Title: The Role of Marketing Research in Management Decision Making
1- The Role of Marketing Research in Management
Decision Making - Raj Echambadi
2Schematic of the Marketing Process
Product
Place
Promotion
Price
PROFITS
Based on Robert Dolans Note on Strategy, HBR
Press
3Examples of Marketing Research
- Any decision that helps in making informed
marketing decisions. Information gathering.
4Why do Marketing Research?
- The individual (wo)man is an insoluble puzzle, in
the aggregate (s)he becomes a mathematical
certainty. -
5Why do we need Marketing Research?
- Perception is Reality. SPAM. COLOR
- Initial perceptions can lead to selective
interpretation. That may hurt your prospects. - Environmental Changes.
6Benefits 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.
7Marketing 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.
8The 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.
9Types 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
10The 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
11Step 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
-
12Step 2 Research Design
13Exploratory 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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15Focus 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?
16In-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.
17Descriptive 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)
18Collecting 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
19Causal Studies
- Does one variable cause another?
- Experiment
- Test markets
A (Cause) ? B(Effect) Independent ? Dependent
20Example 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.
21More 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.
22How effective is your pricing?
- Testing various price points to compute price
elasticity.
23Step 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
24Step 4 Sampling Fundamentals
- Population vs. Sample.
- Probability vs. Non-probability sampling.
25Non 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?
26 27Customer 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?
28KNOW 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.
29Possible Internal Sources of Secondary Data For
Customer-Centric Research
30Possible Internal Sources of Secondary Data For
Customer-Centric Research
31How 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.
32Scoring 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.
33Using 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.
34Recency
- 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
35Frequency
- 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.
36Monetary
- 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.
37Calculating 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.
38ANALYZE your Customers Highest Monetary Cells
39ANALYZE your Customers Lowest Monetary Cells
40Benefits 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?
41- The next step after knowing and analyzing your
customers is CLONING your customers.