MKTG504: MARKETING MANAGEMENT
Topic Guide
Marketing Information, Strategy, and Plans
Summary
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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.
Table 1: Selected Marketing
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:
1. 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.
2. Descriptive research designs– These designs provide a description of the
units studied.
3. 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]
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
0
Function
Marketing Information
847
System
Marketing Decision
112
Support System
TERM
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:
http://www.altavista.com/av/content/help.htm
The anatomy of a typical address is:
http:// : 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
"customer satisfaction"
Documents
matching query
148,202
+"customer satisfaction" +hotel
+"customer satisfaction" +hotel
+"United States"
"four seasons hotel"
+"four seasons hotel"
+"customer satisfaction"
25,745
4,854
5,915
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 FIND
DATA YOU DO
NOT FIND
DATA YOU NEED
DATA YOU DO NOT NEED
OBJECTIVE OF
SEARCH
ERROR: Missed
useful data
ERROR: Must wade
through extra 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:
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Directory: Yahoo at www.yahoo.com
Index: AltaVista at www.altavista.digital.com
Index: HotBot at www.hotbot.com
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:
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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.
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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
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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.
Knowledge of markets is essential in developing effective marketing strategies
and plans which are considered next.
Marketing Strategy and Plans
Ansoff's product/market expansion grid [Figure 1] is a useful method of showing
marketing strategic alternatives. Do we want to fight for a greater share of our
current markets, develop new products for our current markets, or take our
existing products to new markets? On an organizational scale larger than
marketing strategy we could choose to diversify our organization through
mergers and acquisitions.
FIGURE 1: Growth Strategies (Ansoff 1957)
CURRENT
MARKETS
NEW
MARKETS
CURRENT
NEW
PRODUCES
PRODUCTS
Market
Product
Penetration
Development
Market
Diversification
Development
Having evaluated and selected a strategy of penetration or development specific
market plans can be constructed as outlined previously as:
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Executive Summary and Table of Contents
Situation Analysis
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o
o
o
o
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Market
Company
Competition
Macroenvironment
Opportunity Analysis
Objectives
Action Program
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o
o
o
o
Product
Price
Promotion [Marketing Communications]
Place [Distribution]
Reference
Ansoff, Igor (1957) Strategies for Diversification," Harvard Business Review,
Sept-Oct., pg. 114.
Internet References
Example Business and Market Plans