Value of Marketing Research:
Example given in previous lecture
• Decision: – To launch a new product or keep selling the current product.
• Payoffs:
– Current product: $5 million
– New product: $ 1 million (if failure), $ 6 million (if success)
• Manager’s belief about success: 50%
• Now assume that a marketing research project can be done to accurately predict the success or failure of the new product. • What’s the value of the research?
Dr. Yacheng Sun, UC Boulder
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Assess the Value of
Marketing Research Information
Step 1. What will be the decision without
marketing research?
Step 2. What are the odds that marketing research will change the decision made in Step 1?
Step 3. When the change occurs, how much will be the gain?
Step 4. Value of MR= Odds of changing decision in
Step 2 × the gain in Step 3
Dr. Yacheng Sun, UC Boulder
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What happens if the prospect just gets rosier?
• Decision: – To launch a new product or keep selling the current product.
• Payoffs:
– Current product: $5 million
– New product: $ 1 million (if failure), $ 6 million (if success)
• Manager’s belief about success: 90%
Dr. Yacheng Sun, UC Boulder
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Assess the Value of
Marketing Research Information
Previous example This example
Decision without MR Invest the $10 mil (step 1) elsewhere Odds that MR will change the decision (step 2) Gain conditional on the change (step 3)
Value of research
(step 4) Invest the money in the watermelon business
50%
$1 million
$0.5 million
Dr. Yacheng Sun, UC Boulder
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One More Example
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3M is evaluating a new product for the college students
market. The estimated R&D cost for this product is
estimated to be $20 million and the marketing cost is $5
million.
Suppose with 1/3 of chance, the product will be a great
success, bringing $90 million in revenue; with chance of
1/3 it will be a failure, bringing $15 million revenue, and
with 1/3 it will be a disaster and will generate zero
revenue.
What is the value of the marketing research here?
The answer is $11.67 million.
Spend 3 minutes and try this example out yourself!
Dr. Yacheng Sun, UC Boulder
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• 1. Identify the status quo course of action without marketing research. 
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Expected cost
Expected revenue
Status quo course of action
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 2. Identify the scenario(s) in which marketing research will change the course of action and the odds for these scenarios.
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 3. Determine the gain conditional on the relevant scenario(s). Dr. Yacheng Sun, UC Boulder
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 4. Multiply the conditional gain and the odds for the scenarios.
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Notice that in this case, there are 2 scenarios in
which the research has the potential to change
status quo course of action and be valuable.
Thus, we need to calculate the expected value of
the marketing research, accounting for both
scenarios.
Expected Revenue
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MR Industry and Career in MR
MKTG 3350:
MARKETING RESEARCH
Yacheng Sun
Leeds School of Business
Dr. Yacheng Sun, UC Boulder
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Two types of organizations..
Client
Supplier
Organizations that provide
information for decision makers
within (typically) fortune 500
corporations.
Companies that provide products
and services to the consumer or
business community.
Organizations that provide
research services to client
organizations.
These companies focus on
providing marketing research
services to client organizations.
Sells to the client organizations.
Spends on marketing - advertising
and promotions budget.
Dr. Yacheng Sun, UC Boulder
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What companies represent each type?
Client
Dell
Motorola
Coca-Cola
Ford Motor Company
Microsoft
Excel energy
Roche Diagnostics
Pizza Hut
AT&T
Crocs
Supplier
Lynx Research Consulting
The MARC Group
Burke Research Services
Nielsen
BASES
IRI
GFK
Synovate
TNS
Research International
(See Homomichl’s list for the big ones…)
Dr. Yacheng Sun, UC Boulder
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What is great about each side?
Client
Supplier
To the Supplier, you are the boss
Industry expertise
Internally, you are often the expert on
research…power!
Researchers can make themselves into
very strategic tools within their
organizations
There are some jobs available in the
market…very difficult to get in fresh.
Variety – you will work for a lot of
different consultants, for a lot of different
clients.
A good client is a joy!
For the consultant, there is the thrill of
the hunt!
Tend to be very flat organizations
And the joy of teaching someone and
seeing that glimmer of understanding!
Dr. Yacheng Sun, UC Boulder
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What sucks about each side?
Client
Supplier
Inside the company, you have a lot of
bosses…all of your clients and your
boss…
Many of your clients won’t like the fact
that they have to do research
Research recommendations not
implemented
Researchers rarely ever get to be the
president of a fortune 500…too bad!
Client…no matter how unrealistic (crazy,
insane, etc) is your boss!
No one appreciates your good
work…clients expect it and management
expects you to sell (you are a god if you
do and a dog if you don’t)
Long hours – even a feeling of being in
the bowels of the organization…
Lots of travel
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Possible Jobs in Marketing
Research
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A Typical Career Path in Market Research Company
Associate Responsible for producing high quality research and analysis that is consistent with the project objectives as well as explaining findings in project and client meetings
Project Lead Responsible for producing high quality research and analysis that is consistent with the project objectives as well as explaining findings in project and client meetings
Analyst Responsible for producing high quality research and analysis that is consistent with the project objectives as well as explaining findings in project and client meetings
Source: Grail Research
Dr. Yacheng Sun, UC Boulder
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A Typical Career Path in Market Research Company
Project Manager Expert in one or more content areas or categories, overseeing the development of these skills across all of Grail Research
Client Engagement Manager Group management – Leading and managing talent within a group Project management – Running 4‐
5 projects on both content and process side – creating analytical plans, working with clients in ensuring high quality output for clients
Associate Project Manager Solid expertise and experience in one or more content areas or categories
Dr. Yacheng Sun, UC Boulder
Source: Grail Research
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Compensation for market researchers
0‐2 years of experiences
4‐6 years of experiences
2‐4 years of experiences
6‐8 years of experiences
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Qualities of a Good Researcher
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Help manager
to understand
real problem
Select among
viable
alternatives
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Fits technique
to problem
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Good
communication
skills
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Other Qualities
• Careful and conscientious
• Uses insider expertise
• Recognizes overt and covert purposes for marketing research
• Before doing research, knows
– Manager’s decision rule
– Decision time horizon
– Impact of wrong decision
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Top Things Clients Want in a Research
Company or Department
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•
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•
•
•
•
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•
•
Maintains client confidentiality
Honesty
Punctuality
Flexibility
Delivers against projects specifications
Provides high-quality output
Responsive to client’s needs
High quality-control standards
Customer-orientated in interactions with client
Keeps client informed throughout a project
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