondary data Company interviews Consumer survey

Accuracy 9 7 5

Currency 5 9 9

Sufficiency 5 6 5

Relevancy 6 9 9

2. Once the numbers are up, the instructor should press students for substantiation by raising several questions. Why is the consumer survey evaluated as relatively inaccurate? Answers might note the small, regional, and non-random sample or that question order was not constant or that interviewers may have lacked supervision. The instructor might then ask if such cases. Or inaccuracy are so pronounced that the consumer data should be entirely dismissed. (Few students will take this extreme position.) The instructor might pose similar questions with respect to the secondary data’s lack of currency. Are these data too old to be relevant? What do researchers do when they cannot find up-to-date data? (They may adjust old data by estimating linear or nonlinear trends or they may collect new data.) Aren’t all data, even primary data, somewhat dated by the time data appear in a research report—or by the time a marketing management decision, based on these data, is operationalized? As time permits, the instructor could proceed with like questions for the sufficiency and relevancy ratings. 3. At completion or this discussion, the instructor may make two important points: no research study is perfect; research studies reduce, but do not eliminate, decision uncertainty.

D. If Ms. Anderson conducts additional marketing research. what should her objectives be? 1. The instructor might begin discussion here by commenting that another way. Of answering the preceding question would nave been by comparing research results with research objectives. One may, in fact, evaluate any management action in such s manner. More appropriate to the present question, however, the instructor might note that marketing research objectives structure any subsequent research action. Thus, it is quite important that before Ms. Anderson authorizes additional research, she carefully consider what this research should accomplish Students may identify four major research objectives i.

Investigate potential relationships with banks or other entities in ten major European ports to determine the feasibility of local service of the currency exchange machines.

ii. Identify municipal bodies at the 25 largest foreign ports of entry who would be responsible for the approval process. (Anderson might begin negotiations with 4

bodies governing the ten largest European ports, if the Executive Planning Committee agrees.) iii. Determine supplier lead-time for the delivery and installation of ten machines. iv. Investigate the relative cost and effectiveness of promotions that would induce arriving U.S. citizens to use the machines. Students will develop other research objectives. Discussion will work best if all objectives are first listed on the board and then the class considers each one. 2. Some students will hold for conducting additional research that merely replicates and extends the recently completed consumer survey to other markets, primarily the East Coast. Better students (or the instructor) should question whether such research would likely lead to dramatically different results. Students might also recall that earlier analysis has shown that even if the percentage of U.S. citizens that would use the machine drops to 5%, the machines would still be very profitable In short, replication or extension seems wasteful. E. What should Ms Anderson recommend to the Executive Planning Committee? Why? A good way to begin discussion on this question is to ask the class to identify Ms. Anderson’s options. Students will quickly respond with the three options identified in the case’s last paragraph ordering 40 to 50 machines, dropping the project, or conducting more marketing research. However, such a listing is incomplete and the instructor should be prepared to take advantage of it. That is, the instructor should ask the class if Ms. Anderson doesn’t have some more options, consistent with preceding class discussion. A creative response would involve a fourth or fifth option. For example, Anderson might recommend that 10-15 machines be ordered for placement in the London, Frankfurt, Paris, Rome, and Amsterdam airports as soon as possible. She might couple this recommendation with one for additional research, to he conducted along the lines suggested by the earlier identified research objectives. The instructor might note that marketing managers are regularly expected to make creative recommendations, consistent with both research results and rigorous analysis of a marketing situation. Once the creative recommendation has been identified, few students support an original option. F. Summary Points o Marketing research reduces, but does not eliminate, decision uncertainty. o The value of marketing research information is determined, in part, by its accuracy, currency, sufficiency, and relevancy. o Good marketing research information will have clearly defined objectives that are relevant to the problem at hand.

Marketing managers are regularly expected to make creative recommendations consistent with both research results and rigorous analysis of a marketing situation. Hypothesize Universe Mean = 50%

= 10%

p=(50)(50) 667

 p =(10)(90) 667

 p = 1.93%

 p = 1 23%

This suggests that the expected range of accuracy at 95% confidence will be between 24 percent. The same type of calculations for a sample size of 1,431 after-shave users suggests that the expected range of accuracy at 95% confidence will be between 1-2 percent. The sample size could be reduced if the desired range of accuracy is not as small as those calculated here. There seem to be three courses of action worthy of consideration by Enhance: 1. increase the amount of money available for field work; 2. sample in fewer cities, say in only two, three or four cities; 3. use a more liberal definition of an Enhance user and/or be willing to work with a smaller sample of hair spray users in each city. Alternative Sample Designs The solution posed by the advertising manager is not very feasible because of the obvious biases which would result. Perhaps another solution—assuming a $23,000 limit on the study—is to locate users by phone and then mail them a questionnaire for completion in their homes. Follow-up mailers could be used to improve the response rate. There appears no reason why the study could not lend itself to such a design, unless the product has an unusual appeal to certain income and/or nationality groups whose members have a low incidence of telephone service, or unless the questionnaire would be too long or too complicated to be feasible by mail.

Teaching Notes for Cases CASES FOR PART III: DATA ANALYSIS Case III-1 VANCOUVER SYMPHONY ORCHESTRA (SPSS ®) Synopsis

Faced with declining attendance (subscription and single ticket), a large deficit and a “sluggish” economy, three executives of the Vancouver Symphony Orchestra (VSO) pondered the results of an audience survey completed in January, 1987. The main purposes of the survey were to obtain information about different segments (e.g., subscribers, non-subscribers) and about promotional effectiveness (e.g., theme, media). Given this information, actionable recommendations are to be made. Purposes of Case This is a comprehensive marketing research case and there are many possible purposes depending upon the instructor’s wishes. These include: 1) To illustrate the utility of marketing research for a service and not-for-profit organization; 2. To stress the importance of having a plan of action (i.e., a clear formulation of the problem/opportunity, specific research objectives, and information needs) before conducting the research; 3) To examine tradeoffs that must be made in conducting marketing research; 4) To give students experience in evaluating a research design, in this instance, an exploratory/descriptive one; 5) To provide students with (too much?) data and force them to “sift and sort” so as to come up with relevant, actionable and specific recommendations (both in the short-term and in the long-term); 6) To emphasize the necessity of examining results on a group-by-group basis as opposed to an overall or aggregate basis; ________________ * Copyright © 1989 by D.F. Gardiner and C.B. Weinberg, University of British Columbia, Faculty of Commerce, Vancouver, Canada.

Analyses 1. What are the strengths and weaknesses of this market research project? Factor

Strengths

Weaknesses

1. Preliminaries Problem/opportunity formulation, Research Objectives, Information Needs

- implicit that objective was to identify segments, needs/wants of each and cornrnunication theme in a cost and time effective manner

- lack of clarity as to purpose/research objectives; should be spelled out more clearly or else vague questions. E.g., RO1 Subscriber,

- basic problem may be an ad hoc approach to marketing so far

and Former Profiles R02 - Compare

Never

groups across selected characteristics RO3 - How can the VSO better appeal to these groups? 2. Research Design

- exploratory/descriptive and used for problem discovery which is appropriate - specific

- generalizability of results of exploratory designs - few opportunities for participants to bring forth other relevant factors.

3. Sampling

- convenient nonprobability - time and cost effective in getting to non-subscribers, but people with some interest in classical music

- not all had opportunity to pick up tickets, only those listening to a local radio station at a particular time - watch generalization from non-probability sample: are “free concertgoers” representative of population? (selection bias)

Factor 4. Questionnaire Design

Strengths - Layout straightforward - order flow and length appear good - structured and opencomplicated, instructions varied - range of choices per question appropriate - covering letter good - items covered, to some extent, the marketing mix elements: product (4-7), price (7) distribution (8, 9) communication (10, 11) - demographics at end - response and non-response

Weaknesses - more extensive pre-testing needed - Q7 problematic: perceived to be ended questions provide unclear -Q4 double barreled and memory dependent - coding categories may have led to confusion - some questions have explicit assumptions re: music knowledge (Q6 & Q7) - 25% response rate somewhat disappointing - minor pretest biases Additional

information

Need 1)Other cultural activities (film, theatre, etc.) 2)individual series attendance 3) reasons why formers dropped out 4) income 5) image of VSO, conductor, repertoire, social aspects of attendance But: Added length rsus response rate

5. Data Analyses

- Quantitative and qualitative - can use multivariate techniques (e.g., discriminate) requiring larger sample sizes

- data presented in aggregate form: perhaps more useful if looked at regulars, nevers and formers. - comments (overall and per group) for Q15 & Q16 are available.

The above summary of major strengths and weaknesses should drive home the notion of making tradeoffs when conducting marketing research. Such tradeoffs involve added information versus added cost (time, resources, questionnaire length), structured versus unstructured formats (breadth and ease of coding versus depth and difficulty in coding), nonprobability sampling (easier, quicker, lack of generalizability) versus probability sampling (typically more difficult and slower but higher generalizability). The student should recognize that perhaps some sampling bias has been introduced in that only those who might have been “predisposed” to the VSO would attend the free concert. However, the cost of attempting to locate and research non-subscribers and formers must be weighed against the convenience of conducting the research in a free concert setting. 2. What information can you derive from the data? State specifically the management questions you are hoping to resolve and how the data help you. In terms of making recommendations to “management”, the following major on”, based upon an analysis of the data over all respondents can be made. They are grouped according to elements of the marketing mix. [Although not required, an analysis can be undertaken on a group-by-group (current, former and never-subscribed) basis. Students with access to the database on a computer should be encouraged to do this and it can be done easily using the “Select if’ command in SPSSX if this is done, much useful information may arise. However, the data (percentages) in the case as written, have to do with all 622 respondents taken as a group.] (a) Product/Service Music selection is an important issue of concern. About 20% percent of respondents rate it poor or fair, as indicated in the univariate analyses. With respect to bivariate analyses and based upon Exhibit VII, there is a highly significant (but note that the Kendalls’s Tau is only .13 - .14) relationship between evaluation of the selection of music and subscriber status. Current subscribers appear to rate the music selection more negatively than do former subscribers or those who never subscribed. Perhaps “ignorance is bliss?” Regular concert goers appear to be quite critical; this may be reflected in the distribution of responses in Question 4, Alternative 2 (coding column 5). The principal conductor and music director chooses the music and it appears that there may be some problems in this regard as well.

In terms of what to do about this, there is some evidence that respondents perceive the amount of classical music played to be too little (Question 6) and nearly onequarter of respondents feel the amount of Canadian music played is too much.1 (Although not indicated in the overall results, current subscribers and formers especially felt this way). As such, some students recommend decreasing the amount of Canadian music. However, to the extent that the VS0 gets funding (grants) from the Federal Government to play a certain amount of Canadian music, this recommendation may be a difficult one to implement. (In general, many symphony audiences appear to be intolerant of “new” music). Further, it appears that one in five respondents feel that too much “Pops” music is being played. On a group-by-group analysis, the responses were identical. Given the above, it may be that the VSO should undertake a review of its programming and music selection for it appears improvements can be made in this area. However, there are tradeoffs. In addition and based upon responses to Question 7, there appears to be a strong preference for international performances compared to “new, promising performances,” regardless of ticket price and seating arrangements. Again, students may recommend the VSO moving towards more international performances but there is the cost aspect as well. (It is unlikely that incremental single ticket sales could cover the performer’s fees and consequently, other . approaches have to employed). Nevertheless, it may be that there is some price insensitivity here. Other major findings/recommendations that arise from the data and relate to product/service characteristics include the following: (I) a strong preference across all respondents for 8:00 p.m. concerts (Question 8). This is an actionable item and concert time were changed to 8:00 p.m.; (ii) three out of four respondents favor concerts held on the weekends (Friday and Saturday evenings and Sunday matinees) with the least preferred time being Wednesday and Thursday evenings. Somewhat surprisingly, twenty-seven percent favored Tuesday evening. However, it is to be noted that the “free night” was a Tuesday; (iii) nearly one-half of the respondents rated “convenience of parking” (Question 5) to be poor or fair. There is not too much that can be done about this but perhaps some arrangement could be made whereby parking at reduced rates could be incorporated into the prices of tickets. Alternatively, the use of “shuttle buses” from specified locations might be considered; and

(iv) based upon the comments of Question 16, the most frequent answer to the question “All things considered, what would it take to get you to attend VSO performances on a regular basis?” was “more time and/or more money.” At first glance, it may seem that not too much can be done to rectify this perception. However, by scheduling a shorter series of concerts and by implementing a flexible ticket structures (a “mix and match” concept across various series), it may be that the VSO could encourage more regular attendance. These two suggestions (shorter series and mix and match) were implemented. 2. Distribution Tickets for the VSO are obtained through an independently operated organization called the “Vancouver Ticket Centre - Concert Box Office” or “VTC-CBO.” There is some indication that service was not as good as it could have been (see Question 5). It may be that the VSO should consider operating its own ticket distribution centre, at least for subscribers. Again, benefits and costs must be considered. 3. Pricing There is some evidence that respondents feel that the prices of concert tickets are too high (Question 5). Forty-one percent rated ticket prices as either poor or fair. However, significantly more formers and nevers felt this way (44% - 48% versus 25% of current subscribers). Consequently, it may be that deeper promotional allowances/discounts 1

This is also supported from an analysis of the comments received in Question 16. should be offered to “first time subscribers.’ For example, “five concerts for the price of four” or “get one free” may be appropriate incentives to induce trial among the non-scriber group. To further support this recommendation, it appears, based on responses to Question 7 for subscribers, that there is less price sensitivity especially at the lower ticket price range ($8 - $14). it may be, that to offset the cost of special promotions to “first time subscribers,” the prices of lower-priced series and/or individual tickets could be increased, just below the “just noticeable difference.” Students, however, may not want to base a recommendation on the results of Question 7 because of the extent of missing data and possible confusion in answering. The entire question was designed to force respondents to make tradeoffs, two at a time. We agree that this may be difficult for them (indeed anyone) to do. Perhaps at the least, students could be asked what the direction of price bias is likely to be.

4. Promotion A number of findings or recommendations can be made in this area. Major ones are presented below: i) based upon the responses to Question 4, the promotional message to all groups should emphasize the attraction of hearing “live music,” “famous artists” and the “setting” (“Orpheum”). indeed, the sentence “Make Live Music A Part of Your Life” was inserted into all VSO material pieces as a result of this survey;

ii) with respect to sources of information, in order, VSO mailings, advertisements in daily newspapers and radio ads are the most frequently mentioned sources.. VSO mailings are the most common sources for current and former subscribers whereas newspaper and radio ads are the most common sources for non-subscribers. Therefore, recommendations can be made in terms of overall media categories; and iii) with respect to specific types of media, the Vancouver Sun and perhaps, an FM station or a classical music station may be appropriate for effective advertising, especially to non-subscribers. For subscribers, direct mailings as previously indicated appear to be worthwhile. Some students may say that the Province newspaper should be avoided but for 20%-25% of respondents, this is an important source. As such, the elimination of this source must be considered carefully. 5. Other Findings Based upon the analysis of Question 13, it appears that non-subscribers (nevers) are a younger group than subscribers and the VSO should consider targeting to the 44 and under group. To do this, the use of more theme performances such as the Michael J. Fox benefit (for the VSO), “Bach to the Future” or series that specifically appeal to this group may be appropriate. ______________ 2 This was further supported by an analysis of the comments to Question 15 The most common response was flexibility lack of commitment to a “locked-in” series. Supplementary Analyses Appendix I presents responses on a group-by-group basis. Instructors may wish to distribute this information ahead of time in addition to the case itself or assign the building of group profiles as an exercise. The point to be made is that the development of appropriate strategies may vary according to the particular group. In other words, the necessity of market segmentation and product differentiation can be emphasized. In addition to the two bivariate (2) analyses presented in the case itself, the results of selected other bivariate analyses are outlined in Appendix II. In Appendix III, the results show control for frequency of attendance since 1986 (never, 1-3 times, 4 or more as indicated in Question 3). Instructors may wish to omit this analysis but the topic of controlling for other variables may be a one for discussion. Although not required, multivariate analyses such as factor and discriminant analyses can be illustrated with this case as well. With respect to the former, three factors can be extracted from a principal components/varimax factor analysis on responses to Question 5: the music (orchestra, gout artists, selection), the environment (acoustics, atmosphere) and peripherals (parking convenience and VTC-CBO service) relating to obtaining tickets and attending a concert.

Discriminant analyses (two or three) groups also can be performed on the data. In most cases, only five or six significant variables (e.g., age, ratings of prices,, sources of information, time preference [day and/or hour) are selected with only weak discriminating power (in the range of 20-25%). Nevertheless, the results generally support previous recommendations in terms of market segmentation and product differentiation. Teaching Suggestions In teaching this case, we have found that most students can easily criticize. Therefore, we start the class discussion with the second question and state something like the following: “Granted there are weaknesses, but what one recommendation would you make based on the results as given?” This forces students to think and prioritize. After making a brief list of a number of these, the instructor can either move to Question I or continue on with Question 2. Depending upon how the case is to be wed in the course, the instructor can decide which question to emphasize. Some “Lessons” to be Learned/Points to Make 1. All research has limitations: often “we have to do the best with what we have” and we cannot go out and conduct more research due to time and cost constraints; 2. It’s very easy to criticize but when faced with the situation of having to act on what is available, one must make a decision; 3. Inevitably, tradeoffs must be made in the conducting of market research; 4. Have a clear idea of the problem or opportunity, research objectives and information needs before starting—in other words, have focus; 5. Quantitative and qualitative aspects are important aspects—don’t forget to examine the comments; 6. Results must be examined on an aggregate and a disaggregate basis for meaningful strategy development; 7. Make recommendations specific and actionable; and 8. Often, one has to pick and choose from a mountain of data in terms of judging what is relevant and not relevant.

Appendix I VSO RESPONDENT PROFILE BY SUBSCRIBER STATUS Percentages are % Of respondents within each group:

Subscriber Former Never

Q. 1 Subscriber Status

Q. 2 Individual Ticket Purchase Yes, since Sept. 86 Yes, before Sept. 86 No

38 53 9

24 59 18

16 47 37

Q. 3 Attendance since Sept. 86 Never Once 2-3 times 4-5 times 5 or more

18 10 18 30 24

64 22 10 2 2

67 19 11 2 1

** Live Music Most important 2nd or 3rd most important Not ranked in top 3

54 23 22

46 21 33

35 17 48

** VSO good under current director Most important 2nd or 3rd most important Not ranked in top 3

7 27 66

1 21 78

2 10 88

Orpheum good place for music Most important 2nd or 3rd most important Not ranked in top 3

6 52 42

8 45 47

6 42 52

** Choice of music Most important 2nd or 3rd most important Not ranked in top 3

7 33 60

20 29 51

12 33 55

** Famous guest artist or conductors Most important 2nd or 3rd most important Not ranked in top 3

18 41 41

12 45 43

13 31 57

Q. 4 Reasons for past attendance (** Significant relationship to subscriber status, p  .05)

Percentages are % of respondents within each around

Subscriber

Former

Never

Q .5 Ratings of VSO’s characteristics (** Significant relationship to subscriber status) Performance of Orchestra Poor to Fair Good Excellent

1 38 62

1 33 66

1 32 67

Guest Artists Fair Good Excellent

4 55 41

6 54 40

3 51 45

** Music Selection Poor to Fair Good Excellent

20 7 8

21 59 20

16 54 20

Acoustics in Orpheum Poor to Fair Good Excellent

4 41 55

3 38 59

5 39 56

** Price of Tickets Poor Fair Good Excellent

4 41 62 13

7 41 44 9

7 37 40 16

Convenience of Parking Poor Fair Good Excellent

10 30 51 10

14 38 37 11

13 32 40 15

** General Atmosphere of Orpheum Poor to Fair Good Excellent

4 41 56

4 40 56

2 27 71

Service from VTC-CBO Poor Fair Good Excellent

2 15 55 28

3 14 56 27

5 12 58 24 10

Percentages are % of respondents within each around

Subscriber

Former

Never

Q. 6 Opinion of music played by VSO (** Significant relationship to subscriber status) Classical Too Little About Right Too much

21 72 6

22 70 8

22 73 5

Twentieth Century Too Little About Right Too much

18 73 9

11 69 20

15 73 12

** Pops Too Little About Right Too much

10 70 20

16 65 19

25 56 19

22 48 30

13 58 29

16 68

Q. 8 Preference of concert times Matinee (2:30 pm) 7:30 8:00 8:30

11 33 44 12

10 33 51 6

12 29 52 6

Q-9 Preference of day for attendance Sunday Monday Tuesday Wednesday Thursday Friday Saturday

6 26 22 6 6 12 23

10 16 17 12 10 13 22

14 8 16 12 14 18 18

** Canadian Too Little About Right Too much 16

Q. 10 Information about VSO events VSO mailings Ads in daily newspaper Ads in community newspapers Radio ads TV ads Reviews and Features Non word of mouth Word of mouth Percentages are % of respondents within each around

46 22 1 13 2 9 3 3 Subscriber

42 28 1 16 1 7 1 4

Former

17 35 3 27 3 6 1 8 Never

Q. 11 Most often read papers Vancouver Sun Province Globe and Mail Others

64 25 9 2

65 20 8 7

65 23 5 6

Q. 12 Gender Male Female

40 60

38 62

40 60

Q. 13 Age of respondents 24 and under 25 - 34 35 - 44 45 - 54 55 and over

4 11 9 21 55

4 10 10 23 53

12 21 20 17 28

Interpretation of % The percentages represent the proportion of respondents within each subscriber group (e.g., Subscribers, Formers, Nevers) that responded to each of the questions. For example, with respect to the gender of the respondents, 60% of the subscribers are female compared to 62% of the formers.

Summary of Preference of Show Time Based on Days of Week Questions 6 & 9) a)

Current Subscribers % of Responses

Matinee

7:30

8:00

8:30

#of respondents

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

70 7 5 11 11 15 16

20 45 47 33 22 35 27

30 50 58 55 78 65 60

10 14 8 22 11 25 10

10 42 36 9 9 20 37

% of Responses

Matinee

7:30

8:00

8:30

#ofRespondents

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

40 2 4 6 7 13 11

20 44 31 32 32 24 30

50 51 67 62 71 71 58

6 6 4 6 3 5 9

30 45 48 34 28 38 64

Matinee

7:30

8:00

8:30

# of respondents

31 12 8 12 14 13 12

31 38 34 31 30 38 34

50 69 70 67 69 63 62

11 2 2 3 4 6 9

73 42 82 65 71 94 96

d) All Respondents % of Responses

Matinee

7:30

8:00

8:30

#ofRespondents

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

38 7 6 10 12 13 13

27 43 36 31 29 34 32

48 56 67 65 70 65 60

10 8 4 5 4 8 10

114 129 166 108 108 152 198

b) Former Subscribers

Non Subscribers % of Responses Sunday Monday Tuesday Wednesday Thursday Friday Saturday

Price Sensitivity Analysis: Question 7 Among the Subscriber Group Condition

Orchestra

Balcony

International Players

Orchestra = 20 Balcony = 14

Orchestra = 20 Balcony = 8

Orchestra = 14 Balcony = 8

Orchestra = New Performer Balcony = International Performers

(% of respondent- within each group)

Condition

International Per.

New Performers

Int. Per. = 20 New Per. = 14

Int. Per. = 20 New Per. = 8

Int. Per. = 14 New Per. = 8

Price Sensitivity Analysis: Question 7 (Contd.) Among the Former Subscriber Group Condition

Orchestra

Balcony

International Players

Orchestra = 20 Balcony = 14

Orchestra = 20 Balcony = 8

Orchestra = 18 Balcony = 8

Orchestra - New Performers Balcony - International Performers

(% of respondents within each group)

Condition

International Per.

New Performers

Int. Per = 20 New Per. = 14

Int. Per. = 20 New Per. = 8

Int. Per. = 14 New Per. = 8

Price Sensitivity Analysis: Question 7 (Contd.) Among the Never Subscriber Croup Condition

Orchestra

Balcony

International Players

Orchestra = 20 Balcony = 14

Orchestra = 20 Balcony = 8

Orchestra = 14 Balcony =8

Orchestra - New Performers Balcony - International Performers

(% of re fondants within each group)

Condition

International Per.

New Performers

Int. Per = 20 New Per. = 14

Int. Per. = 20 New Per. 8

Int. Per. = 14 New Per. = 8

APPENDIX II SELECTED BIVARIATE RESULTS CROSSTABULATION OF QUESTIONS 4, 5, AND 6 WITH SUBSCRIBER STATUS

VARIABLE

CHI-SQ.

SIGNIF.

KENDALL’S TAU (AVERAGE)

27.65295 34.08265 15.51075 11.38285 4.77423

0.0000 0.0000 0.0038 0.0226 0.3113

0.1755 0.1667 0.1115 -0.0153 0.0638

0.0000 0.0000 0.0008 0.3313 0.0349

23.2721 20.9858 12.6676 7.4133 2.6318 3.1098 1.5813 0.0850

0.0010 0.0018 0.0130 0.2843 0.6212 0.7950 0.8122 0.8966

0.1442 -0.0665 0.1249 -0.0007 0.0366 -0.0262 -0.0024 0.0313

0.0001 0.0456 0.0004 0.4932 0.1722 0.2562 0.4745 0.1974

14.9398 10.9114 8.1262 1.0726

0.0048 0.0276 0.0871 0.8986

-0.0662 -0.0849 0.0042 -0.0075

0.0560 0.0164 0.4571 0.4195

SIGNIF.

Question 4 Live music VSO Good Famous Choice Orpheus Good Question 5 Selection Of Music Prices Atmosphere Parking Artists Guest Articles Service Acoustics Of Orpheum Orchestra’s Perform. Question 6 Canadian Pops 20th Music Classical

APPENDIX III CROSS-TABULATION OF SUBSCRIBER STATUS WITH QUESTIONS 4, 5, 6 CONTROLLING FOR FREQUENCY OF ATTENDANCE KENDALL’S TAU

VARIABLE

FREQUENCY

CHI-SQ.

SIGNIF.

(AVERAGE)

SIGNIF.

>4 1-3 >4 >4 1-3 never never 1-3 1-3 1-3 never >4 >4 never never

13.2548 6.6067 6.3485 6.0187 5.6210 4.9591 4.8963 4.1145 3.7154 2.8589 2.5274 0.7762 0.2968 0.1718 0.1623

0.0041 0.0855 0.0958 0.1107 0.1316 0.1749 0.1795 0.2494 0.2939 0.4139 0.4704 0.8551 0.9606 0.9820 0.9834

-0.2474 0.1394 0.0330 -0.2057 -0.1291 0.1052 -0.0187 0.1744 0.0481 0.0163 0.0049 0.0233 -0.0038 0.0157 0.0015

0.0044 0.0919 0.3656 0.0177 0.0847 0.0791 0.4005 0.0492 0.3207 0.4383 0.4712 0.4053 0.4842 0.4165 0.4921

never never >4 never 1-3 1-3 1-3 1-3 >4 >4 >4 never 1-3 >4 >4 1-3 1-3 never >4 >4 1-3 never never never

11.1671 10.8688 10.3274 10.1079 8.3903 10.5267 7.4021 6.7326 8.6553 8.0322 2.7114 7.6131 6.7514 4.2735 3.5111 4.6630 2.7750 1.9547 3.3408 1.5112 1.4995 1.4243 1.4568 1.0440

0.0247 0.0281 0.0324 0.0386 0.0783 0.1042 0.1161 0.1507 0.1939 0.2358 0.2578 0.2678 0.3445 0.3703 0.4762 0.5877 0.5962 0.7441 0.7650 0.8245 0.8267 0.8400 0.9623 0.9839

0.1234 0.1525 -0.1719 0.1632 0.1645 -0.0883 0.0479 -0.1078 -0.2219 -0.0877 0.0368 0.0431 -0.0814 0.1009 0.0551 -0.0756 -0.0076 0.0201 -0.0324 -0.0351 0.0362 0.0397 0.0092 0.0157

0.0102 0.0011 0.0257 0.0008 0.0074 0.1132 0.2404 0.0545 0.0063 0.2021 0.3568 0.2136 0.1199 0.1318 0.2595 0.1389 0.4553 0.3427 0.3605 0.3479 0.2930 0.2167 0.4314 0.4093

Question 4 Choice of Music Live Music Live Music Orpheum Good VSO Good Famous Artists Choice of Music Famous Artists Choice of Music Orpheum Good VSO Good VSO Good Famous Artists Orpheum Good Live Music Question 5 Guest Atmosphere Guest Selection Atmosphere Parking Selection Acoustics Prices Parking Orchestra Prices Prices Atmosphere Selection Service Guest Orchestra Service Acoustics Orchestra Acoustics Parking Service

KENDALL’S TAU

VARIABLE

FREQUENCY

CHI-SQ.

SIGNIF.

(AVERAGE)

SIGNIF.

never >4 1-3 1-3 1-3 never 1-3 >4 never >4 >4 never

15.8980 8.4928 6.9050 5.3373 4.2371 3.9012 3.8590 3.5278 3.4063 2.8485 1.8070 0.9602

0.0032 0.0751 0.1410 0.2544 0.3749 0.4195 0.4254 0.4737 0.4923 0.5835 0.7712 0.9158

-0.0656 -0.1216 -0.1264 -0.0885 -0.0883 -0.0282 0.0405 -0.0591 -0.0825 -0.0172 0.0467 -0.0351

0.1293 0.0967 0.0256 0.0976 0.1132 0.3063 0.2593 0.2629 0.0562 0.4230 0.3060 0.2614

Question 6 Cdn Music Pops 20th Music Pops Cdn Music Pops Classical Cdn Music Classical Classical 20th Music 20th Music

CASE III-2 RALSTON DEVELOPMENT COMPANY Introduction

This case is a useful vehicle for reviewing and clarifying the following aspects of survey research and attitude measurement. (1) the nature of attitude structure; especially the relationship of awareness, knowledge and preference and the problems encountered when attitudes are unstable, (2) the pros and cons of alternative attitude scaling methods, (3) the influence of response bias on the answers to questions in concept and other studies, (4) the consequences of different standards of evaluation being applied to studies exposed to public scrutiny versus studies for internal decision-making purposes. Teaching Suggestions This case is a natural for an involving discussion since it is possible to directly put one action alternative against an opposite, and each has strong arguments in its favor. A good starting point is to ask how many students would introduce the results of the study in the next planning commission meeting, and how many would not introduce the results. If there is a roughly even split—as there often is—then the class can be divided into two opposing groups. It is desirable to have the members of each group sit together, and take 15 to 20 minutes to plan how to present their arguments and refute the other arguments of the group. Of course, if the class leans strongly one way or the other, then the instructor win have to conduct a straight case discussion to consider the improvements in the design and/or questionnaire, or possible uses of the data for marketing the Ralston proposal. It may be useful at this juncture to pose a situation where the planning commission holds over the decision for 60 days (and Ralston has not yet submitted the data to the commission). What action steps would be recommended to Ralston to better inform the public and influence the wavering members of the commission? Analysis of Alternative (A) Arguments in favor of introducing the results of the study to the planning commission. 1. The key argument is that the results dearly favor the Ralston shopping center concept (evidently because it is less disruptive), by starting with an existing store. 2. There is low unaided recall awareness of either proposal. This means that the attitudes are not wed established, and/or that the issue has not been a topic of public discussion on interest—the lengthy hearings reported in the local newspaper.

3. The fact that a survey has been conducted is certainly public knowledge (although Ralston could argue, if pressed, that the results are not ready for presentation). This is a slippery argument since it is not dear that the members of the planning commission have anything to gain from the survey, since it undercuts their role as public representatives. Thus, they may choose to ignore the knowledge that a survey was conducted. 4. The results of question 8b show that only 33 percent of the sample prefer “neither” over concepts R or S (on the other hand these are likely to be the people who vote and possibly have more interest in civic affairs. 5. The attitude of those who responded - most prefer “neither” in question 8b do not appear stable, inasmuch as 15% of this group (19 to 130) then said they least preferred “neither” (one wonders, however, whether they really understood the question). 6. The cross-tabulation of question 6 (need for shopping center) with question 8b (most preferred option) shows 50 percent of those originally saying “not needed” switched their opinion to favor one of the alternatives—versus a defection of only 12 percent of those who originally favored a shopping center. As expected, the rate of switching is greater within the intermediate categories. 7. The description of the two shopping centers is very neutral. For example, there is no explanation of the revenue/tax/employment benefits to the citizens of the town, and no attempt to counter the concerns about traffic congestion. (B) Arguments against the introduction of the results. 1. The real problem with the study is the evidence of opposition to any shopping center. This is first apparent in the (projective) question 5 which indicates that 40.4 percent believe that others are opposed, and only 34 percent believe others are in favor (there is, of course, a minor problem of multiple responses to complicate this interpretation). 2. Whereas question 5 can be criticized because it is projective, and hence it is not dear whose of the “not at an needed” category. By comparison, there is not much intensity to those with favorable attitudes (most of those with favorable attitudes say it is only “somewhat needed”). The high proportion of negative attitudes revealed in question 6 within the not aware category is some evidence of a fundamental antagonism to large scale development. 3. The support for a shopping center evidenced in question 8 is dubious on several grounds: (a) the answer came only after a lengthy description of the two concept by which time the respondent probably concluded that the interviewer was associated with the R ant S development. This sets up a possible courtesy bias situation in which the respondent supplies the answer the interviewee is thought to want to hear, (b) the switching of opinion between question 6 and question 8 occurred mainly within the intermediate response categories: 21

Response to Question 6 Need for shopping center:

Very much needed Somewhat needed Not much needed Not at an needed

% in category from switching to or away from either R or S in 08 3/44 = 7% 17/124 = 14% 53/85 = 62% 59/144 = 41%

This suggests that the support for R & S comes mainly from those whose attitudes are poorly informed, and whose information came in a biased format, (c) there is an assumption that endorsement of either R & S is tantamount to general support for the shopping center. It is possible that a different result would have been obtained had the question been simply R versus no further shopping center development 4. Those who support neither R or S after the potentially biasing presentation of the concept descriptions are most likely to be hard core opponents who will demonstrate aggressively. This is still a large minority (one third of the sample) and if they are activists, opinion leaders and/or concerned citizens of long-standing, they should be given more weight in the interpretation than the suggestible group of supporters. Other issues to Disarm Once the class reaches a deadlock or a decision it is useful to shift direction and ask whether another design might have been less susceptible to criticism. The most attractive alternative would be a heavy direct mail information campaign on the merits of both alternatives for a two-week period prior to survey. The survey could be limited to asking whether the respondent was for or against further shopping center development. (A variant on this design would have the direct mail material distributed only in certain neighborhoods, with no information given to other matched areas. Then the effect of information could be directly and unambiguously tested.) Given the problems with the survey it would be desirable to ask an intention to vote for or against each of the proposed developments in turn. What Happened? There is an implied third alternative in the case, which some students may suggest, and that is to delay submitting the study in hopes that the issue will not be resolved at the next meeting. Indeed Ralston was sorely tempted to delay, and would have done so had it not been for his great concern that Santini might have undue influence over the Planning Commission. This dictated submitting the study. A contingent plan was prepared in the event the criticisms of the study were too severe, which would have proposed a second study in conjunction with the Planning Commission to minimize the negative “halo.” This was not necessary for the commission did accept the Ralston proposal, largely because it promised less disruption because a store already existed at the site.

Case III-3 POPULAR PIZZAS

Introduction This case could be used as a group mini project that helps student practice and reinforce marketing data analysis skills. Students can apply different statistical techniques such as frequency, cross-tabulation, or other descriptive statistics tools to different variables and come up with meaningful findings. These findings would be combined to present a demographic profile of customers and their consumption behaviors. This information could be used for making marketing strategy recommendations. Datasets for Popular pizzas in excel and SPSS formats, along with a copy of the questionnaire used for customers of Popular and customers of competition and a coding sheet is available in the diskette accompanying the book as well as on the website accessible using the link www.drvkumar.com/mr9 .

Analysis (suggestions) Research Objectives

Information Requirements

1. What are the consumption habits of pizza and smoothie by Popular customers and competition?

General attitudes and preferences of customers of Popular and strengths and weaknesses of Popular with respect to competition. The demographic details such as age, number of family members, and income. Lifestyle activities of customers such as hobbies. The strengths and weaknesses of Popular with respect to competition, the preferences of customers and trends in the industry.

2. Develop demographic and lifestyle profile of the customers of Popular and customers of competition. 3. Identify relevant strategies for growth of Popular.

Popular Pizzas Questionnaire/Coding Sheet for Popular Study Location: Hartford, CT Date: 08/01/06 Q1) On an average, within the past 3 months, how often have you been to pizza joints? (Circle one) Code At least twice a week 1 Once a week 2 Once in two weeks 3 Once a month 4 Less than once a month 5 Q2) Within the past 3 months, how often have you come to Popular for pizza or smoothie? (Circle one) Code At least twice a week 1 Once a week 2 Once in two weeks 3 Once a month 4 Less than once a month 5 Q3) Whom do you go out with most often when you visit pizza joints? (Circle one) Code Friends 1 Spouse 2 Family 3 Colleagues 4 Other. Please specify 5 Q4 ) On an average, how much do you spend on pizza every time you visit a pizza joint? (Circle one) Code Less than $5 1 Between $5 and $9.99 2 Between $10 and $14.99 3 Between $15 and $19.99 4 More than $20 5 Q5) What products do you normally consume when you visit a pizza joint? (You may circle more than one)

Regular pizza Chicken wings Cheese sticks French fries Soda or other beverages Others (please specify)

Code 1 2 3 4 5 6

Q6) How important are the following features while deciding on which pizza joint to go to? (Circle your response)(Code: 1= Not important, 2= Somewhat important,3=Quite important, 4= Very important) Very Quite Somewhat Not Important Important Important Important A. B. C. D. E. F. G. H.

Convenient location Attractive prices Quality of products Range of products Clean atmosphere Large dine-in area Less than 5-minute wait Any other (Please specify)

4 4 4 4 4 4 4 4

3 3 3 3 3 3 3 3

2 2 2 2 2 2 2 2

1 1 1 1 1 1 1 1

7) How do you rate Popular on the following features (Circle the response)(Code: 1= Not important, 2= Somewhat important,3=Quite important, 4= Very important) Very Important

Quite Important

Somewhat Not Important Important

Product Range

Product Quality

Price

Location

Room for dine-in

Less than 5 minute wait

Clean atmosphere

Q8) Will you come back to this outlet again? (Circle one)

Code:

Definitely 5

Probably 4

Maybe 3

Probably not 2

Definitely not 1

Q9) If your answer to question 8 is "probably not" or "definitely not", please tell us briefly why?

Q10) Which are the other pizza joints you have visited within the last 3 months? (You may circle more than one) Code A. Dominos Pizza 1 B. Pizza Hut 2 C. US Pizza 3 D. Papa Ginos 4 E. Sbarro 5 F. Other, Please specify 6 G. Not visited any other shop 7

Q11) Compared to other pizza outlets that you have visited, how would you rate Popular on the following factors? (Circle your response)(Code: 1= Not satisfactory, 2= Somewhat satisfactory, 3=Quite satisfactory, 4= Very satisfactory) A. Product Range B. Product Quality C. Price D. Location E. Room for dine-in F. Less than 5 minutes wait G. Clean atmosphere

4 4 4 4 4

3 3 3 3 3

2 2 2 2 2

1 1 1 1 1

4 4

3 3

2 2

1 1

Q12) Currently, do you drink smoothie? (Circle one) Yes

(If you have answered "no", proceed to question 18) Q13) How often have you had smoothie at Popular in the last 3 months? (Circle one) Code At least twice a week 1 Once a week 2 Once in two weeks 3 Once a month 4 Less than once a month 5 Q14) Compared to other smoothies you have had, the smoothie at Popular is (Circle the response) Very Superior

Superior

About the same

Inferior

Very Inferior

Q15) Have you consumed the following smoothies within the last 3 months (Circle the response) Smoothie Island Tropical Smoothie Planet Smoothie

Yes Yes Yes

1 1 1

No No No

2 2 2

Q16) If "Rejoice" smoothie was not available to you, how likely are you to switch to (Circle the response) Probably Definitely Definitely Probably Maybe Not Not Smoothie Island 5 4 3 2 1 Tropical Smoothie 5 4 3 2 1 Planet Smoothie 5 4 3 2 1 Q17) Please rank these three statements (Code:1=most important; 2 = important; 3 = least imporatant) a) I would like Popular to be more of a smoothie shop b) I would like Popular to be more of a smoothie shop c) I would like Popular to be more of a smoothie and pizza shop

Please tell us about yourself. Q18. Age : _____________

Q19. Sex : Male : ______

Female : ________ (Code: Male=1, Female =2)

Q20. Marital status : Single : _____

Married : ________(Code: Single =1, Married=2)

Q21. Excluding yourself, what is the age and sex of others living in your household ? Male : ____ (Code: Male=1) Ages : ______________________ Female : ____ (Code: Female =2) Ages : ______________________ Q22.

Occupation : Homemaker Professional/Technical Upper management/Executive Middle management Sales/marketing Clerical or service worker Tradesman / machine operator

You ____ ____ ____ ____ ____ ____ ____

Code 1 2 3 4 5 6 7

Q23. What is your annual income ? A. less than $15,000 B. $15,000 - $25,000 C. $25,001 - $35,000 D. $35,001 - $50,000 E. Above $50,000

Code 1 2 3 4 5

24. What are your other interests ? (Eg. Sports, music, books etc)

Figures III-1, IIII-2, III-3, and IIII-4 show the results of the data analysis of the Popular study. Figure III-1 shows the frequencies and percentages of the age of people visiting Popular. It can be seen that more than 70 percent of the respondents lie within the 19-34 age group. This implies that Popular's customer base is predominantly young and that ambience inside Popular as well as the menu should reflect the young generation's preferences. It can also be seen from Figure III-2 that there does not exist significant gender differences with regard to patronage of Popular. Figure III-3 shows that a majority of the customers are very satisfied with the product range and the product quality of Popular. However, the figure also indicates that customers are not as happy about the price of

Popular Pizza. Location, room and waiting time are also considered satisfactory, while cleanliness has a very high rating by most of the customers. Figure III-4 shows the cross-tabulations of the intentions of the customers to revisit with the age and gender of the respondents, respectively. It can be seen that the people in the age group of 19-34, who are also Popular’s major customers are also most likely to revisit. These facts enable Popular to plan its future course of action. Figure III-1 Age (Years) <18 19-24 25-34 35-44 45-64

Frequency 7 24 14 2 5

Age Percent Cumulative Frequency 13.5 7 46.2 31 26.9 45 3.8 47 9.6 52 Frequency Missing = 1

Cumulative Percent 13.5 59.6 86.5 90.4 100.0

Figure III-2 Gender Gender Male Female

Frequency 27 24

Percent 52.9 47.1

Cumulative Frequency 27 51

Cumulative Percent 52.9 100.0

Frequency Missing = 2 Figure III-3 Satisfaction Level 2 3 4

Frequency 4 22 26

Rating of Popular on Product Range Percent Cumulative Frequency 7.7 4 42.3 26 50.0 52 Frequency Missing = 1

Cumulative Percent 7.7 50.0 100.0

Rating of Popular on Product Quality Satisfaction Level 2 3 4

Frequency 1 17 34

Percent

Cumulative Frequency

1.9 1 32.7 18 65.4 52 Frequency Missing = 1

Cumulative Percent 1.9 34.6 100.0

Rating of Popular on Price Satisfaction Level 1 2 3 4

Frequency 4 13 21 11

Percent

Cumulative Frequency

8.2 4 26.5 17 42.9 38 22.4 49 Frequency Missing = 4

Cumulative Percent 8.2 34.7 77.6 100.0

Rating of Popular on Location Satisfaction Level 1 2 3 4

Frequency 3 4 16 28

Percent

Cumulative Frequency

5.9 3 7.8 7 31.4 23 54.9 51 Frequency Missing = 2

Cumulative Percent 5.9 13.7 45.1 100.0

Rating of Popular on Room for Dine-in Satisfaction Level 1 2 3 4

Frequency 1 6 22 20

Percent

Cumulative Frequency

2.0 1 12.2 7 44.9 29 40.8 49 Frequency Missing = 4

Cumulative Percent 2.0 14.3 59.2 100.0

Rating of Popular on Waiting Time Satisfaction Level 2 3 4

Frequency 6 13 32

Percent

Cumulative Frequency

11.8 6 25.5 19 62.7 51 Frequency Missing = 2

Cumulative Percent 11.8 37.3 100.0

Rating of Popular on Clean Atmosphere Satisfaction Level 1 2 3 4

Frequency 2 4 7 37

Percent

Cumulative Frequency

4.0 2 8.0 6 14.0 13 74.0 50 Frequency Missing = 3

Cumulative Percent 4.0 12.0 26.0 100.0

4-Very Satisfied 3-Quite Satisfied 2-Somewhat Satisfied 1--'-Not Satisfied Figure III-4 Revisit intention Frequency Percent 1 2 3 5 Total

Table of Revisit Intention (Q8) by Age (Q18) Age 1 2 3 4 0 1 0 0 0.00 1.96 0.00 0.00 0 0 1 0 0.00 0.00 1.96 0.00 0 1 0 0 0.00 1.96 0.00 0.00 7 21 13 2 13.73 41.18 25.49 3.92 7 23 14 2 13.73 45.10 27.45 3.92

5 0 0.00 0 0.00 0 0.00 5 9.80 5 9.80

Total 1 1.96 1 1.96 1 1.96 48 94.12 51 100.00

Frequency Missing = 2

Table of Revisit Intention (Q8) by Gender (Q21) Revisit Gender Intention Frequency 1 2 Total Percent 1 1 0 1 2.00 0.00 2.00 2 0 1 1 0.00 2.00 2.00 3 0 1 1 0.00 2.00 2.00 5 26 21 47 52.00 42.00 94.00 Total 27 23 50 54.00 46.00 100.00 Frequency Missing = 3

Teaching Notes for Cases CASES FOR PART IV: SPECIAL TOPICS IN DATA ANALYSIS CASE IV-1 SMITH’S CLOTHING (B)

The objective of this case is to have the students plan data analysis showing how the various techniques can be covered. A first step might be to conduct a factor analysis on question sets a, c, e and perhaps d (if theoretical grounds did not exist to combine the questions). A second step would be to get averages of all the variables. A third set could be to do a perceptual map on question set "a." The question set "a" data could be cluster analyzed first so that the perceptual maps could be created on more homogeneous groups. Fourth, cluster analysis could be used on question set "e" to generate segments. Among these possible dependent variables are: 1. Where respondents shopped. 2. Frequency of shopping at a store or type of store. 3. Opinion leadership. 4. Segment membership. Cross-classification as well as the other dependence analysis techniques would be applicable.

CASE IV-2 NEWFOOD (SPSS ®) Introduction

The case describes a controlled variable test market conducted during the test marketing for the Newfood product. Sales and related measures were obtained under various advertising, pricing, and in-store shelf location conditions. The resulting data from the experiment are given. The principal assignment for the student is to discuss the correlation matrix and to run a series of regression analyses concerning how the various marketing variables affect the sales of the new product. Even students who have previously been exposed to regression often have trouble with the case. Their experience in using regression is often in the forecasting context and does not prepare them for looking for causal relations and estimating their economic impact. The use of regression here is essentially as an equivalent of the analysis of covariance model where one is essentially interested in simultaneously adjusting for extraneous factors and estimating the impact of various experimental treatments. If students are weak here, it may be advisable to review some aspects of basic regression before considering the discussion questions in the case. I often progress as follows: 1. Review simple linear regression. Cover the estimating criteria, definition of coefficients, standard error and correlations. 2. Extend the above to multiple regression, introducing R2 and the intercorrelations between the independent variable. Illustrate the two independent variable cases graphically and provide interpretations. 3. Review the coding schemes used in the data set, particularly the use of 0-1 dummy variable for advertising and location. 4. Consider interpretations of the various correlations results. 5. Review (a) the regression results involving only experimental terms. (Runs 1-3 below) (b) the regression results with all terms. (Runs 4-6 below) 6. Consider other possible analyses.

Discussion Questions 1-3 These questions all have to do with interpretation of correlations. The main difficulty students often have here is to see that the interpretation depends on the type of variable being considered and the nature of the procedure that produced the data (here a formal statistical design). One might choose to consider the questions as given in the discussion questions or proceed to review the entire correlation matrix by section as below

Sales Treatments Covariates

Sales

Treatments

Covariates

a c d

b e

Part a — Observations on the dependent variable are strongly related over time. Given that these correlations were obtained from cross-sectional type data (across stores or groups of stores) this result is evidence of the obvious fact that stores which sell a lot of the test product in one period also tend to sell a lot in other periods. Part b — This block of “0” correlates is of course not a sign that “one variable does not affect another” but is an indication that an orthogonal experimental design has been employed. This is the signature of the factoral design and is the feature that will allow accurate measurement of each treatment separately and will allow a test of whether the various factors interact in the production of sales. Part c — Price—here we see that price correlates strongly and negatively with sales in every period. A causal interpretation is possible here given that price was a manipulated variable. It is reasonable to say the price change caused change in product sales. There is a temptation to say at this point that “price has a large effect on sales.” This is of course not a correct statement. To investigate the magnitude of sales change forthcoming from a price change, it will be necessary to look at the regression coefficients. Advertising— the effect here appears to be relative to time. The advertising to sales correlation is positive in the first period, near zero in the second and negative in the third. If interpreted literally, this says that higher advertising will eventually result in sales losses. Some reason for this counter intuitive result can be seen by reviewing part d and e of this correlation matrix and by comparing the regression runs (1 to 3) to (4 to 6).

Location— all correlations here are quite small, suggesting that there is little relationship between in-store locations and sales. Part d — Both income (I) and store size (V) are positively correlated with sales of the test product. The causal interpretation would be that the test product will sell best in large stores and in stores that service highincome neighborhoods. In terms of the analysis of the experimental variables, given that these two factors are affecting sales, including them in the regression analysis should improve the sensitivity of the reading of the experimental variables and may remove biases associated with samples that are mismatched on one or both of these factors. Part e — Here we see (i) only small correlations between location and covariates (I and V), (ii) some relatively small correlations between price and the covariates, and (in) large negative correlations between advertising and the covariates. These correlations with advertising indicate that the cities receiving the high advertising treatment are serviced by small stores (at least in our sample) and the cities receiving the low advertising treatment are served by larger stores. This imbalance in the test coupled with the correlations between the covariates and sales suggest that direct readings of the test results with respect to advertising will be biased. This is one rationale for the inclusion of I and V in this analysis model, that is, to adjust for sample mismatching. Part f — High correlation between I and V indicates that large stores tend to be found in higher-income areas. Discussion Question 4 If you wish to move from the simplest to the most complex interpretation problems, start with the location and save price till last. Location (L) Period 1 2 3

Regression Coefficient 1.8 -5.2 5.1

Standard Error of Regression Coef. 27.4 18.0 19.2

Ave. Sales Value per Period 236 164 174

The model here is S = O +  price (Price) +  Adv (Adv.) +  Loc (Loc). Sales at location coded 1 is: S1 = O + P P + A A +  Loc (1) Sales at location coded 0 is: S0 = O + P p + A A +  Loc (0)

The difference is (S1 = S0) =  Loc. Thus, the interpretation of the regression coefficient for location is the differences in sales obtained by moving from location “0” to “1”. These differences are: (a) small compared to average sales—therefore not economically important. (b)

small compared to their standard errors--therefore not statistically significant.

Advertising (A)

Period

Regression Coefficient

1 2 3

20.5 3.2 -22.1

Standard Error of Regression Coef. 27.4 18.0 19.2

Ave. Sales Value per Period 236 164 174

Because this term is coded 0-1 the interpretation is similar to the above case. That is, the sale difference due to advertising. We see (a) sales differences due to advertising in the first period are positive, in the second period close to zero and in the third period negative. (b) although these differences are statistically significant they are counter intuitive. Further clarification is available from the later runs. Pricing (P)

Period

Regression Coefficient

Standard Error of Regression Coef.

Ave. Sales Value per Period

1 2 3

-15.1 -10.5 -13.0

3.5 2.2 2.3

236 164 174

Because P is coded as a continuous variable we may interpret these regression coefficients as estimates of sales change per unit change in price. Thus we estimate that for a$0.01 increase in price, sales win fall by 15.1 units in the first period, 10.5 units in the second and 13.0 units in the third. (a) Note all coefficients are significant at 1% level.

(b) The ratio of coefficients to average sales value is similar in all periods, indicating the lack of a trend in the price effect. To estimate the sales value that would result from each tested price we calculate forecast value from the regression equation. Using the coefficients for the first period and considering a forecast for the condition A = 0, L = 0, we have, S = 663 - 15.1 P Price 24 29 34

Sales 663 - 362 = 301 663 - 438 = 225 663 - 513 = 150

Discussion Question 5 Reviewing the regression runs which include the income and store size term we see: (a) Only small changes in the estimated size or significance of the location term. (b) Slightly smaller coefficients ant standard error estimates for price. The results have about the same significance level as before. (c) Major shifts in the advertising results.

Period

Original Coefficient

New Coefficients

New Standard Error

1 2 3

20.5 3.2 -22.1

128.1 19.8 41.5

29.3 23.5 23.1

All advertising results have been shifted upward. Now all are positive. They are also statistically significant at the 5% level for 2 out of 3 periods. This major shift in results is due to the “correction” that the income and store size terms make for sample mismatches. At this point in the discussion it would be possible to point out the misreading of the test results that would have resulted by using only the simpler analysis based on runs 1 through 3 or by simply tallying and reporting the raw data. It can also be noted that the only reason it was possible to do this adjustment was that someone had the foresight to collect information on the sample characteristics. This allowed identification and eventual correction of the problem.

Discussion Question 6 Analysis of residuals is one possible method of identifying specification problems such as (a) nonlinearities (b) excluded regressors and, in the present case, (c) interactions. For example, the three largest residuals from Run 4 are: Observation

Size of Residual

Condition

3 8 19

72 68 -71

lowest price, high adv. lowest price, high adv. highest price, high adv.

Plotting these against the model suggest that the two demand curves might not be parallel as is assumed in our additive model; that is, advertising and price may interact. A test of the possibility is to include the cross-product term (P x A) in the regression run. Results of inclusion of this term can be seen in attached runs 10 through 12. Here we see that a negative interaction does exist. An estimate of the impact of this interaction on the demand curve for the first period is as follows. For low advertising (A - 0) and average values for Income (I = 7.0) and Store size (V = 32) the demand equation is: S = [50 - 8.1 (7.0) + 12.1 (32)] - 7.3P 380 For high advertising (A=1) and average values for the covariates S = ([380] + 398) - (7.3 + 9.5)P 778 16.8 That is, the curve under the second condition is more than twice as steep. The reasons why it was possible to identify this interaction are (1) the use of a test design in which interactions are measurable, and (2) asking the question, Does an interaction exist (i.e., using A x P as a term in the regression).

(X)

- Model Values For High Adv (X) For Low Adv 24

Discussion Question 7 Some other issues that can be investigated in this data set are: (a) Normalization—another possible dependent variable of interest is share of market. Unfortunately, the firm in this case was unable to define an established market as its target. An alternative is to consider as the market the total dollar sales of all goods sold in the store (i.e., V) and define as dependent variable (S/V). This is an alternative method for adjusting for the mismatch on store size. The results of these runs are very similar to those from original runs 4 through 6. (b) Functional Form—Is the demand curve linear? To test this, variable 4 could be replaced by two -01 dummy variable terms. If the demand curve is linear the coefficient for the second dummy variable in price should be twice as large as the first coefficient. Log Linearity—is another possible specification of the model. This procedure involves calculating the logarithm of all terms, substitution in these for the original variables in the model, and rerunning the regressions. Students who wish to try this should be warned about the fact that the log of 0 is not defined. This problem will arise because advertising and location are currently defined as 0 - 1 dummy variables. Some respecification will thus be required before using logs. We suggest coding advertising as actual dollars and dropping location which appears to have such a small effect (c) Alternative Treatments of the Advertising Term—The dummy variable treatment of advertising does not account for the observed differences in achieved advertising between markets in the same ad level cell. Also no account is taken of the fact that the average difference between spending in high advertising and low advertising markets was less than planned. To adjust for this, actual advertising inputs could be substituted in the equation for the dummy term. As can be seen in the following chart the impact of substituting actual for planned data is to increase the estimate of the response due to advertising and increase its statistical significance. Using Planned Adv.

Using Actual Adv.

Period

Adv Coef

“t” value

Adv Coef

“t” value

1 2 3

1.28 .20 .41

4.3 .8 1.8

1.83 .50 .86

4.9 1.6 3.1

Note that the above runs are based on the model which does not include an interaction term. Because of the high degree of multicollinearity between (A x P) and main effect terms, our computer program has difficulty with the matrix inversion necessary to calculate the regression estimates. This can be handled by recoding the data in such a way that these inter-correlations are minimized. In the runs that follow (Runs 19* - 21*) we have used: * Var 4: P = P - 29 * Var 5: A = A - 150 * * Var 9: Interaction = P x A To interpret these runs one must recall the coding used. For example, to evaluate demand at low advertising set A = 50, and to evaluate at high advertising set A = +50. (c) Are both store size (V) and income (I) needed in the model as covariates? A review of the original runs (4 to 6) vs. (7 to 9) shows little difference in results. This is due to the high inter-correlation between V and 1.

RUN 1:

Dependent variable = first period sales (r2 = .51)

Variable

Coefficient

Std Error

Constant 4 5 6

662.732 -15.1 20.5 1.83331

100.305 3.36034 27.437 27.437

RUN 2:

Coefficient

Constant 4 5. 6

469.19 - 10.475 3.16669 - 5.16669

Std Error 65.8686 2.20668 18.0175 18.0175

T-value 7.12312 -4.74696 .175756 -.28676

Dependent variable = last period sales (r2 = .62)

Variable

Coefficient

Constant 4 5 6

556.149 -12.975 -22.0834 5.08331

RUN 4:

6.60717 -4.4936 .747165 .066819

Dependent variable = second period sales (r2 = .53)

Variable

RUN 3:

T-value

Std Error 70.0398 2.34642 19.1584 19.1584

T-value 7.94047 -5.52969 -1.15267 .26533

Dependent variable = first period sales (r2 = .81)

Variable

Coefficient

Std Error

Constant 4 5 6 7 8

157.885 -11.8721 128.105 7.97931 -6.10205 12.2916

161.418 2.26675 29.253 17.8588 20.9096 2.62892

T-value .978109 -5.23748 4.37923 .4468 -.29183 4.67554

RUN 5:

Dependent variable = second period sales (r2 = .73)

Variable

Coefficient

Std Error

Constant 4 5 6 7 8

513.072 -9.55385 19.7905 -1.40201 -45.9878 7.52936

129.884 1.82393 23.5383 14.3732 16.8248 2.11535

RUN 6:

3.95022 -5.23806 .840781 -.097565 -2.73333 3.55939

Dependent variable = last period sales (r2 = .81)

Variable

Coefficient

Std Error

Constant 4 5 6 7 8

279.99 -10.9919 41.4766 9.22256 -11.749 8.27838

127.221 1.78653 23.0556 14.0753 16.4798 2.07198

RUN 7:

T-value

T-value 2.20081 -6.15264 1.79898 .655229 -.712934 3.9954

Dependent variable = first period sales (r2 = .81)

Variable

Coefficient

Std Error

Constant 4 5 6 7

125.918 -11.8358 131.285 7.7681 11.8697

116.343 2.21783 26.6028 17.4856 2.15119

T-value 1.0823 -5.33667 4.93502 .444256 5.51772

Residuals for Run 7a Observation

Observed

Predicted

Residual

1 225 245.4 -20.4 2 323 328.5 -5.5 3 424 352.9 71.1 4 268 305.5 -37.5 5 224 253.1 -29.1 6 331 336.2 -5.2 7 254 253.9 .1 8 492 420.0 72.0 9 167 174.3 -7.3 10 226 245.6 -19.6 11 210 270.0 -60.0 12 289 234.4 54.5 13 204 229.6 -25.6 14 288 300.8 -12.8 15 245 277.8 -32.8 16 161 147.2 13.8 17 161 103.3 57.7 18 246 222.0 24.0 19 128 199.0 -71.0 20 154 139.6 14.4 21 163 111.1 51.9 22 151 158.5 -7.5 23 180 206.7 -26.7 24 150 147.4 2.6 ______________ a Residue is the difference between the observed value of the dependent variable and the predicted (Y) view Large residuals are of interest because they indicate that the model did not perform well for that dam point

RUN 8:

Dependent variable = second period sales (x2 = .62)

Variable

Coefficient

Std Error

Constant

272.531

110.757

2.46061

-9.27913 43.7534 -2.99243 4.348512

2.11135 25.3256 16.6462 2.04792

-4.39487 1.72763 -0.179767 2.12338

4 5 6 8

T-value

Residuals for Run 8 Observation

Observed

Predicted

Residual

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

190 210 275 200 199 178 157 351 163 148 134 212 200 171 120 116 141 126 83 122 116 112 100 122

197.6 228.1 232.7 215.3 194.6 225.1 190.6 251.4 146.9 173.0 177.6 164.6 161.3 187.4 174.6 126.8 96.1 139.6 126.9 105.1 93.2 110.5 123.9 102.1

-7.6 -18.1 42.3 -15.3 4.4 -47.1 -33.6 99.6 16.1s -25.0 -43.6 47.4 38.7 -16.4 -54.6 -10.8 44.9 -13.6 -43.9 16.9 22.8 1.5 -23.9 19.9

RUN 9:

Dependent variable = final period sales (r2 = .81)

Variable

Coefficient

Constant 4 5 6 8

218.504 -10.9218 47.5981 8.81616 7.46582

Std Error 92.6937 1.76701 21.1952 13.9313 1.71392

T-value 2.35727 -6.18098 2.2457 .632832 4.356

Residuals for Run 9* Observation

Observed

Predicted

Residual

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

205 241 256 201 209 267 185 365 145 170 128 200 175 247 117 111 111 184 83 102 116 119 75 101

210.2 262.4 242.8 213.0 219.0 271.3 184.5 289.0 148.1 192.9 173.3 150.9 186.8 231.6 182.1 100.0 86.0 160.7 111.2 73.9 94.8 124.7 120.0 82.7

-5.2 -21.5 13.2 -12.0 -10.0 -4.3 .5 76.0 -3.1 -22.9 -45.3 49.1 -11.8 15.4 -65.1 11.0 25.0 23.3 -28.2 28.1 21.1 -5.7 -45.0 18.3

* Residual is the difference between the observed value of the dependent variable and the predicted (Y) value. Large residuals are of interest because they indicate that the model did not perform well for that data point.

RUN 10:Dependent variable = first period sales (r2 = .84) Variable

Coefficient

Std Error

4 5 6 7 8 9 (inter action)

217.36 -8.36249 195.125 9.16126 -12.9368 8.15606 -5.38525

127.629 2.34974 96.7699 13.4662 15.7835 1.98372 3.30253

T-value 1.70307 -3.5539 2.01638 .680314 -.819641 4.1115 -1.63065

RUN 11: Dependent variable = second period sales (r2 = .86) Variable

Coefficient

Std Error

Constant 4 5 6 7 8 9

47.9648 -7.2569 397.785 7.87171 -8.18826 12.0769 -9.45215

149.945 2.7606 113.691 15.8208 18.5433 2.33058 3.87999

RUN 12:

T-value .319882 -2.62874 3.49884 .497553 -.441586 5.18193 -2.43613

Dependent variable = third period sales (r2 = .78)

Variable

Coefficient

Std Error

Constant 4 5 6 7 8 9

435.249 -6.28632 210.725 -1.47821 -47 .4624 7.37734 -6.69226

125.114 2.30344 94.8634 13.2009 15.4725 1.94464 3.23746

T-value 3.47881 -2.7291 2.22135 -.111978 -3.06754 3.79368 -2.06713

.This teaching note was provided by Professor Gerald Eskin