Understanding Consumers and Markets through Research

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Matt Disston714-356-6538

mattd@dmgnet.com

Understanding Consumers and Markets Through Research

"The best teachers are those that show you where to look, but don't tell you what to see." -- Alexandra Trenfor

Grading Rubric

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Proposal1. Summary2. Background3. Objectives4. Research Approach or Scope of Work5. Time, cost and critical path chart (cpm)6. Technical Appendix

1. Secondary data2. Focus Group Script3. Questionnaire for the survey

Proposal

• Grading rubric– Format

• Have you included all the sections?

– Organization• Are the sections in order and complete?

– Content• Could I do this research from the information provided?

– Comprehension• Have you conveyed to me the approach needed to

answer the management objective?

ProposalSummary

• Summarize the purpose of the proposal• Answer why this research will achieve the

objectives• Target audience for the Summary is the Vice

President of Marketing• Provide total cost estimate and time require

to complete• Write this section last

ProposalBackground

• Describe the market situation• What is the product?• Why is this product/service perceived as being a

good idea by management?• Who are the customers?• Who is the competition?• Are there any special characteristics of this

product or market?• SWOT

ProposalObjectives

• What are the management objectives?• How will the research tasks generate useful

information?• What are the most important “researchable

questions” the research will answer once it is complete?

ProposalResearch Approach/Scope of work

• This is a detailed, step by step list of tasks that describe the work to be completed

• Specify the product of each task – For example:– Task 1. Meet with the client – At the outset of the research we

will meet with the client to clarify the research to be completed. The product of this task will be a scoping memo which specifies any requests for information and specifies any decision points for the client throughout the research effort.

• The Research Approach will have 5 or 6 tasks:– Task 1. Meet with the client– Task 2. Secondary research– Task 3. Focus Group– Task 4. Intercept Survey– Task 5. Analysis

ProposalTime, Cost and CPM

• Construct a budget based on the hours you expect to spend on each task

• Establish a billing rate for each employee position

• Provide an estimate of the number of hours, by employee for each task

• Each task should have a subtotal of the total budget

• CPM chart should illustrate when each will be undertaken and in what order

Critical Path Method -- CPMTask Week 1 Week 2 Week 3 Week 4 Week 5 Week 6Meet with Client

X X X X

Secondary Data Search

XXXX X

Focus Group XX XXXXXX XXXXXDecision Point Meeting

X

Intercept Interviews (500)

XX XXXXX XXXXX X

Analysis X X XXXXX

ProposalTechnical Appendix

• Examples of the secondary research you found on your topic

• Focus group script – Introduction, definitions, 30 – 40 questions grouped by topic

• Questionnaire – description of methodology 20 – 30 questions

Marketing ResearchDefinition

• Market research is the formalized process of obtaining information to be used in marketing decisions.

• Product: Information!– not decisions, – not a marketing plan, – not a SWOT, – not a new business

Market ResearchVocabulary

Market ResearchThe Environment

Market ResearchProcess -- MIS

Research Schematic:

Marketing Environment Marketing Research Department

Marketing Manager MIS

Internal Information

External Information

Organized Information

Guidance

Recurrent

Requested

Monitoring

Decisions

Requests and Refinement

Decision Support System

• Provides necessary information at the time a decision is made

• Incorporates business judgment in the form of business/computer models

• Provides output to the decision maker based on their input and the input of others in the company

• Example: Salesman’s Ipad at the point of sale

Decision Support

• Understanding your own company?– Computer models/pro forma

• Understanding customers?– Why do companies fail in China

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/130918/why-big-american-businesses-fail-china

– How would you research this question?• What should these companies have known?• How would you find this information?• Primary, secondary and experimental data

General Research Process1. Establish the objective with the client – select the marketing

opportunity/problem -- What is the customer’s “marketing pain”?2. Express the objective(s) in terms of “researchable questions”3. Agree on the measurements to use and the information needed to

answer the “researchable questions” – what is the research design4. Determine how to collect the information -- Data collection

methodology5. Design the data collection forms – questionnaire, competitor product

specification sheets6. Determine the sampling method/collect data7. Analyze the data8. Write the report

Marketing Research – Methodshttp://www.dmgnet.com/uci/lectures/Market Research Process.pdf

Case 1

Case 1

• Find similarities:– Who uses the product?– What similar characteristics describe them?– When are they a customer?– What are the conditions of the purchase?– How did they discover the product? – How could they become your customers?– Why didn’t everyone purchase?

Case 1I am a potential research client. I have developed a new design for a sport boat. It is called a Carabelli 30. I am manufacturing these boats in Brazil. I would like to expand my market.

Carabelli 30http://www.youtube.com/watch?v=xfZm-y9YkyU

•Researchable Questions--– Should I export them to the United States?– What research (information) do you recommend I have to

make this decision?– How do you propose to find it?

Case 1

• Start with secondary information.– Sources:

• Internal (4P’s)– What are the specifications of the product?

» Price» Cost» Features» How is it manufactured?» What are the strategic relationships to make the product?

– Where is it sold?– How is it currently promoted?– What are the objectives of the management team?

Case 1

• External– What are the characteristics of the customers who bought the

product?» How do they use it?» How much did they pay?» What is the “value” they see?» Is there market segmentation?

– What companies are the competitors?» Price, placement, promotion

– What suppliers are required to build it and what are their requirements?

– Are there governmental/export issues?

3 Conceptions of Marketing

• The production concept: consumers will buy goods that are widely available and inexpensive; focus is on improving efficiency in production & distribution• The selling concept: consumers will not buy enough of your product if you leave them alone; focus on advertising & contact with potential customers

• The marketing concept: consumers will buy your products if you identify their needs & satisfy those needs better than competitors.

Source: Kotler, Philip, John Bowen, and James C. Makens. Marketing for Hospitality and Tourism

Errors in Research Design

• Surrogate information error• Measurement error• Experiment error• Frame error• Population specification error• Sample error• Selection error• Non-response error

Three Types of DataData Type Benefit DisadvantagePrimary • Specific to your questions

• Specific to your target market

• Proprietary data• Researcher controls timing

of data

• Expensive• Takes time

Secondary • Useful in exploratory research

• Inexpensive• Available now

• May not be exactly what you need – wrong time, location or interval

• Probably is old data

Experimental • Can show causality• Deeper description of the

variables

• Very expensive• Requires absolute control

of the variables – difficult

Secondary DataForty Years of Music Distribution

Secondary Data and the Internet

• The Internet– Sputnik – October 1957• ARPA• 1960s technical papers

– 1969 UCLA, SRI, Univ of Utah, UC Santa Barbara• ftp

– 1972 – Ray Tomlinson – Email (@)• V.A. Shiva Ayyadurai –1978 age 14 for Univ of

Medicine, NJ (Owns “EMAIL”)

– 1978-79 Vinton Cerf – TCP/IP

The Internet(continued)

• 1970s Proliferation of networks– ARPANET – scientific/military– USENET – bulletin boards– THEORYNET – academic– ALOHANET/PRNET – radio– BITNET – general use (1981)

The Internet(continued)

• 1980s – 1981 - 1983 TCP/IP cutover– 1984 – DNS• .com, .edu, .net, .org, .gov, .mil

– 1985 – WELL– 1986 – NSFNET – backbone created 56K– 1988 – backbone upgraded to 1.5 mps• IRC chat invented by Jarkko Oikarinen

– 1989 ARPANET ceases

The Internet(continued)

• 1990s– 1991 – WWW – Tim Berners Lee– 1993 – Internic created– 1993-94 Mosaic • Marc Andreessen

– Netscape w/ Silicon Graphics– 1997 IE – Browser wars– 1999 – Netscape sold to AOL $4.2 B– Adreessen Horowitz – Twitter, Foursquare, Pinterist, Skype,

Facebook, Groupon and Zynga

– 1995 – JAVA, Streaming technologies

The Internet(continued)

– 1990s – Gopher, Archie, Veronica, Jughead– 1994-95 Geographic domains– 1995 – Online services, ISP

• Compuserve• Prodigy• AOL

– 1996 – Internet2– 1997 – 99 E-commerce, Etrade,– 2000 – IPv6– 2003 – First online election – Switzerland– 2003 -- 09 Countries tax the Internet– 2005+ -- Social networking

The Internet

• Business Models – Front end/back end decisions

– Advertising• Pop ups• Banners• Ads

– Pay for content– Membership– Software reliant– Internet service

The Internet

• Gathering information – Depends on business model

– Survey– Observation• Page hits• Downloads• Cookies

– Input Data Gathering• Registration – Personal data/email• Orders

The InternetSecondary Data

• Marketing Research – Methods http://www.dmgnet.com/uci/lectures/Market%20Research%20Process.pdf

• USC Internet Resourceshttp://www.sc.edu/beaufort/library/pages/bones/bones.shtml

• Brooklyn College Internet Resourceshttp://depthome.brooklyn.cuny.edu/economics/webresch.htm

• How to develop an Internet search strategy - UC Berkeley http://www.lib.berkeley.edu/TeachingLib/Guides/Internet/Strategies.html

• What cookies are on your machine? – How do you Opt Out?

The InternetSecondary Data

• Digital Music News – 40 Years of Musichttp://www.dmgnet.com/uci/powerpoint/109sx.gif

• Google Analytics – DMG site– Videos– Tools

• Google Control – Skewing of searches– http://www.wsj.com/articles/how-google-skewed-search-results-1426793553

• The problems with “Big Data”– http://www.ft.com/intl/cms/s/2/21a6e7d8-b479-11e3-a09a-

00144feabdc0.html#axzz2xd2J0Z8q

Case Study 2

• Management objective:– Open a new store in LA and increase Hispanic penetration

• Internal– What is the client’s “trade area”?– How much sales is requires

• Find a highly Hispanic area in LA– Where/what is “highly Hispanic”

• Census• Average for the County• Find higher percentages

Case Study 2

• What is the population in the trade area?• What is the Income?• What is the sales potential – “Purchasing

Power”• What is the sales potential?• Existing sales in the trade area?• What is the supportable size of store?

Focus Group

1. Meet with the client2. Create Script, get it approved3. Create screener4. Recruit attendees5. Demographic survey upon arrival6. Conduct focus group – record7. Pay incentive8. Write summary report within 48 hours

Measurement

• Measurement is the assignment of numbers to characteristics according to rules.– Operational– Conceptual– Range of variables• True characteristics• Additional stable charactersitics• Short term characteristics• Situational characteristics

Experimentation• Examples of simple experimental design:

– Experiments require a dependent and independent variableMeasure A Experiment Measure B

Before and After

After Only

Before and After with Control **

e

c

Simulated Before & After

e

c

After Only with e

Control ** c

**Solomon 4 Group

Quantitative Research

• Tactical vs Strategic research– Tactical – aimed at a specific issue. Answers a specific

question.• What percentage of our customers are over 21?• Do people prefer red or green?

– Strategic – may not have specific answer to test. Aimed at identifying the trends, characteristics and similarities in the data.• Looking for trends in a database – What are the biases in the data?• What are existing customers doing?• What are the shopping “bundles” our product experiences?

Quantitative ResearchPlanning the Questionnaire

• Structured vs Unstructured– Related to the amount of freedom the respondent has to answer

• Direct vs Indirect– Related to the amount of knowledge the respondent has about the

topic of the research

• Eg: Types of questions:• Structured – Direct

– Multiple choice question where the respondent knows the topic

• Structured – Indirect– Multiple choice where the respondent does NOT know the topic

• Unstructured – Direct– Open ended question where the respondent knows the topic

• Unstructured – Indirect– Psycho-analysis

Quantitative ResearchPrimary Data

• Survey– Decide the type of survey method:

• Telephone• Intercept• Mail • Computer

– Determine sample• Domain• Unit• Extent• Timing

– Questionnaire development – Field study plan– Tabulation plan

Quantitative Research

• Observation– May be more accurate than a survey– Intrusive

• Disney electronic trackinghttp://www.nbcnews.com/travel/travelkit/disney-world-track-visitors-wireless-

wristbands-1B7874882

• Database– Subscription databases– Associations archives– Membership– Check data– Credit card data– Customer data (from sales dept and accounts)

Quantitative Research

• Sampling• Scaling

– Nominal– Ordinal– Interval– Ratio

• Attitudinal scales– Comparative scales– Likert– Stapel– Paired alternatives– Constant sum

Survey Data Set

Name Age Sex Household Number of Beers Drunk

Activities When

Purchased Favorite Brands Job Description

Income Children Last Week TV Sports Bar B Que Outdoor Other Bud Coors Other

1 John 37 M $41,250 2 6 Yes Yes Yes Vet

2 Mabel 46 F $62,837 6 14 Yes Yes Yes Yes Stay at home mom

3 Thelonius 62 M $22,555 0 16 Yes Musician

4 Buzz 42 M $108,425 2 6 Yes Yes Yes Yes Yes Yes Yes Real estate developer

5 Muffy 41 F $128,016 1 24 Yes Yes Yes Yes Yes Stock broker

6 Red 55 M $167,880 8 36 Yes Yes Contractor

7 Griff 24 M $66,666 0 48 Yes Yes Yes Yes Car mechanic

8 Colton 33 M $55,000 3 12 Yes Yes Yes Yes Teacher

9 Terry 52 F $50,000 1 0 Yes Yes Clerk

10 Milton 22 M $600,000 4 4 Yes Yes Computer programmer

11 Roger 39 M $400,000 2 30 Yes Yes Yes Yes Doctor

12 Richard 38 M $16,000 2 30 Yes Yes Yes Yes Yes Framer

13 Mary 36 F $38,000 2 12 Yes Yes Aerobics Instructor

14 Ginny 44 F $72,725 3 16 Yes Yes Yes Flight instructor

15 Ferlinghetti 72 M $38,000 1 6 Yes Yes Poet

Average $124,490 17.33 8 7 8 6 8 4 9

Market Research Analysis

Gender Number Percentage

Male 10 67%

Female 5 33%

Total 15 100%

Income Rank Respondent

1 Milton

2 Roger

3 Red

4 Muffy

5 Buzz

Nominal

Ordinal

Market Research Analysis

Income Number Percent

$0-24,999 2 14%

$25 – 49,999 3 20%

$50 – 74,999 5 33%

$75 – 99,999 0 0%

$100 + 5 33%

Total 15 100%

Interval

Market Research Analysis

Beers Drunk Number Percent

0-3 2 14%

4-6 3 20%

7-14 3 20%

15-24 3 20%

25+ 4 26%

15 100%

Ratio