Mba – marketing management

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MBA – MARKETING MANAGEMENT

Introduction MKIS Researching the market Scope of marketing research The marketing research process

- Research brief - Research plan

- Data sources- Qualitative and Quantitative techniques- Sampling- Research instruments

Implementing the plan Interpreting and reporting the findings Other aspects of research

- Defining the market- Estimating actual sales and market share- Forecasting future demand

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MARKETING RESEARCHIntroduction

To carry out marketing analysis, planning, implementation and control,

managers need information. One marketing executive put it this way.

‘To manage a business well is to manage it’s future and to manage the future is

to manage information’.

Increasingly, marketers are viewing information, not just an input for making

better decisions, but also as a marketing asset that gives competitive

advantage of strategic importance.

During the 20th century most companies have been small and have known

their customers first hand. Managers picked up on information by being around

their customers, observing them and asking questions. But through the 20th

century and into the 21st century companies have become national and

international in scope, and so need more information on larger, more distant

markets in order to make timely decisions.

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In addition, as incomes increase and buyers become more selective, sellers

need better information about how their buyers respond to different products

and appeals. As sellers use more complex marketing approaches and face

more competition, they need information on the effectiveness of their marketing

tools.

The supply of information has also increased greatly. According to J Nesbitt, the

world is undergoing a ‘mega-shift’ from an industrial to an information based

economy. His studies concluded that more than 65% of the US workforce now work

at producing or processing information compared to only 17% in the 1950s. In some

way, the proliferation of computer databases means that today, running down

information is not a problem, but drowning in it is. Frequently we hear that

marketers have too much information of the wrong kind and not enough of the right

kind.

One way of ensuring the right information is available at the right time is for

firms to develop their MKIS system.

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MKIS SYSTEM

Marketing research should be seen simply as just one part of an ongoing

integrated information process or system.

The marketing information system (MKIS) requires the firm to develop and

utilise a system for scanning the macro and micro environments in a

continuous manner and for storing the data such that it can be retrieved and

reviewed in the future.

The way the system operates is demonstrated on the following slide

.

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A Basic Marketing Information System

Macro environment

Opportunities and Threats

Micro environment

Strengths and Weaknesses

Company Objectives and

Strategies

Marketing Plans

Marketing intelligence network/system

•Marketing Research

•Internal records

•Sales/marketing reports

•Continuous monitoring

•Decision information

•Forecast information

•Data storage and retrieval

Implementation of marketing plans

Key:

Implementation -

Feedback -

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RESEARCHING THE MARKETS The marketing process

The first stage in the marketing process is to understand customers, the markets in

which they buy as well as the marketing environment in which all of this activity takes

place as show below: To understand each of these 3 areas, an organisation requires

information which directs activities, helps satisfy customer needs

and at the same time, reduces the risks involved in decision making. The overall success

of the marketing process will therefore be dependent upon the quality of information

gathered and then on how this information is used.

CUSTOMERS

MARKETING ENVIRONMENT

MARKETS

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Purpose and Definition of Marketing Research

The purpose of marketing research is to provide answers to questions. The American Marketing Association (AMA) uses a simple working definition.

‘Marketing research is the systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services.’

Systematic – using an organised and clear method or system.

Gathering – knowing what you are looking for and collecting appropriate information.

Recording – keeping clear and organised records of what you found out.

Analysing – ordering and making sense of you information in order to draw out relevant trends and conclusions.

Problems relating to marketing – finding out the answers to questions which will help you to better understand your customers and other details about the marketplace.

But it is really about DICE.

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Key Marketing Research Activities

INVESTIGATION EXPERIMENTATION

DECISIONS

CONTROL

DECISIONS

INVESTIGATION

EXPERIMENTATION

CONTROL

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SCOPE OF MARKETING RESEARCH

Marketing research includes a number of

activities covering the range of problems and

decisions with which marketers have to deal as shown on the next slide.

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Sales by rep/product Effectiveness of selling techniques

Elasticity factors Price bands Marginal costing

Product design Benefits offered Packaging Test marketing

Media effectiveness Type of copy

Channel members Location studios Logistics

Sales Research Pricing Research Product Research Promotion Research

Distribution Research

£

Marketing environment research

P.E.S.T

Competitor research

No. of size strengths and weaknesses

Scope of marketing research

Customer profile Needs and wants Buyer behaviour

Market segment Size and trends Brand shares Demand factors

Customer research Market research

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MARKETING RESEARCH PROCESS

Marketing research is NOT a ‘one-off’ activity which takes place as part of a

new product development. It should be ongoing so marketers should constantly

be collecting and analysing information and feeding it through for planning and

decision making purposes.

There are 5 distinctive stages in the setting up of a marketing research

programme.

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Define the problem and determine the research objectives.

Decide on information needed, data sources, contact methods and sampling plans.

Who, where, when and what time frame the data is to be collected.

Data storage and retrieval using a marketing information system.

Presentation to key management decision makers together with conclusions and recommendations

Research brief

Research plan

Information needs

Data sources Methodology

Sampling

Collection of data

Analysis and evaluation

Interpreting and presenting the findings

1.

2.

3.

4.

5.

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RESEARCH BRIEFThe key to good research

The first stage of the research process is always the hardest, but it is also the key to

providing a sound and effective research project. Defining the research problem is at the

heart of determining the research objectives – or in other words, exactly what information

is required in order in make effective decisions to address the problem

Marketing research objectives may, for example, include;

To identify new markets To monitor changes in customer needs or preferences To identify new product opportunities To improve the quality of information available for strategic decision making To improve the organisations understanding of changes in the marketplace,

particularly of competitors strategies To identify opportunities and threats To monitor the effects of political, economic, social and technological trends (PEST)

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RESEARCH PLANThe first stage here is determining the information required and developing a plan for

gathering it efficiently. The plan should outline sources of existing data, explain the

specific research methods and sample plans and instruments that researchers will use to

gather new data.

Information needs

Research objectives need to be translated into specific information needs. For example;

Bolswessanen, a Dutch food and drinks company, decides to conduct research and find

out how consumers will react to a new breakfast cereal aimed at the adult market. The

European breakfast cereal market has been growing fast as health conscious people

abandon croissants in France, rolls in Belgium and espresso in Italy.

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The specific information they seek could be as follows;

• The demographic, economic and lifestyle characteristics of current breakfast cereal users (how do social and demographic trends affect the breakfast cereal markets?)

• Consumer usage patterns, for cereals, how much do they eat, where and when? (will all the family eat the cereal or does each family member have their favourite).

• Retailer reactions to the new product (failure to get retailer support could seriously hurt sales).

• Consumer attitudes towards the new product ( will consumers switch from own brands and is the product strong enough to compete with the market leaders, Kelloggs)

• Forecasts of sales of the new product ( will the new packaging increase Bolswessanen’s profits?)

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DATA SOURCESThere are two broad areas from which researchers can often obtain data as shown below.

Market Research

Secondary data sources Primary data sources

Secondary data is information that already exists somewhere, having been collected for another purpose.

Primary data consists of information collected for the specific purpose at hand.

Researchers usually start by gathering secondary data (see sources over). For example, a visit to the library may provide all the information that Bolswessanen needs on cereal usage, at almost no cost, whereas a study to collect primary information may take weeks or months and cost a lot. Also, secondary data can sometimes provide data which an individual company cannot collect on its own because it is not directly available or it is too expensive to collect.

However, it is most unlikely that secondary information exists on customers reactions to Balwassannen’s new cereal. Plus what secondary data is available must be evaluated to ensure it is relevant, accurate, up to date and impartial in respect of the research project at hand.

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SECONDARY DATA SOURCES

Reports of individual firms

Professional bodies, trade associations

Trade publications

Reports/research papers from

institutes/universities etc

Other sources

Secondary data

Internal External

*Sales reports

*Distribution costs and prices/inventory records

*Production schedules /quality reports

*Finance/revenues/ profits

*Advertising expenditures etc

Commercial

Nielsen, BRMB etc

Indexes Guides Directories etc

Industry sources

Government sources

Government information

Census Reports

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PRIMARY DATA COLLECTION TECHNIQUES

Good decisions require good data. Just as researchers must carefully evaluate

the quality of secondary information, they must also take great care in

collecting primary data to ensure they provide the decision makers with

relevant, accurate, current and unbiased information

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There are 2 main research techniques which can be used dependant on the type of

information that is sought.

Depth Interview

Focus Groups

Projective Techniques

Observation

Survey

Experiment

Diaries

Product Tests

Qualitative Quantitative

Primary Research Techniques

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QUALITATIVE TECHNIQUESThese techniques are used primarily in exploratory research where there is a requirement

to understand, explore, diagnose, generate ideas, test hypotheses, or simply gain insight

into a market situation. The approaches use in-depth techniques to examine attitudes,

feelings and motivations of product users. The research itself is characterised by small

unrepresentative samples and as such often precedes quantitative research in providing

a basis for questionnaire development. The main techniques used are described below:

Depth Interviews – this represents a relatively unstructured one to one interview

possibly with Bolswessanen’s retail customers. The interviewer needs to be fully trained

in the skill of probing and eliciting detailed answers to each question (eg psychologists

are often used).

Focus Groups – a focus group consists normally of 8-12 persons led by a moderator in

an in-depth discussion on a particular topic. The aim of the session is to learn and

understand what people have to say about a topic and understand their reasoning. Used

primarily in consumer research it brings together a knowledgeable group of people to

discuss a topic of interest. It would also prove a useful tool for Bolswessanen in

assessing retailer reactions to its new breakfast cereal, but, getting the retailers together

as with most business people often proves too difficult. It could however prove useful in

researching consumer motivations for cereal choice, usage and their attitudes or feelings

towards the new cereal.

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Projective Techniques – sometimes used in depth interviews in order to discover hidden feelings which respondents are reluctant to or cannot reveal, often because of psychological defence mechanisms.

There are a number of projection techniques used such as:

Word association – used to help select brand names, advertising themes and slogans (eg what word comes into your mind when I say Kelloggs).

Sentence/story completion – scenarios are presented and the participant is asked to complete the sentence or story, reflecting their hidden beliefs and motivations. (I ate a large bowl of cereal yesterday, it made me feel…….?)

Cartoon Picture Tests – cartoon figures are shown in a particular situation and the balloons from their mouths are left open for the participant to complete. This technique measures strength of attitude towards a particular product or brand.

Third person – rather than ask someone directly what they think, a third party is used (eg why don’t many housewives provide their family with nutritionally balanced breakfasts?)

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QUANTITATIVE TECHNIQUESQuantitative TechniquesQuantitative research provides statistics from a large sample of consumers. The table below shows that designing a plan for primary data collection calls for a number of decisions on research techniques, methods, sampling plan and research instruments.

Observation – this technique gathers primary data by watching relevant people, actions and situations. For example, Bolswessanen could send researchers into supermarkets to find out about cereal brands stocked, prices charged, shelf space and display. A bank evaluates possible new branch locations by checking traffic patterns, location of competing branches. A department store checks numbers of customers entering and leaving its store, the number of shopping bags each has and the route they take as they walk around the store. A mystery shopper observes how the assistants serve their customers. The research instruments used here can include reporting sheets, mechanical or electronic observation devices and people meters on television sets.

Research techniques

Methods Sampling plan Research Instruments

Observation Mail Sampling unit Questionnaire

Survey Telephone Sample size Mechanical/

Experiment Personal Procedure Electronic

Internet/Text

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Experimental – this technique gathers casual data. Experiments involve selecting

matched groups of participants, giving them different products (i.e. cereals) controlling

unrelated factors and checking for differences in group responses. Such experiments

may be carried out in a laboratory, in a person’s home (i.e. product placements) or in a

test area (i.e. a retail shop). Before launching its new cereal Bolwessenan may choose to

carry out laboratory consumer tasting sessions with cereal eating consumers to ascertain

their preferences.

• Survey – survey techniques can include several contact methods, including;

telephone, mail, internet and face to face. The approach is best suited for gathering

descriptive information and could serve Bolwessanen in understanding consumers’

knowledge, preferences and buyer behaviour towards different cereals by simply asking

them. Dependant on the survey design it may be possible to collect the data more quickly

and at a lower cost than observational or experimental research. However, such a

technique has its problems. Pepople cannot always answer your questions because they

can’t remember or never thought about it. Or, they may be unwilling to respond to

someone they don’t know or just haven’t got the time.

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STRENGTHS AND WEAKNESSES OF THE CONTACT METHODSBelow is a sumary of the strengths and weaknesses of the four contact methods that can

be applied to surveys.

Mail Telephone Personal Internet

Flexibility Poor Good Excellent Fair

Quantity of data collected Good Fair Excellent Good

Control of interviewer bias Excellent Fair Poor Excellent

Control of Sample Fair Excellent Fair Fair

Speed of data collection Poor Excellent Good Excellent

Response rate Poor Good Good Excellent

Cost Good Fair Fair Excellent

Sample frame Good Excellent Fair Poor

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• Sampling Plan – marketing researchers draw conclusions about large groups of

consumers by studying a small sample of the consumer population. A sample is a

segment of the population selected to represent the population as a whole. Ideally the

sample should be representative so that the researcher can make accurate estimates of

the thoughts and behaviours of the larger population.

Choosing a sample calls for 3 decisions

Sample

Sampling unit Who to be sampled?

Sample size How many to sample?

Sampling procedure How the sample is to

be selected?

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RESEARCH INSTRUMENTSTwo main research instruments are used in quantitative studies:

Research Instruments

Questionnaire Mechanical/Electronic devices

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Questionnaire – this is by far the most common instrument. A questionnaire consists of

a set of questions presented to the respondent for his or her answers. In preparing a

questionnaire, marketing researchers must decide what questions to ask, the form of

questions, the wording of questions and the ordering of questions. Each question must

be checked to see that it contributes to answering the research objectives and the

information needs identified. Only questions that address the objectives should be

asked.

There are two general types of question – closed and open questions. Closed questions

include all possible answers and allow respondents to make choices by ticking a box and

are good for filtering out respondents and for control. Open-ended questions allow

respondents to answer in their own words and are useful in exploratory research in trying

to find out what people think. Questions generally should use simple, direct and

unbiased words. All questions should be pre-tested before use.

NB: leave difficult or personal questions until last so that respondents does not become

defensive.

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ActivityReview the questions below that a holiday director has prepared for use in interviewing the parents of prospective campers. How would you assess each questions?

1. What is your income to the nearest £100?2. Are you a strong or weak supporter of overnight camping for your children?3. Do your children behave themselves well on adventure holidays?4. How many adventure holiday operators mailed literature to you last April? This

April?5. What are the most ‘salient’ and ‘determinant’ attributes in your evaluation of

adventure holidays?6. Do you think it is right to derive your child of the opportunity to grow into a mature

person though the experience of adventure holidays?

Mechanical devices – two common mechanical instruments include people meters and supermarket scanners. Others include; galvanometer ( i.e. lie detector) which can be used to measure the strength of interest or emotion aroused by the subjects exposure to different stimuli (eg ad or picture). Tachistoscope flashes an ad to a subject at an exposure of less than one hundredth of a second to several seconds. After each exposure the respondent describes everything they recall.

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Implementing the research plan

This stage of the marketing research process involves collecting, processing and

analysing the data. This can be done by the company’s own staff or by a research

agency.

The data collection phase is generally the most expensive and the most subject to error.

The researcher should watch fieldwork closely to make sure the research plan is

implemented correctly and to guard against only collecting data from certain types of

respondents, those who give biased or dishonest answers and with interviewers who

make mistakes or take short cuts.

Interpreting and reporting the findings

The researcher must now interpret the findings, draw conclusions and report to

management.

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OTHER ASPECTS OF RESEARCHDefining the market

When a company finds an attractive market, it must estimate that market’s current size

and future potential. Over or underestimating the market can seriously affect our

decisions and future profits

To the marketer, a market is a set of actual or potential buyers of a product or service.

and the industry is the set of sellers. The size of a market hinges on the number of

buyers who might exist for a particular market offer. Potential buyers generally display

3 common characteristics,

1. interest in a product

2. income sufficient to buy the product

3. access means by which to acquire the product

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Using hypothetical figures, the diagram below brings all 3 characteristics together in attempting to define a market.

Total Population

100%

Potential Market

A. Total Market

Potential Market

100%

Available Market

Qualified Available market

Served market

Penetrated Market

40%

20%

10%

5%

B. Potential Market

10%

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The bar on the left shows the ratio of the potential market, i.e. all interested persons

taken from the total population. The figure could be obtained by contacting a random

sample of consumers and a question such as;

‘ Do you have an interest in buying, owning or using a particular product or service?’

If 1 person in 10 says yes, you can assume that 10% of the total number of consumers

would constitute the potential market.

The bar on the right shows several possible breakdowns of the potential market. Firstly

the available market – those whose interest, income and access is 40% of the potential

market. The point of this review of potential market is required because consumer

interest alone is not enough to define a market. Potential buyers must have enough

income to afford the product and have the ability to access it. To ascertain the available

market we would need to ask the same random sample,

‘Would you pay £xx for such a product or service?’

Those who answer ‘yes’ to both questions will determine the market size based on

interest and income. However, if the product or service is restricted to a certain location

or region (ie say 50% of the region) then this will half the market size. The available

market is therefore estimated as the set of consumers who have interest, income and

access to a particular product.

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Companies may restrict sales to certain groups. For example, the law will prevent sales

of alcohol to persons under 18. The remaining adults make up the qualified available market. Now the company has a choice of going after the whole qualified available

market or concentrating on selected segments. The selected segments , possibly based

on demographics, will determine the company’s served market(s).

Now by assessing the number of customers the company already serves in this final

customer sector will enable the marketer to determine the company’s penetrated market.

(which in this case is 5% of the potential market).

These market definitions are a useful tool for marketing planning. If a company is unsatisfied

with current sales, it can take a number of actions.

Marketing planning actions

a) Expand into other available markets

b) Lower its price to expand the size of the potential market

c) Attempt to penetrate the served market by attracting a greater proportion of buyers through

stronger promotion and distribution efforts.

d) Expand the potential market by increasing its advertising to convert non-interested consumers into interested consumers.

(eg concern over heart disease amongst middle-aged people who have avoided exercise for

years may be persuaded via a communication campaign to encourage them to buy exercise

products/ or attend fitness centres.)

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Estimating Actual Sales and Market Shares

Besides estimating demand for the segments served, a company will want to know the

actual industry sales in its market. Then it must identify its competitors and estimate

their sales.

The industry’s trade association will often collect and publish total industry sales,

although not listing individual company sales separately. This way a company can

evaluate its performance against the industry as a whole in terms of market share and

market trend performance.

Another way to estimate sales is to buy reports from marketing research firms that audit

total sales and brand sales (eg Neilson, AGB and others use scanner data to audit retail

sales of various product categories in supermarkets and pharmacies and sell the

information to interested companies.

Forecasting future demand

Forecasting is the art of estimating future demand by anticipating what buyers are likely

to do under a given set of conditions. Very few products and services lend themselves to

easy forecasting. Getting it wrong , however, can lead to excessively large unwanted

stock, costly price mark-downs or lost sales due to being out of stock.

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3 Stage Approach to Sales Forecasting

1. Environment Forecast - Review of inflation, unemployment, interest rates, consumer spending and saving,

government investment/expenditure, exports and other events.

2. Industry Sales - Above events are used to forecast industry sales

3. Market Share - The company prepares its sales forecast assuming a certain share of industry sales

Techniques for forecasting

Survey of Buyer’s Intentions - This requires asking them directly. Several research organisations will conduct periodic

surveys of consumers buying intentions Composite of Sales Force - Sales force provide estimates of sales

Opinions by product/region which are often used to help set sales quotas. A good conservative approach is that

the salesperson will never wish to overstate the market potential in his/her area and will take account of

competitor actions.

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Expert Opinion - Experts include dealers, wholesalers, distributors, suppliers, marketing consultants and trade associates

Test Market - Where there is no past experience to go on (eg launch of new product) as company may conduct a direct

test market Time series analysis - Forecasts are often based on past sales data. The

assumption is that statistical analysis can uncover the causes of past sales which can then be used to predict future sales. The method consists of breaking down the original sales into 4 components – trend, cycle, season and erratic events.

Trend – long term underlying pattern of growth or decline in sales relating to changes in population, technology, social changes etcCycle – captures the medium term, wavelike movements of sales resulting from changes in general economic and competitive activity.Seasonality – refers to a consistent pattern of sales movements with the year and often is used to predict short term forecasts.Erratic – erratic events include fads, strikes, snow storms, earthquakes, riots, fire etc.