CHAPTER 8 Marketing Research and Sales Forecasting Chapter Objectives 1 Describe the development of the marketing research function and its major activities. Explain the steps in the marketing research process. Distinguish between primary and secondary data and identify the sources of each type. 4 Explain the different sampling techniques used by marketing researchers. Identify the methods by which marketing researchers collect primary data. 6 Explain the challenges of conducting marketing research in global markets. Outline the most important uses of computer technology in marketing research. Identify the major types of forecasting methods. 5 2 7 3 8

THE MARKETING RESEARCH FUNCTION • Marketing research Process of collecting and using information for marketing decision making. • Research is central to understanding effective customer satisfaction and customer relationship programs. DEVELOPMENT OF THE MARKETING RESEARCH FUNCTION • First organized marketing research conducted in 1879 by N.W. Ayer. • Second milestone was founding by Charles C. Parlin in 1911 of the nation’s first commercial research department at Curtis Publishing, publisher of The Saturday Evening Post. • 1930s—better sampling techniques and greater accuracy. • Computer technology has significantly advanced market research.

WHO CONDUCTS MARKETING RESEARCH? • Many firms outsource research needs; major U.S. marketing research firms include ACNielsen and Arbitron. • Syndicated services—regularly provide a standardized set of data to all customers. • Full-service research supplier—conducts complete marketing research projects. • Limited-service research supplier—specializes in a limited number of activities, such as conducting field interviews or performing data processing. CUSTOMER SATISFACTION MEASUREMENT PROGRAMS • Firms often focus on tracking satisfaction levels of current customers and analyze dissatisfaction to identify problem areas. • Organizations may outsource these studies or conduct them themselves.

THE MARKETING RESEARCH PROCESS • Usually follows a six-step process. DEFINE THE PROBLEM • Well-defined problems are half-solved. • Avoid confusing symptoms with problem itself. • Loss of market share is a symptom; reason for the loss is the problem. • Evaluate firm’s marketing mix and possible changes to the marketing environment.

CONDUCT EXPLORATORY RESEARCH • Exploratory research Process of discussing a marketing problem with informed sources both within and outside the firm and examining information from secondary sources. • May use internal data from customer surveys, sales analysis, accounting data, and marketing cost analysis. FORMULATE A HYPOTHESIS • A tentative explanation that sets the stage for more in-depth research. CREATE A RESEARCH DESIGN • A master plan or model that will measure what researchers intend to measure.

INTERPRET AND PRESENT RESEARCH INFORMATION COLLECT DATA • Secondary data Previously published information. • Primary data Information collected specifically for the investigation at hand. INTERPRET AND PRESENT RESEARCH INFORMATION • Present in a format that allows managers to make effective judgments. • Researchers and end users must collaborate to ensure effectiveness of research. • Reports must be clear and concise.

MARKETING RESEARCH METHODS SECONDARY DATA COLLECTION • Secondary data comes from internal and external sources. • Government data—nation’s most important source of marketing data. • U.S. Census. • TIGER system, which overlays topographic features with census data. • Private data from trade associations, business and trade magazines, and other sources. •Online sources such as databases and research aggregators that acquire, catalog, reformat, segment, and resell premium research reports. • Internet discussion groups, chat rooms, and newsgroups.

SAMPLING TECHNIQUES • Sampling Process of selecting survey respondents or research participants. • Probability sample Sample that gives every member of the population a chance of being selected. • Simple random sample, stratified sample, or cluster sample. • Nonprobability sample Sample that involves personal judgment somewhere in the process.

PRIMARY RESEARCH METHODS • Choice of method depends on the issues under study and the decisions marketers need to make. • Observation method—researchers view the overt actions of subjects being studied. • Interpretive research Observational research method developed by social anthropologists in which customers are observed in their natural setting and their behavior is interpreted based on an understanding of social and cultural characteristics; also known as ethnography, or “going native.”

SURVEY METHOD • Telephone interviews—inexpensive way of getting a small quantity of relatively impersonal information. • Personal interviews—allow researchers to obtain detailed information and ask follow-up questions. • Focus group Simultaneous personal interview of a small group of individuals, which relies on group discussion about a certain topic. • Mail surveys—cost-effective means that allows respondents anonymity. • Fax surveys—difficult to get good household sample, and federal junk fax law limits its use commercially. • Online surveys and other Internet-based methods—allow researchers to speed the survey process, increase sample sizes, ignore geographic boundaries, and dramatically reduce costs. • Experimental method—controlled experiment, for example; least used method.

CONDUCTING INTERNATIONAL MARKETING RESEARCH • Follow same basic steps as for domestic marketing research. • U.S. Department of Commerce offers reports and guides about almost every country in the world. • Export America and Overseas Business Reports. • Researchers must be aware of cultural and legal environments. • May have to adapt research methods to local conditions. • Example: Focus groups may be difficult to organize in countries where violence and kidnapping are common.

INTERPRETIVE RESEARCH • Provides insight into consumer behavior and the ways consumers interact with brands. • Researcher spends time studying the culture, called ethnographic research. • Focus is on understanding the meaning of the product or consumption in the consumer’s life. • Cost is higher than other forms of research. • Captures what consumers actually do, not just what they say they do.

COMPUTER TECHNOLOGY IN MARKETING RESEARCH MARKETING INFORMATION SYSTEMS (MIS) • A planned, computer-based system designed to provide decision makers with a continuous flow of information relevant to their areas of responsibility. • Continually monitors marketing environment and provides instantaneous information. MARKETING DECISION SUPPORT SYSTEMS (MDSSs) • Marketing decision support system (MDSS) Marketing information system component that links a decision maker with relevant databases and analysis tools. • Develops raw data into information useful for decision making.

BUSINESS INTELLIGENCE DATA MINING • The process of searching through computerized data files to detect patterns. • Focuses on identifying relationships that are not obvious to marketers. • Efficient way to sort through huge amounts of data and make sense of it. • Example: NACCO Industries uses data mining to scan warranty claims for common problems. BUSINESS INTELLIGENCE • Process of gathering information and analyzing it to improve business strategy, tactics, and daily operations. COMPETITIVE INTELLIGENCE • A form of business intelligence that focuses on finding information about competitors using published sources, interviews, observations by salespeople and suppliers in the industry, and other sources.

SALES FORECASTING QUALITATIVE FORECASTING TECHNIQUES • Sales forecast Estimate of a firm’s revenue for a specified time period. QUALITATIVE FORECASTING TECHNIQUES • Jury of executive opinion—combining and averaging the outlooks of top executives. • Delphi technique—soliciting opinions from several people and gathering input from outside experts. • Sales force composite—forecasting based on internal insights concerning short-term future sales. • Survey of buyer intentions—gathering input to determine the purchasing intentions of a representative group of present and potential customers.

QUANTITATIVE FORECASTING TECHNIQUES • Test markets—gauging consumer responses to a new product under actual marketplace conditions. • Trend analysis—developing forecasts for future sales by analyzing the historical relationship between sales and time. • Exponential smoothing—weighing each year’s sales data, giving greater weight to results from the most recent years.