The Nature of Marketing

1
The Nature of Marketing

• Marketing
• Is the process of planning and executing the
  conception, pricing, promotion, and distribution
  of ideas, goods, and services to create exchanges
  that satisfy individual and organizational
  objectives.

2
The Nature of Marketing

• The Marketing Concept
• To effectively accomplish their goals, firms
  today have adopted the marketing concept, which
  requires
• A consumer orientation.
• Long-run profitability rather than sales volume.
• A cross-functional perspective.

3
The Nature of Marketing

• Identifying Target Markets and Researching the
  Marketing Mix The Opportunistic Nature of
  Marketing Research
• Marketing Mix
• A marketing mix is the unique blend of
  product/service, pricing, promotion, and
  distribution strategies designed to reach a
  specific target market.
• The External Marketing Environment
• Marketing research is a key means for
  understanding the external environment.

4
Plan and Implement a Marketing Mix

• Price Safeway does a competitive pricing
  analysis
• Distribution Caterpillar Tractor Co.
  investigates dealer service program.
• Product Oreo conducts taste test, Oreo cookie
  vs. Chips Ahoy
• Promotion How many consumers recall the Life
  Tastes Good. Coca Cola! slogan?

5
Keeping Customers and Building Relationships

• RELATIONSHIP MARKETING - the idea that a major
  goal of marketing is to build long-term
  relationships with the parties who contribute to
  the companys success.
• Marketers want customers for life.
• Managing the relationships that will bring about
  additional exchanges

6
The Role of Marketing Research in Decision Making
Marketing Research is the Primary Tool for
Exploring New Opportunities in the Marketplace
Marketing Research is Part of the
Marketing Intelligence Feedback Program
7
Marketing Research Defined
Marketing research is the planning, collection,
and analysis of data relevant to marketing
decision making and the communication of the
results of this analysis to management.
8
The Importance of Marketing Research to Management

• Marketing Research Plays Three Functional Roles
• Descriptive
• The gathering and presentation of statements of
  fact.
• Diagnostic
• The explanation of data or actions.
• Predictive
• Specification of how to best take advantage of
  opportunities as they arise in the ever-changing
  marketplace.

9
Trends Influencing the Importance of Marketing
Research
The Unrelenting Drive for Quality and Customer
Satisfaction
The Paramount Importance of Keeping Existing
Customers
The Need for Managers to Understand the
Ever-Changing Marketplace
10
The Proactive Role of Marketing Research
Understanding the nature of the marketing system
is necessary for a successful marketing
orientation. By having a thorough knowledge of
factors that have an impact on the target market
and the marketing mix, management can be
proactive rather than reactive.
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Characteristics of a Proactive Management
Orientation

• Proactive Management Orientation
• Alters the marketing mix to fit newly emerging
  patterns in economic, social, and competitive
  environments.
• Continually seeks new opportunities in the
  ever-changing marketplace with both existing
  customers and potential new customers.
• Not only examines emerging markets but also
  seeks, through strategic planning, to develop a
  long-run marketing strategy for the firm.

12
Applied Research versus Basic Research
Basic Research
Applied Research
Research aimed at solving a specific, pragmatic
problem - often focused on trying to better
understand the marketplace or why a strategy
failed.
Research aimed at expanding the frontiers of
knowledge rather than solving a specific,
pragmatic problem.
13
Situations That Preclude the Effective Use of
Marketing Research

• A Lack of Resources
• Research Results Would Not be Useful
• Poor Timing in the Marketplace
• The Decision Already has been Made
• When Managers Cannot Agree on What They Need to
  Know to Make a Decision

14
Situations That Preclude the Effective Use of
Marketing Research

• When Decision-Making Information Already Exists
• When the Cost of Conducting Research Outweighs
  the Benefits

15
Determining When to Conduct Marketing Research
Time Constraints
Availability of Data
Nature of Decision
Benefits vs Costs
Is the information already on hand inadequate for
making the decision?
Is the decision of considerable strategic or
tactical importance?
Does the value of the research information exceed
the cost of conducting research?
Is sufficient time available before a managerial
decision must be made?
Conduct Marketing Research
Yes
Yes
Yes
Yes
No
No
No
No
Do Not Conduct Marketing Research
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Potential Value of a Marketing Research Effort
Should Exceed Its Estimated Costs
Costs
Value

• Research expenditures
• Delay of marketing decision and possible
  disclosure of information to rivals
• Possible erroneous research results

• Decreased uncertainty
• Increased likelihood of a correct decision
• Improved marketing performance and resulting
  higher profits

17
The History of Marketing Research
The Inception Pre-1900
Early Growth 1900-1920
The Adolescent Years 1920-1950
The Maturing of Marketing Research 1950-Present
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Marketing Research in the 21st Century

• Increased globalization
• Growth of the Internet and other information
  technologies

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Global Research

• Business Research is increasingly global
• Market knowledge is essential
• A.C. Nielsen - more that 67 international
  business

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Global Marketing Research

• General information about country - economic
  conditions and political climate
• Cultural and consumer factors
• Market and competitive conditions - demand
  estimation

21
The Growing Role of Strategic Partnering and
Global Research

• Strategic Partnering
• Marketing research is becoming a team effort
  between supplier and client/user.
• In a strategic partnership, the client and
  research firm work together on a forward-looking
  and ongoing basis.
• About half of all large marketing research
  departments engage in strategic partnering with
  research suppliers.

22
Global Marketing Research Trends
Strategic partnering is not just an American
phenomenon but is occurring all around the globe.
23
The Internet is Transforming Society

• Time is collapsing.
• Distance is no longer an obstacle.
• Crossing oceans is only a mouse click away.
• People are connected 24 hours a day, seven days a
  week.
• "Instantaneous" has a new meaning.

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Internet Research

• Seeking facts and figures about an issue
• Surveys on Web sites

25
Marketing Research Today and in the Future
Precisely where research will go in the future is
difficult to foretell, but it is safe to predict
that marketing research will greatly expand both
quantitatively and qualitatively.
26
The Marketing Research Process
Follow-up
Writing and Presenting the Report
Creation of the Research Design
Problem/ Opportunity Identification Formulation
Choice of Method of Research
Analysis of the Data
Collection of the Data
Selection of the Sampling Procedure
27
Step 1 Problem/Opportunity Identification and
Formation

• The research process begins with the recognition
  of a marketing problem or opportunity.
• As changes occur in the firms external
  environment, marketing managers are faced with
  the questions, Should we change the existing
  marketing mix? and, If so, how?

28
The formulation of the problem is often more
essential than its solution

• Albert Einstein

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Important Points About Problem/Opportunity
Definition

• Marketing Research Problem
• The marketing research problem is information
  oriented. It involves determining what
  information is needed and how that information
  can be obtained efficiently and effectively.
• Marketing Research Objective
• The marketing research objective, then, is to
  provide insightful decision-making information.

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Important Points About Problem/Opportunity
Definition

• Management Decision Problem
• The management decision problem, in contrast, is
  action oriented.
• Management problems tend to be much broader in
  scope and far more general, whereas marketing
  research problems must be more narrowly defined
  and specific if the research is to be successful.

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3 Key Questions at the Problem/ Opportunity
Definition Stage
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Using Exploratory Research to Define the
Problem/Opportunity

• Exploratory Research
• Exploratory research is usually small-scale
  research undertaken to define the exact nature of
  the problem and to gain a better understanding of
  the environment within which the problem has
  occurred.

33
Definition of Research Objectives

• The culmination of the problem/ opportunity
  formulation process is a statement of the
  research objectives.
• These objectives are stated in terms of the
  precise information necessary to answer the
  marketing research problem/opportunity.
• Objectives must be as specific and unambiguous as
  possible. The entire research effort is geared
  toward achieving the objectives.

34
Research Objectives Stated as Hypotheses

• Often researchers state research objectives in
  the form of a hypothesis.
• A hypothesis is a conjectural statement about a
  relationship between two or more variables that
  can be tested with empirical data.

35
Step 2 Creating the Research Design

• The research design is the plan to be followed to
  answer the research objectives or hypotheses.
• There is no single, best research design.
  Instead, the investigator faces an array of
  choices, each with certain advantages and
  disadvantages.

36
Descriptive vs. Causal Studies
The researchers first task is to decide whether
the research will be descriptive or causal.
Studies that answer the questions who, what,
when, and how
Studies that examine whether one variable causes
or determines the value of another variable
Descriptive
Causal
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Descriptive and Causal Studies

• Descriptive Studies
• Implicit in descriptive research is the fact that
  management already knows or understands the
  underlying relationships of the problem area.
• Descriptive studies are limited to answering who,
  what, when, where, and how questions.

38
Descriptive and Causal Studies

• Causal Studies
• In causal studies the researcher investigates
  whether one variable causes or determines the
  value of another variable.
• A dependent variable is a variable expected to be
  predicted or explained. An independent variable
  is a variable in an experiment that the market
  research can, to some extent, manipulate, change,
  or alter.
• Criteria for causation.
• Temporal sequence and concomitant variation.

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Degree of Problem Definition
Exploratory Research Descriptive
Research Causal Research (Unaware of
Problem) (Aware of Problem) (Problem Clearly
Defined) Our sales are declining and What
kind of people are buying Will buyers purchase
more of we dont know why. our product? Who
buys our our products in a new package? competi
tors product? Would people be interested
Which of two advertising in our new
product idea? What features do buyers
prefer campaigns is more effective? in our
product?
possible situation
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Step 3 Choosing a Basic Method of Research

• A research design, either descriptive or causal,
  is chosen according to a projects objective.
• The next step is to select a means of gathering
  data (or research methods).

41
Basic Research Methods

• Survey
• Research in which an interviewer interacts with
  respondents (except in mail surveys) to obtain
  facts, opinions, and attitudes.
• Observation
• Descriptive research that monitors respondents
  actions without direct interaction.

42
Basic Research Methods

• Experiments
• The objective of experiments is to measure
  causality.
• An experiment is distinguished by the researchers
  changing one or more variables -- price, package,
  design while observing the effects of those
  changes on another variable (usually sales).

43
Step 4 Selecting the Sampling Procedure

• A sample is a subset from a larger population.
• Once the population has been defined, the next
  question is whether to use a probability sample
  or a nonprobability sample.

44
Probability versus Nonprobability Samples
Probability Samples
Nonprobability Samples
Subsets of a population that ensure a
representative cross section by giving every
element in the population a known nonzero chance
of being selected
Subsets of a population in which little or no
attempt is made to ensure a representative cross
section
45
Step 5 Collecting the Data

• Most data collection is done by marketing
  research field services.
• Field service firms, found throughout the
  country, specialize in providing personal and
  telephone interviewing for data collection on a
  subcontract basis.

46
Step 6 Analyzing the Data

• After the data have been collected, the next step
  in the research process is data analysis.
• The purpose of data analysis is to interpret and
  draw conclusions from the data that has been
  collected.

47
Step 7 Preparing and Writing the Report

• After data analysis is completed, the researcher
  must prepare the report and communicate the
  conclusions and recommendations to management.
• The researcher will ordinarily be required to
  present both written and oral reports on the
  project.

48
Step 8 Follow-Up

• After a company has spent a considerable amount
  of effort conducting marketing research and
  preparing a report, it is important that the
  findings of the research be used.
• One way to help ensure that the findings will be
  used is to minimize conflict between the
  marketing research department and other
  departments.

49
Managing the Research Process

• Research Request
• Document used in large organizations that
  describes a potential research project, its
  benefits to the organization, and estimated
  costs. A project cannot begin until the research
  request has been formally approved.
• The components of a formal research request are
  as follows Action, Origin, Information, and Use.

50
Managing the Research Process

• Manager-Researcher Conflict
• Complaints about ineffectiveness, uselessness,
  and even interference in the decision process are
  all too common by product managers and corporate
  executives.
• Resolution of these problems is not a simple
  task. The first step is a clear delineation of
  authority and responsibility.

51
Managing the Research Process

• Categories of Marketing Research Studies
• Programmatic research is done to develop
  marketing options through market segmentation,
  market opportunity analysis, or consumer attitude
  and product usage studies.
• Selective research is used to test decision
  alternatives.
• Evaluative research is done to assess program
  performance.

52
Managing the Research Process

• Factors Influencing a Managers Decision to Use
  Research Information
• Conformity to prior expectations.
• Clarity of presentation.
• Research quality.
• Political acceptability within the firm.
• Lack of challenge to the status quo.

53
Users of Marketing Research

• External Clients
• Because marketing research can be valuable source
  of new or improved competitive advantages and it
  is often very expensive to gather, its
  circulation outside of the company is usually
  limited.
• Many firms dont provide any information to
  outsiders. However, those that do usually find
  it is to their mutual benefit.

54
Users of Marketing Research

• Vendors
• Manufacturers are moving into strategic
  partnerships with their vendors as the only way
  to implement just-in-time manufacturing.
• Marketing research information is fed back to a
  manufacturers suppliers when consumers have
  voiced opinions about a component on the
  manufacturers customer satisfaction surveys.

55
Users of Marketing Research

• Franchisees
• Most major franchisors of consumer goods and
  services provide marketing research data to their
  franchisees.
• Franchisors also share marketing information with
  their franchisees to help reinforce why they are
  taking certain actions.

56
Users of Marketing Research

• Internal Clients
• Virtually every manager within an organization
  will, at some point, be a user of marketing
  research information.
• New product development managers are among the
  heaviest users of marketing research.

57
Users of Marketing Research

• Top Managements Use of Marketing Research
• Senior management uses strategic marketing
  research to help plan the strategic vision,
  mission, and long-term allocation of resources of
  the organization.

58
Users of Marketing Research

• Other Internal Users of Marketing Research
• From time to time, other individuals, besides
  marketing and top management, will find a need
  for marketing research.

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Continuum of Marketing Research Sophistication
Intuition-Centered Decision Making
Stage of intuitive decision making
Stage of sophistication
Research-Centered Decision Making
Stage of development
60
Research Departments Perform a Staff Function

• Clients
• Director of research
• Research analysts
• Cross-functional teams

61
Medium-Sized Research Department
Director of marketing research and sales
forecasting
Manager of sales research
Research analyst (project director)
Forecast analysts
Research assistant (entry-level trainee)
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Managers
Researchers
1. Decision oriented
1. Technique oriented
2. Intuitive
2. Analytical
3. Managers like to confirm
3. Researchers like to explore
4. Time orientation toward a. project
immediacy (I need it now.) b.
results about future behavior (what
will sales be next year?)
4. Time orientation toward a. Project
prolongment (later when we have time
for a complete study) b. results
about past behavior (our trend has
been . . .)
5. Frugal (keep the cost down)
5. Not cost conscious (you get what you
pay for)
6. Results orientation a. managers do not
like surprises--when they are surprised they
tend to reject the results b. concern
(arent we number one yet?) c. certainty
(is it or isnt it?)
6. Results orientation a. researchers
love surprises b. abstraction (our
exponential gain. . .) c. probability
(may be)
7. Reactive
7. Proactive
63
Top Management-Marketing Research Conflict

• Research responsibility
• Research personnel
• Budget
• Assignments
• Problem definition
• Research reporting
• Use of research

64
Research Supplier

• A commercial marketing research service that
  conducts marketing research activities for
  clients
• Syndicated service
• Standardized service
• Provides customized research

65
Considerations for Hiring Outside Suppliers

• Expertise
• Urgency of the decision
• Personnel resources
• Economic factors
• Objectivity
• Confidentiality
• Quality control

66
Ethical Issues

• Philosophical questions
• Societal norms
• Codes of behavior

67
Rights and Obligations of the Respondent

• The obligation to be truthful
• Privacy
• Deception
• The right to be informed

68
Rights and Obligations of the Researcher

• The purpose of research is research
• Objectivity
• Misrepresenting research
• Protect the right to confidentiality of both
  subjects and clients
• Dissemination of faulty conclusions
• Advocacy research

69
Rights and Obligations of the Client Sponsor
(User)

• Ethics between buyer and seller
• An open relationship with research suppliers
• An open relationship with interested parties
• Privacy
• Commitment to research
• Pseudo-pilot studies