Chapter 4: Conducting Marketing Research and Forecasting Demand

I. The Marketing Research System

Marketing Insights- provide diagnostic information about how and why we observe
certain effects in the marketplace, and what that means to
marketers

Marketing Research- systematic design, collection, analysis, and reporting of data and
findings relevant to a specific marketing situation facing the
company

Three Categories of Marketing Research

1. Syndicated-service Research Firms- firms gather consumer information and trade
information which they sell for a fee
2. Custom Marketing Research Firm- firms hired to carry out specific projects; they
design the study and report the findings
3. Specialty-line Marketing Research Firm- firms providing specialized research services

Creative and Affordable Research:

1. Engaging students or professors to design and carry out projects
2. Using the internet
3. Checking out rivals

II. The Marketing Research Process

1. Define the Problem, the Decision Alternatives, and the Research Objectives
* Be careful not to define the problem too broadly or too narrowly for the marketing
researcher

Exploratory Research- goals is to shed light on the real nature of the problem and to
suggest possible solutions or new ideas

Descriptive Research- seeks to quantify demand

Casual Research- purpose is to test a cause-and-effect relationship

2. Develop the Research Plan
* Develop the most efficient plan for gathering the needed information and what that
will cost

- Data Sources
- Primary Data: data freshly gathered for a specific purpose
- Secondary Data: data that were collected for another purpose and already
exist somewhere
- Research Approaches
- Observational Research
- Ethnographic Research: uses concepts and tools from anthropology and
other social science disciplines to provide deep
understanding of how people live and work
- Focus Group Research: a FOCUS GROUP is a gathering of 6 to 10 people
carefully selected by researchers based on certain
demographic, psychographic, or other
considerations and brought together to discuss
various topics of interest at length
- Survey Research: to learn about people’s knowledge, beliefs, preferences,
and satisfaction and to measure these magnitudes in the
general population
- Behavioral Data
- Experimental Research: designed to capture cause-and-effect relationships
by eliminating competing explanations of the
observed findings
- Research Instruments
- Questionnaire: consists of questions presented to respondents
- Open-end Questions: allow respondents to answer in their own words
- Closed-end Questions: specifies all possible answers
- Qualitative Measures: relatively unstructured measurement approaches
that permit a range of possible responses
- Technological Devices
- Galvanometers
- Tachistoscope
- Audiometers
- GPS
- Sampling Plan
- Sampling Unit: Who should we survey?
- Sampling Size: How many people should we survey?
- Sampling Procedure: How should we choose the respondents?
- Contact Methods
- Mail Questionnaire: best way to reach people who would not give personal
interview
- Telephone Interview: best method for gathering information quickly
 - Personal Interview: most versatile method
- Arranged Interviews
- Intercept Interviews
- Online Interview

3. Collect the Information

* The most expensive and the most prone to error
* Need to achieve consistency (international setting)

4. Analyze the Information

* Extract findings by tabulating the data and developing frequency distributions

5. Present the Findings

* Present findings relevant to the major marketing decisions facing management

6. Make the Decision

Marketing Decision Support System

- a coordinated collection of data, system tools, and techniques, with supporting
software and hardware, by which an organization gathers and interprets relevant
information from business and environment and turns it into a basis for making action

III. Measuring Marketing Productivity

* An important task of marketing research is to assess the efficiency and effectiveness
of marketing activities

Two Approaches in Measuring Marketing Productivity:

1. Marketing Metrics: to assess marketing effects
2. Marketing-Mix Modelling: to estimate causal relationships and measure how
marketing activity affects outcomes

Marketing Dashboards- structured way to disseminate the insights gleaned from these
two approaches within the organization

- Customer-performance Scorecard: records how well the company is doing year

after year on such customer-based measures
- Stakeholder-performance Scorecard: tracks the satisfaction of various
constituents who have a critical interest in
and impact on the company’s performance

Marketing Metrics- set of measures that helps them quantify, compare, and interpret
their marketing performance [synthesis and interpolation]
Marketing-Mix Modelling- analyzes data from a variety of sources to understand more
precisely the effects of specific marketing activities

IV. Forecasting and Demand Measurement

The Measures of Market Demand

1. Potential Market- set of consumers who profess a sufficient level of interest in a
market offer

2. Available Market- set of consumers who have interest, income, and access to a
particular offer

- Qualified Available Market: set of consumers who have interest, income, access,
and qualifications for the particular market offer

3. Target Market- part of the qualified available market the company decides to pursue

4. Penetrated Market- set of consumers who are buying the company’s product

A Vocabulary for Demand Measurement

1. Market Demand- the total volume that would be bought by a defined customer group
in a defined geographical area in a defined time period in a defined
marketing environment under a defined marketing program
- Market Minimum: base sales without any demand-stimulating expenditure
- Market Potential: upper limit to market demand within a marketing expenditure

- Expansible Market: very much affected in size by the level of industry marketing
expenditures
- Non-expansible Market: not much affected by the level of marketing expenditure

- Market-penetration Index: a comparison of the current level of market demand

to the potential market demand
- Share-penetration Index: a comparison of a company’s current market share to
its potential market share

2. Market Forecast- the market demand corresponding to the level of industry marketing
expenditure

3. Market Potential

Product-penetration Percentage: the percentage of ownership or use of a product

or service in a population
4. Company Demand- company’s estimated share of market demand at alternative
levels of company marketing effort in a given time period

5. Company Sales Forecast- expected level of company sales based on a chosen

marketing and an assumed marketing environment

- Sales Quota: sales goal set for a product line, company division, or sales
representative
- Sales Budget: conservative estimate of the expected volume of sales, primarily
for making current purchasing, production, and cash flow decisions

6. Company Sales Potential- sales limit approached by company demand as company

marketing effort increases relative to that of competitors

Estimating Current Demand

1. Total Market Potential
- maximum amount of sales that might be available to all the firms in an industry
during a given period, under a given level of industry marketing effort and
environmental conditions

2. Area Market Potential

Market-buildup Method- calls for identifying all the potential buyers in each market
and estimating their potential purchases

Brand Development Index (BDI)- index of brand sales to category sales

Estimating Future Demand

1. Forecasting- art of anticipating what buyers are likely to do under a given set of
conditions

2. Past-Sales Analyses

- Time-Series Analysis: breaks past time series into four components (trend, cycle,
seasonal, erratic)
- Exponential Smoothing: project’s the next period’s sales by combining an
average of past sales and the most recent sales, giving
more weight to the latter
- Statistical Demand Analysis: measures the impact of a set of causal factors
- Econometric Analysis: builds sets of equations that describe a system and
statistically derives the different parameters that make up
the equations statistically