Topic Guide
Marketing Information, Strategy, and Plans
Summary
- Information, Knowledge, and Wisdom
- Obtaining Marketing Information
- Measuring Market Demand
- Strategic Alternatives
Information, Knowledge, and Wisdom
To better understand our environment we must have information, knowledge, and wisdom. In the marketing literature we tend to focus on information and less on knowledge and wisdom. Data is the lowest form of information represented as qualitative and quantitative bits and pieces. After some processing it becomes information. But is this information of any value? Only if it increases our knowledge of the problems we are trying to solve. Hence only by asking the right questions and collecting the right data and information can we increase our knowledge. Finally, knowledge is less useful unless we have the wisdom to ask the right questions and to interpret and use our knowledge to achieve our objectives. You should read the following to better understand these distinctions:
Malhotra, Yogesh. (1996). Organizational Learning and Learning Organizations: An Overview [WWW document].
Where is the wisdom we have lost in knowledge?
Optional additional readings on this topic:
WWW Virtual Library on Knowledge Management
While we hope to be able to give you knowledge about marketing in this course, we can't give you wisdom. We turn next to methods of obtaining marketing information that serves as a potential foundation for marketing knowledge and wisdom.
Obtaining Marketing Information
Last week we defined and discussed the marketing variables shown in Table 1. Our wisdom about marketing leads us to formulating useful marketing question such as what is the current state of these variables among our potential customers. We can gather information on these customer focused variables through use of survey research questionnaires completed most likely using telephone interviews. Many organizations make use of research firms that have established consumer panels of individuals who have agreed to provide individual and family characteristics and to respond to mail and telephone survey questionnaires. Use of panels is a cost-effective method of measuring and tracking changes in customer marketing variables over time. An experienced and/or intuitive manager who has knowledge and wisdom of his or her marketplace can infer how marketing actions might have produced changes in these variables.
Perceived Quality & Price lead to
Perceived Value which leads to
Customer Trial purchase which leads to
Customer Satisfaction which leads to
Customer Repeat purchase which leads to
Customer Loyalty which leads to
Customer Positive word-of-mouth which can lead to
Customer Partnership with the organization
We can obtain marketing information through the use of one or more research designs.
TYPES OF RESEARCH DESIGNS AND TYPICAL RESEARCH DESIGN FLOW
Research Design: The methods or procedures of investigation to obtain answers to one or more research questions.
When a research question is new to us we must first explore and better define the problem. Then we can begin to describe possible solutions to our research questions. Finally, we may want to seek out cause and effect relationships between variables. Thus, over time research on a specific topic tends to flow from one general type of design to another as:
- Exploratory research designs– Research methods to help us better understand our research questions. Exploratory research also include several qualitative methods which help us understand research issues and are an end in themselves – no further research is needed in these instances.
- Descriptive research designs– These designs provide a description of the units studied.
- Causal research designs- These designs permit to make inferences about the cause and effect of variables for the units studied.
EXPLORATORY DESIGNS
1) Literature search and analysis
a) Internal – archival/document method
b) External – library, Internet
2) Interviews, usually loosely structured, open-ended questions.
3) Observation of people
4) Focus groups - Group discussions led by a trained moderator using a loosely structured "interview guide."
OBJECTIVE OF DESIGN
To develop an understanding of the issues your are studying and permitting more precise problem formulation or to understand complex processes in depth. In general, these methods are qualitative.
USE
When you do not have a clear idea of the research problem or when you want to understand complex processes in depth.
EXAMPLE
What is known about the size and characteristics of a specific industry? How much do customers spend for specific product categories? What attributes of a product do customers find most attractive? How do customers feel about a new product?
DESCRIPTIVE DESIGNS
1) Census: Measurement of variables for all members of a population.
2) Survey Research [Sample Surveys]: Measurement of variables for a sample of members of a population.
3) Panels: Repeated measurement of variables for a sample of members of population.
OBJECTIVE OF DESIGN
To describe characteristics of the units [customers, employees, accounting records, financial results, or organizations] you are studying. In general, these methods are quantitative.
USE
When you have a clear understanding of the variables you want to measure, can develop clear and focused questions, can communicate with all or a sample of the population of interest to you, and are able to plan how to analyze the results of your survey to produce actionable results.
EXAMPLES
Kentucky Fried Chicken wants to know if its customers are satisfied with its service and what the demographics are of its most satisfied and dissatisfied customers. Swatch wants to know who buys its watches and their opinions and use of the watches? Four Seasons wants to know if its customers are brand loyal or switch hotels in different cities? In each case a questionnaire could be developed and completed by either interviewing a sample of people or having them self-complete the questionnaire.
CAUSAL DESIGNS [Note: Causal designs are the most difficult to plan and implement. Additionally, they require that your research problem is very well defined.]
1) True experiments: A planned "treatment" [examples of treatments: an advertisement, an employee training program, product packaging] is applied to an "experimental group" who are compared to a "control group" which does not receive the treatment to determine if the treatment produced an effect in the experimental group different than in the control group [examples of effects: more purchases of a product, more attention to customers, more positive attitudes toward the product's packaging].
a) Laboratory: An experiment in a setting highly controlled by the researcher.
b) Field: An experiment in a setting that appears natural to those research subjects receiving a treatment and being measured.
2) Quasi experiments: Experiments where it is difficult to create a control group such as test markets of new products.
OBJECTIVE OF DESIGN
To infer causation, that is a change in a management action causes a change in employee or customer behavior and/or attitudes.
USE
To gather evidence that a specific management action will lead to a specific desired result.
EXAMPLES
Will an employee training program lead to an increase in employee motivation and positive relationships with customers? Will an advertising campaign lead to an increase in sales. A sample of people will be measured prior to the treatment and after. Generally a second sample of people will be measured prior to and after the first group receives the treatment, however, they will not receive the treatment and be used as a comparison group.
COMBINATION DESIGNS and KISS ["Keep it Simple, Stupid!" or "Keep it Short and Simple"]
Research to answer marketing problems often requires a combination of designs. The most general case is to proceed from a exploratory design to a survey research design. Experimental designs are less frequently used, however, when they are they can be very cost-effective such as whether and how to launch a new product. Student research projects often use only an exploratory design due to time, resource, and experience constraints. Very useful information can be gained from exploratory research, especially to understand processes than management used to reach specific decision and the results of these decisions. Exploratory research methods should not be considered any lesser form of research methods than survey or experimental methods. In fact, when exploratory research is sufficient to solve a marketing research problem the research can be far faster and cheaper than using survey or experimental research designs.
We now turn to one important, specific area where we can develop information, measuring market demand.
The Internet as a Source of Information
The Internet is a potentially rich source of "secondary" data about customers, competitors, and markets and also a "primary" source of data on competitor's activities on the Internet. There is a vast amount of information that represents both a benefit and a cost since locating information that is useful to answering your research problems can be difficult and frustrating. Table 2 shows the potential of the Internet to research marketing questions. This search reveals that the way we construct our research inquiry produces different results. For example, the search terms "market research" and "customer satisfaction" locate far more "hits" or Internet "pages" than the very similar terms "marketing research" and "consumer satisfaction." The decision as to which terms are more productive only comes through experience [this leads to a strong argument for information specialists in an organization who can develop specific areas of expertise]. For many searches we have a confusing quantity of information, while for others we seem to have too little such as "marketing response function,' a fairly common term in marketing science, which nets no references. "Advertising response function," however nets 31 hits with some useful information.
Table 2: Number of Information "Hits" on Marketing Terms Using Altavista [17 Oct 1998]
TERM / NUMBER OF "HITS"Marketing / 10,822,340
Product / 19,867,750
Advertising / 7,752,470
Marketing Research / 49,104
Market Research / 148,605
Market Plan / 1,784
Marketing Plan / 51,685
Customer Satisfaction / 148,203
Consumer Satisfaction / 5,378
Word-of-mouth / 79,300
Marketing Response Function / 0
Marketing Information System / 847
Marketing Decision Support System / 112
Overall there may be over 40 million web pages. For information on the number of Internet sites see Network Wizards Internet Domain Survey.
We now turn to a brief discussion of the use of the Internet as a research tool. Some of the basics here may be familiar to you.
Universal Resource Locator [URL]: An address to a specific page on the Internet. The URL is similar to a telephone number, however, more complex and contains mostly alphabetic characters rather than numbers. URLs are called Location: in Netscape Navigator and Address: in Internet Explorer. The format of most URLs is:
The anatomy of a typical address is:
: HyperText Transfer Protocol and is officially a part of the Internet address, however, it and the: // can be dropped from the address since browsers assume this is a part of your address.
altavista.com : The Domain Name or the location of the owner of the Web site. In this case the AltaVista search service.
/av/content/help.htm : The location of one of many specific pages within AltaVista's Web site.
Electronic Searching
There are two types of electronic searching:
Subject Tree Search: An index of categories and sub-categories where you move from the general term to more specific terms similar to a telephone book where you find the last name and then the first name of the person you are looking for.
Example: Business then to Marketing then to Demographics then to Income Groups
Open Text Search [applies to both CD-ROM and Internet searches]: Searches for word matches for a string of text. You can search for one or more words using "Boolean" logic to define your search. Boolean logic is the use of operators including AND, OR, NOT, or NEAR to specify more specific searches.
AND: All pages including BOTH search terms.
OR: All pages including EITHER search terms.
NOT: Excludes all pages including the term.
NEAR: All pages where two terms are near each other - distance between terms varies by search engine.
These operators can be combined to include and exclude several terms at the same time. There are a wide variety of search Indexes on both CD-ROMs and the Internet. While their logic is generally similar, their details often vary. It is useful to read the specific help instructions for a specific index. Most search indexes permit you to include a phrase within quotations.
Table 3: Example Internet Searches from AltaVista Search [NOTE: in AltaVista + means AND while – means NOT 17 October 1998]
Term used / Documents matching query"customer satisfaction" / 148,202
+"customer satisfaction" +hotel / 25,745
+"customer satisfaction" +hotel +"United States" / 4,854
"four seasons hotel" / 5,915
+"four seasons hotel" +"customer satisfaction" / 31
Your objective in searching for data is to locate the data that will be useful in developing a solution to your research problem, while minimizing the amount of useless data. Searching is difficult for everyone since there is often such a large quantity of information available on a topic area, much of it not useful to you. Your search goals are expressed in Table 4.
Table 4: Search Goals
DATA YOU NEED / DATA YOU DO NOT NEEDDATA YOU FIND / OBJECTIVE OF SEARCH / ERROR: Must wade through extra data
DATA YOU DO NOT FIND / ERROR: Missed useful data / OBJECTIVE OF SEARCH
Solutions to being more productive are to develop skills through experience or ask for help from a trained information professional. Most large organizations have information specialists on staff.
Although there are over 25 search indices, the following are recommended when you begin:
- Directory: Yahoo at
- Index: AltaVista at
- Index: HotBot at
Referencing Internet Sites
In this and in future course and in your job you will be making use of Internet sites. These should be referenced so that users of your reports can make use of the same sties. The most useful referencing method for Internet addresses is "name-date" listings in the text of your report such as (McGann 1996, May 6). The complete bibliography entry appearing at the end of your report would be:
McGann, J. (1996, May 6) The rationale of HyperText.
The format is author, data, title, Internet address, and the date you accessed this page. Note that the address is enclosed in brackets < >to avoid confusion with any symbols in the address since < and > are never used in addresses. Many Internet pages do not provide an author or date. If these are missing they simply cannot be included. You should, however, also include the data you located the site at the end of your reference.
Next we turn to one specific form of market research, estimating current demand.
Measuring Market Demand
The most direct method of measuring market demand would be to conduct a product specific survey of current customers and this is frequently done. Surveys, however, are time consuming, costly, and do not provide estimates about how large the market could be under ideal buying patterns. Also it is difficult or impossible to measure demand for a new product using surveys of potential customers since they may be unlikely to understand the extent to which they need or want the product. This leads to the concept of "market potential":
Market Potential: "is the 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 given environmental conditions." (Kotler 1997, 9th ed., pg. 135)
There are two general approaches to estimating market potential, market breakdown [chain-ratio method] and marketing buildup:
- Market Breakdown: Takes the total number of potential customers for a specific product and then uses a chain of multplications to estimate the sales for a specific product.
- Market Buildup: Begins with estimates of purchases by specific customers and then sums all of these customers to estimate the sales for a specific product.
As as example, we will focus on the market for luxury hotels. These hotels can use both methods productively. Luxury hotels have two major types of customers, individual guests and corporate groups.
- Individual guests [market breakdown method]: A possible formula [chain ratio] is: Population of households x personal discretionary income per household x average percent spent on accommodations away from home x average percent amount spent on hotels x average percent amount spend on luxury hotels
- Corporate Groups [market buildup method]: Take an industry group such as stock brokers [secondary data sources often organize information on industry groups using either the older Standard Industrial Classification (SIC)= 6216 or the newer North American Industry Classification System (NAICS) = 52312]. Within this group identify what type of firms would be likely to hold meetings at luxury hotels - could be based on size of firms focusing only on large brokers, and then estimate how many persons from this type of organization would be likely to attend, for example you could assume that at most five percent of the employees representing top management or partners would be candidates for either rewards or seminars at luxury hotels. Then you would add up the potential attendees within each industry group and add all of the industry groups to estimate your toal market potential. A secondary benefit of this approach is that you would know the industries and geographic locations that represent the highest market potential.
Examples of Market Potential Studies
- Frost & Sullivan publication: Market Potential: Case Study - Anesthetic Gas Monitor
- This is a long and carefully detailed method of determining market potential for an industrial product. It represents the content and extent of a very complete assessment of market potential.A Handbook for Assessing the Market Potential of Off-Grid Photovoltaic Power Systems in Utility Service Territories
NOTE: Industry classification systems are useful in specifying markets:North American Industry Classification System (NAICS) The North American Industry Classification System (NAICS) is replacing the U.S. Standard Industrial Classification (SIC) system. NAICS will reshape the way we view our changing economy. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America. For the relationship between SIC codes and NAICS codes see the U.S. Census comparisons.