The Management Problem the Marketing Research Problem versus the Marketing Research Problem

Recap What is Marketing Research? Why do Organizations Need Market Research? What sort of information is needed – generally? Why and When does Marketing Research Work? What is the Marketing Research Process

The Marketing Research Process Step 1: Identify and define the Management Problem Step 2: Define the Marketing Research Problem Step 3: Establish Research Objectives Step 4: Specify the Research Design Step 5: Develop the Data Collection Procedure Step 5: Design the Sampling Procedure Step 6: Collect the Data Step 7: Process and Analyze the Data Step 8: Present the Results Step 9: Follow-up

The Management Problem the Marketing Research Problem versus the Marketing Research Problem A distinction must be made between the management problem or opportunity and the marketing research problem. Management Problem Marketing Research Problems Focus on symptoms Action oriented Focus on causes Data oriented

Step 1: Identify the Management Problem or Opportunity What Question Does the Management decision Problem ask? What should the decision maker do? Situation arises, management needs to make a decision. Simply a statement of the issue that management is dealing with that requires research, starts the research process Moti Italian restaurant sales are low (the symptom) and if they remain at current levels the restaurant will soon go out of business. What broadly is the management decision problem? What should the restaurant do to improve sales? Is this enough? Must discover the problem

What do we need to know to identify or define the problem What do we need to know to identify or define the problem? – The problem audit distinguish between the symptom and the problem History of the problem – what is the business issue prompting the research Ask: What caused this to occur. – Why are sales low? What will the information be used for – what decisions made? Environment in which it is being made (eg legal, competitive, economic, financial, social) – situation analysis What alternative courses of action are there? What criteria should we use to decide between alternatives (e.g. sales targets, market share, profitability, ROI) Constraints, e.g.. timing, monetary Who are the decision makers and what are their purposes? why is the information is being sought

Why is it important to clearly define the management decision problem? The problem definition process provides guidelines on how to correctly define the marketing research problem Because problem definition sets the course of the entire project Because the client is paying for the research so both need to know what to expect Because mistakes made at this level grow into larger, more expensive mistakes later on. All the effort, time and money spent from this point on will be wasted if the problem is not properly defined.

Step 2: Define the Marketing Research Problem A statement of the information needed by a decision maker to help solve a management decision problem. Marketing research problem has to be narrowly defined What’s wrong with these statements? Develop a marketing strategy for the brand. Improve the competitive position of the firm Improve the company’s image What’s wrong with this statement? How should the company adjust its pricing given that a major competitor has initiated price changes?

Tips for Accurately Defining Research Problems Find out why the information is being sought. Determine whether the information already exists. Determine whether the question really can/should be answered. Use exploratory research to define background of the problem Situation analysis The iceberg principle Determine relevant variables

Management Decision Problem: What should Moti restaurant do to improve sales? Marketing Research Problem: Why are Sales low? What factors influence people to spend money in restaurants and to what extent does Moti meet their needs? What information is needed to answer this question?

What can we say about restaurant patrons that makes them go out to dinner to an Italian restaurant and spend money? I.e. what’s our theory? People who go out to restaurants like a wide menu selection at a convenient location and demand good tasting food, good service, at a reasonable price.

A Local health food store is interested in opening a branch near the SAIT campus. What is your management problem? What is the Research Problem? What information would be needed What Secondary sources of information are available to help you decide whether to open such a store Summarize the data that would bear on their decision on whether or not to open such a store.

Step 3 Definition of Research Objectives Marketing Research Objectives: the specific bits of knowledge that need to be gathered to close the information gaps highlighted in the research problem. Stated in action terms Serve as a standard to evaluate the quality and value of the research Objectives should be specific and unambiguous Examples: To measure the number of marketing majors at the Calgary campus To assess viewer recall of our ad campaign To describe the segments of the marketplace To determine the impact on sales and profits at various price levels To determine the needs of product users and the extent to which the needs are being met by the market.

Research Objectives and Hypotheses What needs do restaurant goers seek to satisfy. Hypotheses? How well does Moti Italian restaurant meet these needs? Hypotheses? What are the psychographic and demographic characteristics of the restaurant goers? Hypotheses? Does Moti Italian restaurant cater to this segment? Hypotheses? make a list of the information that should be collected for each research question and hypothesis

Putting It All Together Management Problem The U of L Placement office has noticed, while major companies make annual recruiting visits to campus for engineers, few local companies formally recruit business management majors through the placement office What should the Placement office do get local companies to hire business management majors ? Marketing Research Problem Why are companies not taking advantage of the resources that the placement service offers? Hypotheses Companies are going around the service Companies are unaware of the U of L placement service? Companies are unaware of the reputation of the U of L FOM Companies use other recruitment methods

Marketing Research Objectives To determine to what extent companies are aware of the U of L placement service Determine whether companies, especially locals, are aware of the strong reputation of the U of L FOM Business School

Another Example Management Problem What price should we charge for our new product? Research Problem What are our costs of production and marketing (COGS)? What are our pricing objectives and position in the market? What price does similar types of products sell for? What is the perceived value of our product in the marketplace? Are there any norms or conventional practices in the marketplace (e.g., customary prices, continual discounting) Research Objectives To assess the costs involved in producing and selling our product To determine corporate objectives and their implications for pricing To examine current prices for direct and indirect competition To determine potential customer reaction to various prices and their perception of the benefits of owning the product

Practice, Practice For the following management problems, identify the underlying research problems and a couple of research objectives. “Should our retail chain offer online shopping?” “What advertising media should we use to reach our market?” “How do we get more people to attend our outdoor festival/event?” “Should we buy a new cube van to deal with our increased demand?” “How can we increase customer retention?” “Should the amount of in-store promotion for an existing product line be increased?”

Marketing Decision Problem Marketing Research Problem   Should a new product be To determine consumer preferences introduced? and purchase intentions for the proposed new product. Should the advertising To determine the effectiveness campaign be changed? of the current advertising campaign among the target audience. Should the price of the To determine the price elasticity brand be increased? of demand and the impact on sales and profits of various levels of price changes.

In 2002, Westjet added service to two new Ontario destinations, London and Toronto. As Westjet expanded into Eastern Canada it began to run into competition from Montreal-based discount carrier Jetsgo, which started in 2002 (and ended March 2005).

In 2003 Jetsgo expanded into Western Canada to compete directly on flights between Calgary and Toronto and Montreal. In the first six months of 2004, Westjet’s net earnings were $8.0 million compared to $15.5 million during the first six months of 2003. Both Jetsgo and Westjet modeled themselves on the highly successful US Carrier Southwest Airlines. Both airlines offered the same schedules, the same service, and the same fares. With little to differentiate the two airlines Westjet began to look at a way to increase passenger loyalty especially on the longer haul domestic flights.

Management decision problem How to attract more loyal customers Marketing Research Problem Identify the factors that influence loyalty of airline passengers Marketing Research Objective How to differentiate Westjet from the competition. Exploratory research revealed that the consumer’s choice of an airline is influenced by safety, ticket price, frequent flyer program, convenience of scheduling and brand name. A theoretical model stipulated that consumers evaluate competing airlines based on factors of the choice criteria to select a preferred airline. Since both airlines offer the same schedules, same service, and fares Westjet had to find a way to differentiate itself.

Food turns out to be the solution. Secondary data, like the J. D. Power and Associates survey on “current and future trends in the airline food industry” indicated that “food service is a major contributor to customer loyalty”. This survey also emphasized the importance of food brands. Westjet then conducted a survey to evaluate the importance of food service to its customers

The following research questions and hypothesis may be posed RQ1 How important is food for the airline customers? H1 Food is an important factor for airline travelers H2 Travelers value branded food H3 Travelers prefer larger food portions, but with consistent quality H4. Travelers prefer exotic food.   Characteristics which influence the research design will include the identification of competing airlines, factors of the choice criteria (already identified) measurement of airline travel loyalty.

This kind of research helped Westjet to define their marketing research problem and approach. Focus groups and surveys were conducted to check customers perceptions of food in Westjet aircraft. The results provided support for all the hypotheses. Westjet Airlines then made a few changes: new “culinary menus” larger portions of food, new coffee and branded products, eg. Bernard Callebaut chocolates.. This has resulted in better service increasing customer satisfaction fostering loyalty. The survey conducted by Westjet told them that “customers wanted more varied and up-to-date food”

Defining the marketing/management problem                                     

Problem Formulation and Approach Understand and define the managerial decision problem/opportunity Translate into research objective(s) (what information is needed) Pose the right research questions State questions in terms of hypotheses

The management decision problem asks what the DM needs to do The marketing research problem asks what information is needed and how it can be obtained effectively and efficiently. The marketing research objective is a restatement, in general terms, of what management needs to know to make a decision