The Role of Marketing Research in Management Decision Making

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• The Role of Marketing Research in Management
  Decision Making
• Raj Echambadi

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Schematic of the Marketing Process
Product
Place
Promotion
Price
PROFITS
Based on Robert Dolans Note on Strategy, HBR
Press
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Examples of Marketing Research

• Any decision that helps in making informed
  marketing decisions. Information gathering.

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Why do Marketing Research?

• The individual (wo)man is an insoluble puzzle, in
  the aggregate (s)he becomes a mathematical
  certainty.

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Why do we need Marketing Research?

• Perception is Reality. SPAM. COLOR
• Initial perceptions can lead to selective
  interpretation. That may hurt your prospects.
• Environmental Changes.

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Benefits of Marketing Research

• Market research guides your communication with
  current and potential customers.
• Market research helps you identify opportunities
  and problems in the marketplace.
• Market research minimizes the risk of doing
  business.
• Market research helps you to create benchmarks,
  track your progress, and evaluate your success.

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Marketing Research for Businesses

• Marketing Research is a mindset.It is an art as
  much as a science.
• Observe the happenings around you carefully.
• STYLE. ENTERT. AUTO.

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The Three Questions Rule

• Before conducting any MR, ask yourself the
  following three questions
• What do I want to know?
• Why do I need this information?
• What decisions will I take once I've got it?
• Answering these three questions will lead to
  ACTIONABLE RESEARCH.

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Types of Data
Primary Data Collected by the researcher for
the problem at hand.FRESH Focus groups Indepth
interviewing Surveys Observation Experiments

• Secondary Data
• Already collected by persons other then the
  researcher

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The Marketing Research Process
5. Data collection
4. Selecting the Sampling procedure
How?
3. Choosing the research method
What?
7. Follow-up
2. Creating the
Why?
research design

• Identifying
• Formulating the
• Research Problem

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Step 1 Problem Diagnosis

• The root cause of the problem is harder to
  identify than its obvious manifestations.
• To define the problem, list every factor that may
  have influenced it, then eliminate any that
  cannot be measured.
• Assess the information that is immediately
  available. Weigh the cost of gathering more
  information against its potential usefulness.
• Define Objectives and Set Parameters

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Step 2 Research Design
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Exploratory Research

• Exploratory Research
• Seeking insight into the general nature of the
  problem.
• Examples
• Why do consumers shop / not shop in our stores?
  SM.
• What are the internal motivations of consumers
  for using DSL and not cable modems?
• Focus groups, Depth Interviews, Observation

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Focus Groups

• Lower cost.
• Quickness of execution.
• Concept testing.
• How do consumers use a product?
• Good source of ideas about product improvements.
  Checking Account.
• Exploring problems. Deans Tuxedos
• Why do consumers behave the way they do?

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In-Depth Interviewing

• Why do customers exhibit certain behaviors? Why
  do consumers use a product in a particular way?
• Sometimes give the marketers a better feel for
  customers lives.

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Descriptive Research

• Describe the characteristics of relevant groups
  of customers
• Who buys our products?
• What are their needs?
• Where do they buy it?
• Surveys (Mail., Telephone, Online)

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Collecting Primary Data
Survey Methods
Mail and Personal Online
Telephone Interview
Costs Flexibility Interviewer Bias Length
5-10 Low Low Low
25 Med. Probes Med. Med.
gt 200 High High High
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Causal Studies

• Does one variable cause another?
• Experiment
• Test markets

A (Cause) ? B(Effect) Independent ? Dependent
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Example of an Experiment

• Firm A advertised in two formats the Yellow
  pages (Mode A) and a banner ad in a web site
  (Mode B).
• Which format is most effective?
• Import all the purchase records of people who
  used either Mode 1 or Mode 2 into separate
  spreadsheets. 
• Compute the percentages in both modes. You know
  which mode worked better for your segment.

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More Examples

• Create special coupons. Use different codes for
  various messages or offers. That way, you'll know
  what attracts business or response.
• Buy a group of toll free 800 numbers and use
  different numbers for varying promotions.
• Can consumers decipher differences between a
  variety of broadband speeds?
• Test your marketing strategies in a small
  geographic area first. Work out the kinks. Then,
  duplicate the strategy to all markets.

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How effective is your pricing?

• Testing various price points to compute price
  elasticity.

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Step 3 Choosing a Method of Research Data
Sources
Primary Data Collected by the researcher for
the problem at hand. Focus groups Indepth
interviewing Surveys Observation Experiments

• Secondary Data
• Collected by persons other then the researcher

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Step 4 Sampling Fundamentals

• Population vs. Sample.
• Probability vs. Non-probability sampling.

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Non Probability Sampling Techniques

• Convenience
• Used to obtain information quickly and
  inexpensively
• Quota
• Minimum number from each specified subgroup in
  the population.
• Often based on demographic data.
• Snowball
• Each respondent, after being interviewed, is
  asked to identify one or more others in the
  appropriate group
• Example When conducting personal interviews
  about customer satisfaction with a treadmill, the
  interviewer can ask Do you know anybody that
  uses the same type of treadmill?

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• CUSTOMER RESEARCH

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Customer Characteristics

• As a small business owner, you should be able to
  answer the following questions
• What need does my product or service satisfy?
• Who needs and can afford what I am offering?
• Who has the authority to say "yes" to the product
  or service I am offering?
• How accessible is my product or service to my
  customers?

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KNOW your Customer

• Now that you know what youre looking for,
  develop an ideal demographic profile of your
  customer.
• Example Customer is married, age between 25-54,
  has children, lives in an upscale neighborhood,
  and reads the Time magazine
• Visualize your "ideal" customer. Then, try to
  imagine what their priorities might be in
  relation to your product or service.

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Possible Internal Sources of Secondary Data For
Customer-Centric Research
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Possible Internal Sources of Secondary Data For
Customer-Centric Research
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How do we get Customer Info?

• Telephone numbers Phone prefixes will tell
  geographic areas of your customers.
• Key your ads and coupons.
• Communicate with customers Every customer should
  get a "How did you find us?" question.
• Check license plates in your parking lot.

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Scoring Customers

• Create a customer database. Include prospects.
• All customers are not equal. Some customers are
  more equal than others.
• Use past customer behaviors to predict future
  behaviors.

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Using RFM to find best customers

• Recency, Frequency, Monetary (RFM) analysis can
  be used to categorize customers.
• Best Customers are those who
• Bought from you recently
• Buy from you frequently
• Spend a lot of money on your products and
  services.

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Recency

• Recency is the time that has elapsed since the
  customer made his most recent purchase.
• A customer who made his most recent purchase last
  month will receive a higher recency score than a
  customer who made his most recent purchase three
  years ago.
• Example of a Scoring system
• 1 Customers who made a purchase more than 9
  months ago2 Customers who made a purchase more
  than 3 months ago but fewer than 9 months ago3
  Customers who made a purchase in the last 3
  months

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Frequency

• Frequency is the total number of purchases that a
  customer has made within a designated period of
  time.
• A customer who made six purchases in the last
  three years would receive a higher frequency
  score than a customer who made one purchase in
  the last three years.
• Example of a Scoring system
• 1 Customers who made a single purchase in the
  past 12 months2 Customers who made between two
  12 purchases in the past year.3 Customers
  who made more than 12 purchases in the past year.

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Monetary

• Monetary is each customer's average purchase
  amount.
• A customer who averages a 100 purchase amount
  would receive a higher monetary score than a
  customer who averages a 20 purchase amount.
• Example of a Scoring system
• 1 Customers with an average purchase amount up
  to 15.2 Customers with an average purchase
  amount from 15 to 50.3 Customers with an
  average purchase amount greater than 50.

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Calculating RFM

• Rank customers in your database based on time
  since last purchase - Divide into 3 EQUAL groups
  with 3 being the 33 of customers who bought most
  recently
• Do the same thing again for frequency.
• Repeat the same exercise for total dollars spent.
• These three codes give us 27 different categories
  of customers ranging from 333 111.

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ANALYZE your Customers Highest Monetary Cells
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ANALYZE your Customers Lowest Monetary Cells
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Benefits of RFM Analysis (TRANSACTION or ONE-TIME
CUSTOMERS?)

• RFM Analysis can provide answers to the following
  questions
• Can I identify my best customers?
• Who do I e-mail offers to?  When do I e-mail
  them?  How often?
• Should I promote to some customers more often
  than others?  YES.
• How much incentive should I provide to get a
  customer to do something?
• How can I tell when Im losing a customer?
• Can I refine my marketing mix variables?

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• The next step after knowing and analyzing your
  customers is CLONING your customers.