4-1 © Kotler, Keller, Ang, Leong & Tan Marketing Management - An Asian Perspective 4th Edition CAPTURING MARKETING INSIGHTS PART 2

4-1© Kotler, Keller, Ang, Leong & Tan

Marketing Management - An Asian Perspective4th Edition

CAPTURING

MARKETING INSIGHTS

PART

2



CONDUCTING

Marketing Research and Forecasting Demand

Chapter

4



1. What constitutes good marketing research?2. What are good metrics for measuring

marketing productivity?3. How can marketers assess their return on

investment of marketing expenditures?4. How can companies more accurately

measure & forecast demand?

In this chapter, weaddress the

followingquestions:



LG Telecom - differentiated servicedifferentiated service - each group

- research on customer value & profitability

Marketing Research and Forecasting Demand



The Marketing Research System

Good marketing research is Good marketing research is characterized by characterized by

scientific method, creativity,

multiple research methods,

accurate model building,

cost-benefit analysis,

a healthy skepticism

& an ethical focus



Other ways to conduct research

Engage students Use the Internet Check out rivals

3 categoriesMarket Research

Firms

1. Syndicated-service2. Custom marketing3. Specialty-line

market

The Marketing Research System



The Marketing Research Process

Define problem& research objective,

Develop research plan, Collect information, Analyze information,

Present findings to management& Make decision



Figure 4.1Figure 4.1TheMarketingResearchProcess




Marketing- studies to researcher Define problem carefully Survey, forecast, ad evaluation Marketing researcher - insight -

customer’s attitudes & buying behavior

Step 1: Define Problem, Decision Alternatives & Research Objectives




Develop efficient plan - gather information

Design research plan calls for:Data sourcesResearch approachesResearch instrumentsSampling planContact methods

Step 2: Develop the Research Plan




Secondary data Collected for other purpose & already exist Low cost & ready availabilityPrimary data Data freshly gathered for specific purpose

Procedure - interview people – their feeling on topic - develop instrument & proceed

Step 2: Develop the Research Plan - DATA SOURCES




Primary data collected in 5 ways

1. Observation2. Focus groups3. Surveys4. Behavioral data5. Experiments

Step 2: Develop the Research Plan – RESEARCH APPROACHES



A focus groupA focus group





Marketing researchers - 3 main

research instruments to collect primary data:

1. Questionnaires

2. Qualitative measures

3. Mechanical devices

Step 2: Develop the Research Plan – RESEARCH INSTRUMENTS



Table 4.1 Types of Questions



Table 4.1 Types of Questions



Questionnaire Dos & Don’tsQuestionnaire Dos & Don’ts

1. Ensure questions - not biased

2. Make questions simple & specific

3. Avoid jargon

4. Avoid uncommon or ambiguous words

5. Avoid questions with a negative

6. Avoid hypothetical questions

7. Avoid words that could be misheard

8. Desensitize questions - use response bands

9. Ensure fixed responses don’t overlap

10.Allow for “other” in fixed response questions




Qualitative research techniques Unstructured measurement

approaches Range of responses





Understand customer experience 7 techniques1. Shadowing2. Behavior mapping 3. Consumer journey 4. Camera journals 5. Extreme user interviews6. Storytelling7. Unfocus groups




Getting into Consumers’ HeadsGetting into Consumers’ Headswith Qualitative Researchwith Qualitative Research

Common qualitative research

approaches:

1) Word associations

2) Projective techniques

3) Visualization

4) Brand personification

5) Laddering




After research approach & instruments,

design sampling planDecide on:

1. Sampling unit2. Sample size

3. Sampling procedure

Step 2: Develop the Research Plan – SAMPLING PLAN



Table 4.2 Probability & Non-probability Samples




Once sampling plan is determined,

decide how to contact subject:

Mail Questionnaire

Telephone Interview

Personal InterviewOnline Interview

Step 2: Develop the Research Plan – CONTACT METHODS



Pros and Cons of Online ResearchPros and Cons of Online Research

AdvantagesAdvantagesInexpensiveFasterPeople - more honest online than - personal or telephone interviews More versatile

DisadvantagesDisadvantagesSamples - small & skewedProne to technological problems & inconsistencies




Data collection – expensive, prone to

error

Get right respondents - critical

Data collection improve - technology

Protect personal data of respondents

Step 3: Collect the Information




Step 3: Collect the Information

4 surveys problems:4 surveys problems:

1. Respondents not home2. Respondents refuse to cooperate3. Respondents – biased/dishonest

answers4. Interviewers biased or dishonest




Extract findings from collected data Tabulate & develop frequency

distribution Averages & dispersion computed -

variables Advanced statistical techniques &

decision models

Step 4: Analyze the Information




The researcher present findings relevant to major marketing decisions facing management

Step 5: Present the Findings




Marketing decision support system (MDSS)Marketing decision support system (MDSS)

Collection of data, systems, tools & techniques

With software & hardware by which organization

gathers & interprets relevant information

from business & environment & used

for marketing action

Step 6: Make the Decision



Table 4.3 7 Characteristics - Good Marketing Research




Many fail to use marketing research sufficiently or correctly WHY?WHY?Narrow conception of research Uneven caliber of researchers Poor framing of problemLate & occasionally erroneous findingsPersonality & presentational differences

Overcoming Barriers to the Use of Marketing Research




Failure to use marketing research properly

led to numerous gaffes:Eg: Star Wars

Researcher predicted science fiction film fail– America - realism over science fiction– “War” in title - America would stay away

He gave information, not insight Failed to study script - human story -

against space backdrop



Marketing Research in Asia

Marketing research in Asia challenging

WHY?WHY?

1. Unreliable/no secondary data

2. Databases not comparable cross-nationally

3. Poor research infrastructure

4. Cultural differences in response

5. Variations in research capabilities

6. High rates of change in marketplace



Marketing Research in Asia

Solutions:

1.Sequence piloting, adapting & rollout of

surveys regionally

2.External validation of data sources

3.Use samples on future demographic

profiles

4. Invest on research capabilities &

infrastructure



Marketers accountable for investments

Justify marketing expenditures

Measure Marketing Productivity 2 WAYS:

1. Marketing metrics

2. Marketing mix modeling

Measuring Marketing Productivity



Measuring Marketing Productivity- Marketing Metrics

Marketing metrics set of measures - to quantify, compare

& interpret marketing performance customer/company-level concerns

– Eg: 3M tracks sales % from recent innovation

Processes - maximize metrics value Measures - marketing dashboard -

synthesis & interpretation



Table 4.4 Sample marketing metrics



2 scorecards 2 scorecards

- Performance & warning signals- Performance & warning signals::

1. Customer-performance scorecard– Annual performance - customer-based

measures

2. Stakeholder-performance scorecard– Tracks satisfaction of those with critical

interest in & impact on performance

Measuring Marketing Productivity



Table 4.5 Sample Customer-Performance Scorecard Measures



44 tools tools to check on plan performance:

1. Sales analysis2. Market share analysis

3. Marketing expense-to-sales analysis4. Financial analysis

Measuring Marketing Productivity- Measuring Marketing Plan Performance



SALES ANALYSIS Measure & evaluate actual sales - goals

2 tools:1. Sales-variance analysis - relative

contribution of factors to gap in sales performance

2. Microsales analysis - products, territories that failed to produce expected sales




MARKET SHARE ANALYSIS

Market share measured in 3 ways:Market share measured in 3 ways: 1. Overall market share:

– sales as % of total market sales

2. Served market share: – sales as % of sales to served market– always > overall market share

3. Relative market share: – market share in relation to largest competitor




MARKET SHARE ANALYSISAssumptions (not true/valid always):1. Outside forces affect firms- same way 2. Performance - against average of industry 3. New firm- industry– each firm’s market share

falls

Market share decline - deliberate - profits Market share - fluctuate - many minor

reasons







MARKETING EXPENSE-TO-SALES ANALYSIS

Annual-plan control - company not overspend -achieve sales goals

Key ratio - marketing expense-to-sales Find how & where company makes

money Abnormal fluctuations - cause for

concern Period-to-period fluctuations tracked -

control chart




Figure 4.2 The Control-Chart Model



FINANCIAL ANALYSIS Find profitable strategies beyond

sales Factors - rate of return on net worth

Return on net worth =

return on assets x financial leverage

To improve return on net worth– Increase net profits to assets ratio – Increase assets to net worth ratio




Figure 4.3 Financial Model of Return on Net Worth



FINANCIAL ANALYSIS

Return on assets = Return on assets =

profit margin xprofit margin x asset turnoverasset turnover

Improve performance - HOW? 2 ways: 1. Increase profit margin

– increase sales/cut costs

2. Increase asset turnover– increase sales/reduce assets for given sales level




Deep financial analysis – benefits firm

Determine if any product/marketing

activity- expanded, reduced or removed

Analyze profitability of: Products,

territories, customer groups, segments,

trade channels, order sizes

Measuring Marketing Productivity- Profitability Analysis



MARKETING-PROFITABILITY ANALYSIS

Step 1: Identify Functional Expenses Table 4.6 & 4.7Step 2: Assign Functional Expenses to Marketing Entities Table 4.8Step 3: Prepare Profit-and-Loss

Statement for each Marketing Entity Table 4.8 & Table 4.9




Table 4.6Table 4.6Simplified Profit-and-Loss Statement



Table 4.7Table 4.7 Mapping Natural Expenses into Functional Expenses



Table 4.8Bases for Allocating Functional Expenses to Channels



Table 4.9 Profit-and-Loss Statements for Channels



DETERMINING CORRECTIVE ACTION

Marketing-profitability analysis

Only indicate relative profitability of channels, product etc

Not to drop unprofitable entities

Not to show profit if entities dropped




DIRECT VERSUS FULL COSTING Allocate full costs OR only direct &

traceable costs to evaluate entity’s performance

33 types of costs: types of costs:

1. Direct costs 2. Traceable common costs 3. Non-traceable common costs




Full-cost approach

All costs imputed to get true profit

33 major weaknesses:

1. Profit shift if cost allocation replaced

2. Demoralizes managers

3. Weaken real cost control




Activity-based cost accounting

(ABC)

Quantify true profitability of activities

Refocus from only standard to full

cost

Capture actual costs of supporting

individual products, customers &

others




Marketing-mix models

– Analyze data - effects of marketing

– But not how elements work together

– Eg: Multivariate analyses

– How each marketing element influences outcomes

Measuring Marketing Productivity- Marketing-Mix Modeling



Forecasting & Demand Measurement

Marketing research - opportunities

Sales forecasts– Raise investment, hire workers– Based on estimates of demand

Managers need to define market demand



Forecasting & Demand Measurement

Importance of defining market correctly:– Eg: Coke’s sales believed to be maxed out

– New CEO changed that view

– Coca-Cola: tiny Coca-Cola: tiny %% of of fluid world drank dailyfluid world drank daily

– ““The enemy is coffee, milk, tea, water” The enemy is coffee, milk, tea, water”

– Ushered in a huge period of growth



The Measures of Market Demand

Companies can prepare up to 90 types of demand estimates

Each demand measure - specific purpose– Eg: Company forecasts regional demand

for major product line to decide whether to set up regional distribution

Forecasts also depend on type of market



Figure 4.4 Ninety Types of Demand Measurement (6 ×

5 × 3)



The Measures of Market Demand

Productive ways to break down

market:

1. The potential market

2. The available market

3. The target market

4. The penetrated market



The Measures of Market Demand- A Vocabulary for Demand Measurement

MARKET DEMAND

Total product volume bought by defined customer groupin defined geographical area in defined time period in defined marketing environment under defined marketing program



The Measures of Market Demand- A Vocabulary for Demand Measurement Marketing sensitivity of demand

– Distance between market minimum & potential

Expansible market– Total size affected by marketing expenditures

Market penetration index– Compare current demand to potential demand

Share penetration index– Compare current to potential market share



Figure 4.5 Market Demand Functions



Figure 4.5 Market Demand Functions



The Measures of Market Demand- A Vocabulary for Demand MeasurementMARKET DEMAND

MARKET FORECAST expected market demand

MARKET POTENTIAL market demand from high

expenditure– more effort, little demand



The Measures of Market Demand- A Vocabulary for Demand MeasurementMARKET DEMAND COMPANY DEMAND Estimated share of demand at levels of

marketing in given time period

COMPANY SALES FORECAST Expected sales based on marketing &

environment

COMPANY SALES POTENTIAL Sales limit by demand as marketing

increases relative to competitors



The Measures of Market Demand- Estimating Current DemandTOTAL MARKET POTENTIAL

Maximum sales to industry in period, given level of industry marketing & environmental conditions

AREA MARKET POTENTIAL

Sales available to territory given a level of conditions



The Measures of Market Demand- Estimating Current Demand2 methods to assess Area Market

Potential:

1. Market-Buildup Method– Identify buyers in market & estimate purchases

– Accurate but not easy to gather

2. Multiple-Factor Index Method– Estimate area market potentials

– Single factor not complete indicator of sales

– Multiple-factor – each assigned specific weight

– Numbers are weights - to variable



Table 4.10Table 4.10 Calculating the Brand Development Index (BDI)

BDI: Index of brand sales to category sales



The Measures of Market Demand- Estimating Current DemandINDUSTRY SALES AND MARKET SHARES Actual industry sales in market Competitors & estimate their sales

How?1. Published total industry sales2. Buy reports from marketing

research firm - audits total sales & brand sales



The Measures of Market Demand- Estimating Future Demand

3-stage procedure - sales forecast3-stage procedure - sales forecast

1. Macroeconomic forecast

2. Industry forecast

3. Company sales forecast



The Measures of Market Demand- Estimating Future Demand How do firms develop their

forecasts?– Internally or buy forecasts

Forecasts built on: what people say what people do or what people have done



The Measures of Market Demand- Estimating Future DemandSURVEY OF BUYERS’ INTENTIONS

Forecasting - Anticipate what buyers do given conditions

Consumer surveys:

– Buying intentions

– Personal finances

– Expectations about economy



The Measures of Market Demand- Estimating Future DemandSURVEY OF BUYERS’ INTENTIONS

Shifts in buying intentions

– Firms adjust production & marketing

Business buying

– Surveys done on plant, equipment &

materials



The Measures of Market Demand- Estimating Future Demand Buyer-intention surveys -

estimate demand – product purchase

Value increases if:1. Cost to reach buyers is small2. Few buyers3. Clear intentions4. Implement intentions5. Willingly disclose intentions



SALES FORCE OPINIONS

Involve sales to forecast future sales Encourage better estimate - incentives

BenefitsBenefits:

1. Sales reps - insight into trends

2. Reps > confidence in quota & achieve it

3. “Grassroots” forecast - detailed estimates by product, territory, customer & sales rep




EXPERT OPINIONS Experts: distributors, suppliers,

consultants & trade associations1. Buy forecasts - forecasting firms

– More data available & forecasting expertise

2. Invite experts to prepare forecast Group-discussion method Pooling of individual estimates




PAST-SALES ANALYSIS1.Time series analysis

– past time-series - projects them into future

2.Exponential smoothing– project sales – use past average & recent sales

3.Statistical demand analysis– measure impact causal factors on sales

4.Econometric analysis– equations to describe system & fit parameters

statistically




MARKET-TEST METHOD Direct-market test

– Buyers purchases not carefully planned or

– Experts not available/reliable

Forecast new/established product sales in a new distribution channel/territory




Marketing Debate What is the Best Type of Marketing Research?

Many market researchers have their favorite research approaches or techniques, although different researchers often have differentpreferences. Some researchers maintain that the only way to really learn about consumers or brands is through in-depth, qualitative research. Others contend that the only legitimate & defensible form of marketing research involves quantitative measures.

Take a position: Marketing research should be quantitative versus Marketing research should be qualitative.

Marketing DiscussionWhen was the last time you participated in a survey?

How helpful do you think was the information you provided? How could the research have been done differently to make it more

effective?

Final discussion



Video Links

Primary Video to watch: Burke, Inc. (9:01 min)

Secondary Videos to watch: Sony Metreon (8:30 min) Wild Planet (9:21 min)

Click here to watch the video clips from the US Website.

Documents

4-1 © Kotler, Keller, Ang, Leong & Tan Marketing Management - An Asian Perspective 4th Edition CAPTURING MARKETING INSIGHTS PART 2