CHAPTER 4 DEFINING THE PROBLEM AND DETERMINING RESEARCH OBJECTIVES LEARNING OBJECTIVES To understand when marketing research is needed To understand the importance of properly defining the problem To know the two sources of problems and how to recognize them To understand the difference between a symptom and a problem To realize there are different types of problems To know the role the researcher should play in defining the problem and the impediments he or she faces To understand the role of ITB’s and RFP’s To examine a process of defining the problem and research objectives in a case situation To understand the role of research objectives CHAPTER OUTLINE ESTABLISHING THE NEED FOR MARKETING RESEARCH When is Marketing Research Not Needed? DEFINE THE PROBLEM The Importance of Properly Defining the Problem How Can We Beat Burger King? How Can We Win a Taste Test? Two Sources of Problems Recognizing the Problem The Role of Symptoms in Problem Recognition Types of Problems The Role of The Researcher in Problem Definition Impediments to Problem Definition 44 Chapter 4: Defining the Problem and Determining Research Objectives Failure to Change Behavior for Problem Definition Situations Differences Between Managers and Researchers The Role of ITB’s and RFP’s A PROCESS FOR DEFINING THE PROBLEM AND ESTABLISHING THE RESEARCH OBJECTIVES Assess the Background and the Manager’s Situation Clarify the Symptoms of the Problem Pinpoint Suspected Causes of the Symptom University Estates: An Example of the Problem Definition Process Specify Possible Solutions that May Alleviate the Symptom Back to University Estates Speculate on Anticipated Consequences of the Solutions Back to University Estates Identify the Manager's Assumptions About the Consequences of the Solutions The Role of Hypotheses in Defining the Problem Back to University Estates Assess the Adequacy of Information on Hand to Specify Research Objectives Back to University Estates FORMULATE THE MARKETING RESEARCH PROPOSAL Problem Statement Research Objectives The Role of Constructs Detail the Proposed Research Method PUTTING IT ALL TOGETHER USING THE INTEGRATED CASE FOR THIS TEXTBOOK KEY TERMS Problem Opportunity Marketing opportunity Opportunity identification Symptoms Situation analysis ITB’s RFP’s Market Opportunity Analysis Cause Possible cause Probable cause Solutions Consequences Assumptions Hypotheses Information state Information gaps 45 Chapter 4: Defining the Problem and Determining Research Objectives Research objectives Marketing research proposal Construct Operational Definition Research method TEACHING SUGGESTIONS 1. Students will have some difficulty relating to the differences between managers and researchers. Instructors may wish to use the table in our earlier editions (e.g., the 4th edition) as a teaching aid. (We eliminated the table in the 5th edition to conserve space.) 2. If you have had a recent consulting experience with an interesting problem definition dialogue, use it as an example in class. Consider “acting out” the roles of the manager and the researcher in a question and answer format. Alternatively, you can have the class play the role of the researcher, and you play the manager. Exaggerate your manager role by giving cryptic answers and going into detail on irrelevant topics to emphasize that the researcher must be a persistent detective during the problem definition stage. 3. A slightly more risky variation of the dialogue is to actually have a manager come to the class with a marketing problem. You and/or the class play the role of the marketing researcher. You will have to do “stop action” timeouts to explain why certain questions are asked and to explain how the manager’s answers figure into the problem definition process. It is important that the manager agree to this approach beforehand. If students know that a real marketing manager is coming to class, it may inspire them to study the problem definition material as preparation for the class. 4. We find that students often fail to make the transition from solving marketing problems (which is the orientation of all of their marketing courses to date) to thinking about providing information to help a marketing manager solve a problem (which is the purpose of marketing research). An in-class exercise that can help alleviate this problem is to pose a topic question such as “Should (insert company name) cut its prices by 20 percent?” Some students will immediately rush to the recommendation to cut prices, but others will want to have more information. Class brainstorming can identify the needed information. When 10 to12 information topics are noted and agreed upon by the majority of the class as information needs, the instructor can then point out that marketing research activities are necessary to gather this information. That is, the researcher’s task is to gather accurate and timely information, not make the decision. 5. The University Estates example that is continued throughout the chapter is specifically chosen as one that students can relate to. Most college students live off campus, so they have had experience with apartment searches, and while they may 46 Chapter 4: Defining the Problem and Determining Research Objectives not live in student-oriented apartment complexes, they should be able to relate to this concept. Even those who live on campus should have little difficulty relating to the competition that goes on among apartment complexes that are targeting the students of the nearby university or college. Instructors are encouraged to use the University Estates example in class as an example. For instance, go over this example and make certain that students understand how the list of potential causes was narrowed down to probable causes. 6. Class discussion can be generated by presenting students with a problem situation and having them work through the step where they specify actions that may solve the problem plus identifying the consequences of each action. Here are some scenarios. Perrier notices that it is losing market share to fruit-flavored sparkling water competitors The school newspaper finds it increasingly difficult to sell advertising space The American Automobile Association thinks that carjacking is the number one fear of its members 7. The concepts of assumptions, information states, and information gaps are somewhat abstract. It is useful to provide students with concrete examples. One strategy is to identify a student who has a management capacity or who has knowledge of a company, such as a family business. Ask the student what he/she thinks the company can do to perform better. Then query the student to determine assumptions, certainty of these assumptions, and where there is uncertainty. 8. The concept of an operational definition is not easy for students to understand this early in the course. Instructors may wish to use example operational definitions for commonly used constructs. The point of the discussion is that researchers are thinking way ahead of the problem definition and about the actual research methods including how the questions will appear on the questionnaire and how the results will be reported. It illustrates how much difference exists between the orientation of the researcher and the manager. A ‘what-if” exercise that is useful to emphasize these differences is to take two or three of the constructs and say, for example: “What if the researcher found that 80 percent of the respondents are unfamiliar with the manager’s brand?” “What if the researcher found that most respondents did remember a recent ad for the product?” The point is that the researcher would stop at reporting these findings, but the manager would go to work on them. 47 Chapter 4: Defining the Problem and Determining Research Objectives 9. The hierarchy of effects is only an illustration of a model that can be used to structure constructs into relationships. It is fairly intuitive, and students will grasp it easily. Other models that might be introduced include the following. Involvement (high, low, situational, enduring) Elaboration likelihood model Importance-performance model Purchase process model Adoption model Service quality model Satisfaction model 10. The chapter describes generically what is in a research proposal, and it provides a short proposal example using the University Estates problem case. If you have a research proposal with which you are familiar, such as a consulting project, consider using it as an example because students will relate to a specific example. 11. Students will have little appreciation of the amount of work that goes into problem definition and proposal development by marketing research companies. They will also underestimate the amount of competition for research business. You may have a colleague in economics or real estate who has done a lot of grant proposal writing. This is analogous to responding to an ITB and ties in with the ITB/RFP aspects of the chapter. Ask your colleague to talk to the class about grant proposals, particularly the (low) success percentage. If you are lucky, he or she may also note some of the political aspects of grant awards. 12. The Integrated Case, “The Hobbit’s Choice Restaurant,” is introduced with considerable detail toward the end of the chapter. References are made to this case situation with various topics in subsequent chapters, and there is an end-of-chapter integrated case item for most chapters beginning with this chapter (chapter 4). Instructors who intend to use the integrated case are advised to go over the integrated case description to ensure that students have a good grasp of its nuances. The headings in the integrated case section of chapter 4 can be used as topic questions for students to respond to in class. ACTIVE LEARNING EXERCISES Want to see some actual RFP’s and ITB’s? Go to advanced search at www.google.com. At “With at least one of the Words” enter ITB RFP. You will get many hits, and that is ok. Explore and you will find actual ITB’s and RFP’s. You will also find some sites designed to help you write an effective ITB or RFP. 48 Chapter 4: Defining the Problem and Determining Research Objectives This search many result in a great many and different types of ITB’s or RFP’s as they are not constrained to marketing research proposals. As this is a “dynamic” search with the results changing daily, there is no single example to point out. Instructors may wish to perform this search ahead of class and/or assigning this exercise to students in order to anticipate what students might encounter. ANSWERS TO END-OF-CHAPTER QUESTIONS 1. Name the situations in which marketing research is not needed. Review question. Students must find the four situations. Marketing research is not needed when: (1) information is already available, (2) the timing is wrong, (3) funds are not available, and (4) costs outweigh the value of the marketing research. 2. Name the situations in which marketing research is needed. Review question. Students must find the three situations listed under “When will research more likely have greater value?” Some guidelines for answering this question are: Will the research help clarify problems or opportunities? Will research identify changes that are occurring in the marketplace among consumers and/or competitors? Will research clearly identify the best alternative to pursue among a set of proposed alternatives? Will the research help your brand establish a competitive advantage? 3. Explain why defining the problem is the most important step in the marketing research process. Review question. If the problem is not defined correctly, all of the following steps in the marketing research process will be wasted. That is, the wrong problem will be investigated, and the findings will not be useful to the marketing manager. 4. Give an example of a research project that was conducted with the wrong problem definition. Review question. Students should recall the McDonald’s and Coke examples. The two examples cited are McDonald’s who defined the problem as “How can we beat Burger King rather than on adult fast food customers preferences and diet 49 Chapter 4: Defining the Problem and Determining Research Objectives preferences and Coke who defined the problem as “beating the competitor in taste tests” instead of “how can we gain market share against our competitors?” 5. What are the two sources of marketing problems? Review question. Students should relate the two sources. A problem exists when a gap exists between what was supposed to happen and what did happen. This second type of problem, called an opportunity, occurs when there is a gap between what did happen and what could have happened. 6. Explain how managers should recognize they have a problem. Review question. This requires understanding of problem recognition. Unless managers have a control system they will not likely identify problems arising from failure to meet objectives. Managers must also be aware of opportunities and unless they have a system for monitoring opportunities they will not likely identify these problems. 7. What is the role of symptoms in problem recognition? Review question. Students must relate the definition and how symptoms figure into problem recognition. Symptoms are changes in the level of some key monitor that measures the achievement of an objective, such as our measure of customer satisfaction has fallen 10 percent in each of the last two months. In this case, the role of the symptom is to alert management to a problem; there is a gap between what should be happening and what is happening. A symptom may also be a perceived change in the behavior of some market factor that implies an emerging opportunity. 8. Explain how problems may vary, and give some examples. We have already established that the sources of problems may differ: some arise through recognition of a failure to meet an objective (example: not gaining the desired market share) and others from the recognition of an opportunity (example: realizing the Ebay could be used to sell one’s products). We can also characterize problems in terms of their being specific (example: what price to charge) versus general (example: what target market strategy to use). 9. What is the role of the researcher in problem definition? Review question. Students should identify the researcher’s role. 50 Chapter 4: Defining the Problem and Determining Research Objectives The researcher has an obligation to help managers ensure they are defining the problem correctly. 10. Explain the impediments to problem definition. Review question. Student must find and relate the two impediments. Two impediments are described in the chapter: Failure to Change Behavior for Problem Definition Situations Differences Between Managers and Researchers 11. Discuss the differences between managers and researchers. Review question. These are found in the section with this name. Managers possess line positions; researchers are in staff positions. Managers are responsible for generating profits; researchers are responsible for generating information. Managers are trained in general decision making, and researchers are trained in research techniques. 12. What are ITB’s and RFP’s used for? Review question. Students must define these terms and describe how they figure into the research process. ITB’s stands for “invitations to bid.” Alternatively, some firms use RFP’s which stands for “requests for proposals. Companies use these documents to alert research firms that they would like to receive bids or proposals to conduct research. In either case, the role of the researcher and manager is changed in the problem definition process. 13. Discuss the ethical problem with phony ITB’s or RFP’s. Review question. Students should understand why bogus or phony ITB’s or RFP’s are unethical. This practice is one where the company issuing the ITB/RFP is seeking ideas on how to do the research, probably so it can do the research itself or otherwise to bargain down the price. It is unethical because marketing research firms spend time and money thinking they will gain business, but none comes from their efforts. 14. What is the process for determining the problem and establishing research objectives? Review question. The task is for students to list the steps. 51 Chapter 4: Defining the Problem and Determining Research Objectives The process is identified as steps to be taken. These steps are: Assess the Background and the Manager’s Situation Clarify the Symptoms of the Problem Pinpoint Suspected Causes of the Symptoms Specify Possible Solutions that May Alleviate the Symptom Speculate on Anticipated Consequences of the Solutions Identify the Manager's Assumptions About the Consequences of the Solutions Assess the Adequacy of Information on Hand to Specify Research Objectives Specify research objectives 15. Explain how the process for determining the problem and establishing research objectives differs when a manager is faced with an opportunity instead of a failure to reach an objective. Review question. Differences between these two cases are called for. The major difference is that, for opportunities, the firm must do research to determine the attractiveness and probability of success of any opportunity, referred to as market opportunity analysis (MOA). With failure to reach an objective, the researcher must determine causes and assess possible solutions (actions). 16. What is the difference in a possible versus a probable cause? Review question. This question will entice students to think about the difference between a possible and a probable cause to a problem. Problems do not arise out of the blue—there always is an underlying cause, or a factor that underlies and gives rise to the symptom. A possible cause is any conceivable cause of the problem, while a probable cause is a small set of possible causes that defines the most likely factors giving rise to the symptoms. 17. What is the role of a hypothesis in defining the problem? Review question. This answer is found under “The Role of Hypotheses…” Hypotheses are statements that are taken for true for the purposes of argument or investigation. In making assumptions about the consequences of solutions, managers are making hypotheses. When a manager makes a statement he or she believes to be true and wants the researcher to determine if there is support for the statement, we call these statements hypotheses. 52 Chapter 4: Defining the Problem and Determining Research Objectives 18. Why is the information state important to resolving a problem? Review question. The answer to this question points out why it is vital for the marketing manager and the researcher to work closely in problem definition. The existing information state is the quantity and quality of evidence a manager possesses for each of his or her assumptions. During this assessment, the researcher should ask questions about the current information state and determine the desired information state. Conceptually, the researcher seeks to identify information gaps, which are discrepancies between the current information level and the desired level of information at which the manager feels comfortable resolving the problem at hand. Ultimately, information gaps are the basis for establishing research objectives. 19. What are the components of the marketing research proposal? Review question. The components must be identified. The components are: Problem statement Research objectives Constructs (can be subsumed in research objectives) Proposed research method Here is a detailed description. Function Defines the marketing management problem Description The problem statement identifies: (1) the client company and principals, (2) symptoms, (3) possible causes of these symptoms, and (4) anticipated uses of the research. The proposal itemizes the information objectives agreed to by the manager and researcher. The proposed research method identifies data collection mode, questionnaire design, sample plan, and other aspects of the anticipated marketing research. Specifies the research objectives Details the research method proposed by the researcher to accomplish the research objectives 20. Sony is contemplating expanding its line of 3-inch and 6-inch portable televisions. It thinks there are three situations in which this line would fit to be purchased: (1) as a gift; (2) as a set to be used by children in their own rooms, and (3) for use at sporting events. How might the information objective be stated if Sony wished to know what consumers’ preferences are with respect to these three possible uses? Application question. Here is the information objective. 53 Chapter 4: Defining the Problem and Determining Research Objectives To determine if prospective buyers of either 3-inch or 6-inch color portable televisions are purchasing their TVs as a gift, a child’s room set, or for use at sporting events, or if they have no preference. 21. Take the construct of channel (i.e., “brand”) loyalty in the case of teenagers viewing of MTV. Write at least three different definitions that indicate how a researcher might form a question in a survey to assess the degree of MTV loyalty. One example is “Channel loyalty is determined by a stated preference to view a given channel for a certain type of entertainment.” Application question. Here are some alternative definitions of the channel loyalty construct. We have simply taken alternative definitions of brand loyalty and applied them to television viewing. Here are four examples. Television channel loyalty is: The channel the person recalls watching most recently The channel that was on when the television was last turned off The channel that the person spends most of his or her time watching The channel the person considers most entertaining 22. You just started a new firm manufacturing and marketing MP3 players. Since your design offers more storage and several other features at two-thirds the cost of the lowest priced competitor, your sales have been very good and it has been difficult to keep up with production. Describe the systems you need to put into place in order to detect problems your firm may have now or in the future. Application question. This question will require students to reflect on what monitors are appropriate to use in order to reveal possible problems, that is, what symptoms should be monitored? The monitors (systems) to put in place are: a. Total sales – the total number of units sold per quarter, or in relevant time periods, including the trend of these sales b. Stockouts (or unfilled orders) – to identify production shortfalls. c. Brand share - the percent of the MP3 sales accounted for by your firm d. Market segment (or target market) - subgroups of MP3 buyers who have different demographic profiles and/or needs with respect to your firm’s MP3 model(s). 54 Chapter 4: Defining the Problem and Determining Research Objectives e. Brand image - the perception of how well a brand performs in satisfying customers’ needs and wants, or a target market’s desired performance f. Brand purchase decision influences - any person, event, or factor that affects the person’s choice of a particular MP3) brand. These include competitors’ actions such as coupons or a price reduction, family member roles such as children’s or a spouse’s preferences, or changes in the customer such as need for more storage, better sound quality, and so forth. g. Marketing mix - those factors under the control of the brand manager that can affect the brand’s sales, including any promotion, price, packaging, distribution, or product performance changes 23. The local Lexus dealer thinks that the 4-door sedan with a list price in excess of $40,000 should appeal to Cadillac Seville owners who are thinking about buying a new automobile. He is considering a direct-mail campaign with personalized packages to be sent to owners of Cadillac Sevilles that are over two years old. Each package would contain a professional video of all the Lexus sedan’s features and end with an invitation to visit the Lexus dealership. This tactic has never been tried in this market. State the marketing management problem and indicate what research objectives would help the Lexus dealer understand the possible reactions of Cadillac Seville owners to this campaign. Application question. This is a test of how well students have learned to differentiate the marketing management problem from the marketing research problem. The Lexus dealer has identified targeted direct mail and the video approach that complements the high income life style that probably accompanies Cadillac Seville owners. Here is the marketing management problem. To determine a tactic that will induce Cadillac Seville owners who are thinking about buying a new automobile to consider the Lexus 4-door sedan model. Note that this is a general statement, and that the Lexus dealer appears to have thought through the various alternatives and narrowed the alternatives down to the one described. Here is the marketing research problem. To determine what percent of owners of Cadillac Sevilles that are two years older will visit a Lexus dealership as a result of watching the professional video. It is important that students realize that actual sales cannot be estimated accurately because there are too many factors impinging on the purchase decision. Also, a single video is very unlikely to spur a $40,000 purchase decision. Another problem is that the video must actually be seen. To illustrate this point, instructors can ask students if they would have still chosen this university to 55 Chapter 4: Defining the Problem and Determining Research Objectives attend if they had received a video on another university. They will respond by asking what is on the video, just as the Cadillac Seville owners cannot assess their reaction to the vague idea of a “video.” CASE SOLUTIONS Case 4.1 AJResearch Case Objective This case provides five mini-cases where students must specify the marketing research objectives. Answers to Case Questions Using the information above, determine the research objectives for each client. 1. Wired, Inc., an electronics firm, has developed a new flat screen television that will sell for one-third of the price of those currently on the market. Problem: Will there be enough demand to offset the large fixed costs of retooling to make the new television sets? Objective: Estimate the number of these units that will be sold in a year. (We can assume that the fixed costs are known because it is internal information; also profit margin for the new unit is assumed to be known for the same reason.) 2. Wacky Znacks, a large snack foods firm, has made a name for itself with wild flavored snacks like licorice cookies and jalapeno sunflower seeds. Problem: They feel that customers expect even wilder flavors. Wacky Znacks wants to know what consumer reactions would be to even more unusual flavored snacks, i.e., watermelon flavored corn chips and barbeque flavored chewing gum. Objective: Determine what Wacky Znacks flavors consumers will consider buying. (This will be a concept test or a taste test situation.) 3. Wild About Toys is a large toy firm that enjoys surprising consumers with innovative new toys. They have developed an edible clay for children. Problem: Will parents want to purchase a toy that their children can also eat? Objective: Determine the reactions of parents to edible clay. 4. Jimmy Roberts wants to start small catalog business that caters to new parents. He wants to offer a variety of high-quality, higher-price items. Problem: So many different baby products exist. Roberts needs to start with a limited product line. Which products should he start his business with? 56 Chapter 4: Defining the Problem and Determining Research Objectives Objective: Identify those baby products that new parents expect to have high quality and where they are willing to pay premium prices. 5. The Better Butter company has spent many years researching and developing a butter product that the company believes is truly superior to other butters on the market. Problem: There are a plethora of butter products” Objective: Identify those package characteristics or features that customers associate with a superior brand of butter. Case 4.2 The Hobbit’s Choice Restaurant Case Objective This case will help students to understand how to develop a list of research objectives and to specify constructs that should be researched based on these objectives. Answers to Case Questions 1. For each of the management problem items specified in Table 4.6 identify a corresponding research objective. Problem Item Will the restaurant be successful? How to design the restaurant? What should be the average price of entrees? What is the optimum location? Description/Research Objectives Will a sufficient number of people patronize it? What percent of people want to dine in an upscale restaurant? How often will those who want to, do so? What about décor, atmosphere, specialty entrees and deserts, wait staff uniforms, reservations, special seating, and so forth. What are the preferences of those who want to dine in an upscale restaurant with respect to… (each of the above)? How much are patrons willing to pay for the “standard” entrees as well as for the “house specials”? What do they expect to pay for: (1) standard entrees and (2) house specials? How far from patrons homes are they willing to drive, and are there any special location features (such as waterfront, ample parking, etc.) to take into consideration? What is the distance (in miles or minutes) that those who would patronize an upscale restaurant will drive to patronize it? 57 Chapter 4: Defining the Problem and Determining Research Objectives What is the profile of target market? What are the best promotional media? Are they willing to drive a greater distance with each special location feature, and if so, how far? What are the demographic and/or life style profiles of those who are going to patronize The Hobbit’s Choice? What demographic characteristics and/or life style differences are specific to those who would patronize the restaurant? What advertising media should be used to best reach the target market? What are the media usage patterns that are specific to those who would patronize the restaurant? 2. For each of your research objectives, identify relevant constructs and possible ways to measure each construct. Research Objectives What percent of people want to dine in an upscale restaurant? How often will those who want to, do so? What are the preferences of those who want to dine in an upscale restaurant with respect to… (each of the above)? What do they expect to pay for: (1) standard entrees and (2) house specials? What is the distance (in miles or minutes) that those who would patronize an upscale restaurant will drive to patronize it? Construct and Measurement Likelihood of using – unlikely to very likely Frequency of patronage – number of times per month Desirability scale – undesirable to very desirable for each item Dollar amount they expect to pay for standard entrees and for specials Estimated driving distance (from home) Are they willing to drive a greater distance with each special location feature, and if so, how far? Additional driving distance they would travel for each special location feature What demographic characteristics and/or life style differences are Use standard demographics from Census – age, education, income, family size, and so on. 58 Chapter 4: Defining the Problem and Determining Research Objectives specific to those who would patronize the restaurant? What are the media usage patterns that are specific to those who would patronize the restaurant? Use life style inventory (this is the standard way to measure life style) Frequency (never to very often) of viewing, listening, reading (whatever is appropriate) for each local media option, such as TV station programs, radio stations, newspaper, and so on by time of day 3. Go back and reread Marketing Research Insight 4.2. You will see that Ron Tatham discusses a concept he calls the “action standard.” What is an action standard? Identify the action standard in the Hobbit’s Choice Case for determining if there will be adequate demand. An action standard is a quantitative finding that allows the manager to choose a particular course of action. The action standard(s) is specified by Cory: “He told Jeff that if only 4 percent of heads of households in the 12 zip code area claimed they were “very likely” to patronize the restaurant and if these same people spent an average of $200 per month in restaurants and were willing to pay an average of $18 for an à la carte entrée, then the model predicted a very successful restaurant operation.” Thus, if the research finds these numbers or higher, the action will be “go.” 59