Chapter 4 Managing Marketing Information Professor Marshall Queens College

Coca Cola’s Marketing Blunder

In 1985, marketers thought they were listening to their target market. They noticed that they were losing market share to Pepsi and they conducted taste tests to develop their new formula.

On April 23, 1985, Coca-Cola stopped producing old Coke and created a new Coke with a sweeter taste. Angry customers panicked, filling their basements with old Coke and threatening lawsuits.

3 months later, Coca-Cola brought back the old formula calling it Coca-Cola Clasic.

Luckily, Coca-Cola had quick reaction time.

The Importance of Marketing Information Companies need information about their:

– Customer needs – Marketing environment – Competition

Marketing managers do not need more information, they need better information.

Marketing Information System

An MIS consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers.

The MIS helps managers to: 1. Assess Information Needs 2. Develop Needed Information 3. Distribute Information

Assessing Information Needs

A good MIS balances the information users would

like

against what they really

need

and what is

feasible

to offer.

Sometimes the company cannot provide the needed information because it is not available or due to MIS limitations.

Have to decide whether the benefits of more information are worth the costs.

Developing Marketing Information

–

Internal Databases

company.

: Electronic collections of information obtained from data sources within the Information in a database can come from many sources. Operations tracks shipments and inventory, sales tracks competitor activities, marketing has customer demographics and buying behavior, customer service contains information on customer satisfaction.

–

Marketing Intelligence

marketing environment.

: Systematic collection and analysis of publicly available information about competitors and developments in the Used to improve strategic decision making –

Marketing Research

organization.

: Systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an Used to help understand customer purchase behavior

Customer Relationship Management

– – – Many companies utilize CRM Capture customer information from all sources Analyze it in depth Apply the results to build stronger relationships.

Companies look for customer

touch points (every contact between company and customer)

.

CRM analysts develop

data warehouses (centralized database)

and use

data mining

(algorithms designed to detect patterns in the data) techniques to find information out about customers.

Marketing Research Process

Defining the problem & research objectives Developing the research plan for collecting information Implementing the research plan – collecting & analyzing the data Interpreting & reporting the findings Problem: Losing market share to Pepsi. We must research the

taste preferences

of consumers.

We should collect taste preference information through blind taste tests.

Conduct blind taste tests in various settings aimed at various consumers Data finds that consumers prefer the sweeter taste of Pepsi. Based on the findings, Coca-Cola decides to produce a sweeter New Coke, and remove the old Coke from its product line.

Defining Problem & Objectives

– Exploratory Research: Gather preliminary information that will help define the problem and suggest hypotheses.

– Descriptive Research: Describes things (e.g., market potential for a product, demographics, and attitudes).

– Causal Research: Tests hypotheses about cause-and-effect relationships. Example: Would a 10% decrease in tuition at a private college increase enrollment enough to offset the decrease in tuition?

Developing the Research Plan

– – – Includes: Determining the exact information needed Developing a plan for gathering it efficiently Presenting the written plan to management – – – – – Outlines: Sources of existing data Specific research approaches Contact methods Sampling plans Instruments for data collection

Developing the Research Plan: Campbell Soup

Campbell wants to conduct research on how soup consumers would react to the introduction of new bowl-shaped plastic containers which would allow consumer to heat soup in the microwave without adding anything and without a need for dishes.

They need to research the following information: Demographic, economic and lifestyles of current soup consumers Consumer usage patterns for soup (where, when, how much) Retailer reactions to new packaging Consumer attitudes toward new packaging Forecasts of sales for new and old packages Next Step: determine where/how to gather this information and all associated costs. Present this in a written proposal.

Gathering Secondary Data

– – Information that already exists somewhere Internal databases Commercial data services: www.acneilson.com

(data on household purchasing), www.dnb.com

(information on companies) – Government sources: www.sec.gov

(financial data on US corporations), www.census.gov

Available more quickly and at a lower cost than primary data.

Must be relevant, accurate, current, and impartial.

See page 116 for more external information sources.

Primary Data Collection

Information collected for the specific purpose at hand.

Must be relevant, accurate, current, and unbiased.

– – – – Plan for Primary Data Collection Must determine: Research approach Contact methods Sampling plan Research instruments

Developing the Research Plan: Campbell Soup

They need to research the following information: Demographic, economic and lifestyles of current soup consumers Consumer usage patterns for soup (where, when, how much) Retailer reactions to new packaging Consumer attitudes toward new packaging Forecasts of sales for new and old packages Secondary Data Secondary Data Primary Data Primary Data Secondary Data

Observational Research

The gathering of primary data by observing relevant people, actions, and situations.

– Ethnographic research: Observation in “natural environment” – – – – Mechanical observation: People meters – records tv shows watched Checkout scanners – record shoppers’ purchases Galvanometer – detects sweating Eye Cameras – study respondents’ eye movements

Survey Research

Most widely used method for primary data collection.

Approach best suited for gathering descriptive information.

Can gather information about people’s knowledge, attitudes, preferences, or buying behavior.

Survey Contact Methods

Personal can mean individual interviewing or focus groups (6-10 people who talk about product) Mail Telephone Personal Online Poor Good Excellent Good Flexibility Good Fair Excellent Good Qty of data that can be collected Control of interviewer effects Control of sample Excellent Fair Fair Excellent Poor Fair Fair Poor Poor Excellent Good Excellent Speed of data collection Response Rate Fair Good Good Good Good Fair Poor Excellent Cost

Choosing the Sample

Sample

selected to represent the population as a whole.

– segment of the population – – – Requires 3 Decisions: Who is to be surveyed?

Sampling unit How many people should be surveyed?

Sample size How should the people in the sample be chosen?

Sampling procedure

Types of Samples

Probability Sample

Simple Random Sample Stratified Random Sample Cluster (area) Sample Every member of the population has a known and equal chance of selection.

Population is divided into groups (ex age groups) and random samples are drawn from each group.

Population is divided into groups based on location and samples are drawn from the groups.

Nonprobability Sample

Convenience Sample Judgment Sample Quota Sample Researcher selects the easiest population members from which to obtain information.

Researcher uses his or her judgment to select population members who are good prospects.

Researcher finds a prescribed number of people in each of several categories.

Primary Data Collection

– – – – Questionnaires: What questions to ask?

Form of each question?

Closed-ended – include all possible answers (multiple choice) Open-ended – allow respondents to answer in own words Wording?

Ordering?

Likert Scale

One of the most popular closed-ended formats, widely used in survey research, particularly in measuring attitudes, beliefs and opinions.

The basic idea here is to:

write the item as a declarative sentence and; then provide a number of response options, or choices, that would indicate varying degrees of agreement with, or endorsement of, that sentence.

Example: Three meals a day is essential to a healthy lifestyle. 1 2 3 Strongly Moderately Mildly 4 5 6 Mildly Moderately Strongly Disagree Disagree Disagree Agree Agree Agree Please note, in the above example, that the "item" to be evaluated consists of a declarative sentence. Thus, it already states a 'position' and 'direction' of attitude. The respondent is then asked to circle the direction and extent (intensity) of his/her agreement (or disagreement) with that "position" sentence.

Implementing the Research Plan

– Collecting the data Most expensive and subject to error Processing the data Analyzing the data

Analyzing the Data

Simple Tabulation – count the occurances of each variable independently of other variables Cross Tabulation – divide the sample into sub-groups to show how the variable varies from one subgroup to another

Answer Choice Question 1 Question 2 Question 1 Question 2

Simple Tabulation

1

5 19

2

8 7

3

10 4

4

11 2

5

14 21

6

16 11

Total Respondants 64 64 PERCENTAGE OF TOTAL

8% 13% 16% 17% 22% 25% 30% 11% 6% 3% 33% 17% Question 1 1 2 3 4 5 6 1 = Strongly Disagree, 2 = Moderately Disagree, 3 = Mildly Disagree, 4 = Mildly Agree, 5 = Moderately Agree, 6 = Strongly Agree

Cross Tabulation

Answer Choice QUESTION 1 1 2 Men PERCENTAGE OF TOTAL Women PERCENTAGE OF TOTAL

4 12% 21% 24% 18% 21% 1 3% 7 1 3%

3

8 2

4

6 5

5

7 7

6

1 3% 15 6% 16% 23% 48%

Total Respondants 33 31 Question 1 - MEN Question 1 - WOMEN

1 2 3 4 5 6 1 = Strongly Disagree, 2 = Moderately Disagree, 3 = Mildly Disagree, 4 = Mildly Agree, 5 = Moderately Agree, 6 = Strongly Agree 1 2 3 4 5 6

Interpreting and Reporting Findings

Interpret the findings Draw conclusions Report to management

Experimental Research

Tries to explain cause-and-effect relationships.

– – – – Involves: selecting matched groups of subjects, giving different treatments, controlling unrelated factors, and checking differences in group responses.

Example: before adding a new product, to its menu, Taco Bell might use experiments to test the effect of sales on two different prices it might charge.

Analyzing the Data

Hypothesis Testing – Uses Regression Analysis to Interpret the results Exmaple: Taco Bell might take the data from the experiments designed to test the effect of sales on two different prices.

The company would run a regression on the data to determine if the new price had a significant effect on sales.

Original Price New Price Day

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

Taco Supreme Meal Taco Supreme Meal $4.98

$5.48

Monday Tuesday Wednesday Thursday Friday Saturday Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sunday Monday Tuesday Wednesday Thursday Friday Saturday

Sales at Old Price

200 179 154 320 228 207 189

Sales at New Price

190 170 146 376 217 197 180 289 182 221 198 178 245 189 167 183 200 196 118 149 275 173 210 188 169 233 180 159 174 221 186 112 142

Regression Output

SUMMARY OUTPUT

Regression Statistics

Multiple R 0.967420566

R Square Adjusted R Square Standard Error Observations 0.935902551

0.932341582

14.39127822

20 ANOVA Regression Residual Total Intercept Sales at Old Price

df

1 18 19

SS

54432.857

3727.959999

58160.817

MS F

54432.857 262.8224086

207.1088888

Significance F

3.4894E-12

Coefficients

-38.22687925

1.167319034

Standard Error t Stat P-value

14.72791383 -2.595539307 0.018269864

0.07200429

16.21179844

3.4894E-12

Lower 95%

-69.16910196

Upper 95%

1.016043518 1.318594551

Lower 95.0%

-7.28465654 -69.16910196

1.016043518

Upper 95.0%

-7.28465654

1.318594551

Interpretation: we are 98% confident (1-p value) that there is a relationship between old sales (x) and new sales (y) data.

To estimate new sales, we would formulate the following equation:

-38.23 + (1.17 * Sales at the Old Price) If sales at the old price averaged 200, we would estimate new sales by: -38.23 + (1.17 * 200) = 195.24

Making the Decision

Given Estimated Sales at the New Price, is the price hike worth it?

Judging by our research estimates, we would reduce sales by 5 if we implement the new price. We sold 200 at $4.98 = $996.00

The new price adds $0.50 per sale, so we would sell: 195 at $5.48 = $1,069.90

Making the Decision

Assuming there are no other costs (or that the other costs don’t outweight the profits)… We would increase revenue by: $73.90 if we increase the price.

So – YES we should make Taco Supreme Meals $5.48.

Video Case

Burke, Inc.

(9 minutes) Applying Knowledge - Improving Decisions Burke is one of the premier international research and consulting firms in the world. For nearly seven decades, Burke has helped manufacturing and service companies understand and accurately predict marketplace behavior. Burke's employee owners add value to research and consulting assignments by applying superior thinking to help clients solve business problems. http://www.burke.com/about/

Thoughts

Can you name some new growing trends?

What products or services might be in high demand to fit those trends?

What jobs will grow to suit those trends?

Video Case

Intel

(15 minutes) http://www.capstonevideo.com/rpm_wvx/capstone_intel.wvx

Thoughts

Marketing Research was used at every stage in developing the Intel brand.

– Deciding on an advertising theme and jingle – Developing a product name – Developing products geared toward the uses of customers all over the globe