Part 3: Target Market Selection

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Part 3: Target Market Part 3: Target Market SelectionSelection

8. Marketing Research Decision-Support Systems, and Sales Forecasting

9. Market Segmentation, Targeting, and Positioning

10.Relationship Marketing, Customer Relationship Management (CRM), and One-to-One Marketing

Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter 8Chapter 8

Marketing Marketing Research, Research,

Decision-Support Decision-Support Systems, and Sales Systems, and Sales

ForecastingForecasting

8-3Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

Chapter ObjectivesChapter Objectives1. Describe the development of the marketing research function

and its major activities.2. Explain the steps in the marketing research process3. Distinguish between primary and secondary data and identify

the sources of each type.4. Explain the different sampling techniques used by marketing

researchers.5. Identify the methods by which marketing researchers collect

primary data. 6. Explain the challenges of conducting marketing research in

global markets.7. Outline the most important uses of computer technology in

marketing research.8. Explain how the use of information technology, particularly

marketing decision support systems (MDSSs), can enhance and refine market research and it’s impact on decision making.

9. Identify the major types of forecasting methods.


The Marketing Research FunctionThe Marketing Research Function

Marketing research: the process of collecting and using information for marketing decision-making

Development of the Marketing Research Development of the Marketing Research FunctionFunctionFirst organized marketing research project done

by N.W. Ayer in 1879First commercial research department in the

U.S. established by Charles C. Parlin for the Curtis Publishing Co. in 1911

Parlin counted soup cans in garbage to convince the Campbell soup Company that working-class families would buy canned soup


Who Conducts Marketing ResearchWho Conducts Marketing ResearchThe size and organizational form of the

marketing research function is typically tied to a given company’s structure

Many firms depend on independent marketing research firms

Syndicated ServicesSyndicated ServicesOrganizations that regularly provide

a standardized set of data to all customers


Full-Service Research SuppliersOrganizations that contract with

clients to conduct complete marketing research projects

Limited-Service Research SuppliersA marketing research firm that

specializes in selected activities like: Field or telephone interviews Data-processing Focus groups


Customer Satisfaction Measurement ProgramsProcedure for measuring customer

feedback against customer satisfaction goals and developing a plan of action for improvement


The The Marketing Marketing Research Research ProcessProcess


Step 1: Define the ProblemStep 1: Define the ProblemAvoid confusing symptoms of a problem with

the problem itselfThe problem(s) should be agreed upon by

all concerned partiesDoing so helps to keep everyone concerned

in agreement and to keep the project focused on solving the problem(s)

Doing so also helps to prevent the all-too-common tendency to spend resources attempting to answer “interesting, but not necessary” questions


Step 2: Conduct exploratory researchStep 2: Conduct exploratory researchAn Informal investigation seeking to discover

the cause of a problem by discussing it with informed internal and external sources

Company records such as sales and profit analyses

Competitive dataUsing Internal Data

Sales records, Financial statements, and Marketing cost analysesSales analysis


Step 3: Formulate a HypothesisStep 3: Formulate a HypothesisHypothesis: a tentative explanation for

some specific event – a statement about the relationship among variables that carries a clear implication for testing this relationship

Sets the stage for more in-depth research by further clarifying what researchers need to test

Not all marketing research tests specific hypotheses


Step 4: Create a Research DesignStep 4: Create a Research DesignResearch design: a series of decisions

that, taken together, comprise a master plan or model for conducting marketing research

Must ensure that the study will measure what the marketer intends to measure

Must also ensure an appropriate selection of respondents


Step 5: Collect DataStep 5: Collect DataSecondary data is data from previously

published or compiled sources (e.g. Census data)Almost always less expensive to gatherLess time is usually necessary to locate

and use itPrimary data refers to data collected for the

first time specifically for a marketing research studyCan provide richer, more detailed

information than secondary data


Step 6: Interpret and Present Research Step 6: Interpret and Present Research InformationInformationFindings must be presented to decision-

makers in a format that allows them to make effective judgments

Cardinal rule of presenting marketing research requires that it assists decision-making rather than being an end in itself


The Research Report and Presentation: Linking the Study and the Research User


Marketing Research MethodsMarketing Research Methods


Secondary Data CollectionSecondary Data CollectionGovernment Data

Nation’s most important source of marketing data

Most frequently used government statisticsCensus information available at no chargeTIGER System: Topographically

Integrated Geographic Encoding and Referencing SystemThe system combines topographic

features like railroads, highways, and rivers with census data such as household income figures


Secondary Data CollectionSecondary Data CollectionPrivate Data

Encyclopedia of AssociationsUrich’s Guide to International PeriodicalsSales & Marketing Management’s Annual

Survey of Media MarketsDialog’s ABI/InformCompuServe’s Knowledge IndexFind/SVP’s FindEx, the Directory of

Market Research Reports, Studies, and Surveys

Starch Readership ReportsA. C. Nielsen’s SalesNet


Secondary Data CollectionSecondary Data CollectionOnline Sources of Secondary Data

Cyberspace sometimes simplifies the search for secondary data

A Web-based research project can cost less, and can yield significantly faster results than offline research

Caveat Emptor should guide Internet searches for secondary data


Sampling TechniquesSampling TechniquesSampling: the process of

selecting survey respondents or other research participantsPopulation (universe): total group

that researchers want to studyCensus: a collection of data on all

possible members of a population or universe


Probability sample: sample that gives every member of the population a known chance of being selectedSimple random sampleStratified sampleCluster sample

Non-probability sample: arbitrary grouping that produces data unsuited for most standard statistical testsConvenience sampleQuota sample


Primary Research TechniquesPrimary Research TechniquesObservation MethodObservation Method

Researchers actually view, or watch, the overt actions of the research subjects

Useful in helping to understand how consumers actually behave in certain situations

Can be as simple as counting passing cars or as sophisticated as people meters recording household TV-viewing habits

Interpretive Research


Survey MethodSurvey MethodTelephone InterviewsTelephone Interviews

An inexpensive and quick method for obtaining a small quantity of relatively impersonal information

Relatively high response ratesLimitations include:

Only simple, clearly worded questions draw appropriate responses

Personal information difficult to obtain Respondents can’t view pictures Caller-ID


Survey MethodSurvey MethodPersonal InterviewsPersonal Interviews

Best means for obtaining detailed information about consumers

Interviewer can explain confusing or vague questions

Offer Good FlexibilityMall interceptsLimitations:

Slow Expensive


Survey MethodSurvey MethodFocus GroupsFocus Groups

A Focus Group is an information gathering procedure in marketing research that typically brings together 8 to 12 individuals to discuss a given subject

Can provide quick and relatively inexpensive insights

May not produce completely honest responses to questions


Survey MethodMail Surveys

Cost EffectiveProvides anonymity that may encourage

respondents to give candid answersLimitations include:

Typically low response rates Take a long time to conduct Questionnaires cannot answer

unanticipated questions that occur to respondents as they complete the forms

Complex questions may not be suitable Bias from nonresponse


Survey MethodFax Surveys

Low response rates and long follow-up times associated with mail surveys have spurred interest in the alternative of faxing survey documents

Faxing provisions may supplement mail surveys

Or, faxing may be the primary method for contacting respondents and obtaining their answers


Survey MethodOnline Surveys and Other Internet-Based

MethodsGrowing number of Internet users has

sparked interest in going online to conduct surveys . . . and even focus groups

Benefits include the lack of geographic restrictions, faster turn-around time, and dramatically lower costs

Growth of the Internet is creating a need for new research techniques to measure and capture information about website visitors


Survey MethodExperimental Method

Scientific investigation in which a researcher manipulates test group(s) and compares the results with those of a control group that did not receive the experimental controls or manipulations

The most common use to date has been test marketing

Major problem with controlled experiments comes from the failure to account for all variables in a real-life situation

Expensive to conduct


Conducting International Marketing ResearchConducting International Marketing ResearchAs corporations expand globally, they need to

gather knowledge about consumers in other countries

The basic steps are the same as for domestic studies, however, face some different challenges

A major secondary information source is the U.S. Department of CommerceForeign Economic Trends and Their

Implications for the United StatesOverseas Business Reports


Interpretative ResearchInterpretative Research

Observes a customer or group of customers in their natural settings and then interprets their behavior based on an understanding of social and cultural characteristics of that settingEthnographic

Focuses on understanding the meaning of a product or the consumption experience in a consumer’s life

Takes time and is expensive


Computer Technology inComputer Technology inMarketing ResearchMarketing Research

Marketing Information System (MIS)Marketing Information System (MIS)A planned, computer-based system

designed to provide managers with a continuous flow of information relevant to their specific decisions and areas of responsibility


Marketing Decision Support SystemMarketing Decision Support System (MDSS) Consists of computer software that helps

users quickly obtain information and apply that information in a way that supports marketing decisions

An MDSS can create simulations or models to illustrate the likely results of changes in marketing strategies or marketing conditions


Data MiningData MiningThe process of searching through computer

files to detect patternsFocuses on identifying relationships that are

not obvious to marketersThe data is stored in a huge database called

a data warehouseCan be an efficient way to make sense of

huge amounts of dataCan help create customer profiles, pinpoint

reasons for customer loyalty or the lack thereof, analyze the potential returns on changes in pricing or promotion, and sales forecasts


Business IntelligenceBusiness IntelligenceProcess of gathering information and

analyzing it to improve business strategies, tactics, and daily operations

Competitive IntelligenceCompetitive IntelligenceForm of business intelligence that focuses

on finding information about competitors using published sources, interviews, observations by salespeople and suppliers in the industry, government agencies, public filings and other secondary sources including the Internet


Sales ForecastingSales Forecasting

Estimate of company revenue for a specified future period.Qualitative Forecasting TechniquesQuantitative Forecasting Techniques


Qualitative Forecasting TechniquesQualitative Forecasting TechniquesThese techniques rely on subjective data

that repots opinions rather than exact historical data.Jury of Executive Opinion

Delphi Technique

Sales Force Composite

Survey of Buyer Intentions


Techniques Benefits Limitations

Jury of executive Jury of executive opinionopinion

Opinions come from executives in many different departments; quick; inexpensive

Managers may lack sufficient knowledge and experience to make meaningful predictions

Delphi techniqueDelphi technique Group of experts can accurately predict long-term events such as technological breakthroughs

Time-consuming; expensive

Sales force Sales force compositecomposite

Salespeople have expert customer, product, and competitor knowledge; quick; inexpensive

Inaccurate forecasts may result from low estimates of salespeople concerned about their influence on quotas

Survey of buyer Survey of buyer intentionsintentions

Useful in predicting short-term and intermediate sales for firms that serve only a few customers

Intentions to buy may not result in actual purchases; time-consuming; expensive


Quantitative Forecasting TechniquesQuantitative Forecasting TechniquesThis method uses statistical computations

such as trend extensions, computer simulations, and economic models.Market Tests

Trend Analysis

Exponential Smoothing


Techniques Benefits Limitations

Market testMarket test Provides realistic information on actual purchases rather than on intent to buy

Alerts competition to new product plans; time-consuming; expensive

Trend analysisTrend analysis Quick; inexpensive; effective with stable customer demand and environment

Assumes the future will continue the past; ignores environmental changes

Exponential Exponential smoothingsmoothing

Same benefits as trend analysis, but emphasizes more recent data

Same limitations as trend analysis, but not as severe due to emphasis on recent data

Part 3: Target Market Selection

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