Revision Answer Book MR 2011

8/3/2019 Revision Answer Book MR 2011

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Revision Session: Suggested Answers

Module: Marketing Research- June, 2011Time: Weeks 16 -17

Day 1:

Case Question 1: Theme Park (Jun 2009 - M 10)

June 2009 Examiner's Solution

Case 1 Answer Base

1. Explain to the managers of the theme park the value they might derive from multivariateregression analysis of the data.

(15 marks)

The relevant module isModule 10.

Multivariate regression analysis will help the managers of the theme park to identify

what factors are important to customers during their visit to the theme park and the

relative contribution of these key factors to the development of customer satisfaction.

So, for example, multivariate regression analysis can show whether queue managementactually affects customer satisfaction and to what extent compared with other variables,

e.g. staff friendliness.

Multivariate regression analysis allows the development of a predictive equation which

shows what changes in overall customer satisfaction may be anticipated as a result of, for

example, initiatives to reduce queue waiting time. This will allow the theme park

managers to gauge future investment priorities, if development of increased levels of

customer satisfaction is a key business objective.

The use of interval scales in the market research study allows the use of the multiple

regression procedure for the analysis of the theme park market research data.

Multiple regression analysis finds the weighted linear combination of independent

variables, e.g. queue management, safety, etc., that has the maximum correlation with

the dependent variable, which is overall customer satisfaction.

In undertaking this analysis, clearly the value of information produced is very much

dependent on inclusion of the independent variables in the market research questionnaire.

A good student answer will note that if there is doubt that the set of independent variables

researched is not fully inclusive in terms of what is important in delivering customer

satisfaction in a theme park environment, it may justify qualitative research to identify

what these key variables are. If other variables are at work, then the quantitative researchmust be re-commissioned.

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2. Are these data helpful in determining investment priorities to increase customersatisfaction levels in future? Explain your reasoning.

(15 marks)

The regression function takes the form

Y = a + b1 X1 + b2 X2 + + b n X n

The computer output suggests the following equation for customer satisfaction:

Customer satisfaction = 1.0 + (0.6 Queue management) + (0.3 Staff friendliness)

(0.3 Security procedures)

So, for example, for every scale point that queue management increases, holding other

variables constant, customer satisfaction levels increase by 0.6 units.

A good student answer will note that, interestingly, for every scale point increase insecurity procedures, customer satisfaction decreases by 0.3 units.

To understand whether these variables are statistically significant, it is necessary to test

the significance of the regression coefficients. The individual values of the t-statistic for

each of the variables can be compared with the critical t-statistic at the 5% level ofsignificance, i.e. 1.96.

Since the calculated t-statistic for queue management (2.73) and staff friendliness (2.50)

are greater than the critical t-value of 1.96 at the 5% level of significance , it is

concluded that both queue management and staff friendliness are statistically related to

customer satisfaction.

In considering future investment priorities, improved queue management is likely to

have more impact on customer satisfaction than programmes to increase staff

friendliness. This of course only holds in the current equation. The values of the

coefficients will all change when safety is excluded.

A good student answer will note that security procedures are observed to have a

negative effect on customer satisfaction, but that the findings are not statistically

significant at the 5% level and, therefore, security procedures should be excluded from

the regression equation. The regression analysis should be run again and the variablestested for statistical significance.

As noted above only queue management, staff friendliness and security procedures have

been considered in the multiple regression analysis. If it is the case that other unidentified

variables affect customer satisfaction (and the adjusted R square would tend to

support this thinking as it suggests that only 40% of the variation in customer

satisfaction is explained by queue management, staff friendliness and security

procedures), then the theme park managers should investigate what these other variables

might be and their relative impact on customer satisfaction levels.

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To do so the theme park managers should undertake qualitative research (to identify the

key variables) and then commission a further quantitative study to provide ratings across

all variables together with measures of customer satisfaction.

June 2009 Selected Student Answer

Case 1 Solution: Theme Park

1. Explain to the managers of the theme park the value they might derive from multivariateregression analysis of the data.

Multivariate regression analysis (MRA) is a statistical method of finding whether there is

a relationship between independent and dependent variables. This is the equation formultivariate regression:

Y = b0 + b1 X1 + b2 X2 + b3 X3 + + b n X n

In this case, the MRA will find out the relationship between customer satisfaction with a

different set of independent variables, such as queue management, staff friendliness and

security procedures. If we find out, for example, that there is a relationship between

customer satisfaction and queue management and/or staff friendliness then the manager

might have to consider improving the queue management and staff friendliness, but if we

find out there is no relationship between customer satisfaction with security procedures

then we might consider trying to establish whether there are other independent variableswhich might affect or have a relationship with customer satisfaction.

Multivariate regression analysis helps to analyse the information and it is one of the

quantitative research technique. Also there is a need to explain the regression correlation

(r) which 1 < r< +1.

o r= 0 This means there is no relationship betweenx andy

o r 1 This means there is a relationship between x and y which means ifx

increases by 1 theny will increase by 1.

o r 1 This means there is a relationship between x and y which means ifx

increase by 1 theny will decrease by 1.

Suppose regression analysis, with customer satisfaction as the dependent variable,

produced the following output:

Aspects of

operation

Coefficient Standard error t-statistic

Queue management 0.6 0.22 2.73

Staff friendliness 0.3 0.12 2.50

Security procedures 0.3 0.27 1.11

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Constant 1.0

Adjusted R square 0.4

2. Are these data helpful in determining investment priorities to increase customer

satisfaction levels in future? Explain your reasoning.

In analysing the variable by using regression coefficient analysis we will first set:

o H0 = 0 (No relationship between x and y) In this case customer satisfaction and

either queue management/staff friendliness/security procedures

o HA 0 (relationship betweenx andy)

As % confidence level = 1.96

Degree of freedom = 17.1

t-statistic = 2.73 (for Queue management, 2.50 for Staff Friendliness, and 1.11 for

Security Procedures.

If we are using these data to analyse the regression coefficient then we can say that queue

management and staff friendliness have a relationship with customer satisfaction. It

means that if queue management is improved and staff are more friendly then there will

be increase in customer satisfaction.

However, to determine an investment we might have to consider other factors or

undertake other types of research because it may give information which will be more

accurate for the manager to make a decision.

First we might consider sample size because a bigger sample gives more accuracy. Also

we need to consider whether to use probability or non-probability sampling. In this casewe might use stratified sampling. Moreover, we have to design a proper questionnaire

which includes the preliminary considerations, age, sex, status, social and economy. Also

it have to provide closed-end and open-end question which will give more opportunity to

understand feelings and attitudes.

Then we have to conduct a survey which is one method of quantitative research but

before that we might have to provide a qualitative research in which we might set up a

focus group or in-depth interview to understand feelings and attitudes, and, then conduct

the quantitative research.

The survey can be postal survey, personal survey/interview or telephone survey. In thiscase, we might decide to use postal survey and personal survey.

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Day 2:

Case Question 1: Electronic Waste (December 2007 M10)

December 2007 Examiner's Solution

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Case 1 Answer Base

1. What does the market research tell us about the effectiveness of the Amnesty?

(15 marks)

The market research gives us only limited insight into the effectiveness of the Amnestybecause:

o the findings of the research study are not representative of the views, attitudes

and behaviour of the wider population of companies located in and around

Greenville; the marketing research undertaken by Marson Ltd was conducted

amongst only those companies taking part in the Amnesty event.

o the views of non-participants may be quite different to those of participants; it

may well be worthwhile to undertake a wider study to ascertain these.

The validity of the findings may be affected by the sampling method used. Sampling

errormay have arisen from, for example:

o The way the sample was drawn (for example, were there strict rules to interview

every nth visitor, or did interviewers have freedom to choose their

interviewees?)

o The layout of the site and the location of interviewers (for example, was there

more than one entry point to Marsons site or site office? Did large trucks use a

separate access point? Were all companies visiting the site on the day equally

likely to be interviewed or not? Were interviews evenly spread over the day or did

interviewers simply do their assigned quota and leave?)

o

Was the individual interviewed the right person to speak to about such matters?There is a big difference between the views of the van driver and those of top

management!

o The number and treatment of spoiled interviews.

o The level of supervision of the interviewers and whether attempts were made to

back-check a sample of the interviews.

In addition, the research undertaken on the Amnesty day may have been subject to non-sampling errors which may also have affected the validity of the research, for example:

o The market research was conducted by face-to-face interview but no information

is provided on whether these were undertaken by professionally trainedinterviewers were questions asked in a leading way? Were responses recorded

correctly?

o Did any tabulation errors arise during data input and analysis?

A good student answer will note that the focus of the market research is only on those

taking part in the Amnesty and, therefore, the key findings of the research can only be

considered in this context. The market research, therefore, tells us little about the

effectiveness of the Amnesty generally but, assuming satisfactory resolution of the

concerns relating to the potential for sampling and non-sampling error in the

implementation of the research, it is possible to draw some statistically sound conclusions

from the research. The richness of the analysis will depend largely on the questions asked

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and careful profiling of the companies participating in the research (details of which we

do not have). Of interest, for example, might be to analyse by type and size of company:

o type of equipment handed in

o average amount of equipment handed in

o distance travelled to the recycling site

o difference in awareness of recycling possibilitieso willingness to pay for disposal/recycling

o proportion of companies who clean own PC systems before hand-in

o proportion of companies seeking security reassurances

2. Is there a statistically significant association between size of company and awareness

that some electronic equipment can be recycled? Explain the implications of your

answer.

(15 marks)

A chi-square test can be used to test whether a statistically significant association exists

between size of company and awareness that some electrical equipment can be recycled.

The chi-square statistic is calculated by the formula:

where O i is the observed value and E i is the expected value, assuming in this case that

there is no difference between the backgrounds of respondents.

For a particular cell, the expected value is calculated as:

Awareness that some electronic equipment can be

recycled

Company size Not

aware

Aware Total

Large (O = observed) 862 288 1150

(E = expected) 759 391

Small (O = observed) 1018 682 1700

(E = expected) 1122 578

Total 1880 970 2850

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We hypothesise that there is no relationship between awareness that some electronic

equipment can be recycled and company size. The chi-square statistic at 1 degree of

freedom at the 5% level is 3.84 and because 69.46 > 3.84, the difference noted in the

sample is statistically significant.

The research findings indicate that 59% of small companies, and 74% of large

companies, are not aware that some electronic equipment can be recycled. The chi-squaretest reveals that the difference in awareness is statistically significant.

A good student answer will note the importance of this finding in terms of the methods

used to communicate recycling opportunities. It may well be the case that the

involvement of more people in waste management issues in larger companies makes

targeting of messages about recycling opportunities more difficult and that a multi media

strategy is required to reach all of the individuals concerned. On the other hand, this

research finding may reflect another problem in the way the sample was drawn for the

survey. In large companies waste management is likely to be a delegated responsibility;

the individual visiting the Marson site and interviewed on Amnesty day may be well

down the decision-making hierarchy and, therefore, not knowledgeable about suchmatters, i.e. their views cannot be held to be representative of those held by senior

management of the company.

December 2007 Selected Student AnswerCase 1 Solution: Electronic Waste

1. What does the market research tell us about the effectiveness of the Amnesty?

In conducting any marketing research it is always important to clearly define what the

objective of the research is. In the case in question, the aim of the amnesty was to

publicise that irresponsible disposal of electronic waste is bad for the environment and

that a lot of electronic equipment, particularly personal computers, can be recycled and

have second life market potential.

It was felt the electronic recycling companies could do much more to raise awareness of

proper disposal of electronic waste.

The method employed to conduct the research on the day of the amnesty was based on

face-to-face interviews. The market research informs us that all those interviewed felt the

amnesty was a good idea. However it must be noted that these were the persons who

attended and a good result of the research would have considered a population frame that

included other persons in the community who may have had a different view or a

suggestion not thought about by the recycling company.

A random sample was taken. However we are not sure of the questions on the structuredresearch questionnaire that were asked. The research appeared to be simply to confirm in

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the minds of the researcher that the amnesty was a good undertaking. Marketing research

must be undertaken to guide the decision of the manager and not simply to confirm what

one wants to do. The sample was taken from persons who handed in unwanted electrical

or electronic equipment on the day and this may have been a way of helping those

persons to get rid of obsolete equipment and not necessarily that their intentions

supported the objective of the researcher.

However the fact that 2850 companies handed in unwanted equipment is a success for the

company (Marson Ltd). But there is no knowledge of the population of persons

(companies) with unwanted equipment on hand.

The fact that 84% of the companies taking part were not aware that recycling was

available informs the researcher that there is a need for more advertising and possibly

promotional opportunities to ensure that the knowledge is more widespread.

55% of the companies felt that Marson Ltd could charge companies a small fee for

disposal and recycling raises an opportunity for a business venture for Marson Ltd and

the research may be considered effective to some level. However further research will benecessary. A combination of focus group and a more structured survey of companies,

possibly by mail (since companies are involved and these are busy people), or by mixing

with telephone interviews. While 55% is a notable number of persons, we must

remember that the interview was conducted on the day of the amnesty and only the

persons who were interested enough attended; and yet only 55% of those who attended

were of the view.

68% of companies sought assurance of hard drives being checked and cleaned before

recycling may be considered to give Marson Ltd extra work to be done and of course at a

cost. This would have to be evaluated further by the company to see whether that

consideration is one that they had thought about.

In conclusion, it is difficult to say whether the research was effective. As noted before,

marketing research must be undertaken in a structured manner and objectives must be

clearly defined to identify the information objective. Parameters must also be set before

research is undertaken. This is in respect to budget and related issues to the success of the

research. The entire process must be clearly planned including the sampling method and

the sample design. The population units and boundaries were previously touched on. The

analysis of the report is also important bearing in mind the objectives that were outlined.

The market research essentially does not tell us much about the amnestys effectiveness

because there are several unknowns in the equation.

2. Is there a statistically significant association between size of company and awarenessthat some electronic equipment can be recycled? Explain the implications of your

answer.

A chi-squared analysis of the data could be conducted to determine whether there is an

association between the two data groups. Based on the findings, a hypothesis can be

drawn. This is usually represented as follows:

HO no association

HA association

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An expected frequency can be calculated using the following formulae where:

The chi-square statistic can then be calculated using the following formulae where:

The chi-critical statistic is then calculated as follows d f (rows 1) (columns 1) where

dfrefers to degrees of freedom.

According to the information provided the chi-critical statistic at 1 degree of freedom at

the five percent level is 3.84.

Company size Not

aware

Aware Total

Large (O = observed) 862 288 1150

(E = expected) 758.5 391.4

Small (O = observed) 1018 682 1700

(E = expected) 1121.4 578.59

Total 1880 970 2850

Using the formulae for expected frequency:

Calculations

Calculations

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Chi statistic at one degree of freedom is 3.84.

According to the calculations with chi-squared statistic at 69.44 being higher than chi

critical at 3.84, a HA hypothesis can be drawn where there seems to be an association

between company size and awareness.

There needs to be greater communication between WEEE and companies. Suggest they

organise visits to all companies to inform of the standards and efforts to better ensure

compliance.

Day 3: Dec 2010 exam questions

Case Question 1: Fruity Juice Bubbles


Case 1 Answer

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1. Advise Pete Martin on how he might use focus groups to help develop a marketingstrategy for Fruity Juice Bubbles.

(20 marks)


It is appropriate to first consider what focus groups are and the general procedures used

in running focus groups, including the role of the moderator in facilitating the discussion

As far as process is concerned, the focus group method relies on self-reports from

individuals in a group situation which are moderated by a professional market researcher.

The group moderator uses a semi-structured, and sometimes unstructured, approach to

discussion of a subject a method designed to reveal respondents full flow of thought in

relation to the subject matter. The intention in focus group interviewing is not just to

ascertain what peoples overall views and opinions are, but also to understand why

people think, feel and behave in the way they do.

The different types of focus group are: exploratory, clinical and experiencing. As far as

Fruity Juice Bubbles is concerned, and in line with the aim of the research which is to

help guide the development of marketing strategy, developing a better understanding of

the target customer is vital. The exploratory or experiencing format looks to be most

appropriate. The focus groups will provide an opportunity for Pete to develop his

understanding of target audience motivations and purchasing patterns (how often to buy,

where to buy, purchase occasions, etc.), the product attributes considered to be most

important to the target audience (determinant attributes), the competitive set and the

relative positions held by different carbonated soft drinks, the strength of the various

positions held by competitive brands in this category, and potentially attractive positions

for Fruity Juice Bubbles.

2. Prepare a focus group discussion guide for the research.

(10 marks)

The discussion guide will include a welcome and introduction to the subject to be

discussed. The facilitator should set respondents at their ease and explain at the outset

that there are no correct opinions, and that each group members comments and opinions

are valid.

The guide to the focus group discussion for Fruity Juice Bubbles will reflect the aim of

the research, which is to help guide the development of marketing strategy.

Understanding consumer behaviour in the carbonated soft drinks category is key, as is the

development of a clear picture of the perceived positions held by competitive brands and

potential positions which offer marketing opportunity to Fruity Juice Bubbles.

An example of a discussion group guide for Fruity Juice Bubbles would be:

1. Opening

Explain focus groups

No correct opinions, only opinions Need to hear from everyone

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Audiotapes

Procedure one person to talk at a time, etc.

Any questions

2. Carbonated soft drinks

Which carbonated soft drinks are consumers aware of, which have they

tried and which do they like?

What like/dislike about individual brands?

When drink (usage occasions)?

Where purchase?

Who purchases?

Individual item purchase or multi-pack?

Value for money perceptions

Image of individual brands

What are the important and determinant attributes in purchase decision-

making and reasons?

3. Fruit Juice Bubbles

Initial reaction to product concept

Perception of key competition Is there a gap in the market?

Distinctiveness of concept

What like/dislike about concept?

Likelihood of trying and perceptions of usage occasion

Reaction to intended price premium

Tasting opportunity reaction to taste and range of flavours

Reaction to proposed size(s) of bottle

Where would expect to buy, etc.?

4. Final questions and comments

5. Thank you for your co-operation

December 2010 Selected Student Answer

Case 1 Solution: Fruity Juice Bubbles

1. Advise Pete Martin on how he might use focus groups to help develop a marketingstrategy for Fruity Juice Bubbles.

Nowadays, when almost each market is highly competitive and rapidly changing, when

customers needs and wants become more and more sophisticated, it is becoming more

and more difficult for companies to compete. So, understanding customers needs and

wants, attitudes, preferences and beliefs in order to match them is essential. To do this

marketing research can help.

Talking about our case, the company is going to launch a new product, so they have to

understand if the product will succeed. The product is carbonated soft drinks. As I

understand from this case, the product concept is already developed, so the company has

to know if the customers will like it.

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In order to understand customers attitudes, motivations and preferences qualitative

research can be conducted. The most popular and the most appropriate technique of

qualitative research in this case is focus groups.

Focus groups this is when 712 people are led by a moderator discussing particular

topics. There are 3 types of focus groups:

1. Exploratory helpful in generation of new ideas.

2. Clinical used in order to reveal peoples inner attitudes and feelings.

3. Experiencing this allows us to evaluate customers during product use, their

emotions, feelings, likes and dislikes concerning the product.

The last type of focus group is what our company needs, as product concept is already

developed, people have to buy it and give their judgements. What they like about the

product, what they dislike, what they would like to change or add, how likely they will

buy this product, how often and in what quantities. Answers on all these questions will

help the company to match their potential customers needs ideally, so becoming

successful and increasing profits.

Focus group discussions can help not only in product evaluation. Pete Martin is

developing a marketing strategy and focus groups can help him to develop it in the best

way, related to product. Focus groups can discuss such aspects as preferable set of

marketing mix 4 Ps. I already mentioned the product, the rest are:

Price at what price they are likely to buy the product.Place where it is better to sell

the product in order to reach availability and convenience, Promotion what kind ofadvertising can be attractive, create awareness and goodwill around the product.

Additional decisions could be made about the packaging of the product it should be

attractive, as well as convenient, and eye-catching.

During the discussion, the moderator can have an influence, so it is a position with high

responsibility, and the person has to understand this. The moderator has to be well

trained, with a quick mind, a good memory on names, socially acceptable and as neutral

as possible in order to avoid negative influence and biased results.

Once the data of research is collected and analysed, the results can help Pete Martin to

develop an appropriate strategy and compete on the market successfully.

2. Prepare a focus group discussion guide for the research.

As I mentioned above, the valid results in most cases depend on the moderator, who leads

the group discussions. He has to be well-trained, be able to identify if respondents have

enough knowledge about the topic, to quieten those who are talkative and encourage to

talk those who are quiet. He doesnt have to push on the people, avoid biased words and

be as neutral as possible. He has to have a quick mind in order to catch good ideas and

lead a discussion in a necessary way.

At the start of the discussion he has to warm up the group. Create a warm friendly

atmosphere, and make people feel relaxed and safe.

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He has to identify the level of knowledge of respondents about the topic. Maybe some

screening questions should be asked. Then the discussion on the main topic is to follow.

In our case, it is a new product, so following questions should be asked:

o Do they like the product?

o What they dislike about it?o What they would like to change in it?

o At what price they would likely to buy the product?

o How often and in what quantities?

o Where it would be convenient to them to buy the product?

o What kind of advertising can attract them and encourage to buy the product?

o Will they advise the product to their friends, relatives, etc.?

After the needed information is obtained, the moderator has to give a possibility to ask

any last questions.

It is necessary to summarise what was said in order to check if everythings understoodcorrectly. Then thank them for participating and warmly finish the session.

The better the atmosphere in the group, the better results obtained.

Case Question 2: Business Solutions Ltd.


Case 2 Answer

1. Critically explain the threats to experimental validity.

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(15 marks)

An experiment implies some sort of test to allow the effects of independent variables on a

dependent variable to be discerned.

Dependent variables are the outcomes of interest in this case, visits to the website. The

independent variable, i.e. the variable which the researcher has some control over is thetelesales initiative. The use of an experiment will help Business Solutions Ltd. to decide

whether a telesales initiative will increase visits to the website.

In examining whether there is a causal relationship between telesales activity and visits to

the website, three types of evidence are important:

o concomitant variation, which influences the extent to which telesales activity and

web sites visits occur together in a predictable way

o time order of occurrence of telesales activity and the effect on website visits

o absence of other causal factors, i.e. no other factor is affecting website visits

Experimental validity has two components:

o Internal validity

o External validity

Internal validity is the extent to which an experiment controls the effects of all non-

manipulated variables so that any difference in web site visits (the dependent variable)

between groups can be regarded as valid effects of the different promotional programmes

used (experimental factor).

Threats to internal validity include:

o History and maturation

o Repeated testing

o Impact of the researchers

o Mortality of participants

o Selection errors

o Regression effects

Each of these effects should be considered in the context of the case situation. For

example, in relation to the impact of researchers, the fact that an SME is beinginterviewed may affect visits to Business Solutions Ltd website.

External validity refers to the extent to which experimental effects will generalise to the

marketplace. Whereas a laboratory experiment is generally believed to be more internally

valid, the field experiment (as used in the case situation) provides more external validity

as it is undertaken in a real market situation.

As the experiment is being undertaken in the field, it offers more realistic conditions in

which to evaluate the effect of the supporting telesales campaign.

2. What type of experimental design do you suggest Business Solutions Ltd should use?Explain your reasoning.

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(15 marks)

The different types of experimental designs are:

o Basic (informal) designs: only measure the treatment impact.

o Statistical (formal) designs: measure treatment impact and also other factors that

may have been at work during the experiment.

Basic designs can be described as follows:

o After only

o Beforeafter without control

o Beforeafter with control

o Afteronly with control

o Ex-post facto designs: groups chosen only after treatment has been applied

o Four group six-study design

o Time series design

Regarding the statistical designs, they are as follows:

o Completely randomised design: only takes account of one variable.

o Randomised block design: measures treatment plus one extra variable.

o Latin square: measures treatment and two extra variables.

o Factorial designs: takes into consideration the fact that variables may interact with

each other.

The best approach for Business Solutions Ltd. may be the use of the basic design,

beforeafter with control.

By using the design beforeafter with control, the control group should be comparable

in make-up to the group who will receive the treatment (tele-sales activity). The major

assumptions in the design are that both groups are affected in a similar manner by

extraneous factors. For this to be the case, the subjects must be selected at random and

the treatment should be randomly assigned.

The statement of the design is:

o EG: O1 O2o CG: O3 O4

The effect of the treatment may be measured as:

o (O2 O1) (O4 O3

Therefore, if the following visits occurred:

O1 = 45 visits O2 = 68 visits

O3 = 34 visits O4 = 42 visits

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The assumption is that the increase in website visits in the control group (8 visits) was

caused by extraneous factors. If this impact is subtracted from the change in website

visits in the companies contacted by the telesales team (23 website visits), the resulting19 website visits can be viewed as the direct impact of the treatment.

It may also be helpful to use a statistical design (randomised block design) to take

account of other variables that may influence visits to the website apart from telesales

activity.


Case 2 Solution: Business Solutions Ltd.

1. Critically explain the threats to experimental validity.

An experiment involves a test to determine the causal relationship between variables i.e.

the dependent and in this case interest in and visits to the website. The independent, in

this case invest in telesales and the effect or results. All experiments must have both

external and internal validity.

Internal validity refers to the extent to which the effect of the dependent (x) was caused

by the independent (treatmenty): this takes into account the confidence that the effect of

x was not caused by other extraneous factors.

External validity on the other hand, refers to the extent the findings/results from the

experiment can hold for other situations. An experiment conducted in a laboratory lacks

external validity, whilst an experiment conducted in the field lacks internal validity.

Hence in this case, if the company Business Solutions Ltd were to conduct a field

experiment, this experiment would lack internal experimental validity as the results may

have been caused by other extraneous factors.

Extraneous factors are factors that affect the dependent variable other than the

independent i.e. the treatment. Some extraneous factors are: regression effects (the use of

extreme values which skew the results), the influence of the interviewer, selection errors,

the maturation and history, repeat testing and the mortality rate of respondents.

2. What type of experimental design do you suggest Business Solutions Ltd should use?Explain your reasoning.

There are two types of experimental design i.e. (i) basic design (informal) and (ii)

statistical design (formal).

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The basic informal design looks primarily at the effect of the treatment and not

extraneous factors, whilst the statistical/formal designs look at both the affect of the

treatment in addition to extraneous factors. Examples of basic/informal experimental

designs include:

o After only ( O),

o Beforeafter without control O1 O2 (O2 O1),o Beforeafter with control,

o EG (experiment group) O1 O2,

o CG (control group) O3 O4 (O2 O1) (O4 O3),

o After only with control (EG O1) (O1 O2) (CG O1), and

o ex-factor post design which is a hybrid of after only design.

The statistical/formal design examples include completely randomised design,

randomised design and Latin square design just to name a few. The completely

randomised assumes ceteris paribus and applies the treatment to all the elements

randomly and then analyses the results.

Given the fact that the Business Solutions Ltd wishes to draw a simple random sample

and divided into two groups, where both groups are exposed to direct mail brochure, but

only one group is exposed to the telesales activity, I would suggest Business Solutions

Ltd use a before-after with control group to determine the effects of the treatment, which

in this case is the telesales activity. However, it should be born in mind the caused

components i.e. concomitant effect, time, order of occurrence and absence of other

factors, if this experiment is to hold on both internal and external validity, hence it may

be advisable to use triangulation i.e. more than one experimental design, perhaps group

design, bearing in mind the cost and time involved, as well as one other statistical design.

Essay Question The Uganda Coffee Development Authority


Essay Solution Answer Base

1. Advise The Ugandan Coffee Development Authority on the need for, and design of, amarketing information system to help realise their goals.

(20 marks)


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A marketing information system is vital to help The Ugandan Coffee Development

Authority to make good decisions and provide sound research and information to their

various stakeholders (exporters, farmers, processors, roasters, etc.).

A well designed information system enables the efficient handling, organisation and

storage of data and may comprise the following sub-systems:

o an internal reporting system

o a marketing intelligence system

o a market-research system

o an analytical marketing system.

o

Useful sources of data will include both internal and external sources: for example,

economic trends, political trends, competitor activity, socio-cultural environment and

impact on coffee consumption, physical environment, transportation costs, members

sales reports, market prices, export data, government sources, etc.

2. What tools do you suggest the Authority use to help forecast market demand forUgandan coffee?

(20 marks)

Various forecasting tools may be used to help forecast market demand. In choosing

which to use the following considerations should be taken into account:

o Time horizon

o

Technical sophisticationo Cost

o Quality of data that can be used

The basic approach is to make an environmental forecast before making a forecast of

sales and profits.

Methods to be considered include: asking people questions (surveys of buyer intentions,

composite of sales force opinion, expert opinion, analysing past data) and time dependent

approaches (classical time-series, moving average, exponential smoothing, and statistical

demand analysis).


Essay Solution

1. Advise The Ugandan Coffee Development Authority on the need for, and design of, amarketing information system to help realise their goals.

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The Ugandan Coffee Development Authority has many goals and objectives that they are

seeking to achieve. They are striving to excel in their coffee industry and at the same time

keep abreast of the dynamics within the environment. A Marketing Information System

will assist the Ugandan Coffee Development Authority greatly in achieving their

initiatives. A Marking Information System deals with a constant flow of information and

coordination of this information to assist decision makers, and to provide the best

possible information in an effort to stay abreast in ones industry. A MarketingInformation System is made up of four aspects: internal data, marketing intelligence,

market research systems and analytical systems. These four aspects produce a sufficient

flow of data to decision makers so that they can make the most suitable and efficient

decisions.

The Ugandan Coffee Development Authority can use each aspect of the Marketing

Information System to help them achieve these goals. In terms of internal data this

includes things such as information on inbound logistics, outbound logistics, production

and operations, customer information and complaints and sales and marketing.

Information from all these internal sources can be used to help the Ugandan Coffee

Development Authority achieve their objectives. For instance, in an effort to promote,improve and monitor marketing of coffee to optimise foreign exchange, special attention

can be paid to sales and marketing information on how sales are doing and the strategies

being used by marketing can be assessed. How people respond to different marketing

strategies can be assessed and if ineffective it can be tweaked.

Information on sales for example can lead the Ugandan Coffee Development Authority to

recognise their most profitable segments in their domestic market. They can assess what

is attributing to success in these segments and try to transfer the source of success to

other segments. They can also look at production and operations information and

determine the best, most efficient ways to produce and to provide the best coffee. A very

important source of internal information is from customers. Customer complaints,

customer enquiries and customer feedback can all be used to develop the product and

even give the Ugandan Coffee Development Authority ideas on how to promote coffee as

a value added product. It can also give them information on how the domestic market feel

about coffee and what can be done to promote their consumption. It can therefore be seen

that an abundance of information can be attained internally to help the Ugandan Coffee

Development Authority make decisions.

Information can also be gained externally. Such information is especially important since

the dynamics of the environment are constantly changing. Marketing intelligence and

market research systems aid in accumulating helpful information about the industry,about competitors, about consumers (both users of coffee and non-users). Marketing

intelligence is the knowledge gained by a firm from everyday interaction with the

environment. It can entail information on competitive behaviour, consumer behaviour,

sales force attitudes and behaviour, and so on. Having a proper understanding of such

information can help the Ugandan Coffee Development Authority understand the

environment and industry and thus set the necessary objectives to maintain

competitiveness. It can also assist in gaining a competitive advantage over others.

Market research systems are another integral part of the Marketing Information System

that can greatly assist decision makers in solving problems and setting and achieving

objectives. Market research involves collecting, analysing and interpreting data from theenvironment in an effort to solve problems, meet objectives and understand consumers.

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Information on answers received from marketing research therefore can help the

Ugandan Coffee Development Authority promote domestic coffee consumption.

Information from market research can help them segment the market and thus have a

more focused approach to satisfying needs. This would inevitably improve the coffee

industry.

Market research information can also be used in gaining information in internationalforeign markets. The Ugandan Coffee Development can determine if they are meeting

international standards, if the quality is good, how can their coffee be marketed better,

and so on.

Other external sources of information may include commercial information such as

scanners in stores. This can give information of where sales are concentrated, which can

help the Ugandan Coffee Development Authority in setting distribution and marketing

objectives. Channel distribution information from the sales force can also be attained to

help the decision makers in choosing the most suitable channels and selling methods.

A final aspect of the Marketing Information System is the analytical systems. These arebasically decision support mechanisms that help decision makers in making valuable

decisions from the information that they have received throughout the Marketing

Information System. It entails forecasting tools, mathematical tools and expert systems.

Forecasting tools for example help forecast demand. This can greatly benefit the

Ugandan Coffee Development Authority since they can use these forecasts to set

appropriate objectives and develop certain aspects of their strategy to meet future

demand.

The Ugandan Coffee Development Authority can therefore benefit immensely from

designing an appropriate Marketing Information System. Special emphasis must be

placed on the aspects of the system that give relevant feedback on customers and the

coffee industry. All information gained from the different components of the system can

be used to help realise goals.

2. What tools do you suggest the Authority use to help forecast market demand for

Ugandan coffee?

Forecasting demand is an essential aspect of a firm. It allows a firm to recognise the

potential of their market and how they can make the necessary arrangements to meet this

forecast or even improve this forecast. Sales can be forecasted by a time period e.g. short

term, long term, medium term or by location e.g. locally, internationally, or regionally.There are many different methods to use when forecasting. The analytical system of a

Marketing Information System deals with the different methods that can be used to

forecast sales. Forecasting tools in this system can either be basic or statistical.

In terms of basic tools this deals with asking people questions, asking sales forces valid

questions, asking experts valid questions and gaining information by looking at past data.

Statistically, forecasting can be done by using time series analysis, moving average,

extrapolation and statistical demand analysis. The Ugandan Coffee Development

Authority can use any one of these methods in assisting them to forecast market demand

for their coffee. For instance, they can embark on asking customers about the coffee. This

can be done via questionnaires, focus groups, telephone interviews and so on. Findingsuch information is valid since it allows the Ugandan Coffee Development Authority to

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recognise how probable an increase in demand is. Asking sales people questions is also

very relevant since they are the ones who are in direct contact with the market whose

sales you are trying to forecast. Sales force can give information on how and where

demand would most probably come from.

The Ugandan Coffee Development Authority can also seek help and forecast using

estimates from experts. Such experts may be ones from similar industries who may befamiliar with coffee drinkers and their habits, information on past demand can also be

used to forecast what kind of demand is to come.

The Ugandan Coffee Development Authority can also take a statistical approach and use

methods such as time series analysis, moving average, extrapolation and statistical

demand. Time series analysis for instance is based on the assumption that sales change

due to different influences over time. In time series analysis sales can either be seasonal,

erratic, follow a trend or rise and fall at different times. Using this method may not be

very appropriate for the Ugandan Coffee Development Authority since they are more

concerned about forecasting demand of a potential market rather than really focusing on

the demand of the current market. A good approach to use statistically is the statisticaldemand analysis which deals with looking at all the external influences that may affect

demand. It looks at things such as personal income, advertising and so on to determine

future demand. Ugandan Coffee Development Authority can use this since they can

ascertain how these influences affect demand and use it to project future demand. They

may also manipulate these influences to further increase demand. The statistical demand

analysis balances the equation where S = a0 + b1P + b2A

In conclusion Ugandan Coffee Development Authority can collaborate both statistical

ways and non-statistical methods of forecasting demand.

Day 4:

Case Question 1: Software House (Module 4 June 2008)


Case 1 Answer Base

1. How confident should Steven be in the results of his own market research?

(8 marks)

Steven has undertaken market research already, based on a sample of 80 customers, and

the results appear to be favourable to the introduction of interactive voice response

technology, with 70% of customers in support of the idea.

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The question is how confident can Steven be in these results. The Confidence Interval

Approach to sample size can assist the evaluation of whether these results are satisfactory

as a basis for such investment decisions.

Therefore, we can be 95% certain that the true population proportion of those in favour of

the introduction of telephone based voice response is between 60% and 80%.

2. If Steven were to undertake additional research and wished the percentage in favour to

be accurate to within 5%, what size of sample do you recommend?

(8 marks)

One option available to Steven is to conduct further research, increasing the sample size.

To be within 5% of 70% Steven would require a sample size as follows:

3. What other methods might Steven use to determine sample size?

(6 marks)

Other methods of deciding on sample size include:

o intuition

o cost limitation

o

industry standards

Each of these should be discussed with reference to section 4.6.1.1,4.6.1.3and 4.6.1.4.

4. Do you think Steven should press on with the installation of the voice response service orshould he conduct more market research? Explain your reasoning.

(8 marks)

In deciding whether to press on with the installation of interactive voice response services

or conduct more market research, Steven should consider the confidence level attached to

his existing market research findings. The key issue he has to consider is the extent to

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which his comfort zone would be enhanced if the confidence interval were narrowed by

conducting further market research amongst his customers.

Increasing the sample size to 323 would produce a 5% confidence interval which Steven

may feel is enough for him to feel confident in making the investment. The cost of

undertaking additional market research, i.e. conducting telephone interviews, is not likely

to be prohibitive.

Steven should take into account the cost of research and the value of the investment

decision being undertaken.

A good student answer will note that Steven should keep in mind that the survey referred

to in the article is a year old and that, in the past year alone, many changes are likely to

have taken place in consumer reaction to modern technology. This in itself may explain

the differences between the findings of the two surveys.

June 2008 Selected Student Answer

Case 1 Solution: Software House

1. How confident should Steven be in the results of his own market research?

Market research helps the supplier to allay uncertainty inherent in all marketing

decisions.

Relating to the case study, Steven is trying to assess if he should go ahead and purchase a

new interactive voice response service (bearing in mind the benefits that his may bring to

his company) or decide against purchasing due to articles that mention the frustration of

consumers with automated telephone systems.

The first consideration in evaluating his research methods is sampling. The research used

a probability sampling (where elements in the sample have a known chance of being

selected) and therefore it is possible to estimate sampling error. In the case, a very small

sample was used (only 80 customers out of his total customer base=2500) and this may

influence the accuracy of results or quality of the data. To overcome this flaw, Stevenshould increase his sampling size because larger samples imply smaller sampling error. It

is worth mentioning that the total survey error comprises sampling and non-sampling

error. Sampling error refers to the sample not being a perfect representation of the target

population and non sampling error can be either non response error (not all in the sample

do in fact respond) and response error (respondents giving inaccurate answers).

Therefore, although Steven has used a probability sampling and error can be estimated,

the small sample size may have affected the quality of the research and hence misled the

results. It may well be that the 70% represents the opinion of those who have strong

feelings about the subject, or those who feel comfortable with the technology (interactive

voice response service) proposed. We should also take into consideration that telephoneinterviews may cause annoyance to the consumer if not properly conducted and if that is

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the case maybe all those 70% in favour of the new system just replied positively because

they wanted to finish the interview as soon as possible.

In short, to produce more accurate results Steven should increase the sample size.

Lets calculate the Stevens study accuracy:

If Steven would be satisfied with 10% accuracy which translates to the lowest 60% and

highest 80% of satisfaction then he could go ahead.

2. If Steven were to undertake additional research and wished the percentage in favour tobe accurate to within 5%, what size of sample do you recommend?

To calculate the size sample we can use the level of accuracy formula. It is as follows:

L = Z S p

Notes:

L = level of precision

Sp = standard deviation for proportion

Z= value given for a determined level of confidence

Therefore the sample size at 5% level of confidence should be n = 324.

3. What other methods might Steven use to determine sample size?

The methods used to calculate sample size are:

o Intuition

o Statistical precision

o Cost limitations

o Industry standards

o Other factors

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Intuition is based on informed intuition but its not the most satisfactorily method. Its used

in industrial marketing research more often.

Statistical precision take into consideration that larger samples are more accurate and that

data that flows from it have more quality. It also takes account of the level of precision

required ( L = Z S x or L = Z S p) and the confidence interval (the interval within which

a population means or proportion have a stated probability of lying). Therefore, thismethod ticks all the boxes and provides a more accurate result.

Cost limitations only consider the available budget despite all the other factors (e.g. level

of precision). Therefore, it should only be used when there is no other possibility.

Industry standards refers to the rules of thumb developed by experts in the industry.

Other factors concern any other variable that may affect/influence how to calculate the

sample size.

4. Do you think Steven should press on with the installation of the voice response service orshould he conduct more market research? Explain your reasoning.

Steven should undertake more research before going ahead with the installation of the

new system. His first interview used a sample too small and therefore its results may be

misleading. Considering the benefits that the new system may bring, but also the costs

that the firm will incur (and bearing in mind all the articles that show a negative feeling

from customers towards automated telephone systems), Steven should undertake more

research but this time increasing the sample size to decrease sampling error and provide

more accurate results.

If after undertaking research using the same method telephone survey with a larger

sample of respondents he still was not convinced about which decision to make, he may

consider the use of qualitative research to complement his quantitative research. Through

focus groups they may assess attitudes and opinions on the subject (automated telephone

systems) and what underlies these feelings. This more detailed research could provide

valuable insights on how the firm may contribute (for those responsible for the

development and design of those systems) to a positive customer experience, thus

changing the perceptions of those who feel frustrated and disappointed when dealing with

this system (maybe the hatred comes from a lack of understanding or ability to use the

system and may be easily resolved).

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Case Question 2: Blood Test Equipment (Module 4 and 8 - June 2006)


Case 2 Answer Base

Advise the manufacturer of the new home kit on what kind of marketing research they shouldundertake to develop an understanding of the views and opinions of young people towards heartdisease and the use of home testing kits to assess personal risk of contracting the disease.

(Total 30 marks)

The terms of reference of the marketing research would seem to indicate a need for data of a

qualitative nature in relation to the attitudes of young people towards heart disease and use of

home test kits to assess personal risk. Clearly, the issues are of a sensitive nature and attitudes

may be influenced by personal circumstances, e.g. death rates/disease rates amongst family and

friends. Because of the emotional, and potentially distressing, background to the research it is

likely that in-depth personal interviewing would be the most appropriate qualitative research

technique (other suitable alternative methods may also be discussed).28


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The full range of advantages of in-depth interviewing should be discussed together with their

drawbacks, including the fact that they are expensive and time consuming and will require

considerable preparatory work in terms of sample recruitment and selection. The need to involve

medical practitioners should be considered.

Once an understanding of attitudes and opinions has been achieved, the qualitative research may

be followed up by a quantitative study to assess the extent to which various views and opinionsare held amongst the wider population.

The merits of different survey methods should be assessed in the context of the case and some

attempt should be made to explain desirable sampling techniques and the range of issues which

would lend themselves to quantitative examination.

une 2006 Selected Student Answer

Case 2 Solution: Blood Test Equipment

Advise the manufacturer of the new home kit on what kind of marketing research they should

undertake to develop an understanding of the views and opinions of young people towards heart

disease and the use of home testing kits to assess personal risk of contracting the disease.

This is quite a sensitive and serious issue that involves young people. To be able to get the best

out of research, I would recommend the use of both Quantitative and Qualitative research

methods.

Quantitative research is research that is based on numerical or statistical figures. This can be

undertaken at the initial phase of the research to ascertain the statistics of how many young

people actually have attacks, what treatments actually exist and what specialists exist to deal

with this situation.

This data will be obtained by the use of secondary data. This can be gathered from health

institutions and government bodies such as the Ministry of Health. This will also assist us to

define the population the group that fall into our research study for our following qualitative

research.

The qualitative market research I would recommend to be undertaken is personal interviews and

telephone interviews.

1. Personal Interviews

Advantages

o Allow interviewer to observe reaction to questions.

o Enables interviewer to ask questions in a systematic order.

o Interviewer can steer off sensitive questions depending on reaction of interviewee.

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Disadvantages

o Interviewer can be biased.

o Personality of interviewer can influence answers.

2. Telephone Interviews

Advantages

o Eliminates interviewer influence.

o Interviewee can express self freely with the knowledge that interviewer does not

know them personally.

o High response rate since most people have impulse to pick up the phone when it

rings and especially so when it is to deal with young people.

3. Depth interviews such as focus groups can be used as well to identify feelings andattitudes to heart disease and the home testing kit.

Selecting the Sample

The success of the research mostly depends on how large the sample size is, and how

representative of the population. Samples may be non-probability or probability.

Non-probability Sampling

Here the sample is not random, but rather managed for practical reasons. Examples of non-

probability sampling are:

1. Quota sampling;

2. Convenience sampling;3. Judgement sampling.

Probability Sampling

Here there is a known chance of selection. This is seen as most appropriate since it avoids bias in

the selection process and hence is most representative. Some examples of probability sampling

are:

1. Systematic sampling. For example, every 80th number from a telephone book is selected

as part of the sample.

2. Random sampling. For example, the names of all the students in a university are writtenon various sheets of paper and put together in a basket or container. The first 40 names

that are picked are used as the sample.

3. Stratified sampling. The sample is stratified into e.g. social classes and a number

randomly selected.

4. Cluster sampling. This is as stratified sampling except that in this case, the cluster is more

demographic.

In the case of the blood test equipment, I would recommend that the probability sampling

technique be used for the reasons stated above. The specific method I would recommend is the

stratified sampling technique. This will give perspective from different sections of social class.

This will affect pricing, promotions message and means, distribution methods and where toactually sell the product.

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Essay Question: Inter-European (Module 4 Dec 2008)


Essay Solution Answer Base

1. Describe the potential problems which Inter-European might face in drawing up asampling frame for the research study. How might Inter-European deal with each of

these potential problems?

(20 marks)


Potential problems with the sampling frame lie in any deviation which may exist from

one to one correspondence between the customer list used and the population of credit

card customers.

For example, the list used must be up-to-date (for example, regarding income status) and

not omit any members of the population. Ineligibility (i.e. listing individuals who are

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not/no longer members of the population lapsed customers) is a further potential

problem.

Other problems may include duplication (holding more than one credit card) and

clustering (joint account holders).

A good student answer will consider possible methods of dealing with each of theseproblems.

2. Discuss the benefits and drawbacks of Inter-European using stratified and cluster sampling methods to determine the relationship, if any, between socio-economic

characteristics and credit card usage amongst their credit card customers

(20 marks)

Stratified and cluster sampling are both probability sampling methods so sampling error

may be stated in mathematical terms.

In stratified sampling, the population is separated into sub-groups called strata. The

division is mutually exclusive and exhaustive which means that every population element

is assigned to one stratum only and no population elements are omitted in the assignment

procedure. Separate simple random samples are drawn from each sub-group.

In cluster sampling, the population is separated into sub-groups called clusters and a

sample of clusters is drawn.

The element which distinguishes the procedures is that with stratified sampling a sample

of elements is selected from each sub-group, whereas in cluster sampling a sample of

sub-groups is chosen.

In the case of Inter-European, it may make sense to separate the population of credit card

customers by country, e.g. credit card customers in UK, France, Germany, etc.

Using stratified sampling, samples of credit card customers will be drawn from each

country. This will allow comparisons to be made between countries.

Using cluster sampling, a sample of countries will be chosen as the focus of the research

study.

A good student answer will note that stratified sampling can improve the cost-

effectiveness of a research project as this technique allows sampling error goals to be

achieved with smaller sample sizes than are required in simple random sampling. A

consequential reduction in the total cost of the research can result under certain

conditions.

Cluster sampling can also be cost-effective. Despite having higher sampling errors than

simple random sampling of equal size, cluster samples allow a large enough increase in

sample size to more than offset their inefficiency so that overall sampling error is reduced

for any given budget.

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In the case of Inter-European, cluster sampling may be the logical approach if analysis of

credit card spending patterns by country is not part of the survey objectives.

Cluster sampling will deliver cost savings in terms of interviewers required by country

and questionnaire translation expenses.


Essay Solution: Inter-European

1. Describe the potential problems which Inter-European might face in drawing up asampling frame for the research study. How might Inter-European deal with each of

these potential problems?

The banking network of the Inter-European Bank is extremely large and widely

dispersed. Therefore, conducting such a research study will not be an easy task and

certain constraints need to be overcome.

The Inter-European Bank wants to draw up a sampling frame for their research study.

This sampling frame is basically a list of the population, that is, their customer base.

However, unfortunately, no sampling frame will ever be perfect, and there will always be

an element of error. The difference between the actual population, and the one that is

used (the working population/operational) will always be different, no matter how

cautious one is.

Reasons for this are due to the information used. Lists of a population are essentially out-

of-date on their publication day as changes are constantly happening. Telephone numbers

and addresses will change with move-outs and move-ins and peoples marital, educational

and income will change too. This all impacts on their credit card usage, as their lifestyles

change to new circumstances. Also, in lists, it is quite common to find duplications and

omissions of data. So maybe, using two lists instead of one for the sampling frame will

assist Inter-European in narrowing this gap.

It is important that measures are taken so that such a gap is reduced, otherwise their

research can bring about misleading results.

Two elements that will also contribute to increasing error are random sampling error and

non-sampling error. Random sampling error occurs when the chosen sample is not a

perfect representation of the required population. This will evidently occur due to the less

than perfect lists and sampling frames used. Non-sampling error is made up of response

error and non-response error. Non-response error occurs when people do not reply; and

this may occur quite frequently. People may be very difficult to get a hold of or else will

refuse to participate in their research study. Such individuals are also generally different

in some way from those who reply. Those who do reply may induce error by providing

them with socially acceptable and pleasing answers, or else may forget and provide the

wrong information.

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Inter-European could inform their customers either by a personalised letter, or a

telephone call beforehand, to inform them that their participation is to be required in a

research study. This can substantially aid participation.

2. Discuss the benefits and drawbacks of Inter-European using stratified and cluster

sampling methods to determine the relationship, if any, between socio-economic

characteristics and credit card usage amongst their credit card customers

A stratified sample is a form of random sample, meaning that each and every element of

a population has a known non-zero chance of being selected to participate in a sample.

Such results can then be projected to the entire population, and sampling error can also be

estimated.

A stratified sample is most appropriate when used with large consumer populations,

which is precisely the case with Inter-European. The members of the population (its

customer base) are divided into mutually exclusive groups to reflect specific social and

economic backgrounds. Random samples are then taken from each of these groups.

The benefits for Inter-European with this method are that they will have an equal,

extensive and detailed coverage of their whole customer base. The customer base will

effectively be divided into its specific socio-economic characteristics and credit card

usage patterns, so their behaviours will be easy to analyse and this will make it easier for

them to target. The drawback is that they may not be able to assess the likely importance

and impact of such a group. It could also be that particular members may be categorized

according to their extensive and repeated card usage; but the amounts (deposited and

withdrawn) may be very small and not compare to those are categorised as less frequent

users; but involving larger amounts.

A cluster sample is also a random sampling method. Here, specific areas that are known

to include a lot of their members are assessed. People in the particular area are targeted as

many of their customers live there. This is beneficial as they know where to locate them

and target them in future. However, still, little is known about the usage patterns. Are

many of their card holders in that area students, or high powered lawyers or executives?

And what are the individuals attitudes and perceptions towards the usage of their credit

card? Is it used for special occasions large purchases or for frequent every day use?

Stratified and cluster sampling methods do provide the opportunity to have their

customer base neatly categorized and classified by specific characteristics, but usage

patterns, as we have seen, can be quite tricky to determine. Other research mustcomplement such a study in order to get more variable and insightful information.

Documents

Revision Answer Book MR 2011